Madhya Pradesh H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in implementing the Tribunal’s order for the asst. yr. 1972-73, the ITO was justified in revising the assessment for the year 1973-74 in the absence of any rectification order having been passed by the AAC ?

B.L. Nema, for the Assessee : B.K. Rawat, for the Revenue

G.G. SOHANI, ACTG. C.J.:

By this application under s. 256(1) of the IT Act, 1961 (hereinafter referred to as “the Act”), the Tribunal, Indore Bench, Indore, has referred the following question of law to this Court for its opinion :

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in implementing the Tribunal’s order for the asst. yr. 1972-73, the ITO was justified in revising the assessment for the year 1973-74 in the absence of any rectification order having been passed by the AAC ?”

2. The material facts giving rise to this reference, briefly, are as follows : While framing the assessment for the asst. yr. 1972-73, the ITO made an addition of Rs.7,918 to the income of the assessee on account of under valuation of the closing stock. This addition was confirmed on appeal by the AAC. While framing the assessment for the asst. yr. 1973-74, the ITO did not make any corresponding increase in the value of the opening stock in the subsequent accounting year, even though the ITO had made an addition of Rs. 7,918 in the closing stock of the earlier accounting year. The assessee, therefore, preferred an appeal before the AAC who directed that necessary adjustment be made in the opening stock in the assessment for the asst. yr. 197374. Now, in the second appeal preferred by the assessee from the order passed in appeal by the AAC for the asst. yr. 1972-73, the Tribunal directed deletion of Rs. 7,918 made by the ITO on account of alleged under-valuation of closing stock. In the meanwhile, in pursuance of the order passed by the AAC relating to the assessment for the asst. yr. 1973-74, the ITO had passed a consequential order making the necessary adjustment in the opening stock. Thereafter, the ITO rectified the order, in view of the order passed by the Tribunal relating to the assessment for the asst. yr. 1972-73. Against this order of rectification, an appeal was preferred before the AAC which was dismissed. The second appeal preferred by the assessee was also dismissed by the Tribunal. Aggrieved by the order passed by the Tribunal, the assessee sought reference and it is at the instance of the Tribunal that the aforesaid question of law has been referred to this Court for its opinion, Shri Nema, learned counsel for the assessee, contended that, by the order passed by the AAC on the appeal arising out of the order of assessment passed by the ITO for the asst. yr. 1973-74, the ITO was directed to adjust the amount of Rs. 7,918 in the value of the opening stock for the accounting year in question and hence the ITO had no power to rectify the order passed by the AAC even though that order had become erroneous in the light of the order passed by the Tribunal in the second appeal relating to the asst. yr. 1972-73. The contention advanced on behalf of the assessee deserves to be upheld. An authority cannot proceed to rectify the mistake in the order of any higher authority. The ITO, no doubt, had jurisdiction under s. 154 of the Act to rectify a mistake in the order passed by him, but he had no jurisdiction to rectify the mistake in the order passed by the AAC. It is no doubt true that after the order passed by the Tribunal in appeal preferred by the assessee relating to the asst. yr. 1972-73, the order passed by the AAC directing adjustment in the opening stock deserved to be rectified as it became erroneous. But rectification in that order could be effected only by the AAC who had passed that order. The ITO had no jurisdiction to rectify the mistake in the order passed by the AAC. Consequently, the Tribunal was not right in holding that in implementing the Tribunal’s order for the asst. yr. 1972-73, the ITO was justified in revising the assessment for the year 1973-74, in the absence of any rectification order having been passed by the AAC.

For all these reasons, our answer to the question referred to this Court is in the negative and in favour of the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.

[Citation : 177 ITR 451]