High Court Of Calcutta
Vijay Mallya vs. Assistant Commissioner Of Income Tax
Sections Art. 226, 154
Asst. Year 1991-92
D.K. Seth & R.N. Sinha, JJ.
APOT No. 735 of 2002 & GA No. 3993 of 2002
12th May, 2003
Counsel Appeared
Pranab Kr. Pal & Subrata Das, for the Petitioner : Dipak Deb, for the Respondent
JUDGMENT
D.K. SETH, J. :
In W.P. No. 213 of 1996, the appellant as petitioner had challenged the jurisdiction of the Asstt. CIT,Investigation Circle 4(1), Calcutta, to issue the notice dt. 9th Jan., 1996, for rectification of the assessment relating to the asst. yr. 1991-92 under s. 154 of the IT Act, 1961. The learned Single Judge, by an order dt. 10th Sept., 2002, was pleased to dismiss the said writ petition. The present appeal has since been filed against the said decision. The letter accompanying the said notice (p. 70 of the paper book) discloses that the AO in the relevant assessment (asst. yr. 199192) had held the appellant as “non-resident”, which is a mistake of fact apparent from the records, requiring rectification. From the assessment proceedings for the asst. yrs. 1992-93 and 1993-94 and the facts furnished by the assessee, it was found that the assessee was a resident for the year 1989-90. Though he could be a “non-resident” for the year 1990-91, but in the asst. yr. 1991-92, the status of the assessee should have been “ordinarily resident”.
2. Mr. Pranab Pal, learned senior counsel for the appellant, pointed out from the order appealed against (p. 184 of the PB) that the learned Single Judge had held that the absence of reason in the assessment order is a mistake apparent from the record rectifiable under s. 154. He also pointed out that the learned Judge had held that the AO has not disclosed the reason for his holding the assessee “non-resident” either under s. 6(1)(a) or 6(1)(c) despite the assessee’s claim that his status was “resident but not ordinarily resident”. Mr. Pal contended that in the order favourable to the assessee, the AO is not supposed to give reasons. The proceeding is not an adversary proceeding, requiring giving of reasons to support the finding, particularly, when holding in favour of the assessee. Therefore, absence of reason cannot be held to be an error apparent from the record. He secondly contended that in the notice itself (pp. 69-70 of the PB) the mistake was claimed to be a mistake of fact that his residential status for the asst. yr. 1991-92 should have been “ordinarily resident”. The facts furnished showed that the assessee was in India for a duration of 180 days, which qualifies the assessee to a “non-resident” status under s. 6(1)(a) as well as under s. 6(1)(c) by reason of the Explanation thereunder. The assessee, a citizen of India, had claimed to have left India in connection with employment outside India. This was accepted by the AO. Therefore, the AO had treated the assessee as a “non-resident” under s. 6(1)(c) even if he was found to have been in India for more than 365 days within the preceding four years. Sec. 154 is attracted only in cases of mistake apparent from the record. Sec. 6(1)(c) contains an Explanation in respect of individuals. The Explanation conceives of two contingencies in cls. (a) and (b), respectively. An assessee coming under cl. (a) would acquire a non-resident status if he remains in India for less than 132 days. Whereas an assessee would acquire non-resident status under cl. (b) of the Explanation if he remains in India for a period less than 150 days. If the petitioner is to be fit in cl. (b) of the Explanation, in that event, there ought to be materials to bring the assessee within cl. (b). The notice does not disclose any material from which it can be said that the assessee comes under cl. (b) of the Explanation, if at all the assessee could be brought within cl. (b) of the Explanation, then it would be drawing of an inference from the facts which are not in dispute, amounting to a mistake in law. Though mistake in law may be treated as an error apparent from the records for the purpose of s. 154, but when such mistake is dependent on long drawn argument to establish such mistake or when two views could be possible on the basis of the admitted facts or where there are some doubts to conclusively establish that a person comes under cl. (b) except after long drawn argument, s. 154 cannot be attracted. Such a situation cannot be brought within the scope and ambit of mistake apparent from the records. According to him, in this case, if the assessee is required to be brought within cl. (b) of the Explanation, in that event, the Revenue requires to put forth a long drawn argument to establish the said fact and that too without any conclusiveness.
In support of his contention that it is not an adversary proceeding and, therefore, no reason is to be given in the assessment order. Mr. Pal relied on S.S. Gadgil vs. Lal & Co. (1964) 53 ITR 231 (SC). In support of his contention that s. 154 cannot be attracted where there is a debatable question on merit, he relied on CIT vs. South India Bank Ltd. (2001) 166 CTR (SC) 216 : (2001) 249 ITR 304 (SC), Bata India Ltd. vs. IAC & Ors. (2001) 167 CTR (Cal) 14 : (2001) 249 ITR 491 (Cal), Coates of India Ltd. vs. Dy. CIT & Ors. (1995) 128 CTR (Cal) 30 : (1995) 214 ITR 498 (Cal), ITO & Anr. vs. India Foils Ltd. (1973) 91 ITR 72 (Cal). He had relied on the last cited decision for another purpose, namely, that if the notice appears to be illegal, then the assessee cannot be made to wait till the assessment was made and that such notice can be challenged in writ Courts as well as on Harbans Lal Malhotra & Sons (P) Ltd. vs. ITO & Anr. (1972) 83 ITR 848 (Cal), T.S. Balaram, ITO vs. Volkart Bros. & Ors. (1971) 82 ITR 50 (SC). He contended that since this petition is pending for a long time, it should not be dismissed on the ground of alternative remedy, relying on the decisions in Dhampur Sugar Mills Ltd. vs. Union of India (2000) 122 ELT 333 (SC); Madura Coats Ltd. vs. Asstt. Collector of Central Excise (2002) 139 ELT 17 (Cal) and Singh Alloys & Steel Ltd. vs. Asstt. Collector of Central Excise (1993) 66 ELT 594 (Cal). Therefore, having regard to the facts and circumstances of the case, the writ petition ought to have been allowed. Therefore, the order appealed against should be set aside and the appeal should be allowed and the impugned notices should be quashed. Mr. Dipak Deb, appearing for the Revenue, on the other hand, contended that the petitioner had come at the notice stage. All these points could have been raised in answer to the said notice. This question had actually been raised by the petitioner in his reply to the notice. But before the question could be decided on the basis of such reply, the petitioner had rushed to this Court without waiting therefor and that too within six days. Therefore, the petitioner having accepted the notice and acted thereunder is estopped from moving this writ petition. He secondly contended that when these matters could be thrashed out before the authority, which had issued the notice effectively and efficaciously, in view of existence of alternative remedy, the writ petition cannot be maintained. He then contended that here on facts, there is no debatable issue. It is a mistake of fact apparent from the records and there is no two opinions and is a case attracting s. 154. He relied on the decision in M.K. Venkatachalam, ITO & Anr. vs. Bombay Dyeing & Manufacturing Co. Ltd. (1958) 34 ITR 143 (SC) where it was held that a glaring and obvious mistake of law is a mistake of fact apparent from the record, rectifiable under s. 35 of the IT Act, 1922, now s. 154 of the 1961 Act. He pointed out that the assessee had been in India for 180 days, namely, more than 150 days. From p. 90 of the paper book, he pointed out that during the previous year 1990-91 relevant to the asst. yr. 1991-92, the assessee arrived in Bombay from abroad on 1st of April, 1990, and left Bombay for abroad on 3rd April, 1990, and thus he had been visiting India occasionally on diverse dates totalling to 180 days. These facts are apparent from the records to attract the application of Expln. (b) of s. 6(1)(c) under which “non-resident” status cannot be conferred if the assessee remains in India for 150 days or more. According to him, the facts clearly disclose that the assessee would be governed by cl. (b) of the Explanation to s. 6(1)(c) and not by cl. (a) thereof as was held by the AO. According to him, it is not a case of leaving India in connection with employment outside India within the meaning of cl. (a) of Explanation to s. 6(1) (c), but a case of visiting India within the meaning of cl. (b) of the Explanation thereto. He contended further that a little amount of argument would not take away the application of s. 154. According to him, in order to establish all facts, some amount of argument is necessary. In this case, the second opinion can be arrived at only by straining the meaning and stretching the facts and interpreting the same in a reverse form. The assessee himself has disclosed the dates of his visit to India. He does not disclose the dates of his leaving India as is apparent from p. 90 of the paper book. He also contended that the absence of reasoning given by the AO as to whether the case falls under Expln. (b) to s. 6(1)(c) itself a mistake apparent from the record, attracting the application of s. 154. Therefore, the writ petition was rightly dismissed. The appeal should, therefore, fail and be dismissed. After having heard the respective counsel for the parties, it appears to us that the question rests on three grounds. The first one being the maintainability of the writ petition against the notice. The second one is the question of estoppel operating against the assessee by reason of his submission of reply to the notice. The third one is with regard to the question of mistake apparent from the records. This third question can be sub-divided into a few more sub-heads, namely, as to whether there is any scope of forming two opinions, or is there any debatable issue, or whether the alleged mistake is to be established through long drawn process of argument or whether on facts the assessee could be brought within Expln. (b) to s. 6(1)(c), or whether there could be any confusion or doubt as to whether the assessee would be governed by cl. (a) or cl. (b) of the Explanation thereto, or absence or reason in the assessment order could be treated to be mistake apparent from the records.
We may first turn to the question of maintainability. A writ petition cannot be entertained where there is an adequate alternative efficacious remedy. Admittedly, the remedy available under the provisions of the IT Act in the proceedings itself is an efficacious adequate alternative remedy. But, in this case, the writ petition was entertained and had been kept pending for quite some time. Affidavits have since been exchanged. It would be iniquitous to relegate the petitioner to an alternative remedy under the Act after such a long time on the principle enunciated in L. Hirday Narain vs. CIT AIR 1971 SC 33 : (1970) 78 ITR 26 (SC). This question may crop up in every order and if such dispute is of recurring nature, then the remedy under the Act would not be an appropriate alternative, as was held in Collector of Central Excise vs. Madura Coats Ltd. (1982) 10 ELT 129 and Superintendent of Central Excise vs. R.K. Chemical Industries (P) Ltd. (1987) 30 ELT 641A. Such a view was taken by this Court in Singh Alloys & Steel Ltd. vs. Asstt. Collector of Central Excise (supra). In Madura Coats Ltd. vs. Asstt. Collector of Central Excise (supra), Babu Ram Jayant vs. U.P. State Road Transport Corporation 1997 Lab 1C 2607 (All) (para 6), and Ex. No. 1535646-F, Ram Niwas vs. Union of India 1997 Lab IC 3409 (All) (para 14) sitting singly, I had occasion to hold that existence of alternative remedy will not be a bar in entertaining a writ petition having been entertained by Court and kept pending till a late stage. In Dhampur Sugar Mills Ltd. vs. Union of India (supra), it was held that pendency of the writ petition for years, relegation to alternative remedy would be a little harsh. That apart, if in this case on the face of the notice it appears to be without jurisdiction or illegal, then the assessee cannot be made to wait till a decision in the proceeding itself debarring him from challenging the notice, excluding the jurisdiction of the writ Court. Therefore, it would be necessary to examine the facts of this case in a little details as to whether the notice is without jurisdiction or ex facie bad or illegal. If it is so found, then the writ petition can be maintained despite alternative remedy. In T.S. Balaram vs. Volkart Bros. (supra), the apex Court had held that a debatable point of law is not a mistake apparent from the record correctable under s. 154. In such a case, the writ petition could be maintained, challenging the notice. The decision in Volkart Bros. (supra) was followed by this Court in Harbans Lal Malhotra & Sons (P) Ltd. (supra). In ITO & Anr. vs. India Foils Ltd. (supra) this Court had taken a view that if the notice was not, in fact, justified, the notice itself was bad and there was no reason why the assessee should wait till the assessment was made pursuant to the notice before going to Court for a writ and after having held the notice to be bad initially, it had held that the proceeding was also bad and entertained the writ petition. This view was reiterated by this Court in Coates of India Ltd. (supra) and Bata India Ltd. (supra). This question, however, would be dependent on the finding with regard to the illegality of the notice issued, which we will look into at a later stage.
The decision in Indo Asahi Glass Co. & Anr. vs. ITO & Ors. (1997) 137 CTR (Cal) 505 : (1996) 222 ITR 534 (Cal)(DB) affirmed by the apex Court in Indo Asahi Glass Co. vs. ITO & Ors. (2002) 174 CTR (SC) 113 : (2002) 254 ITR 210 (SC) relied upon by Mr. Deb, does not help us in the present case inasmuch as in Indo Asahi (supra) this High Court laid down that an opportunity to explain and show cause would operate against exercising discretion to quash a notice at the threshold under Art. 226 of the Constitution. The apex Court affirmed this view in the context that the authority had jurisdiction to issue the notice. But where the jurisdiction is challenged, the principle may not absolutely debar the High Court from exercising its jurisdiction. When it appears to the High Court that the authority could not assume the jurisdiction, then the discretion can be exercised. Similarly, the decision in Brooke Bond Lipton India Ltd. vs. CIT & Ors. (1997) 137 CTR (Cal) 579 : (1996) 222 ITR 540 (Cal) also does not lay down that absence of jurisdiction would not enable the High Court to exercise the discretion. The decision in V.K. Construction Works Ltd. vs. CIT (1995) 125 CTR (P&H) 265 : (1995) 215 ITR 26 (P&H) lays down the same principle, which is distinguishable in the present context. The decision in Radharani Tea Estate (P) Ltd. vs. ITO & Ors. (1989) 78 CTR (Cal) 581 : (1990) 184 ITR 581 (Cal) was dealing with a case where there was no lack of jurisdiction to issue the notice. The decision is Raibahadur Seth Theomal vs. CIT (1963) 48 ITR 170 (Cal), laid down that whether the assessee is a resident or non-resident is a question of fact. Relying on this decision Mr. Deb contended that such a question could be decided by the authorities under the Act. But this principle has no manner of application in the present case. Inasmuch as here we are concerned with the question of jurisdiction to issue the notice under s. 154 on the ground of an error apparent from the record. On facts now we are to examine whether the authority could assume the jurisdiction to issue the notice in the absence of the ingredients satisfying the test of error apparent from the record. Now let us address ourselves to the question of estoppel operating against the assessee. The assessee had submitted his reply and without waiting for a decision in the proceedings, had rushed to this Court and moved the writ petition. On this principle the writ Court could have refused to entertain the writ petition and exercise its discretion at the initial stage. But it had not done so and had entertained the same and kept the matter pending. Therefore, the question of estoppel would not be fatal. Even if the assessee had come to the Court within a very short term, the estoppel would not stare on his face inasmuch as the writ jurisdiction is invoked for a speedy remedy. If the assessee had come after waiting for a long period, the estoppel could have operated. It depends on the facts and circumstances of each case. The question has to be balanced having regard to the situation and the materials placed before it and weighing with the Court unfavourably or against the discretion to invoke writ jurisdiction.
This question is also dependent on the degree of the illegality or invalidity of the notice or the question of absence of jurisdiction. Inasmuch as one cannot be compelled to undergo an unnecessary long drawn process when on the face of it the writ Court is of the opinion that the notice is ex facie bad and cannot be sustained or there is absence of jurisdiction. We, therefore, are unable to agree with the contention of Mr. Deb with regard to themaintainability of the writ petition on the two grounds he had put forth. Now let us examine the third question relating to the mistake apparent from the record in its diverse perspective. Before we do that, we may summarize the scope of s. 154. This will enable us to apply the test in the facts of the present case in order to arrive at a right conclusion. Sec. 154 can be invoked for rectification of a mistake apparent from the record. The mistake contemplated under s. 154 must be a mistake apparent on the face of the records. It must be obvious, clear and patent. It must not be a mistake, to establish which a long and elaborate reasoning and arguments is required on points on which there may conceivably be two opinions. It must not be a debatable point of law. It must be a patent and apparent mistake in the assessment. It must not be a question with regard to which two different views may be possible or with regard to which two different opinions can be formed. It must be a glaring, obvious or self-evident mistake of fact or a mistake of law, in respect of which there cannot be any two opinions and it should not be one in order to establish which a long drawn process of argument or reasoning is to be advanced. We may now deal with the proposition whether absence of reasoning would be a mistake apparent from the records. We do not think that such a proposition would be a sound proposition inasmuch as the proceeding undertaken by the AO is not an adversary proceeding. It is not an adjudication of a civil dispute. It is not in the nature of a judicial proceeding between the contesting parties. It is not a matter capable of a plausible argument. The AO is empowered to assess the tax. But it does not act as a Judge deciding a litigation between the citizen and the state. He is anadministrative authority. The proceeding is regulated by statute. His function is to estimate the income of the taxpayers and to assess him to tax on the basis of such estimate. Tax legislation necessitates the setting up of machinery to ascertain taxable income and to assess tax on the income. But that does not impress the proceeding with the character of an action between the citizen and the state. It was so held in S.S. Gadgil (supra). Therefore, in estimating or assessing the taxable income and tax on income, it is not necessary to give reasons therefor when the decision is in favour of the assessee. Therefore, absence of reasons cannot be a mistake apparent from the records. From p. 90 of the paper book, as pointed out by Mr. Deb, it appears that the assessee had arrived Bombay on 1st of April, 1990, and left Bombay on 3rd of April, 1990. This may be construed to mean a visit to India. But at the same time, it was to show that period of stay of the assessee in India. Instead, if he had shown that he had left India and then returned to India, then he would have been pointing out to his stay outside India. It would make no difference if the period of stay in India is calculated by a reverse mode or by a simple mode.
In order to calculate the stay in India, the arrival to and departure from India would be the simplest mode to calculate the period of stay in India. Whereas the leaving of India and return to India would be a reverse mode for calculating stay in India, but the simple mode to calculate the stay outside India. Then if stay outside India is calculated, it has to be deducted from the period of the year. This is a mode or method of calculation. This makes no difference. It would not be pertinent to depend on these facts, which have been utilized for the purpose of calculation of the period of stay in India. The mode or method of calculation would not be the decisive factor for determining the character of the departure and arrival, namely, whether it is a visit to or leaving of India. The question is dependent on the character of the departure having regard to the purpose. A citizen of India when employed outside India, if he leaves India in connection with his employment outside India, then he would be leaving India in connection with his employment outside India. His arrival to and departure from India would be indicative of his stay in India. The departure would indicate of his leaving India in connection with hiemployment outside India and arrival in India would indicate his stay in India till he departs. At the same time, it can be well construed that having been employed outside India, the assessee comes on visit to India. Now this question, even if we are of the view, would be governed by cl. (a) of the Explanation, but still then a second view is possible for governing the case under cl. (b) of the Explanation. Thus, it seems from these facts that two views are possible. Clause (a) of the Explanation covers cases where a citizen of India leaves India for the purpose of employment outside India, then he would be a “non-resident” if he is in India for a period less than 182 days. Admittedly, in this case, the assessee was employed outside India. This is not in dispute. This has since been affirmed in the affidavit-in-opposition (p. 128 PB) on behalf of the Revenue. Mr. Deb in his usual fairness did not dispute the same. Now having been employed outside India whether the assessee comes to visit India within the meaning of cl. (b) of the Explanation is a question, which cannot be conclusively decided on the basis of the facts available. Thus, having regard to the facts and circumstances of the case, the question can be decided either way, the question seems to be debatable. It is question of drawing inference from the facts and as such is a question of law. A mistake of law can also be a ground for rectification under s. 154 provided such mistake is glaring and apparent. In this case we are unable to hold that this mistake is patent, obvious, clear and apparent from the records. Admittedly, in this case, in order to establish either way, it requires a long and elaborate reasoning and arguments on points on which conceivably there may be two opinions as was held in India Foils Ltd. (supra). Thus, it appears that the question is a debatable point of law and is not a mistake apparent from the records as was held in Coates of India Ltd. (supra).
It is not patent and apparent mistake in the assessment as was held in Bata India Ltd. (supra). In respect of his question two views are possible and that there is every ground for forming different opinion and seems to be a debatable question as was held in South India Bank Ltd. (supra). The mistake in the present case is neither obvious nor patent. Neither this mistake can be established without long drawn process of reasoning on points on which there may be conceivably two opinions. It requires a decision on a debatable point of law and as such cannot be a mistake apparent from the records within the meaning of s. 154. The ratio in Volkart Brothers (supra) has since been followed by the other decisions to which we had referred earlier. The mistake in the present case is neither clerical nor mathematical. It is neither glaring, obvious nor self-evident. On the other hand, it is a mistake to be discovered by a long drawn process of reasoning or examining arguments on points, conceivably capable of forming two opinions as was held in Harbans Lal Malhotra & Sons (P) Ltd. (supra) following Volkart Brothers (supra). On the other hand, the decision cited by Mr. Deb Bombay Dyeing & Manufacturing Co. Ltd. (supra) dealing with s. 35 of the 1922 Act does not seem to lend any help to Mr. Deb in the facts and circumstances of the case. In the said decision, the mistake was a mistake in law. But the same was found to be glaring and obvious. On facts it was found that by reason of the fiction, the proviso forming part of s. 18A(5) of the 1922 Act w.e.f. 1st April, 1952, was applicable in the said case and that the conclusion was inescapable that the order in question was inconsistent with the provisions of the said proviso, therefore, it was held to be a mistake apparent from the record. After having so held in the said decision, it was reiterated by the apex Court that a mistake of law, which is glaring and obvious can be rectified under s. 35 of 1922 Act, a provision similar to s. 154 of the 1961 Act. The reference to M.K. Venkatachalam, ITO vs. Bombay Dyeing & Manufacturing Co. Ltd. (supra), by Mr. Deb does not help us in the present facts inasmuch as there it was held that a glaring mistake in law can be rectified under s. 154. In the present case the mistake alleged, as observed earlier, does not seem to be free from doubt for being held glaring. Similarly, CIT vs. Malayala Manorama Co. Ltd. (2002) 172 CTR (Ker) 600 : (2002) 253 ITR 378 (Ker) also deals with mistake apparent from record. On the same ground as mentioned above this decision does not help Mr. Deb in this case. Applying the above test on the basis of the facts as we have found, it appears that the mistake sought to be rectified is not a mistake apparent from the records within the meaning of s. 154 as is the consistent view of different Courts including the apex Court as discussed above and in respect whereof conceivably two opinions being possible and the question is dependent, in order to establish that there was a mistake in law or fact on long drawn process of reasoning. Sec. 154 empowers the IT authority to rectify a mistake apparent from the record. The jurisdiction can be assumed to rectify any mistake apparent from the records. Unless there is a mistake apparent from the records, the jurisdiction to rectify cannot be assumed. The mistake apparent from the record is a sine qua non for exercising the jurisdiction under s. 154. Absence of ingredients to satisfy the existence of mistake apparent from the records disentitles the IT authority from exercising its jurisdiction of rectification. Unless there is a mistake apparent from the records, there is nothing to be rectified. If two opinions can be formed, it would not be a case of rectification. It would be taking of a different view in law, which is possible only be a superior authority not by the same authority. Sec. 154 does not empower the IT authority to usurp the jurisdiction for exercising the appellate or revisional jurisdiction exercised by a superior authority. Sec. 154 cannot be resorted to for obviating the appellate or revisional jurisdiction.
In these circumstances, in our view, the notice seems to be illegal since the grounds do not conform to the ingredients of s. 154. As such we declare the notice impugned illegal, invalid, bad in law and without jurisdiction. In the result, the appeal succeeds. The order dt. 10th Sept., 2002, passed in writ petition No. 213 of 1996 by the learned Single Judge is hereby set aside. The writ petition is allowed. The impugned notice, dt. 9th Jan., 1996, contained in Annexure B (pp. 69, 70 of the PB) is hereby quashed. Let a Writ of certiorari do issue accordingly. The appeal is, thus, allowed without any order as to costs.
[Citation : 263 ITR 41]
