BHAURAM JAWAHIRMAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) FOR a proper appreciation of the facts it will be convenient to set out the following family pedigree : <FRM>JUDGEMENT_487_ITR121_1980Html1.htm</FRM>

(2.) IT appears that, in the meantime, the assessments for subsequent years were completed. We are concerned in this case with the assessment years 1962-63 and 1967-68. For these years the assessee claimed deduction of interest credited in the accounts of the donees on the basis of the aforesaid two gifts as also on the basis of one made subsequently on October 22, 1960, by Brij Mohan to Smt. Sita Devi. The ITO and the AAC both disallowed the deduction on the common ground that the assessee did not pursue the matter further for these years. On August 6, 1971, the assessee filed an application for rectification under Section 154 of the I.T. Act, 1961. The assessee prayed that on the basis of the judgment of this court in the reference for the year 1961-62, the interest paid on the aforesaid gifts may be deducted from its income, inter alia, for the years 1962-63 and 1967-68. The AAC rejected the application. On appeal, the Tribunal upheld the order of the AAC. At the instance of the assessee, the Tribunal has now referred the following question of law for our opinion:

(3.) THESE observations convey that if a mistake is revealed in an order of assessment on the basis of a judgment of the High Court rendered subsequently, it will, under no circumstances, constitute a mistake apparent from the record. We are unable to subscribe to this view. It contains a statement of law which is much too wide. Although it will be difficult to lay down the circumstances under which a mistake discovered in an assessment order on the basis of a subsequent judgment of the High Court would be a mistake apparent on the record, one thing is clear to us : where an order of assessment is based upon a decision of the Tribunal which was the subject-matter of reference to the High Court, when the order was made, then any error discovered in the order, on the basis of the subsequent judgment of the High Court on that reference, would be an error apparent from the record. We say so because, in the circumstances, it will be assumed that the law declared by the High Court, even if such declaration was made subsequently, was the only correct law applicable at the time when the order was made. Therefore, if the authority making the order has not applied that law, the mistake is obvious and self-evident and does not call for any debate or discussion to discover it. Where that is so, it would constitute a mistake apparent from the record as contemplated by Section 154 of the I.T. Act, 1961. It was so held by a Division Bench of this court in CIT v. Sir Shadi Lal Sugar Mills [1978] 114 ITR 729. The court observed (p. 731):