JUDGMENT This is a writ petition by the department under article 226 of the Constitution challenging the jurisdiction of the Income-tax Appellate Tribunal to reduce the penalty levied by passing an order under section 35 of the Income-tax Act, 1922 (hereinafter referred to as the Act). The facts leading up to this writ petition are thes :
The assessee (respondent No. 2) was a partnership firm which carried on business with its head office in Dehra Dun. Its business consisted of the selling agency of Tata Mercedes Diesel Oil trucks and in the purchase and sale of motor parts and accessories. For the purpose of assessment the case of the aforesaid firm fell within the jurisdiction of the Income-tax Officer, B-Ward, Dehra Dun, prior to its transfer to the charge of the Income-tax Officer, A-Ward, Dehra Dun (petitioner No. 1). The Income-tax Officer, B-Ward, Dehra Dun, who made the assessment against the assessee for the assessment year 1960-61, discovered that the assessee had suppressed its income by a sum of Rs. 41,740 which the assessee had claimed as expenditure on account of insurance premia paid by it to various insurance companies on behalf of its numerous customers. The amount realised by the assessee from its customers towards the insurance premia was not recorded in its books of accounts.
Penalty proceedings were initiated under section 28(1)(c) of the Act in respect of the said concealment and èultimately the Income-tax Officer by his order dated March 16, 1961, levied a penalty of Rs. 30,000, the maximum penalty leviable was Rs. 48,210 which was 1 1/2 times of the difference between the income returned which was Rs. 31,51,533 and the income assessed at Rs. 5,00,528.
The assessee filed an appeal against the aforesaid order to the Appellate Assistant Commissioner of Income-tax, Dehra Dun. The Appellate Assistant Commissioner by his order dated September, 5, 1962, confirmed the levy of penalty and dismissed the assessees appeal. Thereupon, the assessee filed a second appeal before the Income-tax Appellate Tribunal under section 33 of the Act. The appeal was heard by a Bench of the Income-tax Appellate Tribunal at Delhi, known as Bench A, on the 1st of August, 1963, and by its order dated the 6th of August, 1963, dismissed the assessees appeal. This order read :
"This is an appeal against the order levying penalty under section 28(1)(c) of the Act. Penalty of Rs. 30,000 was imposed by the Income-tax Officer as according to him the assessee had concealed the particulars of its income by making a debit of Rs. 41,740 on account of insurance premiums paid to insurance companies on behalf of various customers on various dates, whereas the amounts which were received in respect of the same from the said parties were not recorded in the books of the assessee. Though it was admitted by the assessee that the receipts from the parties in respect of the insurance premium in question were not recorded in the books of the assessee, "yet it was submitted that the amounts had been spent in the course of the assessees business.
That is no explanation at all. Here is a case of deliberate suppression of the real particulars of the assessees income warranting levy of penalty under section 28(1)(c). We, therefore, do not see any justifiable reason for interfering with the order of the departmental officials.
The appeal is, therefore, dismissed."
Thereafter, the assessee moved an application on the 23rd of August, 1963, under section 35 of the Act, which run :
"(1) That the above mentioned appeal was heard on 1st of August, 1963, by a Bench of the Income-tax Appellate Tribunal, Delhi, constituted by Messrs. V. R. Srinivasan and J. Sen.
(2) That at the time of the hearing of the appeal one of the points taken was that the Income-tax Officer had levied a penalty of Rs. 30,000 when the maximum penalty leviable was Rs. 48,210 being 1 1/2 times of the difference between the income assessed and income returned (Rs. 5,00,528 - Rs. 3,51,533). This difference of Rs. 1,48,995 has been reduced in appeal by a sum of Rs. 51,198 and, consequently, proportionate reduction should have been allowed.
(3) That the difference of Rs. 1,48,995 is on account of certain other inadmissibles and the amount held to have been concealed is Rs. 41,740 and the penalty, if at all leviable, should be by taking into consideration this item alone.
(4) That it was otherwise argued that the assessee had made expenses to the extent of this amount which could not be recorded in the books and this went to explain the non-accountability of Rs. 41,740 and further the amount was surrendered on the assurance that a very lenient view will be taken.
(5) That the Tribunal after having heard the counsel for the appellant and the department, made an observation that èa very nominal penalty will be levied.
(6) That the Tribunal has not dealt with the above-mentioned contentions of the assessee which were specifically argued and the assessee submits that the decision of the Tribunal to impose a very nominal penalty was forgotten and by mistake the appeal of the assessee was entirely dismissed.
(7) That these are the mistakes apparent on the record and the assessee prays that the findings on the above-mentioned points be recorded and the order be rectified after giving the assessee due opportunity of being heard."
Thereupon, the Income-tax Appellate Tribunal passed the following order on the 14th October, 1963, purporting to be one under section 35 of the Ac :
"We have gone through the application filed by the assessee and we have heard both the parties. We consider that in the particular circumstances of the case, our order dated August 6, 1963, requires some correction. The sentence beginning with the words that is no explanation at all... to the end of the order in paragraph 2 will be deleted; instead the following will be substitute :
It was also submitted by the learned counsel for the assessee that the addition for inadmissibles was already reduced in appeal by a sum of Rs. 51,198. In those circumstances, it was argued that the penalty levied was excessive. We find considerable force in this contention. Though technically penalty is leviable, still the quantum of penalty levied appears to be excessive. We will reduce the same to Rs. 10,000. Any amount collected in excess of the same is ordered to be refunded to the assessee. The appeal is, therefore, partly allowed."
The order of the Tribunal under section 35 is challenged in this petition as being one without jurisdiction and patently erroneous. To this petition the Income-tax Appellate Tribunal and the assessee were made respondents Nos. 1 and 2 respectively. The Income-tax Appellate Tribunal filed no counter-affidavit but the assessee through its representative, Jai Nath Gupta, filed a counter-affidavit. In paragraphs 25-31 it was state :
"25. That I know English and was present at the hearing of the appeal by the Tribunal on the 1st August, 1963, and also at the hearing of the rectification application under section 35 and what I have stated herein is the very same what I myself heard at the two hearings.
26. That at the time of the hearing of the appeal one of the points taken was that the Income-tax Officer had levied a penalty of Rs. 30,000 when the maximum penalty leviable was Rs. 48,210 being 1 1/2 times of the difference between the income assessed and the income returned (Rs. 5,00,528 - Rs. 3,51,533). This difference of Rs. 1,48,995 had been reduced in appeal by a sum of Rs. 51,298 and, consequently, proportionate reduction should have been made in the amount of penalty.
27. Another point was that the difference of Rs. 1,48,995 was on account of certain inadmissibles and the amount held to have been concealed was only Rs. 41,740. The penalty, if at all leviable, should have been by taking into consideration later items only....
28. That accordingly it was argued in appeal before the Tribunal on August 1, 1963, that a lenient view of the case should be taken. The Tribunal accepted the submission and observed that a very nominal penalty will be levied.
29. That, however, when it came to record a judgment seven days later on August 6, 1963, it appears to have forgotten its observation and stated as follow :
Here is a case of deliberate suppression of the real èparticulars of an assessees income.
30. That the attention of the Tribunal was drawn to this fact of an application dated the 23rd August, 1963, under section 35 of the Income-tax Act, 1922, on which the order dated the 14th October, 1963, was passed and penalty was reduced from Rs. 30,000 to Rs. 10,000."
To these paragraphs the rejoinder filed by the Income-tax Officer was that the counter-affidavit sets out the assessees version of what transpired before the Tribunal at the time of the hearing of the appeal as also at the time of the hearing of the assessees application under section 35, "the correctness whereof the deponent denies for want of knowledge." It is true that the Income-tax Officer would not have the necessary knowledge of what transpired at the hearing of the appeal before the Tribunal but a representative of the department was undoubtedly present and he could very well have contradicted the positive assertion upon affidavit made by the representative of the assessee as to what transpired before the Tribunal. In the absence of any attempt to contradict the aforesaid facts set out in the petitioners counter-affidavit and they being supported by some statements made in the order passed by the Tribunal under section 35, they will have to be accepted as correct. The Tribunal in its impugned order dated the 14th October, 1963, has specifically referred to the application filed by the assessee dated the 23rd August, 1963, where the facts set out were in more or less similar language as those in the counter-affidavit filed by the representative of the assessee. The Tribunal nowhere states that the contents of that affidavit were incorrect. The said portion of the order which was directed to be deleted and substituted also indicates that the contention regarding the reduction in appeal of the assessable income by Rs. 51,198 was raised but no reference to it was made in the original order dated the 6th August, 1963, dismissing the penalty appeal. On a reading of the order of the Tribunal under section 35, it would appear that the allegations made by the assessee in its application were substantially conceded to be correct, inasmuch as the penalty from Rs. 30,000 was reduced to Rs. 10,000.
The Tribunal, however, was not justified in reversing its finding given in the penalty appeal "that there was a deliberate suppression of the real particulars of the assessees income warranting levy of penalty under section 28(1)(c)" and substituting it by "though technically penalty is leviable, still the quantum of penalty levied appears to be excessive." Nor was it justified in deleting the words "that is no explanation at all". The explanation which was rejected then was that, though the amount of insurance premia received had not been shown in the books, yet such amounts had been spent away in the course of the assessees business. Having rejected that explanation on merits it could not have been reversed by an order under section 35 of the Act.
Be that as it may, the question that falls for consideration is whether the Tribunal could under the provisions of section 35 of the Act rectify a mistake, which it would appear to have committed itself, inasmuch èas a very material fact which was brought to its notice in the course of arguments was lost sight of at the time when the Tribunal came to write its orde ? In other words, whether a Tribunal or for the matter of that the Appellate Assistant Commissioner or the Income-tax Officer could in these circumstances have rectified a mistake which had resulted from their own failure to bear in mind a fact or circumstance which would have a material bearing on the quantum of the penalty leviabl ?
Mr. Gulati, the learned standing counsel, has relied upon a decision of the Madras High Court in Commissioner of Income-tax v. J. Sundaram for the proposition that section 35 does not empower the Appellate Tribunal to review or reverse its own orders as the section confers powers only to rectify apparent mistakes in the orders made. That case, however, is clearly distinguishable. That was not a case where certain material facts were brought to the notice of the Tribunal and the Tribunal had inadvertently failed to take those facts into consideration. There the Tribunal after saying that it was satisfied that this is pre-eminently a case for the application of the penal provisions of section 28(1)(c) and after holding that there were no mitigating circumstances calling for reduction of the penalty, yet, when moved by an application for "review", went on to say that "there were extenuating circumstances inasmuch as the assessee had co-operated largely with the department and has offered, through his chartered accountant, to accept assessments by an apportionment of the cash credits over a few years. This attitude should not go unappreciated." Thereupon, they proceeded to reduce the penalty considerably. When that order was challenged by way of a writ petition it was quashed by the Madras High Court. There was, as already observed, no question of the assessee being made to suffer for some mistake of the Tribunal in failing to take into consideration certain extenuating circumstances which had been brought to its notice but it was a clear case of a change of opinion on the same facts.
The Bombay High Court decision in Sidhramappa v. Commissioner of Income-tax was also relied upon by the learned standing counsel for the proposition that the Tribunal could not under the guise of rectifying an error on the face of the record review or revise its order. In that case the Commissioner as well as the assessee had asked for the order of the Tribunal to be rectified. The application of the Commissioner was allowed by the Tribunal but not that of the assessee. The assessee had in a reference under section 66(2) of the Act raised the question as to whether the Tribunal was justified in refusing to rectify its order at the instance of the assessee because of the fact that leave to appeal to the Privy Council against the order of the High Court dated the 29th September, 1941, was not considered. Chagla C.J. was of the view that the failure to consider this fact or an argument or a decision of the court cannot be an "error apparent on the face of the record." The word "face" of the record is not to be found in section 35 of the Act as èhas been pointed out by the Supreme Court in Income-tax Officer, Alwaye v. Asok Textiles Ltd. This made all the difference between Order XLVII, rule 1, of the Civil Procedure Code and of section 35 of the Act of 1922. Their Lordships pointed out that the words in the Act "apparent from the record" and in the Civil Procedure Code "apparent on the face of the record" do not mean the same thing and, therefore, the power to rectify under section 35 of the Act, though, no doubt, limited to the rectification of mistakes which are apparent from the record, would also include errors of law. To some extent, therefore, the provinces of section 35 of the Act were considered to be not as stringent or narrow as those obtaining under the Civil Procedure Code. There are decisions under the Civil Procedure Code which would go to indicate that even under the Code where the court has failed to deal with and determine important issues in the case on which depends the title of the plaintiffs and the maintainability of the suit, it would amount to an error apparent on the face of the record (M. M. B. Catholicos v. M. P. Athanasius). In Mt. Rukhmabai v. Ganpatrao, the Nagpur High Court took the view that if an omission to notice a particular provision of law is a satisfactory ground for entertaining an application for review, much more so is the omission to consider important facts which are on the record and which the judge himself immediately on the passing of his order realised that he had overlooked and which in his opinion would have led him to pass an order materially different.
Some line of distinction must be drawn between the cases where the mistake or error is inadvertently made by the court itself and where the court realises when its attention is drawn to is that if certain facts which were placed before it at the proper time had not escaped its attention at the time when the judgment was written, its decision would have been different. When such facts are already on the record there is no reason to tie the hands of the court and prevent it from doing what it considers to be fair and just. A situation which has arisen because of an oversight by the court itself and provided the fact omitted to be considered is on the record, there is no reason to hold that such an error would not be one apparent from the record.
In any event it is not possible to say that no two opinions are possible as to the interpretation which has to be placed on the provisions of section 35 of the Act. On the facts and circumstances of this case when the Tribunal would appear to have conceded that the mistake was entirely its own, inasmuch as a material fact which was brought to its notice in the course of arguments was lost sight of at the time when the judgment came to be written, that would entitle it to rectify that mistake under the provisions of section 35 of the Act. It sometimes happens that grounds of appeal or contentions which were argued before the Tribunal are not dealt with or disposed of in the judgment and in order to rectify that apparent mistake an application under section 35 is moved and the error which had crept in, not because of any èfault of the assessee but solely that of the court, has been corrected. To hold now, as is contended for by the department, that section 35 would not be applicable in cases where the court or the Tribunal has inadvertently omitted to deal with a particular ground of appeal or contention having an important bearing on the decision of the appeal would be to place unnecessary and unwarranted restriction on the provisions of section 35 of the Act. The only conditions that are required to be satisfied under section 35 are that it must be an error apparent on the record, and once that condition is satisfied there can be no justification for limiting the powers of the departmental officers or the Tribunal to rectify that error.
The learned standing counsel contended that even if the Tribunal had lost sight of the fact that the assessable income was reduced by a sum of Rs. 51,000 in appeal, nevertheless that would not be a material fact or circumstance as the ultimate difference in the tax leviable when computed would only have been a negligible amount. That is neither here nor there for determining the question which arises in the present case and that is whether the Tribunal, having inadvertently ignored such a fact, would have the necessary jurisdiction to rectify its order under section 35 of the Ac ? What effect the fact that the quantum of assessment stood reduced by Rs. 51,000 on appeal ought to have had on the mind of the Tribunal is one which is not capable of being subjected to arithmetical calculation in order to see whether the quantum of penalty reduced was in direct proportion to the reduction or otherwise. The legislature has only fixed the maximum penalty leviable but not the minimum.
In my judgment, where an error which has crept in, is not as a result of any fault of the assessee but is one attributable entirely to the Tribunal in having lost sight of a material fact at the time of writing its order or judgment, which fact was duly brought to its notice by the assessee, there would be an error apparent from the record which could be rectified under section 35 of the Act.
In the circumstances of this case, where the Tribunal would appear to have conceded that the material fact that a substantial reduction in the total income, as a result of appeal, was brought to its notice but which fact was inadvertently lost sight of by it at the time of writing its judgment and in the absence of any counter-affidavit by the department on this point, it would in any event make it difficult, if not impossible, to say that there was any patent error of law or want of jurisdiction in the order of rectification passed under section 35 of the Act so as to warrant interference under article 226 of the Constitution.
For the reasons given above the petition is dismissed. There will, however, in the circumstances of the case, be no order as to costs.
Petition dismissed.