Wp/3919/2001 Of Express Newspapers Ltd Rep By v. Dy Commsnr Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 17.11.2009 CORAM: THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANAND THE HONOURABLE MR.JUSTICE M.M.SUNDRESH W.P.No.3919 of 2001Express Newspapers Limitedrep.by its ChairpersonMrs.Saroj GoenkaChennai-2... Petitioner -vs-1.The Deputy Commissioner of Income TaxSpecial Range, 121, Uthamar Gandhi SalaiChennai – 34.2.Income Tax Appellate TribunalA-2, Rajai Bhavan, Besant NagarChennai – 90. .. Respondents Prayer: Writ Petition filed under Article 226 of theConstitution of India seeking for the relief of issuance of writ ofcertiorari to call for the records in M.P.No.35/Mds/2000 inI.T.A.No.1199 of 1989 dated 30.11.2000 of the second respondentand quash the same. For Petitioner : Mr.V.Ramachandran,Sr.Counsel for M/s.Anita SumanthFor Respondents : Mr.K.Subramanian,Sr.Standing Counsel for Income-tax. ORDER K.RAVIRAJA PANDIAN,J. The Writ Petition is filed seeking for the relief ofissuance of writ of certiorari to call for the records inM.P.No.35/Mds/2000 in I.T.A.No.1199 of 1989 dated 30.11.2000 ofhttps://hcservices.ecourts.gov.in/hcservices/the second respondent and quash the same. The petitioner/assessee is a Company registered under theCompanies Act and derives income from various sources. In respectof the assessment year 1985-86 relevant to the previous year ended31[st] March, 1985, the petitioner filed a return of income on22.7.1985 declaring a net loss of Rs.32,99,289/-, which was revisedby filing a revised return on 26.2.1988 declaring a loss ofRs.32,80,700/- subject to the adjustment of the loss broughtforward from the earlier years. The first respondent – AssessingOfficer completed the assessment on 30.3.1988 and determined thetotal income at Rs.1,27,95,570/- by making various additions anddisallowing various claims made by the petitioner. 3. The petitioner filed an appeal before the Commissionerof Income-tax (Appeals), who by his order dated 31.1.1989 allowedthe appeal in part and rejected some of the claims made by thepetitioner. The petitioner filed further appeal before the Income-tax Appellate Tribunal. The Tribunal by its order dated 31.1.1997allowed the appeal in part which includes the loss claimed on thefollowing three heads, which are germane to the case: The revenue not satisfied with the order of the secondrespondent Tribunal, on 10.4.1997 filed a petition under Section256(1) of the Income-tax Act, 1961 (hereinafter referred to as "theAct") requiring the Tribunal to draw up the statement of the caseand refer the questions of law for determination by the High Court,which are as follows: "1. Whether on the facts and in thecircumstances of the case the Tribunal is justified inholding that the assessee was doing business inpotatoes and the loss of Rs.74.65 lakhs was allowableas a business loss? 2. Whether the Tribunal was justified inignoring the orders of the Settlement Commission, wherethe persons from whom the assessee is supposed to havemade purchases have categorically admitted that theirtransactions with the assessee was a bogus one? https://hcservices.ecourts.gov.in/hcservices/ 3. Whether the findings and conclusions of theTribunal on the facts and documents on record are notperverse? 4. Whether the Tribunal is justified in itsconclusion that the loss in purchase and sale of sharesand scraps was justified in law? 5. Whether the Tribunal had materials to cometo the conclusion that the assessee's dealings inpotato sales, shares and scraps was genuine? 6. Whether the Tribunal is justified in itsconclusion that the loss of Rs.17.97 lakhs stated tohave been incurred by the assessee in scrap dealings isallowable as deduction? 7. Whether the Tribunal is justified in holdingthat the claim of the assessee for deduction ofRs.20,000 as loss in investments was justified in law? https://hcservices.ecourts.gov.in/hcservices/ 3. Whether the findings and conclusions of theTribunal on the facts and documents on record are notperverse? 4. Whether the Tribunal is justified in itsconclusion that the loss in purchase and sale of sharesand scraps was justified in law? 5. Whether the Tribunal had materials to cometo the conclusion that the assessee's dealings inpotato sales, shares and scraps was genuine? 6. Whether the Tribunal is justified in itsconclusion that the loss of Rs.17.97 lakhs stated tohave been incurred by the assessee in scrap dealings isallowable as deduction? 7. Whether the Tribunal is justified in holdingthat the claim of the assessee for deduction ofRs.20,000 as loss in investments was justified in law? 8. Whether the conclusions of the Tribunal onthe various aspects are not perverse and opposed to thevarious documents that are available on record as wellas orders of the Settlement Commission? and 9. Whether the Tribunal on the facts and in thecircumstances of the case and in view of the orders ofthe Settlement Commission should not have remitted thematter for fresh consideration and decision on thebasis of the evidence available on record particularlythe findings of the Settlement Commission? 4. While the said reference petition is pending before theTribunal on 10.7.1997, the first respondent filed a petition underSection 254(2) of the Act in M.P.No.35 of 2000 in I.T.A.No.1199 of1989 for rectification of mistakes in the order of the Tribunaldated 31.1.1997. The petitioner filed reply objecting to the saidpetition. After hearing the parties, the second respondent –Tribunal by its order dated 30.11.2000 allowed the miscellaneouspetition in part. The correctness of that part of the order is putin issue in this writ petition. 5. In order to complete the narration of the facts, thoughit is not relevant to the present case, the following facts are tohttps://hcservices.ecourts.gov.in/hcservices/be stated: While the appeal filed by the petitioner was pending beforethe Commissioner of Income-tax (Appeals), the petitioner filed apetition before the Settlement Commission on 16.12.1988. Afterfiling of the said petition, the Commissioner of Income-tax(Appeals) passed an order in the appeal on 31.1.1989. Thepetitioner filed an appeal before the Tribunal against the order ofthe Commissioner of Income-tax (Appeals). When the appeal waspending before the Tribunal, the Settlement Commission passed anorder under Section 245(d)(1) admitting the petition forsettlement. The revenue carried the matter on appeal before theSupreme Court. The Apex Court by its order dated 11.1.1994(reported in (1994) 206 ITR 443) had set aside the order of theSettlement Commission. In the said order, the Apex Court directedthat it shall be open to the petitioner to file an appeal beforethe Income-tax Appellate Tribunal against the order dated 31.1.1989of Commissioner (Appeals) within one month and directed theTribunal to treat the appeal, if any filed by the petitioner asdirected as within time. Thereupon the appeal already filed andpending before the Tribunal was heard and disposed off on31.7.1997. In the Rectification Petition, the Revenue has pleadedthat the Tribunal's order on already pending appeal is against thedirection of the Supreme Court, which was rightly rejected by theTribunal. 6. In this writ petition, It is contended by thepetitioner that in the guise of passing order under Section 254(2)of the Act, the Tribunal virtually re-heard and reviewed theoriginal order, which is totally without jurisdiction. The powerunder Section 254(2) extends only to rectification of mistakeapparent on the face of the record. The second respondent hascommitted error of law and of jurisdiction in exercising the powerunder Section 254(2) of the Act in re-calling its earlier orderpassed in appeal. The Tribunal is a statutory authority and isexercising power conferred by the Act. It has no "plenary" powerand has no power to review its own decision. Even if the orderpassed by the Tribunal was incorrect or erroneous it would not fallwithin the connotation "mistake apparent on record". The orderpassed by the Tribunal under section 254 is final under sub-section4 of the Act. By invoking sub-section 2 of the said Section, thestatutory finality cannot be destroyed. The Tribunal in itsoriginal order considered all the relevant materials on record andpassed a very lengthy and detailed order in respect of the threeissues under consideration. That shows the Tribunal has has appliedits mind and passed the order. Such an order cannot be re-called byinvoking the power under Section 254(2) of the Act. 7. On the other hand, the learned counsel for the revenuesupported the order passed by the Tribunal by contending thatthere is palpable mistake on the part of the Tribunal in observingthat the borrowals of Express Newspapers from Traders and Serviceshttps://hcservices.ecourts.gov.in/hcservices/and the borrowals of Trades and Services from various creditors had not been questioned by the Department. So, is the observation ofthe Tribunal that the cold storages were functioning even afterNovember 1984 and Express had stocks worth Rs.1.5 Crores in thecold storages between November 1984 to February 1985. The Tribunalhas proceeded on the assumption that the Department has notquestioned the genuineness of the transaction of the assessee withthe bankers and the shareholders, which is also factuallyincorrect. In respect of the transaction in scrap dealings, theTribunal held that except the cash book and ledger all otherdocuments were produced and were available with the assessingofficer when he made the assessment and the Department did not findany discrepancy in the documents impounded later on. Thisassumption is also incorrect on facts. The mistake so committed bythe Tribunal was pointed out by the revenue in the rectificationapplication and the Tribunal has correctly rectified the mistakes,which are manifest on the face of the record. Hence, the orderimpugned requires no interference from this Court. 8. We heard the arguments of the learned counsel on eitherside and perused the materials on record. 8. We heard the arguments of the learned counsel on eitherside and perused the materials on record. 9. The scope and amplitude of Section 254(2) and theanalogous provision Section 154 of the Act have been considered bycatena of decisions of the Apex Court and other High Courts. Theuniform opinion of the Courts of superior jurisdiction is that apatent, manifest and self-evident error which does not requireelaborate discussion of evidence or argument to establish it, canbe said to be an error apparent on the face of the record and canbe corrected under Section 254(2). An error cannot be said to beapparent on the face of the record if one has to travel beyond therecord to see whether the judgment is correct or not. An errorapparent on the record means an error which strikes one on merelooking and does not need a long drawn out process of reasoning onpoints on which there may be conceivably two opinions. The errorshould not require any extraneous matter to show itsincorrectness. To put it differently, it should be so manifest andclear that no court would permit it to remain on record. If theview accepted by the court in the original judgment is one ofpossible views, the case cannot be said to be covered by an errorapparent on the face of the record. Section 254(2) specificallyempowers the Tribunal to amend at any time within four years fromthe date of an order, any order passed by it under Section 254(1)with a view to rectify any mistake apparent from the record eithersuo motu or on an application. In order to attract the applicationof Section 254(2), the mistake must exist and the same must beapparent from the record. The expression "mistake apparent fromthe records" contained in Sections 154 and 254(2) has wider contentthan the expression "error apparent on the face of the record"occurring in Order 47 Rule 1 of C.P.C. The restrictions on thepower of review under Order 47 Rule 1 of C.P.C. do not hold good inthe cases of Sections 254(2) and 154 of the Act. Section 254(2)https://hcservices.ecourts.gov.in/hcservices/does not confer power on the Tribunal to review its earlier order. Under the grab of rectification of mistake it is not possible for aparty to take further chance of re-arguing the appeal alreadydecided. What can be rectified under Section 254(2) is a mistakewhich is apparent and patent. The mistake has to be such for whichno elaborate reasons or enquiry is necessary. Where two opinionsare possible then it cannot be said to be a mistake apparent on therecord. When prejudice resulting from an order is attributable tothe Tribunal's mistake, error or omission, it is its bounden dutyto set it right. The purpose behind the enactment of Section 254(2)of the Act to amend any order passed under sub-section (1), if anymistake apparent from the records is brought to the notice of theTribunal, is based on the fundamental principle that no partyappearing before the Tribunal, be it an assessee or the Department,should suffer on account of any mistake committed by the Tribunal.This fundamental principle has nothing to do with the inherentpower of the Tribunal. If prejudice is resulted to the party, whichprejudice is attributable to the Tribunal's mistake, error oromission and which error is a manifest error, then the Tribunalwould be justified in rectifying its mistake. Rectification canbe made only when a glaring mistake of fact or law committed by theofficer passing the order becomes apparent from the record. Therectification is not possible if the question is debatable. A pointwhich was not examined on facts or in law cannot be dealt with as amistake apparent from the record. No error can be said to beapparent on the face of the record if it is not manifest or selfevident and requires an examination or argument to establish it.Where without any elaborate argument one could point to the errorand say here is a substantial point of law which stares one in theface, and there could reasonably be no two opinions entertainedabout it, is a clear case of error apparent on the face of therecord. Vide ASSISTANT COMMISSIONER OF INCOME-TAX VS. SAURASHTRAKUTCH STOCK EXCHANGE LIMITED (2008) 305 ITR 227; HONDA SIEL POWERPRODUCTS LTD. VS. CIT (2007) 295 ITR 466 (SC); HARI VISHNU KAMATHVS. AHMAD ISHAQUE (1955) 1 SCR 1104; CIT Vs. KESHRI METAL PVT.(1999) 237 ITR 165 (SC); DEVA METAL POWER (P0 LTD. VS. CIT, 2008(2)SCC 439; COMMISSIONER OF INCOME TAX VS. HERO CYCLES PVT.LTD. (1997)228 ITR 463 (SC); SATYANARAYAN LAXMINARAYAN HEGDE VS. MALLIKARJUNBHAVANAPPA TIRUMALE, (1960) 1 SCR 890; THUNGABHADRA INDUSTRIESLTD. VS. GOVERNMENT OF ANDHRA PRADESH REP.BY THE DEPUTYCOMMISSIONER OF COMMERCIAL TAXES, AIR 1964 SC 1372; BATUK K.VLYASVS. SURAT BOROUGH MUNICIPALITY, ILR 1953 BOM 191; UMMA SALMA(MRS.K.T.M.S) VS. CIT (1983) 144 ITR 890, 895 (Mad) ; KIL. KOTAGIRITEA AND COFFEE ESTATES CO.LTD. VS. ITAT (1988) 174 ITR 579 (Ker);CIT VS. R.CHELLADURAI (1979) 118 ITR 108 (Mad); STATE OF TAMIL NADUVS. THAKOREBHAI & BROS (1983) 52 STC 104 (Mad); JAINARAIN JEEVRAJVS. CIT (1980) 121 ITR 358, 363 (Raj); CIT VS. VARDHAMAN SPINNING(1997) 226 ITR 296, 302 (P&H); BATA INDIA LTD. VS. DY.CIT (1996)217 ITR 871 (Cal) and COMMISSIONER OF INCOME-TAX VS. PRAHLAD RAITODI, (2001) 251 ITR 833 (Gauhati). 10. From the various judgments of the Supreme Court abovereferred to and other High Courts, it is clear that the Tribunal'shttps://hcservices.ecourts.gov.in/hcservices/power under Section 254(2) is not to review its earlier order but 10. From the various judgments of the Supreme Court abovereferred to and other High Courts, it is clear that the Tribunal'shttps://hcservices.ecourts.gov.in/hcservices/power under Section 254(2) is not to review its earlier order but only to amend it with a view to rectify any mistake apparent fromthe record. What can be termed as "mistake apparent?". "Mistake"in general means to take or understand wrongly or inaccurately; tomake an error in interpreting; it is an error; a fault, amisunderstanding, a misconception. Mistake in taxation laws has aspecial significance. It is mostly subjective and the dividing lineis thin and indiscernible. "Apparent" means visible, capable ofbeing seen, easily seen, obvious plain, open to view, evident,appears, appearing as real and true, conspicuous, manifest,seeming. The plain meaning of the word "apparent" is that it mustbe something which appears to be ex-facie and incapable of argumentand debate. If such a "mistake apparent on the face of record" isbrought to the notice, Section 254(2) empowers the Tribunal toamend the order passed under Section 254(1). Amendment of an orderdoes not mean obliteration of the order originally passed and itssubstitution by a new order. What is mistake apparent on the faceof the record or where does a mistake cease to be mere mistake,and become mistake apparent on the face of the record is ratherdifficult to define precisely, scientifically and with certainty.An element of indefiniteness inherent in its very nature and itmust be discernible from the facts of each case by judiciouslytrained mind. Mere existence of a mistake or error would not per serender the order amenable for rectification, but such a mistakemust be one which must be manifest on the face of the record. 11. Having in mind the enunciation of the legal principleabout the scope and amplitude of Section 254(2) of the Act, let usconsider the facts of the present case. The rectification petitionhas been filed as if the original order of the Tribunal containscertain mistakes of fact. The first one is regarding the loss inpotato business. It is the case of the Department that the Tribunalin paragraph No.26 of the order has stated that the borrowals ofExpress Newspapers from Traders and Services and the borrowals ofTraders & Services from various creditors had not been questionedby the Department. This assumption of the Tribunal was not correctin view of the various correspondence; that the Tribunal relied onthe interim decree passed in the Civil suit filed by the petitionerin Calcutta High Court for damages from the cold storages andfurther relied on the admission made before the trial Magistrate bythe Director of the Cold Storage in a case filed by the Departmentagainst the petitioner, that it had cheated Express. The Tribunalbefore relying upon them did not give an opportunity to theDepartment to examine the evidence produced first time before theTribunal, which factum was much disputed by the petitioner bycontending that the Tribunal made available to the Department thepaper books containing those materials for its perusal and use andthat no objection was raised by the Department before the Tribunal. 12. The other mistake of fact pointed out by the Departmentin the rectification application is in respect of transaction inshare dealings. According to the Department, the Tribunal proceededhttps://hcservices.ecourts.gov.in/hcservices/on the assumption that the Department had not questioned the 12. The other mistake of fact pointed out by the Departmentin the rectification application is in respect of transaction inshare dealings. According to the Department, the Tribunal proceededhttps://hcservices.ecourts.gov.in/hcservices/on the assumption that the Department had not questioned the genuineness of the transaction of the petitioner with bankers andother share brokers. The assumption is not correct because theassessing officer has given a finding in his assessment order thatthe payments and receipts are interspersed in such a way that it isonly Rs.20 to Rs.30 lakhs which is being rotated though the totalpurchases are of the order of Rs.1.81 Crores. It is the furthersubmission of the Department that the other reasons given by theTribunal that the Bankers have acted as custodian or agent of thepetitioner was also not correct in view of the letter dated8.1.1985 of the Manager of the Lal Bazaar Branch of the Bank. Thestatement of the Manager of Catholic Syrian Bank is that theBankers had accommodated Express in their transactions and also thestatements of the share brokers admitting the transaction to bebogus; and that the Settlement Commission in the case of NarimanPoint Building Services Trading Private Limited, (a concernbelonging to the Express group) has also given a clear finding thatthese transactions of Express group with the share brokers inCalcutta were not genuine. 13. The other mistake of fact pointed out for rectificationis the transaction in scrap dealings. It is the case of theDepartment that the Tribunal held that except the cash book andledger, all other documents were produced and were available withthe assessing officer when he made the assessment and theDepartment did not find any discrepancy in the documents impoundedlater on. According to the Department, this finding is alsoincorrect in view of the fact that the Tribunal failed to noticethat none of the alleged long term contracts on the basis of whichthe petitioners were stated to be bound to sell scraps wereproduced; that the alleged suppliers of the scrap were not alsoable to produce any documents such as godown receipts, evidence ofhaving kept the stock in the godown, transportation charges, etc.;and that the Tribunal ignored the penalty order for 1985-86 givesthe details of the various discrepancies that were noticed by theDepartment in order to conclusively establish that the transactionwas bogus. Loss in potato business: 14. The first issue is loss of potato business. Theassessee claimed Rs.74,65,519/- as loss in the business, which hasbeen rejected both by the assessing officer as well as theCommissioner of Income-tax (Appeals). The Tribunal has consideredthe issue in its order from paragraph No.2 onwards. The factsleading upto the filing of appeal before the Tribunal, thereasoning of the assessing officer to reject the claim, the groundstaken by the petitioner before Commissioner (Appeals), thereasoning of the Appellate order in confirming the order ofassessment; the evidence and the relevant material contained in thePaper Book VII and the evidence of one Gopal Agarwal at pageNo.1846 of the Paper Book No.VII have been referred in paragraphhttps://hcservices.ecourts.gov.in/hcservices/Nos.3 to 19 of the Tribunal's order. 15. In paragraph No.20 of the Tribunal's order, thepetitioner's contention has been summarised. The contention sosummarised was to the effect that the lower authorities have notproved that the purchases and sales and the related moneytransaction taken separately were bogus, that the lower authoritieshave not proved first that the funds deployed by the petitioner tomake purchases came back to the petitioner as expeditiously aspossible; that the lower authorities have not proved that it wasthe petitioner's funds that came back to it in the guise of notsale proceeds; that the main source of income of the petitioner isincome from three properties at Madras, Bombay and Delhi and thusthe petitioner is getting fixed income; that the Department hasalleged that the petitioner had generated bogus loss to reduceproperty income; that this allegation is totally unfounded; thatnormally the practice of buying losses is resorted to only in thefag end of the accounting year or when there is a sudden spurt inthe profits or when there is a wind fall and that is not the casehere; that the contracts for the purchases were entered into asearly as in October 1984 and the payment for the purchases startedin November 1984; that the payments have all been made by accountpayee cheques and thus the transactions are contemporaneous; andthat the cold storages were closed as per statutory provisionduring the relevant period has not been proved by the Department. 16. The contention of the Department has been extracted inparagraph No.21 of the order which reads that the assessee hasfailed to discharge the primary onus in regard to purchase and saleof potatoes and the loss arising in its transaction has not beenfully established;that the purchase and sales have taken place whenthe cold storages ought to be closed under the relevant legislationand that the assessee's own money was circulated twice once at thetime of purchase of potatoes and again at the time of sales ofpotatoes; and that the Department has established beyond doubt thatthe assessee's money has come back to it. 17. The explanation offered on behalf of the petitioner hasbeen extracted in paragraph No.22 of the order of the Tribunal andthe submission made on behalf of the Department in rejoinder hasbeen stated in paragraph No.24. Ultimately after analysing all thesubmissions, counter submissions with reference to material andevidences available on record, the rival submissions are analysedin paragraph Nos.25 and 26 as follows: "25. We have gone through all the relevant factsand arguments of the rival parties. In regard to the losssuffered by the assessee on Potatoes business, it is anaccepted fact that for doing potato business the assesseeengaged Shri Gopal Agarwal for sale and purchase of thepotatoes. Gopal Agarwal was interrogated on oath by thehttps://hcservices.ecourts.gov.in/hcservices/Department and Shri Gopal Agarwal had accepted this fact. "25. We have gone through all the relevant factsand arguments of the rival parties. In regard to the losssuffered by the assessee on Potatoes business, it is anaccepted fact that for doing potato business the assesseeengaged Shri Gopal Agarwal for sale and purchase of thepotatoes. Gopal Agarwal was interrogated on oath by thehttps://hcservices.ecourts.gov.in/hcservices/Department and Shri Gopal Agarwal had accepted this fact. Shri Gopal Agarwal has received commission as well asstorage charges which is not also disputed by theDepartment. The fact that Gopal Agarwal approached theSettlement Commission and filed a petition is alsoestablished and the withdrawal of petition on doubtfuland debatable submissions is also a fact on record. Theassessee sued Shri Gopal Agarwal in the Court of Law andobtained a decree for Rs.80 lacs is also beyond doubt.In the prosecution proceedings, Shri Gopal Agarwalsubmitted before the Magistrate that he or hisinstitutions have tried to cheat the assessee is alsoborne out from records. Allsales and purchase works havebeen done by Gopal Agarwal. Agreements with purchasersand sellers of Potatoes have also been made by GopalAgarwal. It is only Shri Gopal Agarwal who can identifythe respective traders to whom the amount was paidthrough bearer or Account Payee cheques. The Departmenthas not questioned Gopal Agarwal or examined the variouspurchasers and sellers of Potatoes in the presence ofGopal Agarwal and, therefore, the parties examined by theDepartmental Officer are not free from doubt. Thesignatures of the sellers and purchasers could betallied with the signatures available on agreements andonly then the fact whether the cheques were issued to thesame parties or not could be established. 26. In regard to the objection of employment offunds and circulatory in nature it is observed that inthe type of business and the peculiar circumstances, thiscannot be totally refuted. Besides this, the loanobtained by the assessee has not been doubted at anystage by the Department. The loan amount has come throughAccount Payee Cheques and/or through Bank Drafts. TheDepartment has failed to establish non-genuineness of anycredits obtained by the assessee whether it is from IENewspaper (Madurai) Pvt.Ltd., - Rs.46,50,000/-; NarimanPoint B.S. and T.P.Ltd., Rs.31,61,000/- on Traders andServices – Rs.72,89,000/-. No where in the AssessmentOrder, it has been mentioned or proved that the loansobtained by the assessee is not genuine or not proved,genuine, nor it is apparent from the Assessment Orderthat the Assessing Officer of these parties were informedfor conducting necessary enquiries on this account. Northe Assessing Officer has enquired about the source ofthese funds. Similarly in the case of K.K.Sukhani or hisproprietary concern this basis issue was raised by theAssessing Officer. It is also observed that the assesseehad produced the relevant documents which were impoundedby the Department as and when produced and that thesedocuments at no stage were objected to by the Departmentor proved to be wrong. Under the circumstances, we failto understand as to how the Department can say that thehttps://hcservices.ecourts.gov.in/hcservices/loan obtained was from Hawala conductors. If the loan is proved to be not genuine, the conclusions drawn by theassessing officer on this account are baseless." 18. After analysing as above, ultimately the Tribunal inparagraph No.27 has recorded its findings as follows: "After examining the full facts, we are of theopinion that the objections raised by the learnedStanding counsel for the Department have been clearlymet by the Learned counsel for the assessee. We aretherefore, of the opinion that the disallowance of theloss suffered by the assessee on account of businesstransactions on Potatoes is not proper. This loan isheld as suffered in the nominal course of businessactivities and, therefore, to be allowed. proved to be not genuine, the conclusions drawn by theassessing officer on this account are baseless." 18. After analysing as above, ultimately the Tribunal inparagraph No.27 has recorded its findings as follows: "After examining the full facts, we are of theopinion that the objections raised by the learnedStanding counsel for the Department have been clearlymet by the Learned counsel for the assessee. We aretherefore, of the opinion that the disallowance of theloss suffered by the assessee on account of businesstransactions on Potatoes is not proper. This loan isheld as suffered in the nominal course of businessactivities and, therefore, to be allowed. Loss in Shares & Securities: 19. In Paragraph No.28 of its order, the Tribunal discussedthe assessment order on the issue of "loss in shares andsecurities"; that the petitioner's statement of facts before theCommissioner of Income-tax (Appeals) and his discussion on thisissue is referred to therein. The contention of the assesseerelating to both the purchases and sales of the shares has beendiscussed thereafter in paragraph Nos.29 to 33 of the order. Theargument on behalf of the Department was summarised in paragraphNo.34 and the rebuttal argument of the assessee has been stated inparagraph No.35. The analysis of the arguments with reference tomaterial on record is available at paragraph No.36, in which it washeld that the fact that all the purchases and sales of shares weregot done through bank channels are not doubted; that the assesseehas paid custodian charges too to the Bank who has acted as anagent of the assessee; that the Bank in turn has taken necessarypermission from its Head Office for acting as an agent of theassessee; that the source of the amount used for purchase of shareshave not been doubted by the Assessing Officer; that this, in turn,brings out the fact that the Department has accepted thegenuineness of the loans raised by the assessee for the purchase ofthe shares; that the arguments or objections raised by the learnedSr.Standing Counsel for the Department have been clearly met by thelearned counsel for the assessee; that the non-making of entries(in the Souda Bahi) in the books of the brokers would not make muchdifference so far as the transaction conducted by the assessee inregard to purchase and sale of the shares; that the AssessingOfficer has extensively examined the representatives of thebrokers, copies of which were supplied by the assessee; that noneof these have denied the transactions conducted by the assesseeand, therefore, the genuineness of these purchases and sales cannotbe doubted. After so analysing the facts, the Tribunal hashttps://hcservices.ecourts.gov.in/hcservices/recorded a finding in paragraph No.37 to the following effect: "37. In view of the above discussions,we are of the opinion that the assesseegenuinely suffered the loss in the tradingactivities of purchase and sale of shares whichcannot be disallowed nor these transactions canbe held as speculative in nature. Theconclusions drawn by the CIT (Appeals) on thisaccount are considered as unreasonable andunjustified. Hence, this ground of appeal isdecided in favour of the assessee." Loss in scrap dealings: "37. In view of the above discussions,we are of the opinion that the assesseegenuinely suffered the loss in the tradingactivities of purchase and sale of shares whichcannot be disallowed nor these transactions canbe held as speculative in nature. Theconclusions drawn by the CIT (Appeals) on thisaccount are considered as unreasonable andunjustified. Hence, this ground of appeal isdecided in favour of the assessee." Loss in scrap dealings: 20. The next issue is "loss of scrap dealings. TheTribunal in paragraph Nos.38 and 39 of its order referred to thereasoning given by the assessing officer in the assessment orderand that of the Commissioner of Income-tax (Appeals). The facts ofthe case has been discussed in paragraph No.39. The contentionsadvanced on behalf of the assessee before the Tribunal has beenstated in extenso in paragraph Nos.40 to 44. The submission made onbehalf of the Department has been extracted in paragraph No.45. Inparagraph No.46, the issue has been discussed by the Tribunal. Thediscussion proceeded that the assessing officer has disallowed theloss suffered by the assessee on transactions of scrap mainly onthe ground of non-production of books of accounts; that except thecash book and the ledger book all other relevant documents wereproduced and available with the assessing officer; that from thedocuments placed on record, it was observed that the assessingofficer has examined the various scrap dealers on oath; that theirstatements duly recorded are available in Vol-V from page Nos.1089to 1134 of the Paper Book; that all the traders examined by theassessing officer or his authorised representative have confirmedthe transactions conducted with the assessee; that the remainingbooks of accounts were produced before the officer (Inspection),Calcutta on 6.2.1989; that these remaining books of accounts wereimpounded by the ADI (Investigation), Calcutta; the list of whichis available at page 1058 and 1089 of the Paper Book Volume IV;that though the assessments had already been completed before thedate of impounding of the books of accounts, yet if no discrepancywas observed as detected, the same could have been brought onrecord at the time of proceedings before the Settlement Commission;and that since none of such defects or discrepancies were observedor reported, it is proved that whatever stated by the assessee atearlier stages are supported by the documents seized by theDepartment on earlier occasions as reasonable and genuine. 21. After so discussing the issue, the Tribunal hadrecorded a finding in paragraph No.47 as follows:https://hcservices.ecourts.gov.in/hcservices/ "It is also observed that since all the Tradershave confirmed the dealings with the assessee. TheDepartment has not considered it reasonable evento intimatethe transactions to the respective Assessing Officers.Since the matter, in question, is quite old and almost 12years have already gone, no useful purpose would be servedif the matter, in question, can be referred back. Since thematerial available on record and all the supportingdocuments clearly establish the fact of scrap dealings andall transactions are through Account Payee cheques, it canbe genuinely believed that the assessee has suffered losswhich should be allowed as part of normal businessactivities. We are, therefore, of the opinion that the CIT(Appeals) is not justified in not allowing the losssuffered by the assessee on this account." 22. From the above extractions and narration, it is clearthat in respect of all the three points, the Tribunal hasconsidered and discussed all the contentions raised and argued byboth the parties and ultimately recorded a finding. A clearadjudication has been made. A mere isolated or stray sentence"Nowhere in the assessment order it has been mentioned or provedthat the loan obtained by the assessee is not genuine or not provedgenuine; the Assessing Officer not doubted the transaction; thatthe books of accounts were available with the Assessing Officer"have been projected as a mistake apparent on the face of therecord. It is pertinent to state that the Tribunal has not come tothe conclusion that the petitioner is entitled to these claimssolely resting upon the above observations which is regarded asmistake of fact by the Department. The Tribunal has given its ownreasoning in the earlier and subsequent sentences of the aboveobservations, to come to the conclusion. The issues have beenelaborately discussed and decided on merits. The order of theTribunal may be an erroneous order with which we are not expressingany opinion, which can only be rectified or modified or set asidein the procedure known to law, but not in a petition under section254(2). A patent mistake and a self evident error, which strikesone on mere looking at it, which does not require elaborateddiscussion or argument to establish can only be rectified underSection 254(2). The order passed in the rectification petition inour view is one passed in disguise of appeal. Even in the questionof law framed and sought to be referred for the determination ofthis Court in the reference petition filed under Section 256(1) ofthe Act by the Department, the so called alleged mistake apparenton the record which is taken as a point for filing a miscellaneouspetition under Section 254(2) has not been stated. One opiniongiven on consideration of materials by the Tribunal is reversedby giving other opinion in the rectification order, which isimpermissible and against the legislative intent. 23. Learned Senior Standing Counsel appearing for thehttps://hcservices.ecourts.gov.in/hcservices/revenue relied on a judgments of the Allahabad High Court in the case of COMMISSIONER OF INCOME-TAX VS. U.P.SHOE INDUSTRIES reportedin (1999) 235 ITR 663; Rajasthan High Court in the case of CHAMPALAL CHOPRA VS. STATE OF RAJASTHAN reported in (2002) 257 ITR 74 andCOMMISSIONER OF INCOME-TAX VS. S.S.GUPTA reported in (2002) 257 ITR440 and the Supreme Court in the case of HONDA SIEL POWER PRODUCTSLTD. VS. COMMISSIONER OF INCOME-TAX reported in (2007) 295 ITR 466. 24. In the case of COMMISSIONER OF INCOME-TAX VS. U.P.SHOEINDUSTRIES reported in (1999) 235 ITR 663, the facts are that in anappeal before the Income-tax Appellate Tribunal the assessee hadraised a ground regarding the disallowance of development rebateand relief under section 80J of the Income-tax Act, 1961. TheTribunal while deciding the said appeal pertaining to theassessment year 1973-74 decided the said ground has becomeredundant, as the relief was granted by the assessing officer in anapplication under Section 154. Subsequently, it transpired thatthe application under section 154 of the Act moved by the assesseewas rejected. Pointing out this mistake, an application was filedby the assessee under Section 254(2). The Tribunal recalled itsearlier order in respect of that issue and restored the matter todecide that issue. When that order was questioned, the DivisionBench of the Allahabad High Court has held that the order of theTribunal that the issue becomes redundant because of the Income-taxofficer had already passed an order under Section 154 of the Actgiving relief to the assessee was a mistake apparent from therecords. 25. In the case of CHAMPA LAL CHOPRA VS. STATE OF RAJASTHANreported in (2002) 257 ITR 74, a survey was conducted at thepremises of the assessee the karta of a Hindu undivided family,under section 133A, on August 18, 1979. The Income-tax Officerafter investigation assessed the income of the assessee and made anaddition of Rs.80,000 in the income for the assessment year 1978-79. The appeal against the order of assessment was dismissed by theAppellate Assistant Commissioner. On further appeal, the Tribunaldismissed the same by order dated July 26, 1984. The assessee filedan application under section 254(2) of the Income-tax Act, 1961,for rectification of the mistake. It was, inter alia, pointed outin the rectification application that the assessee was assessed asa Hindu undivided family an entirely different entity distinct fromthe assessee in his individual capacity, that the Hindu undividedfamily, was not the owner of the diaries and other papers even atthe time of search and, therefore, the additions which were made onaccount of alleged entries recorded in the said papers in theincome of the Hindu undivided family, were erroneous. Many otherobvious mistakes were also detailed in the application. TheTribunal agreed with the assessee and admitted that there werecertain mistakes of fact. The Tribunal was of the view that as thejudgment had proceeded on a wrong assumption of facts, it wasexpedient in the interest of justice to recall the order and postthe appeal for rehearing. A writ petition filed by the Departmenthttps://hcservices.ecourts.gov.in/hcservices/was allowed by a single judge. On appeal , the Division Bench allowing the appeal, held that the Tribunal granted rectificationand posted the case for rehearing, having admitted that its orderhad proceeded on the assumption of wrong facts. Hence the exerciseof jurisdiction of the Tribunal under Section 254(2) was in orderto correct a mistake apparent in the record. 26. In the case of COMMISSIONER OF INCOME-TAX VS. S.S.GUPTAreported in (2002) 257 ITR 440, the assessee, an individual was apartner of seven firms. The Tribunal held that the seven firms inwhich the assessee was a partner were benami for the assessee andthe assessee was the real owner of such firms. On this finding theincome of all the seven firms for the assessment years 1983-84 to1987-88 was clubbed with the income of the assessee as anindividual. The appellate order of the Tribunal was passed onFebruary 23, 1999. In recording the aforesaid findings, theTribunal had primarily relied on a letter dated January 11, 1999,received from the Assessing Officer, by which it was informed thatin the assessments relating to the firms, the firms were held to benot genuine but benami of the assessee. A miscellaneous applicationwas moved by the assessee bringing to the notice of the Tribunalthat the hearing of the appeals was completed on January 7, 1999,and the letter dated January 11, 1999, which was after the appealswere heard, was never disclosed to the petitioner. Thereupon theTribunal recalled its order on the point of clubbing and directedthe appeals to be placed for hearing in due course. On furtherappeal to the High Court, dismissing the appeal, held that afinding of fact against the assessee had been reached on the basisof material which was conveyed to the Tribunal after the hearingwas over, and thus the Tribunal inadvertently took intoconsideration such information which was never disclosed to theassessee and without affording any opportunity to him to explainthe information transmitted to the Tribunal which vitiated theorder founded on such information. This was a mistake obvious fromthe record. 27. In the case of HONDA SIEL POWER PRODUCTS LTD. VS.COMMISSIONER OF INCOME-TAX reported in (2007) 295 ITR 466, theassessee had taken a term loan in foreign exchange for the importof machinery. On account of fluctuation in the foreign exchangerate, the liability of the assessee to repay the loan in terms ofIndian rupees went up. The assessee enhanced the figure of writtendown value of the block of assets and claimed depreciationaccordingly. The Assessing Officer held that revision in actualcost was not permissible but on appeal the Commissioner (Appeals)held that the claim was admissible. On appeal, the AppellateTribunal held that the revision was not permissible unless actualpayment had been made by the assessee, since under section 43Aactual payment was a condition precedent for availing of thebenefit. The assessee moved the Appellate Tribunal forrectification of its order, pointing out that the earlier order ofa co-ordinate Bench of the Tribunal in which it was held that thehttps://hcservices.ecourts.gov.in/hcservices/enhanced depr