A division bench of the Kerala High Court, in CIT v. Younus Kunju, held that the power to rectify errors under Section 154 of the Income Tax Act, 1961 cannot be invoked to levy interest under section 220 of the Act.
In the instant case, the settlement Commission issued an order under section 245D of the Income Tax Act. To give effect to the said order, the AO issued an order. Later AO found certain mistakes in the revised proceedings and issued notice under section 154 of the Act, to rectify those mistakes: (a) to charge interest under section 220 (2); to levy interest under section 245D (6A); (c) to withdraw interest earlier charged under section 244(1A) of the Act. Later, he did pass an order revising the tax. The Assessee contested this action before the appellate authorities.
The ITAT concluded the matter in assessee’s favor.
Before the High Court, Advocate P. K. Ravindranatha Menon, the Senior Counsel for the Revenue, has submitted that the Tribunal has erred in setting aside the AO’s order as incorrect. He argued that the Tribunal misdirected itself by observing that ‘the mistake apparent from record must be an obvious and patent mistake but not something which can be established by a long drawn process of reasoning. It negates section 154 of the Act.
Dismissing the department’s appeal, the High Court held that a judgmental error is not a reviewable error, nor can it be termed an error on the face of record. “Error in reasoning or, for that matter, in applying law to facts is an appealable error. And that power of appeal is the creation of a statute. An error apparent on the face of record, on the other hand, an error that strikes one “on mere looking at the record and would not require any long-drawn process of reasoning on points where there may conceivably be two opinions.”
“No error can be said to be apparent on the face of the record if it is not manifest or self-evident and requires an examination or argument to establish it. But there might be cases in which it may not work because an error of law might be considered by one Judge as apparent, patent, and self- evident; but might not be so considered by another Judge. Therefore, we ought to conclude that the legal contours of an error apparent on the face of the record cannot be exactly identified. In other words, an element of indefiniteness is inherent in its very nature and must be left to be determined judicially on the facts of each case.”
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