CIT Vs. SOUTH INDIAN BANK LTD

JUDGEMENT

(1.) THESE Income Tax Reference cases are coming up before this Court at the instance of the Revenue under S. 256 (2) of the Income Tax Act, 1961 (for short 'the Act' ). 'the question referred to for decision is as follows: " Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the rectification order of the assessing officer?"

(2.) THE assessee is the South Indian Bank Ltd. , Trichur, which is a 'scheduled Bank' and assessment years in question are 1979-80 and 1980-81. In view of the provisions contained in the Banking Regulation Act, 1949, the assessee is required to buy and sell securities to maintain the requisite ratio. During the above assessment years the asses" sold government securities ex-interest and received a sum of Rs. 5,70,740/- and Rs. 4,75,294 respectively with respect to the broken period interest upto the date of sale. During the same years the assessee purchased government securities cum interest and paid interest on the broken period of Rs. 6,36,411/- and Rs. 5, 15,659/- respectively. THE assessee disclosed these amounts under the heard 'interest on securities' and originally the assessments were completed for the years 1979-80 and 1980-81 under S. 143 (3) of the Act allowing the interest paid for did broken period. Subsequently the assessing officer initiated action under S. 154 of the Act and disallowed the interest paid for the broken period, namely. 6,36,411/- for 1979-80 and Rs. 5,15,659/- for 1980-81 on the ground that as the income had been computed under the head 'interest on securities' there was no provision for allowing such interest paid. THE Commissioner of Income tax (Appeals) confirmed the disallowance against which further appeals were filed before the Tribunal. THE Tribunal found that the rectification order passed under S. 154 cannot be upheld placing reliance on the following decisions. Malabar Cooperative Central Bank Ltd. v. C. I. T, (1975) 101 ITR 87), Karnataka Bank Ltd. v. C. I. T. (1978) 114 ITR 421), Brooke Bond & Co. Ltd. v. C. LT. (1986) 162 ITR 373 (SC) and T. S. Balaram v. Volkart Bros. & Ors. (1971) 82 ITR 50 (SC ).

(3.) AS pointed out earlier, the impugned proceedings have been initiated under S. 154 (1) of the Act on 7. 3. 1985. The said provision as it stood at the relevant time is as follows: " With a view to rectifying any mistake apparent from the record an income tax authority referred to in S. 116 may amend any order passed by it under the provisions of this Act. " In order to attract the above provision, two essential requisites shall be complied with. Firstly it must be a case of a mistake and secondly the mistake must be apparent from the record. No doubt a clerical or arithmetical mistake amounts to mistake apparent from the record. But a mistake found out by a long drawn process of reasoning cannot be said to he a mistake apparent from record. Webster defines the word 'apparent' as clear, or manifest to the understanding, plain evident, obvious appearing to the eye or mind.