Mac Charles (India) Ltd. V. The Asst. Commissioner of Income Tax, Circle \\u2013 12(1)

ITA/916/2007

AI Insights

M/s. Mac Charles (India) Ltd., a public limited company engaged in the hotel business, filed an appeal under Section 260A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal, Bangalore, which had dismissed their earlier appeal. The dispute centered on the rejection of the company's application for rectification of an assessment order under Section 154 of the Act, which was initially filed to correct the calculation of deductions under Section 80HHD. The Assessing Officer's rejection was upheld by the First Appellate Authority and the Tribunal, leading to the company's appeal to the High Court.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 671711 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 22-04-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: S PARTHASARATHI
• Keywords: Assessment Order; Deduction; Depreciation; Income Tax; Rectification; Unabsorbed depreciation
• Section: 142(1); 143(2); 154; 143(1)(a); 143(1)(b); 260-A; 80HHD

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 22ND DAY OF APRIL 2014 PRESENT THE HON'BLE MR.JUSTICE DILIP B.BHOSALE AND THE HON'BLE MR.JUSTICE B.MANOHAR ITA NO.916/2007 BETWEEN: M/s.Mac Charles (India) Ltd., No.28, Sankey Road, Bangalore – 560 052, Represented by its Managing Director, Ms Sangeetha C.Pardhanani, Aged about 39 years, D/o Sri.C.B.Pardhanani. …Appellant (By Sri.S.Parthasarathi, Advocate) AND: The Asst. Commissioner of Income Tax, Circle – 12(1), 14/3, Rastrothana Bhavan, 4th Floor, Nrupathunga Road, Opp. Reserve Bank of India, Bangalore – 560 002. …. Respondent (By Sri.K.V.Aravind, Advocate) 2 This ITA is filed under Sec.260-A of Income Tax Act 1961, arising out of order dated 03-08-2007 passed in ITA No.296/Bang/2006, for the Assessment Year 1997-98, praying that for the reasons stated therein this Hon'ble Court may be pleased to: i. formulate the substantial questions of law stated therein, ii. allow the appeal and set aside the order passed by the ITAT Bangalore Bench-A in ITA No.296/Bang/2006 dated 03-08-2007, in the interest of justice and equity. This appeal coming on for Hearing this day, B.MANOHAR J., delivered the following: J U D G M E N T The assessee has filed this appeal under Section 260A of the Income-Tax Act, 1961 (for short ‘the Act’) challenging the order dated 3-8-2007 made in ITA No.296/2006 passed by the Income Tax Appellate Tribunal, Bangalore Bench ‘A’ (for short ‘the Tribunal’) whereby the Tribunal dismissed the appeal filed by the assessee while confirming the order passed by the Commissioner of Income Tax (Appeals) (for short ‘the First Appellate Authority’) and the Assessing 3 Authority wherein the Assessing Authority rejected the application filed by the assessee under Section 154 of the Act for rectification of the assessment order dated 11-08-2004. 2. The assessee is a Public Limited Company carrying on the hotel business. The appellant-assessee filed return of income for the assessment year 1997-98 on 19-11-1997 declaring the total income comprising of income from business, capital gain and other sources. The said return was originally processed under Section 143(1)(a) subsequently, it was revised under Section 143(1)(b) to adjust the brought forward loss and depreciations of the earlier years. The said order was rectified under Section 154 of the Act by the Assessing Officer on 26-10-1998 by allowing deduction under Section 80HHD of the Act. On 23-3-1999, the assessee filed an application to rectify certain mistakes while calculating deduction under Section 80HHD of the Act. 4 The said application was rejected by the Assessing Authority on 8-9-1999. In the meanwhile, the case of the appellant was selected for scrutiny and notices under Section 142(1) and 143(2) were issued to the assessee. The assessee produced necessary documents, thereafter an assessment order was passed on 30th March 2000 and a demand notice was issued to the assessee. The assessee being aggrieved by the said assessment order, preferred an appeal before the First Appellate Authority. Further, the appellant also filed an appeal challenging the order dated 8-9-1999 rejecting the application filed under Section 154 of the Act. The said appeal was allowed by the First Appellate Authority on 16-11-2000 and directed the Assessing Authority to re-compute the deduction in accordance with law. Further the appeal filed by the assessee challenging the assessment order dated 30-3-2000 was also partly allowed by the First Appellate Authority by its order dated 19-2-2001. The assessee being aggrieved by the 5 order dated 19-2-2001 passed by the First Appellate Authority preferred an appeal before the Tribunal in appeal No.301/2001. The Appellate Tribunal by its order dated 27-4-2004, allowed the appeal directing the Assessing Officer to include the interest from Bill of Discount as income from business even for the purpose of computing deduction under Section 80HHD. 3. The Assessing Officer in order to give effect to the order passed by the Tribunal as well as the First Appellate Authority, passed the revised assessment order on 11-8-2004 in accordance with the directions issued by the Tribunal. The assessee filed an application under Section 154 of the Act on 31-12-2004 for rectification of the revised assessment order dated 11-08-2004. After lapse of more than six months, the said application was rejected by the Assessing Authority on 20th October 2005. Being aggrieved by the said rejection order, the assessee preferred an appeal before 6 the Commissioner of Income-Tax (Appeals)-III, Bangalore contending that the order passed by the Assessing Authority rejecting the application for rectification of mistake is contrary to law in view of non- passing of order on the said application within a period of six months and the application is deemed to have been rectified. Hence, sought for allowing the appeal. 4. The First Appellate Authority after considering the matter in detail, taking into consideration Section 154(8) of the Act and also taking into consideration Circular No.14/2001 issued by the CBDT, rejected the said appeal by its order dated 20th February 2006. Being aggrieved by the said order, the assessee preferred an appeal before the Tribunal challenging the same on various grounds. The Appellate Tribunal after considering the matter in detail, dismissed the appeal filed by the assessee confirming the order passed by the Assessing Authority as well as the First Appellate 7 Authority by its order dated 3-8-2007. Being aggrieved by the said order, the assessee has preferred this appeal. 5. The appeal is admitted to consider the following substantial questions of law: (i) Whether the Tribunal was justified in holding that the Assessing Authority can pass an order in respect of the application under Section 154 of the Act beyond the period of six months, when statutorily there is no bar for passing the order denying the benefit to the appellant beyond the period of three months.? (ii) Whether the Tribunal was justified in impliedly holding that the Assessing Authority can set off the unabsorbed depreciation by arriving at the profit for quantification of the relief under Section 80HHD of the Act, contrary to the decision of CIT(A) which had become final for the relevant assessment year in the appellant’s own case.? 8 6. We have carefully considered the arguments addressed by the parties and perused the impugned orders and other relevant records. 7. The records clearly disclose that in pursuance of the order passed by the Tribunal as well as the First Appellate Authority, the Assessing Authority in order to give effect to the said order, passed the revised assessment order on 11-08-2004 giving deduction under Section 80HHD and also depreciation. The assessee being dissatisfied with the deduction under Section 80HHD, preferred an application under Section 154 of the Act on 31-12-2004 for rectification of the revised assessment order dated 11-8-2004. The Assessing Authority after considering the application, by its order dated 20th October 2005, rejected the same holding that no further modification is required since the revised order has been passed pursuant to the order 9 passed by the First Appellate Authority as well as the Appellate Tribunal. 8. Being aggrieved by the said order, the assessee preferred an appeal before the First Appellate Authority contending that the order passed by the Assessing Authority is contrary to law. The order on Rectification application has to be passed within a period of six months. If no order is passed on the said application, the application is deemed to have been allowed. The order passed by the Assessing Authority is beyond the prescribed limit, hence, sought for setting aside the same. The First Appellate Authority examined the matter in detail and held that the Assessing Authority has to pass a rectification order within a period of six months from the end of the month in which, the application is received, to pass necessary order or reject the same. In the instant case, the Assessing Authority has passed the order after a lapse of six months. Under 10 Section 154 of the Act, it is mandatory requirement that the Assessing Authority has to pass the order within a period of six months from the date of receipt of the application. However, in the circular bearing No.73 dated 7-1-1972 issued by the CBDT it was clarified that if the Assessing Authority do not dispose of the application within the time specified under sub-Section 7 of Section 154, it may be disposed of by that authority even after expiry of the statutory time limit on merit in accordance with law. Hence there is no infirmity in the order passed by the authorities below. 9. With regard to the contention of the assessee that if the Assessing Authority failed to pass order within the period of limitation prescribed and the rectification deemed to have been granted is concerned, there is no such provision under the Act. Hence no relief can be given. Further, set off of brought forward loss is not challenged in the appeal. The circular issued by the 11 CBDT is binding on the authorities concerned. We find no infirmity or irregularity in the finding recorded by the First Appellate Authority as well as the Tribunal. All the three authorities below concurrently held against the assessee and the finding recorded by the authorities below is purely a question of fact. Hence, the assessee is not entitled for any relief in the appeal. The substantial questions of law formulated in this appeal are held against the assessee. Accordingly, we pass the following: ORDER The appeal is dismissed. No order as to costs. Sd/- JUDGE Sd/- JUDGE mpk/-* "