JAWAHAR LAL GUPTA,J. - (1.) CAN proceedings for rectification of an order passed under the provisions of the IT Act, 1961, be initiated on the basis of a judgment delivered by the jurisdictional or a superior Court after the passing of the said order ? This is the short question that arises for consideration in this case. A few facts as relevant for the decision of this case may be noticed.
(2.) THE respondent assessee filed her return for the asst. year 1987 88. She declared an income of Rs. 44,380. While computing the profit from business, the assessee claimed a deduction of Rs. 74,205 on account of loss in chit fund. The AO framed the assessment under S. 143(1)(a) of the IT Act, 1961. Vide order dt. 30th March, 1988, the income as declared by the assessee was accepted. A copy of this order is at Annexure P.4 with the appeal. On 4th April, 1989, a Division Bench of the Punjab and Haryana High Court decided the case of Soda Silicate and Chemical Works vs. CIT (1989) 179 ITR 588 (P&H) : TC 14R.1016. It was inter alia, held that the "contributions made to the chit fund could not be treated as revenue expenditure nor could the payment or receipt of any amount to and from the chit fund be treated as the business activity of the assessee. The transactions involved did not give rise to any income assessable to income tax nor any revenue loss in respect of which any deduction could be claimed". Thus, the order of the Tribunal disallowing the assessee's claim for deduction on account of loss in the chit fund was upheld. After the above decision, the AO issued a notice under S. 154 of the Act to the assessee. She was asked to show cause as to why the deduction on account of loss in chit fund be not disallowed. Finally, vide order dt. 13th Feb., 1992, a copy of which has been produced as Annexure P.3 with the petition, the order of assessment was rectified. The assessee's claim for deduction of Rs. 74,205 on account of loss in chit fund by debiting the amount to her P&L a/c was, thus, disallowed. As a consequence, the amount was added to the taxable income of the assessee. Aggrieved by the order of the AO, the assessee filed an appeal. It was dismissed by the CIT(A), Faridabad, vide order dt. 17th Sept., 1992. A copy of this order has been produced as Annexure P.2 with the appeal. The assessee challenged the order before the Tribunal. Vide order dt. 5th July, 1999, the Tribunal took the view that the issue regarding the admissibility of the deduction was 'debatable as Tribunal, Delhi Bench in the case after considering the decision of the Punjab and Haryana High Court in the case of Soda Silicate (supra) had taken a different view and, thus, it goes out of the purview of the provisions of S. 154. Aggrieved by the order of the Tribunal, the Revenue has filed the present appeal. It maintains that in view of the decision of the jurisdictional High Court, the Tribunal could not have held that the issue was debatable. The matter was placed before a Division Bench of this Court. Keeping in view the conflict in judicial opinion as expressed by different High Courts, the case was referred to the Full Bench. Thus, we have heard it. Mr. Sawhney, learned counsel for the Revenue, contended that in view of the decision in the case of Soda Silicate (supra), the contributions made by the assessee to the chit fund could not be treated as a revenue expenditure and no deduction could be claimed on account of the loss suffered on that account. Since the jurisdictional High Court had pronounced upon the matter, the order of the AO suffered from an 'error apparent from the record." Such an error could be rectified under S. 154 of the Act.
(3.) ON the other hand, Mr. Sanjay Bansal, learned counsel for the respondent assessee, contended that a decision delivered by a Court subsequent to the passing of the order cannot constitute an error apparent from the record so as to entitle the authority to proceed under S. 154.;