COMMISSIONER OF INCOME TAX Vs. GUNWANTI BAI

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue and the following two questions of law have been referred for answer by this court :

(2.) BRIEF facts giving rise to this reference are that the Income-tax Officer noticed that the assessee was having credit balance of Rs. 3,94,045 on the first day of the accounting year relevant to the assessment year under consideration with the firm, Ratilal Manekji, Burhanpur. It was noticed that the assessee had not disclosed any interest income from the above credit balance. It was explained, by the assessee as to why the income of interest was not shown. It was submitted that the income has actually not accrued and it was, therefore, not shown by the assessee. It was submitted that it was for the assessee to decide whether to charge interest or not the Income-tax Officer considered the assessee's letter dated November 18, 1974, addressed to the firm for not charging interest from the firm and other evidence was also placed before him. But the Income-tax Officer found that in the immediate preceding year the assessee had charged interest from the aforesaid firm wherein she was having deposits and accordingly returned the interest income of Rs. 43,898. The Income-tax Officer noted that there was no genuine reason with the assessee for not charging the interest from the said firm and the return filed regarding not charging interest is nothing but an afterthought The Income-tax Officer referred also to his order relating to the assessment year 1973-74 and worked out interest at the rate of 12 per cent, per annum on the deposits of Rs. 3,94,045 and a sum of Rs. 47,285 was added. That was for the first year. For the second year, on the same reasoning, the Income-tax Officer added Rs. 45,913 and for the third year, he added Rs. 35,677.

(3.) THEREAFTER, a rectification application was moved stating that certain material facts, i.e., letters, hundis, etc., were not considered by the Tribunal. The Tribunal by order dated August 16, 1982, rejected this application for rectification and observed that all the material which was there on record was considered. THEREAFTER a second application was moved and in that, the Tribunal observed that in the original order passed by the Tribunal dated February 12, 1982, full material was not considered. This is absolutely an erroneous approach on the part of the Tribunal. In fact, all the material was the subject-matter of decision before the Income-tax Officer and the letter which the assessee had written that she would not charge interest, was taken into consideration by the Income-tax Officer but the Income-tax Officer disbelieved that part and held that the interest is chargeable. This finding was reversed by the Appellate Assistant Commissioner of Income-tax and the finding of the Appellate Assistant Commissioner of Incomes-tax was reversed by the Appellate Tribunal. Therefore, it is absolutely wrong to say that full material was not considered by the Tribunal in its first order dated February 12, 1982. The Tribunal again reiterated the same thing while rejecting the first rectification application on August 16, 1982. But it is unfortunate that on the second rectification application, the Tribunal observed that the letter, hundis and affidavits were not considered by the Tribunal either in the original order or in the order dated August 16, 1982, on the first rectification application. In fact, in the rectification application what can be corrected is an apparent error and not to deal with merits and to recall the order on the basis of taking a second opinion on the merits, which is not the scope of rectification.