THE COMMISSIONER OF INCOME TAX V. M/S MANGALORE GANESH BEEDI WORKS

ITA/381/2007

AI Insights

The case involves an appeal by the Commissioner of Income Tax and the Assistant Commissioner of Income Tax against M/s. Mangalore Ganesh Beedi Works concerning the assessment year 2002-03. The primary legal contention revolves around the interpretation and application of Section 154 and Section 263 of the Income Tax Act, 1961. The CIT had annulled previous orders under Sections 154 and 143(3) r/w Section 147, deeming them erroneous and prejudicial to the interest of revenue. The ITAT, however, allowed the assessee's appeal, which led to the current appeal by the tax authorities in the Karnataka High Court. The High Court did not delve into the substantive issues but set aside the ITAT's order and remanded the matter back to the Tribunal for a fresh decision.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 729066 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 25-02-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: G SARANGAN
• Assessee Lawyers: K V ARAVIND
• Keywords: Assessment Year 2002-03; Erroneous and prejudicial to the interest of revenue; Income Tax; Rectification Application; Revision powers
• Section: 147; 143(3); 154; 263; 260-A

Judgement Text

" - 1 - IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 25th DAY OF FEBRUARY 2014 PRESENT THE HON’BLE MR.JUSTICE DILIP B.BHOSALE AND THE HON’BLE MR.JUSTICE B.MANOHAR I.T.A.NO.381/2007 BETWEEN: 1. The Commissioner of Income Tax, Central circle, C.R.Building, No.55/1, Shilpashree, Vidhyaranya complex, Vishveshwaranagar, Mysore. 2. The Asst. Commissioner of Income Tax Circle – 1, C.R.Building, No.55/1, Shilpashree, Vidhyaranya complex, Vishveshwaranagar, Mysore. …APPELLANTS (By Sri.K.V.Aravind, Adv.) AND: M/s.Mangalore Ganesh Beedi Works, Vinoba Road, Mysore. ...RESPONDENT (By Sri.G.Sarangan, Sr.Adv. for Smt.Vani H. Adv.) - 2 - This ITA is filed under Section 260-A of I.T.Act, 1961, arising out of the order dated 30.11.2006 passed in ITA No.395/Bang/2006 for the Assessment year 2002-2003, praying to formulate the substantial questions of law stated therein and allow the appeal and set aside the order passed by the ITAT, Bangalore, in ITA No. 395/Bang/2006 dated 30.11.2006 and confirm the order of the Appellate Commissioner confirming the order passed by the Assistant Commissioner of Income Tax, Circle-1, Bangalore, in the interest of justice and equity. This ITA coming on for hearing this day, DILIP B.BHOSALE J, delivered the following:- PC: This appeal is directed against the order dated 30.11.2006 passed by Income Tax Appellate Tribunal (for short ‘the Tribunal’) in ITA No.395/2006 pertaining to the Assessment Year 2002-03, whereby, the Tribunal allowed the appeal, upholding claim of the assessee and setting aside the order of Commissioner of Income Tax (for short ‘the CIT’) passed under Section 263 of the - 3 - Income Tax Act, 1961 (for short ‘the Act’). The CIT vide its order dated 21.03.2006, set aside the orders dated 28.10.2003 and 18.11.2003 passed under Sections 154 and 143(3) r/w Section 147 of the Act. It would be relevant to reproduce the concluding observations made by the CIT in its order dated 21.03.2006, which read thus:- “Hence, claims that the order passed u/S 154 dated 28.10.2003 and 147 r/w S.143(3) dated 18.11.2003 are not erroneous and prejudicial to the interest of revenue have to be rejected and I have established clearly the fact in the preceding paragraphs of this order that both the above orders are erroneous and prejudicial to the interest of revenue and hence both the orders mentioned above are hereby annulled as provided u/s.263 through this combined order, issued u/s.263 for the purposes of convenience, the effect of this is that the order u/s.154 dated 28.10.03 stands cancelled/annulled and the order u/s.143(3) r.w.s.147 dated 18.11.03 is set - 4 - aside to enable the A.O. to reframe the same as per law and after affording necessary opportunities of being heard to the assessee in as much as I am satisfied that both the referred orders passed u/s.154 and 143(3) r.w.s.147 respectively are found to be erroneous and prejudicial to the interest of revenue, by exercising the powers of revision available to me by the provisions of section 263 of the I.T.Act”. 2. We have heard learned counsel for the parties and with their assistance, gone through the orders passed by the Tribunal and the CIT. We have also had a glance at the order passed by the Assessing Officer. The CIT, after considering the factual matrix in detail, including the order passed by this Court in Writ Petition filed by the respondent-assessee challenging the Notification dated 24.10.1996 and the other relevant material placed on record, considered the question, whether, letter dated 24.09.2003 of the respondent- - 5 - assessee could be treated as a petition under Section 154 of the Act. The CIT considered this question in depth and after reproducing the letter dated 24.09.2003 in its order and after considering the provisions contained in Section 154 of the Act, held that the assessee could not point out any mistake that had crept in, in the order dated 12.05.2003. In other words, the CIT held that the assessee could not point out any mistake apparent from the record, which could be rectified in the application under Section 154 of the Act. In short, the CIT held that the letter dated 24.09.2003 cannot be said to be an application under Section 154 of the Act. If it is ultimately held that the letter dated 24.09.2003 was not a petition under Section 154, perhaps the assessee would have to loose and in that event, it could be open to the assessee to seek deduction of Rs.15 crores & odd for the Assessment year 2002-03. - 6 - 3. We do not wish to examine these issues at all. It is clear from the order of the Tribunal that the Tribunal did not consider these issues. In other words, the Tribunal has not addressed the question, whether the letter dated 24.09.2003 was in the nature of rectification application as contemplated by Section 154 of the Act, and if not, whether the assessee could seek deduction of Rs.15 crores & odd for the Assessment year 2002-03. 4. Learned counsel for the parties, therefore, fairly stated that we need not examine these issues and record any reasons for setting aside the order of the Tribunal and they have agreed for the following order:- (i) The order dated 30.11.2006 rendered by the Tribunal is set aside. The appeal bearing ITA No.395/2006 for the Assessment year 2002-03 is restored to file. (ii) The Tribunal shall consider and decide the appeal afresh in the light of the - 7 - observations made in this order, on merits, in accordance with law. (iii) It is made clear that this Court has not expressed any opinion on the questions raised in this judgment for consideration of the Tribunal. (iv) All contentions of the parties are kept open. With these observations, appeal is disposed of. Sd/- JUDGE Sd/- JUDGE Srl. "