Gujarat H.C : The Assessing Officer can pass a rectification order modifying the original assessment order carried into appeal and having already merged with the order of the Commissioner of Income Tax (Appeals) while giving effect to the order passed by Commissioner of Income Tax (Appeals)

High Court Of Gujarat

Gujarat State Seeds Corporation Ltd. Vs. ITO (OSD)

Section 154

Assessment Year : 1983-84

K.S. Jhaveri And K.J. Thaker, JJ.

Tax Appeal No. 1105 Of 2006

November 27, 2014

JUDGMENT

K.S. Jhaveri, J. – Being aggrieved and dissatisfied with the impugned order dated 13.01.2006 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench in ITA No. 1009/Ahd/2000 for the assessment year 1983-84, the assessee has preferred the present tax appeal.

2. This appeal was admitted by this Court on 30.07.2007 for consideration of the following substantial question of law:

“Whether in the facts and circumstances of the case the Income Tax Appellate Tribunal was right in law in holding that the Assessing Officer can pass a rectification order modifying the original assessment order carried into appeal and having already merged with the order of the Commissioner of Income Tax (Appeals) while giving effect to the order passed by Commissioner of Income Tax (Appeals)?”

3. The assessee filed its return of income for the assessment year in question. The assessee claimed weighted deduction u/s 35C of the Act being 1/5th of the total expenditure incurred by the assessee. The Assessment Officer took a view that 10% of the total expenditure was only eligible for weighted deduction u/s 35C of the Act and allowed deduction to the assessee accordingly. Against this order, the assessee went in appeal before CIT(A). In the meantime, the Assessing Officer noted a mistake apparent in theorder passed u/s 143(3) of the Act and accordingly the A.O reduced the subsidy from the eligible expenditure.

3.1 Thereafter vide order dated 31.03.1990 passed u/s 154 of the Act, the weighted deduction was withdrawn. Subsequently, CITA() passed order dated 15.03.1991 in respect of appeal filed by the assessee against the order passed by A.O u/s 143(3) of the Act. In consequence of the appellate order of CIT(A) the A.O passed order dated 10.07.1991 and computed the qualifying amount for 100% deduction and qualifying amount eligible for 30% of the deduction.

3.2 The Assessing Officer thereafter after considering the submission of the assessee took the view that a mistake had occurred in the order passed in consequence upon the order of CIT(A) dated 10.07.1990 as in that order the order passed u/s 154 of the Act dated 30.03.1990 was not considered. The findings in the rectification order was that the amount of subsidy received by the assessee was to be deducted from the qualifying expenditure before the weighted deduction is to be computed and accordingly A.O passed an order on 29.03.1996.

3.3 The assessee went in appeal before the CIT(A) against the order dated 29.03.1996 but the same was dismissed. The assessee therefore challenged the said order by filing appeal before the Tribunal. The Tribunal vide impugned order dismissed the same. Hence the assessee is before this Court by way of the present appeal.

4. Mr. S.N. Soparkar, learned Senior Counsel appearing with Mr. B.S. Soparkar, learned advocate for Ms. Swati Soparkar, learned advocate for the assessee submitted that the Tribunal has gravely erred in confirming the action of revenue by holding that if a mistake apparent on record has occurred while giving effect to the order of CIT(A) then the Assessing Officer is competent to rectify the order giving effect to the order of CIT(A). He submitted that the order passed by the Assessing Officer in consequence of the appeal effect can only be rectified by CIT(A) and in the facts and circumstances of the case rectification order passed by Assessing Officer subsequent to the order giving effect to the order of CIT(A) is void ab-initio and ought to have been quashed and set aside by the Tribunal. He has relied upon a decision of the Apex Court in the case of T.S. Balaram ITO v. Volkart Bros [1971] 82 ITR 50.

5. The Apex Court in the case of Vokart Bros. (supra) has held as under:

“From what has been said above, it is clear that the question whether S. 17(1) of the Indian Income-tax Act, 1922 was applicable to the case of the first respondent is not free from doubt. Therefore the Income-tax Officer was not justified in thinking that on that question there can be no two opinions. It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under S. 154 of the Income-tax Act, 1961. 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 on points on which there may conceivably be two opinions. As seen earlier, the High Court of Bombay opined that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question. In Satyanarayan Laxminarayan Hegde v. Millikarjun Bhavanappa Tirumale this Court while Spelling out the scope of the power of a High Court under Art. 226 of the Constitution ruled that an error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions cannot be said to be an error apparent on the face of the record. A decision on a debatable point of law is not a mistake apparent from the record-see Sidhamappa v. CIT Bombay. The power of the officers mentioned in S. 154 of the Income-tax Act, 1961 to correct “any mistake apparent from the record” is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an “error apparent on the face of the record”. In this case it is not necessary for us to spell out the distinction between the expressions “error apparent on the face of the record” and “mistake apparent from the record”. But suffice it to say that the Income tax Officer was wholly wrong in holding that there was a mistake apparent from the record of the assessments of the first respondent.”

6. Considering the above decision, we are of the opinion that the Tribunal and the CIT(A) have committed an error in upholding the rectification made by the Assessing Officer. A decision on a debatable point of law is not a mistake apparent on the record. After the implementation of order passed by CIT(A), it was not appropriate on the part of Assessing Officer to review the earlier order under the guise of rectification and in arriving at new facts and new order could not be passed unless order of CIT(A) was challenged or modified. The Tribunal has materially erred in upholding the erroneous finding of fact by CIT(A) and the Assessing Officer and the findings are not only perverse but also against the rules and provisions of law and therefore they are required to be set aside.

7. In the premises aforesaid, appeal is allowed. The impugned order passed by the Tribunal and CIT(A) are quashed and set aside. The rectification order passed by Assessing Officer is also set aside. We accordingly answer the question raised in the present appeal in favour of assessee and against the revenue.

[Citation : 370 ITR 666]