K S VENKATESH vs. THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL

for the assessment year 2003-04 at `21,43,917/- was brought forward to the assessment year 2004-05 and was allowed to be set off only against business income of `6,23,596/- for the current year as per provisions of section 72 of the Act. Being aggrieved by the said order assessee filed an appeal before CIT(Appeals) who by order dated 24.11.2008 dismissed the appeal and affirmed the order passed by the jurisdictional Assessing Officer. Assessee carried the matter further in appeal before the Tribunal in ITA No.60/BANG/2009 and the appellate Tribunal after considering the rival contentions held that one cannot change the “head” in proceedings under section 154 and therefore Assessing Officer could not have changed the head from “income from other sources” as claimed by assessee to that of “income from business” and could not have allowed to set off against the carry forward business. As such the Tribunal dismissed the appeal filed by the Assessee by order dated 09.04.2009 and confirmed the orders passed by the authorities. Hence, this appeal by the assessee which

has been admitted by order dated 15.12.2009 to consider the following substantial questions of law:

(i) “Whether the Tribunal was justified in law in holding that the provisions of section 154 of the Act are applicable to the facts and circumstances of the case?

(ii) Whether the Tribunal erred in law in holding that the appellant was not entitled to set off of the carry forward business loss on the facts of the appellant’s case?”

impediment on the part of the assessee to seek for set off of the business loss for the assessment year in question against “profits and gains” and such business loss cannot be restricted to business profits only. Hence, he would pray for order of the authorities being set aside by answering substantial questions of law in favour of assessee. In support of his submission he has relied upon the following Judgments:

(1971) 82 ITR 50 – T.S.Balaram, Income Tax Officer, Company Circle IV, Bombay Vs Volkart Brothers and others

(2003) 259 ITR 26 (Madras) – Commissioner of Income tax Vs Ramnath Goenka

(1997) 93 TAXMAN 502 – Tuticorin Alkali Chemicals and Fertilizers Ltd., Vs Commissioner of Income Tax.

(2003) 128 TAXMAN 0011 – Commissioner of Income Tax Vs Menon Impex (P) Ltd.

carrying on the business of money lending and had deposited money in Fixed Deposits, NSCs, Banks and had earned interest and in the return of income filed had shown the interest income earned under the head “Income from other sources”. As to whether the interest earned on the Fixed Deposits, NSCs is an income which can be set off under section 72 would arise for examination by us while answering substantial question of law No.2 formulated above only in the event of this court arriving at a conclusion that substantial question of law No.1 is to be answered in the affirmative. As such at this juncture without examining said issue we are examining substantial question of law No.1.

RE: SUBSTANTIAL QUESTION OF LAW NO.1: 8. A bare reading of section 154 of the Act would clearly indicate that Assessing Officer would be empowered to invoke section 154 namely amend any order passed by it under the provisions of the Act, amend with intimation or deemed intimation under sub-

section(1) of Section 143 or on intimation under sub- section(1) of section 200A as indicated under section1(a)(2) to (8) of Section 154 in order to rectify any mistake apparent from the record. Thus, keeping in mind this tenor of the language used in section 154, the facts on hand are required to be examined.

corners of Section 72 of the Act itself would be a debatable point and as such if the issue involves examination in detail, we are of the considered view that the Assessing Officer could not have resorted to invoking section 154 of the Act so as to bring within the sweep of “error apparent on the face of the record”. The Hon’ble Apex Court in T.S.Balaram Vs Volkart Brothers and others reported in 1971 (82) ITR 50 has observed that a mistake apparent on the record must be obvious and patent mistake and not something which is established by long drawn process of reasoning. It has been held by the Hon’ble Apex Court in the said case as under:

“From what has been said above, it is clear that the question whether section 17(1) of the Indian Income-tax Act, 1922, was applicable to the case of the first respondent is not free from doubt. Therefore, the Income-tax Officer was not justified in thinking that on that question there can be no two opinions. It was

not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under section 154 of the Income-tax Act, 1961. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. As seen earlier, the High Court of Bombay opined that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question. In Satyanarayan Laxminarayan Hegde Vs Mallikarjun Bhavanappa Tirumale, this court while spelling out the scope of the power of a High Court under Article 226 of the Constitution ruled that an error which has to be established by a long drawn process of reasoning on points where there may

conceivably be two opinions cannot be said to be an error apparent on the face of the record. A decision on a debatable point of law is not a mistake apparent from the record – see Sidhramappa Andannappa Manvi Vs Commissioner of Income tax. The power of the officers mentioned in section 154 of the Income Tax Act, 1961, to correct “any mistake apparent from the record” is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an “error apparent on the face of the record”.

income which was inclusive of the income earned by the assessee under the head “Income from Other Sources” and “Income from House Property” as declared by him in the return of income and carried forward loss could have been set off against “Business Income” only. As already observed by us herein above the issue as to whether the said income earned by way of interest on Fixed Deposits, NSCs, would be available to the assessee to seek for set off as business loss or not under section 72 of the Act is a debatable issue and as such we are of the considered view that said issue could not have been gone into in a proceeding under section 154 of the Act. The “brought forward loss” came to be set-off against the total income earned by the assessee as per the assessment order dated 30.11.2006. As to whether income earned by way of interest would form part of total income so as to allow the assessee to seek set-off is an issue which will have to be gone into in detail and mere declaration in the return of income by assessee would not alter its status and as such it cannot be held that an error had occurred in the

assessment order so as to enable the Assessing Officer to invoke section 154 of the Act for rectification. In that view of the matter we are of the view that substantial question of law No.1 formulated herein above is required to be answered in the negative i.e., in favour of assessee and against the revenue.

Commissioner of Income Tax, Circle -1(3), Bangalore in No.DCIT.CC-1(3)/2007- 2008/154/Venkatesh are hereby set aside by answering the substantial question of law No.1 in favour of the assessee.

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