ORDER
Pramod Kumar, A.M.
1. This is a miscellaneous application, which seeks recall of the Tribunal’s order dt. 31st May, 2001 on the ground that it suffers from such fundamental errors as has vitiated the very conclusion arrived at by the Tribunal. It is stand taken by the Tribunal, in the impugned order, to the effect that “when shares are held as part of the trading assets, dividend on those shares would form part of ‘income from business'” which has been assailed in this petition.
2. The fundamental errors, so pointed out, are two-fold–first, that the Tribunal deviated from a series of earlier decisions on the same issue in which the same issue was decided in favour of the assessee; and–second, that the Tribunal wholly misread the Hon’ble Supreme Court’s judgment in the case of Western States Trading Co. (P) Ltd. v. CIT and Hon‘ble Bombay High Court’s judgment in the case of CIT v. Amritlal and Co. Ltd. , and gravely erred in applying the same on the facts of this case.
3. We have heard the parties, perused the material on record and duly considered factual matrix of the case as also the applicable legal position.
4. The scope of our powers under Section 254(2) is inherently limited to rectifying mistakes apparent from record. As to what is the scope of expression “mistake apparent from the record”, it is well settled that this expression refers to 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. In the landmark case of T.S. Balaram, ITO v. Volkart Bros. and Ors. , Hon’ble Supreme Court concluded that in the process of rectifying a mistake apparent on record, it was not open to go “into true scope of the relevant provisions of the Act” and that “a decision on a debatable point of law is not a mistake apparent from records’. In the case of CIT v. Ramesh Electric and Trading Co. , Hon‘ble Bombay High Court has held that in the garb of rectifying a mistake apparent on record, it is not open to Tribunal to review its orders. Their Lordships have observed that “the mistake which Tribunal is entitled to correct is not an error of judgment but a mistake which is apparent from record itself”. In the light of these binding judicial precedents, let us look at the facts of the case before us.
5. To decide whether or not a case is to be referred to a larger Bench, particularly when the Bench is satisfied, rightly or wrongly, that the issue in appeal is also covered by the binding judicial precedents of higher judicial forums, is inherently a subjective exercise. Even a co-ordinate Bench’s decision, when the same is per incuriam, does not have binding force of precedents. In the case of JKT Fabrics (P) Ltd. v. Dy. CIT (2005) 4 SOT 84 (Mumbai), this Tribunal has held that, “It is … beyond dispute that a decision which is per incuriam is not a binding judicial precedent”. In Punjab Land Development and Reclamation Corpn. Ltd. v. Presiding Officer, Labour Court (1990) 3 SCC 682 the Supreme Court explained the expression ‘per incuriam’ thus:
The Latin expression per incuriam means through inadvertence. A decision can be said generally to be given per incuriam when the Supreme Court has acted in ignorance of a previous decision of its own or when a High Court has acted in ignorance of a decision of the Supreme Court.
In other words, decision of a judicial forum in ignorance of a previous decision of a higher judicial forum is to be treated as per incuriam. Therefore, once the Tribunal comes to the conclusion, as it did in the case before us, that the decisions of the co-ordinate Benches were not binding as these decisions did not take into account the binding judicial precedents, it could be a possible view of the matter that those decisions of the co-ordinate Benches did not have any precedence value. In such a situation, a view can indeed be taken that the Tribunal can, without the binding force of those decisions of the co-ordinate Benches, take an independent view of the matter, and recommendation for constitution of Special Bench is not necessary. We hasten to add that even as such a course of action may perhaps be highly inappropriate or improper, it cannot be beyond the scope of, what can possibly be termed as, a debatable issue. What is really important is that a Bench of the Tribunal may indeed be under a bona fide impression that it is open to the Tribunal to take an independent view when co-ordinate Benches have not taken into account the ratio of binding judicial precedents, and that those Benches did not follow the binding judicial precedents. This impression could be erroneous on both the counts but then that is an error of judgment and not an error of omission. Therefore, in the given circumstances, not sending a matter to the larger Bench, howsoever erroneous as it may be, can only be an error of judgment and not something on which no two views are possible.
6. That leaves us with the question whether misreading of Hon’ble Supreme Court’s judgment in the case of Western States Trading Co. (P) Ltd. (supra) on the facts of the present case would constitute a mistake apparent from records.
7. In the Tribunal’s order, which has been called into question by way of this application, it has been observed that in the light of Hon’ble Supreme Court’s judgment in the case of Western States Trading Co. (P) Ltd. (supra) “when shares are held as part of the trading assets, dividend on those shares would form part of ‘income from business'”. It was. on this basis that the Tribunal came to the conclusion that dividend income is to be assessed as ‘income from business’. Having perused the Hon’ble Supreme Court’s judgment as carefully as we could, we are satisfied that it was nothing more than an error of omission that the Tribunal came to the conclusion that, in the light of the aforesaid judgment, dividend income from shares held as stock-in-trade is to be taxed under the head ‘Income from business’. We are of the view that this is an error of omission because the Tribunal apparently overlooked the context in which these observations were made. It is useful to reproduce para 8, extracts from which have been referred to and relied upon by the Tribunal in the impugned order of Hon’ble Supreme Court’s judgment which is as follows:
…It is well settled by the decisions of this Court that [see CIT v. Cocanada Radhaswami Bank Ltd. ] that Section 6 classifies taxable income under several heads but the scheme is that income-tax is one tax and Section 6 only classifies the taxable income under different heads for the purpose of computation of net income of the assessee. While Sub-section (1) of Section 24 provides for setting off the loss under one of the heads mentioned in Section 6 against the profits under a different head in the same year, Sub-section (2) provides for carrying forward of the loss for one year and setting off the same against the profits and gains of the assessee from the business in subsequent year or years. It was emphasized in the aforesaid decision that Sub-section (2) of Section 24 in contradiction to Sub-section (1) is concerned only with the business and not with its heads under Section 6 of the Act. Dividends are included in the meaning of income under Sub-section 100(1A) of Section 12 which is a residuary head.
(Emphasis, italicised in print, supplied by us now)
Having so taken note of the significance of the head under which an income is to be taxed and the nature of an income, for the purpose of taxability vis-a-vis for the purpose of eligibility for set off of losses incurred in earlier years under the head ‘Income from business’, Their Lordships went on to add, in the very next sentence, that:
Applying the principles adverted to before, the amount of dividends would form part of the income from business of the assessee if the shares were a part of the assessee’s trading assets and the assessee would be entitled to a set off as claimed against the loss from its business incurred in previous years.
Having so set out the principles, and coming back to the facts of the case that Their Lordships were in seisin of, Their Lordships, in the immediately following sentences, concluded that:
It does not appear to have been disputed at any stage that the shares formed part of the stock-in-trade of the share dealing business of the assessee. There could be no reason, therefore, for the assessee not being entitled to the set off claimed.
As the above observations clearly show, the observations made by Their Lordships were in the context of set off as an income from business and not in the context of taxability under the head Income from business’. The distinction between these two things was duly appreciated by Their Lordships in the above extracts from the judgment and Their Lordships did take note of the position that one set of provisions ‘classifies the taxability of income under several heads for the purpose of computation of net income’ while the other set of provisions is ‘concerned only with the business and not with its heads (of taxability)’. Their Lordships unambiguously noted the contradiction that Section 24(1) and (2), which dealt with carry forward of business losses in the 1922 Act, in the sense that while Sub-section (1) dealt with the loss incurred under the head ‘Income from business’, Sub-section (2) referred to income of the business and not under the head under which it is taxed. Due note of taxability of dividend income, under the residuary head of income from other sources, was duly taken. In effect, it was noted that a loss incurred under the head ‘Income from business’ could be set off against income under any other head as long as it was in the nature of the income of the business. Having taken note of this subtle distinction, Their Lordships proceeded to observe that “Applying the principles adverted to before, the amount of dividends would form part of the income from business of the assessee if the shares were a part of the assessee’s trading assets and the assessee would be entitled to a set off as claimed against the loss from its business incurred in previous years”. The observations by the Hon’ble Supreme Court were made, after taking due note of contradiction in legal provisions in the context of taxability vis-a-vis treatment for set off of losses incurred in preceding years, in the context of set off of losses incurred in preceding years. To treat these observations as relevant for deciding the head under which an income can be taxed cannot be anything but an error of omission to take into account the context in which the observations were made. The error made by the Tribunal, by holding that dividends are taxable under the head ‘Income from business’, is not capable of two views of the matter. The law is unambiguous. As Hon’ble Supreme Court has also observed, in the very case of Western State Trading Co. (P) Ltd. (supra) as also in umpteen other cases, dividends are taxable under the residuary head, i.e., Income from other sources. The law settled by the Hon’ble Supreme Court cannot be said to be capable of any other view being taken as taken by Their Lordships of Hon’ble Supreme Court. It cannot be a possible view of the matter that dividends are taxable under the head ‘Income from business’,
8. It is also important to bear in mind, and is beyond any doubt or controversy, that so far as application of Explanation to Section 73 is concerned, which was the subject-matter of consideration by the Tribunal, the relevant factor is the head under which an income is to be taxed and not the nature of an income. The exclusion clause in this Explanation categorically refer to “a company whose gross total income consists mainly of income chargeable under the head (emphasis, italicised in print, supplied by us now)… and these wordings leave no doubt that what is material is the head under which an income is to be taxed and not the nature of the income. The issue as to whether the provisions of Explanation to Section 73 will apply to the facts of a case is certainly somewhat complex an issue, but while adjudicating upon this rectification petition, we are not really influenced by complexity of the issue in appeal; we are only concerned about simplicity of the error which is said to have been committed. Once we come to the conclusion that Tribunal did err in coming to a particular conclusion, and the error is such an error on which no two views are possible, it is irrelevant whether the error was an error on a point of law or on a point of fact, or as to what is the degree of complexity of the issue. Elaborating upon the scope of the expression ‘mistake apparent from record’ and explaining the import of Hon’ble Supreme Court’s judgment in the case of Volkart Bros. (supra), a Full Bench of Hon’ble Punjab and Haryana High Court, in the case of R.A. Boga v. AAC , has observed:
The basic principle is thus clear. A mistake apparent from record means an ‘obvious or patent mistake’ or a ‘glaring and obvious mistake’. Hotly debatable issues are excluded; hardly debatable issues are included. The issue may be complicated, yet the mistake may be simple. It is a mistake apparent from record. The test is not complexity of the issue but simplicity of the mistake.
The question whether dividend income can be taxed as income under the head ‘Income from business’, in our considered view, is hardly debatable.
9. The next issue raised before us is whether a considered view of the Tribunal can be subjected to rectification of mistake. It is Revenue’s contention that the mistake, even if there be any, is a conscious one inasmuch as the Tribunal duly considered all aspects of the matter and then came to a particular conclusion. Whatever be the merits of such a conclusion, the conclusions so arrived at by the Tribunal cannot be unsettled as it would amount to reviewing the order of the Tribunal. We are not persuaded by this line of reasoning. Undoubtedly, all mistakes cannot be rectified under Section 254(2). The rectifiable mistakes are the mistakes which are obvious, patent, and glaring mistakes on which no two views are possible. Once a mistake fits in this category, as is the case before us, it is immaterial whether it is a conscious mistake or unconscious mistake. If a judicial body like this Tribunal applies its mind to a situation but reaches a wrong conclusion because of a simple mistake committed in the process on reasoning, on which no two views are possible, it will indeed be unreasonable to suggest that only because this mistake is committed after application of mind on a situation, this is not a mistake apparent from record. It cannot be termed as an error of judgment, but, in our humble understanding, it has to be termed as a mistake apparent from record resulting in a vitiated judgment. The difference between an error of judgment vis-a-vis an error apparent from record leading to an erroneous judgment may be thin but is too subtle to be ignored by a judicial body. The question of error of judgment can only arise when two views are possible and one of the views is adopted. That is not the case before us. It is a simple case of omission to take note of the context in which Hon’ble Supreme Court made certain observations and then interpreting those observations as complete exposition of law on that subject. Hon’ble Supreme Court itself, in the case of CIT v. Sun Engineering Works (P) Ltd. , has observed that, “it is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration, and to treat it to be complete law declared by this Court”. The Tribunal has ended up doing something which, as is the law laid down by the Hon’ble Supreme Court, is impermissible in law. That cannot but be a glaring, obvious and patent error and, accordingly, liable to be rectified under Section 254(2) of the Act. To suggest that a conscious mistake, even if that be a mistake apparent from record, cannot be rectified under Section 254(2) is somewhat devoid of logic and rationale. If a conscious mistake is a mistake apparent from record, there is no reason for not rectifying the same under the provisions of law. To err is human but there cannot be any justification for perpetuating an error. In his inimitable words, Justice Bhagwati, in the case of Distributors (Baroda) (P) Ltd. v. Union of India , had observed thus:
To perpetuate an error is no heroism. To rectify it is the compulsion of judicial conscience. In this, we derive comfort and strength from wise and inspiring words of Justice Bronson in Pierce v. Delameter : ‘a Judge ought to be wise. enough to know that he is fallible, and, therefore, ever ready to learn; great and honest enough to discard all mere pride of opinion and follow the truth wherever it may lead; and courageous enough to acknowledge his errors.’
We are, therefore, unable to accept Revenue’s contention that a considered opinion expressed by the Tribunal, after applying its mind to an issue in appeal, cannot be unsettled even if the mistake in the process of reasoning is a simple mistake apparent from record on which no two views are possible.
10. In the light of the above discussions, we are of the considered view that the Tribunal did commit an error, which is apparent from record, in holding that assessee’s dividend income could be taxed under the head ‘Income from business’. As we hold so, we are alive to the fact that the case before us is a case where the distinction between rectification of a mistake and review of an order may appear to be blurred to some extent, but then, just because it is a close judicial decision, cannot be a ground to justify any inertia on our part. Merely because the exercise of powers under Section 254(2) on the facts of this case is uncomfortably close to a review of the Tribunal’s order, we cannot justify negation of a remedy provided to the applicant under the scheme of the Act. As regards learned Departmental Representative’s reliance on Hon’ble jurisdictional High Court’s judgment in the case of Ramesh Electric and Trading Co. (supra), we do not find much substance in the same. Even in this jurisdictional High Court’s judgment, Their Lordships have observed that “the power of rectification under Section 254(2) of the IT Act can be exercised only when the mistake which is sought to be rectified is an obvious and patent mistake from record, and not a mistake which is required to be established by arguments and long drawn process of reasoning on the points on which there may conceivably be two opinions, as has been shown in the present case (before Their Lordships)”. In our considered view, the case before us falls in the first category and there cannot conceivably be two opinions on the question as to under which dividend income can be taxed. Treating the dividend income as ‘income from business’ for the purposes of chargeability is a mistake which is not capable of two views being taken in that respect. The stand taken by the Tribunal being directly contrary to the law settled by the Hon’ble Supreme Court and directly opposed to the clear provisions of law, is so fundamental that it goes to the root of the matter and may directly affect the conclusions arrived at by the Tribunal. The only ground of appeal in the Tribunal’s order, related to this issue and, therefore, the appeal has to be recalled in entirety. We make it clear that the decision that we have arrived at is on peculiar facts of this case and it should not be construed as laying down any general proposition, on the scope of Section 254(2) of the Act, which can be applied universally. With this caveat, we recall the impugned order passed by the Tribunal. We direct the Registry to fix the matter, before the regular Bench, for hearing de novo.
11. The rectification petition is allowed in the terms indicated above.