Vallabh Knits Limited V. Commissioner of Income Tax, Ludhiana (Punjab)

ITA/27/2014

AI Insights

Vallabh Knits Limited appealed against the order of the Income Tax Appellate Tribunal, which had upheld the rectification of their tax assessment for the year 2002-03. The rectification involved adjusting the deduction under Section 80HHC by the amount of deduction under Section 80IB, as required by Section 80IA(9). The appellant contested that the issue was debatable and thus not a 'mistake apparent from the record', which would make rectification under Section 154 inappropriate. However, the Tribunal and the CIT(A) had found the mistake to be apparent from the record, leading to the adjustment. The High Court dismissed the appeal, agreeing with the lower authorities and citing relevant judicial precedents.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 795312 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 15-09-2014
• Assessment Year: misc
• Other Referred Cases: Associated Capsules Pvt. Limited vs. DCIT, Olam Exports (India) Limited vs. CIT, Friends Casting Pvt. Limited vs. CIT, M/s Great Eastern Exports vs. CIT, Deva Metal Powders (P) Limited vs. Commissioner Trade, Tax (Uttar Pradesh), CIT vs. Smt. Aruna Luthra
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: PANKAJ JAIN; DIVYA SURI; SACHIN BHARDWAJ
• Keywords: Deduction; Jurisdictional high court; Mistake apparent from the record; Rectification; Divergent judgment
• Section: 143(3); 143(2); 154; 80HHC; 80IB; 80IA; 260A

Judgement Text

"ITA No.27 of 2014 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.27 of 2014 (O&M) Date of decision: 15.9.2014 Vallabh Knits Limited ……Appellant Vs. Commissioner of Income Tax, Ludhiana (Punjab) …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE FATEH DEEP SINGH Present: Mr.Pankaj Jain, Sr. Advocate with Mr. Divya Suri and Mr. Sachin Bhardwaj, Advocates for the appellant. Ajay Kumar Mittal,J. 1. The delay in refiling the appeal is condoned. 2. This appeal has been preferred by the appellant assessee under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 22.11.2012, Annexure A.11 passed by the Income Tax Appellate Tribunal Chandigarh Bench 'A', Chandigarh (in short, “the Tribunal”) in ITA No.893/CHD/2012 for the assessment year 2002-03, claiming following substantial questions of law:- i) Whether under the facts and circumstances of the case, the action for rectification under Section 154 is sustainable while on the impugned issue there is a divergent judgment of Hon'ble Bombay High Court to that of Jurisdictional High Court? ii)Whether the action for initiation of rectification proceedings GURBAX SINGH 2014.10.13 11:10 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.27 of 2014 (O&M) 2 is sustainable while examining claim of deduction under Section 80HHC, 80IB, while the proceedings are not covered within the words 'mistake apparent from the record'? 3. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The appellant company is engaged in the business of manufacturing and trading of garments made up and cloth. Return of income was filed declaring income of ` 12,34,993/- was filed on 31.10.2002, Annexure A.1 wherein deductions under Sections 80HHC and 80IA of the Act was claimed at an amount of ` 1,09,69,098/- and ` 52,30,324/- respectively and regular assessment proceedings were initiated by issuing notice under Section 143(2) of the Act to adjudicate the issue whether deduction under Sections 80HHC and 80IB of the Act claimed had been correctly claimed or not. Assessment under Section 143 (3) of the Act was completed on 17.12.2004, Annexure A.2 at an amount of ` 57,87,108/-. Notice under Section 154 of the Act was issued to the assessee on 11.3.2008, Annexure A.3 on the ground that there was mistake apparent on record since deduction under Section 80HHC of the Act was not allowed correctly as according to section 80IA(9) of the Act, deduction allowable under section 80IB of the Act was allowed to be reduced from the profit of business for computing deduction under Section 80HHC of the Act. Order under Section 154 of the Act was passed on 22.5.2008, Annexure A.4 determining taxable income at an amount of ` 71,51,394/- whereby deduction under Section 80HHC of the Act had been re-computed after reducing the profits of business by the amount of deduction under section 80IB of the Act. The assessee challenged the said order before the Commissioner of Income Tax (Appeals) [CIT(A)]. During the proceedings, written submissions were filed by the assessee before the CIT(A) on GURBAX SINGH 2014.10.13 11:10 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.27 of 2014 (O&M) 3 24.5.2012, Annexure A.6 to the effect that rectification was not possible if the question was debatable for which reliance was placed on certain decisions. Vide order dated 28.6.2012, Annexure A.7, the CIT(A) confirmed the order dated 22.5.2008 (Annexure A.4). Aggrieved by the order Annexure A.7, the assessee filed appeal before the Tribunal. Vide order dated 22.12.2012, Annexure A.11, the Tribunal dismissed the appeal. Hence the instant appeal by the assessee appellant. 4. We have heard learned counsel for the appellant and perused the record. 5. Learned counsel for the appellant submitted that on merits regarding admissibility of deduction under Section 80HHC of the Act, the Bombay High Court in Associated Capsules Pvt. Limited vs. DCIT, (2011) 50 DTR 65 had decided the issue in favour of the assessee whereas the decisions given by the Kerala High Court in Olam Exports (India) Limited vs. CIT, (2011) 332 ITR 40, this Court in Friends Casting Pvt. Limited vs. CIT, (2011) 50 DTR 61 and Delhi High Court in M/s Great Eastern Exports vs. CIT, (2011) 49 DTR 33 are against the assessee. In such a situation, the issue was debatable and could not be rectified under Section 154 of the Act. Support was drawn from Apex Court decision in Deva Metal Powders (P) Limited vs. Commissioner Trade, Tax (Uttar Pradesh), 2008(2) SCC 439. 7. Full Bench of this Court in CIT vs. Smt. Aruna Luthra (2001) 252 ITR 76 has considered the parameters for rectifying an order in the following terms:- “The power given to the authority is wide. It can correct \"any mistake\" provided it is \"apparent from the record\" The first question that arises for consideration is—when a mistake can GURBAX SINGH 2014.10.13 11:10 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.27 of 2014 (O&M) 4 be said to be apparent from the record? The plain language of the provision suggests that the mistake should be apparent. It must be patent. It must appear ex facie from the record. It must not be a mere possible view. The issue should not be debatable. Mr. Sawhney contended that when the view taken by an authority is ex facie contrary to the decision of the jurisdictional High Court or a superior court, the case would fall within the mischief of section 154. However, Mr. Bansal submitted that while deciding a matter, an authority cannot anticipate the view that may be taken by the High Court or the Supreme Court on a subsequent date. If at the time of the passing of the order, the authority takes a particular view, which is not contrary to the existing interpretation of law, the provision of section 154 cannot be invoked. Apparently, the argument of Mr. Bansal appears to be attractive. If the issue of error in the order is to be examined only with reference to the date on which it was passed, it may be possible to legitimately contend that it was legal on the date on which it was passed. The subsequent decision has only rendered it erroneous or illegal. However, there was no error much less an apparent error on the date of its passing. Thus, the provision of section 154 is not applicable. However, such a view shall be possible only if the provision were to provide that the error has to be seen in the order with reference to the date on which it was passed. Such words are not there in the statute. Resultantly, such a restriction cannot be introduced by the court. Thus, the contention raised by counsel for the assessee cannot be accepted. There is another aspect of the matter. In a given case, on an interpretation of a provision, an authority can take a view in favour of one of the parties. Subsequent to the order, the jurisdictional High Court or their Lordships of the Supreme Court interpret the same provision and take a contrary view. GURBAX SINGH 2014.10.13 11:10 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.27 of 2014 (O&M) 5 The apparent effect of the judgment interpreting the provision is that the view taken by the authority is rendered erroneous. It is not in conformity with the provision of the statute. Thus, there is a mistake. Should it still be perpetuated? If the contention raised on behalf of the assessee were accepted, the result would be that even though the order of the authority is contrary to the law declared by the highest court in the State or the country, still the mistake could not be rectified for the reason that the decision is subsequent to the date of the order. Only the dead make no mistake. Exemption from error is not the privilege of mortals. It would be a folly not to correct it. Section 154 appears to have been enacted to enable the authority to rectify the mistake. The legislative intent is not to allow it to continue. This purpose has to be promoted. The Legislature’s will has to be carried out. By placing a narrow construction, the object of the legislation shall be defeated. Such a consequence should not be countenanced.” 8. Adverting to the factual matrix in the present case, the assessee filed its return for the assessment year 2002-03 on 31.10.2002 showing income of `12,34,993/- which was processed under Section 143(1) of the Act. The case was selected for scrutiny and assessment was completed under Section 143(3) of the Act on 17.12.2004 at total income of ` 57,87,108/-. Subsequently, it was noticed that deduction under Section 80HHC of the Act was not allowed correctly as according to Section 80IA (9) of the Act, deduction allowable under Section 80IB of the Act was required to be reduced from the profit of business for computing deduction under Section 80HHC of the Act. This has judicial acceptance in the decision of the jurisdictional High Court in Friends Casting Pvt. Limited's case (supra). Since the mistake was found to be apparent from record, notice GURBAX SINGH 2014.10.13 11:10 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.27 of 2014 (O&M) 6 under Section 154 of the Act was issued to the assessee and the order of rectification was passed, which was upheld by the CIT(A) and the Tribunal. In view of the binding precedent of the Full bench decision of this Court in Smt.Aruna Luthra's case (supra) with regard to rectification of mistake apparent on record, learned counsel for the appellant has not been able to show any illegality or perversity in the findings recorded by the authorities below. 9. The issue of rectification as arising in present appeal was not under consideration in Deva Metal Powders (P) Limited's case (supra) and thus, would not come to the rescue of the assessee. 10. In view of the above, no substantial question of law arises. The appeal stands dismissed. (Ajay Kumar Mittal) Judge September 15, 2014 (Fateh Deep Singh) 'gs' Judge GURBAX SINGH 2014.10.13 11:10 I attest to the accuracy and integrity of this document High Court Chandigarh "