S K G Refractories Limited, Hyderabad, Hyderabad V. ACIT, Circle-3(2), Hyderabad, Hyderabad

ITA 342/Hyd/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8610 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2006-2007
• Appeal Filed On: 26-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T. SUNIL GOUTAM
• Keywords: Revised return
• Section: 147; 28; 154; 43B; 139; 143(3); 139(5); 143(1); 139(4); 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad (Through Video Conferencing) Before Shri A. Mohan Alankamony, Accountant Member AND Shri S.S. Godara, Judicial Member O R D E R Per S. S. Godara, J.M. This assessee’s appeal for A.Y. 2006-07 arises from the Commissioner of Income Tax (Appeals) – 10, Hyderabad’s order dated 09.08.2016 in case No.0412/CIT(A)-10/2015-16 involving proceedings u/s 154 of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused. 2. The assessee’s seventeen substantive grounds raised in the instant appeal challenge correctness of both the lower authorities’ action declining its section 154 rectification plea regarding interest payment deduction of Rs.37,75,104/- involving M/s. Sicom Limited. It therefore pleads to have rightly set into motion ITA No.342/Hyd/2017 Assessment Year: 2006-07 SKG Refractories Limited, Hyderabad – 500063. PAN : AADCS4040G. Vs. The Asst. Commissioner of Income Tax, Circle 3(2), Hyderabad. (Appellant) (Respondent) Assessee by: Shri Samuel Nagadesi. Revenue by : Shri T. Sunil Goutam. Date of hearing: 16.02.2022 Date of pronouncement: 18.02.2022 ITA No.342/Hyd/2017 2 section 154 rectification which was wrongly rejected in the Assessing Officer’s order dated 05.10.2009 as upheld in the CIT(A)’s lower appellate discussion as follows : “7. Ground No.2 is with regard to allowability of payment of funded interest as deduction u/s 43B. The assessee relied on explanation 3 (c) to section 43B inserted by the Finance Act, 2006 w.e.f. 01.04.1989. As per the explanation 3(c) deduction of any sum being interest payable under clause (d) of Section 43B shall be allowed if such interest has been capital paid and any interest referred to in that clause which has been converted into a loan 0: borrowing shall not be have been capital payable. The assessee relied on the explanatory notes to the Finance Bill, 2006 in support of his claim that interest portion converted into a loan will be allowed as a deduction in the year of actual payment. In the written submissions, the assessee submitted mat interest was paid in four instalments totaling to Rs.37,75,104/- from 12.08.2015 to 15.02.2006. It was claimed that this amount was not taken into account while filing the return of income as the same was in the nature of principal at the time of payment. As the amendment in the form of explanation 3(c) w.e.f 01.04.1989 introduced by Finance Act, 2006, the assessee relied on the decision of Hon'ble Supreme Court in the case of Venkatachalam (MK) Vs. Bombay Dyeing & Mfg. Co. Ltd, (958) 34 ITR 143 (SC) and lAC Vs Ravi Namboodripad (VM) (1974) 96 ITR 73 (SC). 7.1 It is seen that the return of income was filed on 29.11.2006 much after the amendment to section 43B by way of insertion of explanation 3(c). The assessee ought to have filed revised return of income on or before 31.03.2008 u/s 139(5) of the IT Act. Instead of filing revised return, the assessee filed petition u/s 154 on 25.02.2009. The assessee again filed letter dated 02.03.2010 for modification of the order u/s 154, which was disposed off by the Assessing Officer on 11.07.2011. 7.2 The provisions of sec. 154(1)(b) reads as under: 154(1)(b) "With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 176 may,- (b) amend any intimation or deemed intimation under sub-section (1) of section 143;" 7.3. The provisions of section 43B(5) were amended by Finance Act, 2005 w.e.f. 01.04.2006. The assessment year consideration is 2006- 07. If the assessee wanted to claim any deduction he ought to have filed revised return of income before the due date. A reading of these provisions indicate that w.e.f, 01.04.1999, additional claims cannot be entertained and rectified u/s 154. In this case the assessee omitted to make a particular claim and this can be remedied only by ITA No.342/Hyd/2017 3 way of filing of revised return and not by rectification of the intimation already sent to the assessee. There are several judgments, wherein it was decided that such kind of mistake is not apparent from record and cannot be rectified u/s. 154. In the ease of M. Far Hotels Ltd. vs CIT Hon'ble High Court of Kerala reported in 361 ITR 442 held as under: "1. The admitted facts that led, tv-filing of the present appeal are as under: When the appellant had to file the return. pertaining to the assessment year 2005-06 on 27-10-2005, completion of the assessment proceedings for the earlier assessment year 2004'05 was pending. He declared Rs.54,40,440 as income while filing the return of income because of waiver of interest by the creditor who lent money to the appellant – assessee. He was also under the impression that the interest expenditure of Rs.54,40,440/- claimed for the assessment year 2004-05 would be allowed. Unfortunately, the interest expenditure for the assessment year 2004-05 was disallowed by the Department and the appellant – assessee did not raise any agitation by filing an appeal, etc. Therefore, the assessment proceedings so far as 2004-05 is concerned reached finality. 2. Coming to the assessment year 2005-06, no revised return came to be filed declaring income under different heads, which could have been done by the appellant/ assessee on or before 31-3- 20070, in spite of the knowledge of disallowance of the interest expenditure of Rs.54,40,440 for the previous year 2004-05. The Department computed the tax payable based on the return. of income filed by the appellant-assessee on 27-10-2005, and issued a demand notice indicating Rs.93,016 as shortfall tax to be paid. 3. Subsequently, an application under section 154(1)(b) of the Income-tax Act came to be filed seeking rectification of mistake alleged to have crept in the intimation sent by the Department demanding short fall tax. The entire problem faced by the appellant-assessee seems to be his own creation. He has not acted properly in time in respect of both the assessment years. Apparently, as on 27-10-2005, when the return of income for the assessment year 2005-06 came to be filed, computation of tax for the earlier year was not yet processed. The belief or impression of the assessee that interest expenditure would be allowed for the year 2004-05 proved to be wrong. He ought to have challenged the said disallowance. This was the first wrong step of the appellant. Later, though the year had an opportunity to file revised return in spite of information of disallowance of interest expenditure for the previous assessment year. This is the second wrong step taken by the appellant - assessee. 4. The appellant-assessee kept quiet till the intimation was sent under section 143(1) of the Act demanding deficit fax. Assessment ITA No.342/Hyd/2017 4 by the Department would be based on if the material or information indicated in the return of income filed by the assessee. Demand of deficit tax is also based on the details found in the return. of income submitted by the assessee on 27-10-2005. So far as the calculation or method of computation and the deficit of tax with reference to the details, the appellant – assessee has no quarrel. 5. The case of the assessee is, they have wrongly shown Rs. 54,40,440 as income, in spite of having the benefit of waiver of interest for the assessment year 2005-06 on account of their impression that for the earlier year 2004-05 they would get the benefit of interest expenditure. At least when the disallowance of interest expenditure came to their knowledge, they could have revised their returns which apparently they did not do so. By this process, the appellant-assessee though did not get the benefit of the interest expenditure for the assessment year 2004-05, he had to pay again a tax of Rs. 51,40,440 though they had the benefit of waiver of interest. Instead, the appellant - assessee sought rectification of mistake. by filing an application under section 154(l)(b) of the Income Tax Act, which reads as under: "154. Rectification of mistakes, --(1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may ,...”. (b) amend any intimation or deemed intimation under sub-section (1) of section 143.” 6. Reading of the above direction clearly indicates that rectification of mistake apparent on the record can be allowed by the Department which includes amendment of any intimation or deemed intimation under sub-section (1) of section 143 of the Act. Intimation under section 143 of the Act relates to excess payment of tax or short fall of tax. This intimation would be sent at the relevant point of time only in case there is refund of excess tax paid or short fall of tax. Apparently, it was a case of short Jail in payment of tax. This short fall was calculated properly and correctly based on the return. of income declared by the assessee. Therefore, there was no mistake or error apparent on the face oj record to the intimation sent by the Department indicating the exact short fall of tax to be paid. This cannot be treated as a mistake apparent on the face of record to compel the Department to amend the intimation. The mistake on the part of the appellant-assessee in not challenging, the assessment order for 2004-05 and not filing revised rerum for 2005-06 has led the assessee to this situation. The entire difficulty in which the. appellant is put in is on account of his mistake which cannot be treated as a mistake apparent on the face of record so far as the intimation sent. by the Department and the same cannot be allowed to be rectified treating it as a mistake in the intimation of the Department. Therefore, the Tribunal was justified in rejecting the claim of the appellant – assessee ITA No.342/Hyd/2017 5 though the Commissioner of Income-tax (Appeals) allowed the same. 7. In that view of the matter, we are of the opinion, the appeal deserves to be dismissed. Accordingly, the appeal is dismissed. 7.4 In the case of Harinder Singh vs. ITO, ITAT, Chandigarh, reported in 49 SOT 464 it was held that a new contention was made which is exemption u/s 10(37) be considered and treated as return of income wherein no fundamental material exists for the purpose of rectification of mistake apparent from the records such contention of the appellant is contrary to the scheme of the Act. The gist of the decision is as under : '--RECTIFICATION--MISTAKE APPARENT Making fresh claim not made in return of income-- The assessee filed its return of income on 31-3-2008 disclosing total income at 3,13,760 after claiming exemption of Rs.35,85,830 under section 10(37) in respect of enhanced compensation on acquisition of land. The assessee also claimed credit for a sum of Rs. 4,37,534 being the tax deducted at source in respect of interest income declared in the return of income. The AO processed the case under section 143(1) without making any adjustment to the income disclosed by the assessee and a refund was accordingly issued. In the present case, the AO exercised his jurisdiction under section 143(1) and issued the impugned refund to the assessee as per the necessary claim made by the assessee in this regard. Subsequently, the appellant filed mis application under section 154 contending that interest shown by him was part of enhanced compensation received in relevant assessment year therefore, the interest was also exempt under section 10(37). Held: The assessee intends that the RECTIFICATION application, wherein details including receipt of full interest had been furnished and a new contention made that such interest received under section 28 of the Law Acquisition Act, which is exempt under section 10(37), be considered and treated as return of income, wherein foundational material exists, for the purpose of RECTIFIATION of MISTAKE APPARENT FROM the records. Such contention of the appellant is contrary to the scheme of IT Act, 1961 and relevant provisions of sections 139 and 154. The assessee did not furnish such details and material in the return of income, which was processed and accepted as such by the AO under section 143(1). It was undisputed fact that such materials or claim of the assessee was not available in the assessment RECORD, before the AO, at the time the return of income was processed by the AO. Further, the AO had no jurisdiction under section 143(1) to make adjustment to the returned income. In short, there did not exist any MISTAKE in the INTIMATION issued by the AO under section 143(1) much less the MISTAKE APPARENT FROM RECORD. Accordingly such alleged MISTAKE was not self-evident and consequently, could not be rectified under section 154. The provisions of section 154 and the provision of section 143(1) are distinct and different in nature and ITA No.342/Hyd/2017 6 scope. The provisions of section 154 are applicable where there is a MISTAKE APPARRNT FROM RECORD. The existence of MISTAKE APPARENT FROM RECORD in the order of the concerned income tax authority is a statutory condition precedent to invoke the provisions of section 154. RECTIFICATION proceedings as contemplated under section 154 could not be converted into assessment proceedings with a view to making fresh. claim, which was not made in the return of income filed by the assessee. The assessee is duty bound to bring on RECORD requisite material or evidence, while filing the return of income with a view 1.0 making a claim of RECTIFICATION under section 154. The provisions of section 154 could not be invoked where the assessee has committed a MISTAKE while filing the return of income. The provisions of such section are intended to amend the order passed by any revenue authority, mentioned therein in respect of MISTAKE which is floating on surface of the assessment RECORD. If MISTAKE of law or fact has to be established by construing the words of a section to find its proper meaning, then such an error cannot normally be a rectifiable error. The Supreme Court in the case of T.S. Balram, ITO Vs. Volkart Brothers (1971) 82 ITR 50 (SC) held it was not open to the ITO to go into the true scope of relevant provisions of the Act in proceedings under section 154. A MISTAKE APPARENT on the RECORD must be an obvious and patent MISTAKE and not something which can be established by a long drawn process of reasoning of points on which there may, conceivably two opinions. A decision on a debatable point of law is not a MISTAKE APPARENT FROM RECORD. The power of RECTIFICATION under section 154 could not be understood to review, revise or reconsider the substantial decisions, taken after due consideration of law and facts. In a nut-shell, MISTAKE APPARENT FROM RECORD, under section 154 must be self evident, obvious and patent MISTAKE of facts or law which is floating on the surface of the RECORD and not the MISTAKE which can be discovered or discerned or established by way of discussions, debate and investigation into the issue. (Para 7). The assessee intends that the RECTIFICATION application, wherein details including receipt of full interest have been furnished and a new contention made that such interest received under section 28 of the Law Acquisition Act, which is exempt under section 10(37), be considered and treated as return of income, wherein foundational material exists, for the purpose of RECTIFICATION of MISTAKE APPARENT FROM the records. Such contention of the appellant is contrary to the scheme of Income Tax Act, .1961 and relevant provisions of sections 139 and 151. The appellant did not furnish such details and material in the return of income, which was processed and accepted as such by the AO under section 143(1). It is undisputed fact that such materials or claim of the assessee is not available ·in the assessment RECORD, before the AO, at the time the return of income was processed by the AO. Further, the AO had no jurisdiction under section 143(1) to make adjustment to the returned income. In. this case, such new material was not examined and considered by the AO at the time of ITA No.342/Hyd/2017 7 processing the return filed by the appellant. Thus the intended RECTIFICATION requires interpretation of the provisions of section 28 of the Law acquisition Act, 1894, sections 154 and 143(1) and determination of existence of foundational facts needs detailed investigation and verification and, hence, the case of the assessee patently falls beyond the ambit of the provisions of section 154 but was the subject matter of scrutiny assessment within the meaning of section 143(3) or reassessment under section 147 rule with section 148. In short, there did not exist any MISTAKE in the INTIMATION issued by the AO under section 143(l), much less the MISTAKE APPARENT FROM RECORD. Accordingly, such alleged MISTAKE is not self-evident and consequently, cannot be rectified under section 154. (Para 8). The assessee appellant intends that the RECTIFICATION application, wherein details including receipt of full interest have been furnished and a new contention made that such interest received under section 28 of the Law Acquisition Act, which is exempt under section 10(37) of the Income Tax Act, 1961, be considered and treated as return of income, wherein foundational material exists, for the purpose of RECTIFICATION of MISTAKE APPARENT FROM the records. Such contention of the appellant is contrary to the scheme of Income Tax Act, 1961 and relevant provisions of section 139 and 154 of the Act The appellant did not furnish such details and material in the return of income, which was processed and accepted as such by the assessing officer under section 143(1) of the Act. It is undisputed fact that such materials or claim of the assessee is not available in the assessment RECORD, before the assessing officer, at the time the return of income was processed by the assessing officer. Further, the assessing officer has no jurisdiction under section 143(1) of the Act to make adjustment to the returned income. In this case, such new material was not examined and considered by the assessing officer at the time of processing the return filed by the appellant. Thus the intended RECTIFICATION requires interpretation of the provisions of section 28 of the Law acquisition Ad, 1894, section 154 and 143(1) of the Income Tax Act, 1961 and determination of existence of foundational facts needs detailed investigation and verification and, hence, the case of the appellant patently falls beyond the ambit of the provisions of section 154 of the Act but is the subject matter of scrutiny assessment within the meaning of section 143(3) or reassessment under section 147 rule with section 148 of the Act. In short, there does not exist any MISTAKE in the INTIMATION issued by the AO under section 143(1), much less the MISTAKE APPARENT FROM RECORD. Accordingly, such alleged MISTAKE is not self-evident and consequently, cannot be rectified under section 154.” 7.5 Since no details are available in the return of income it becomes a long drown process to find out whether a particular amount is deductible or taxable and such an exercise is not permissible u/s. 154 of the IT. Act. In this case, the assessee did not furnish such details and material in the return of income which was processed and ITA No.342/Hyd/2017 8 accepted by the Assessing Officer u/s 143(1). From the statement of total income it is seen that there is no claim of this item. 7.6 A reading of both these judgements suggests that the assessee cannot claim the deduction by way of filing of revised computation of income u/s 154 of the I.T. Act. Instead he has to file a revised return of income if any claims are to be made. Since the assessee did not file any revised return of income within the time allowed u/s 139(4) the action of the assessing officer in rejecting the application u/s 154 is upheld and the ground of appeal is dismissed. 7.7 As per section 250(5), the CIT(A) can admit additional grounds of appeal if the appellant can establish that there existed sufficient reasons for not raising the grounds at the time of filing of appeal and such omission is not willful or unreasonable. Though additional grounds of appeal are filed, no mention is made about the circumstances under which these grounds are modified or added. In the first set of grounds of appeal though signed by the appellant no reasons were mentioned as to why they could not be raised in the appeal filed. Remand report was sent to the appellant and no rejoinder was filed by the appellant / AR. In these circumstances since the appellant did not avail the opportunity granted the additional grounds of appeal are not admitted in the absence of sufficient reasons.” 3. Learned authorized representative vehemently reiterated the assessee’s stand that it is very much entitled for the impugned deduction in light of Explanation 3C to section 43B inserted by the Finance Act, 2006 with retrospective effect from 01.04.1989. The Revenue has strongly supported the CIT(A)’s foregoing detailed discussion declining the assessee’s impugned rectification prayer. 4. We have given our thoughtful consideration to rival pleadings and find no merit in assessee’s stand. It is made clear that we are in section 154 rectification which is confined to only on the apparent mistakes on record than involving detailed rowing enquiries as held in T.S. Balram, ITO Vs. Volkart Brothers 82 ITR 50 (SC). Coming to the facts of the instant case, there is hardly any dispute that the assessee’s return filed on 20.09.2006; very well after the impugned amendment (clarificatory in nature) had ITA No.342/Hyd/2017 9 nowhere even sought deduction u/s 43B of the Act. It had also chosen not to file any revised return as well. Hon’ble apex court’s landmark decision in Goetze (India) Ltd Vs. CIT (2006) 284 ITR 323 has settled the law that the Assessing Officer is not empowered to entertain any deduction claim in absence of a revised return. Be that as it may, we are of the opinion that once the assessee’s computation or return had not even claimed the impugned relief, the Assessing Officer could be hardly held to have committed any apparent error on record which could be trigger to section 154 petition. We thus uphold both the learned lower authorities’ action declining the assessee’s relief claimed to this affect. 5. This assessee’s appeal is dismissed in above terms. Order pronounced in the Open Court on 18 th February, 2022. Sd/- Sd/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER Hyderabad, dated 18 th February, 2022. TYNM/sps ITA No.342/Hyd/2017 10 Copy to: S.No Addresses 1 SKG Refractories Limited, S/o. Daga & Co., Chartered Accountants, 403, Paigah Plaza, Basheerbagh, Hyderabad. 2 The Asst. Commissioner of Income Tax, Circle 3(2), Hyderabad 3 CIT(Appeals) – 10, Hyderabad. 4 PCIT -3, Hyderabad. 5 DR, ITAT Hyderabad Benches 6 Guard File By Order