Bombay H.C : Whether on the facts and in the circumstances of the case and in law the Tribunal is correct in holding that there could be argument on the issue relating to determination of period of delay in finalization of proceedings resulting in refund taking the matter out of purview of section 154 of the Act when this issue stood decided by the Commissioner of Income-tax?

High Court Of Bombay

CIT – 23 VS. Nathpa Jhakri Joint Venture

Section : 244A, 154

Mohit S. Shah, CJ. And M.S. Sanklecha, J.

IT Appeal No. 1912 Of 2011

April 18, 2013

JUDGMENT

M.S. Sanklecha, J. – In this Appeal by the Revenue for the Assessment Year 2002-03, following questions of law have been raised for our consideration:

“(a) Whether on the facts and in the circumstances of the case and in law the Tribunal is correct in holding that there could be argument on the issue relating to determination of period of delay in finalization of proceedings resulting in refund taking the matter out of purview of section 154 of the Act when this issue stood decided by the Commissioner of Income-tax?

(b) Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in deciding the appeal on question involving exclusion of period of delay attributable to the assessee from the period from which interest is payable when this issue was decided by the Commissioner of Income-tax and his decision on the issue is final as provided in sub-section (2) of Section 244A of the Act?

(c) Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in holding that the interest is due to the assessee even for the period prior to 31.12.2004 when no claim of refund was made by the assessee?

(d) Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in holding that there would be argument on the issue relating to determination of whole of the period of delay in finalization of proceedings resulting in refund when, on facts of the case, there could not be any argument regarding delay attributable to the assessee at least unto 31.12.2004, i.e. the date on which the claim for exclusion of amount of ‘retention money’ from income declared in the return which resulted in refund consequent to the order of the CIT(A) was made before the Assessing Officer and reasonable period thereafter for consideration of claim by the Assessing Officer?”

2. For the Assessment Year 2002-03, the Respondent-Assessee by its return of income declared its total income at Rs.63.89 Crores. During the assessment proceedings, the respondent-assessee claimed that the amount disclosed as retention money which was offered as income cannot be considered to be part of its income and, therefore, cannot be subjected to tax. However, the Assessing Officer did not accept the same and assessed Respondent-Assessee to an income of Rs.68.94 Crores by an Assessment Order dated 31st January, 2005.

3. Being aggrieved, Respondent-Assessee carried the matter in Appeal. By an order dated 29th March, 2006, the CIT(A) allowed the claim of the Respondent-Assessee that the retention money cannot be considered to be part of the Respondent-Assessee’s income. Consequent to the above, the Assessing Officer by an order dated 28th June, 2006 gave effect to the order dated 29th March, 2006 of the CIT(A) and determined the Respondent’s income for the Assessment Year 2002-03 at negative figure (loss) of Rs.60.59 Crores. Further, by the aforesaid order, the Assessing Officer also holds that the Respondent is entitled to refund of Rs.32.06 Crores paid as tax and interests thereon under Section 244A of the Income-tax Act, 1961 (the said Act), amounting to Rs.5.33 Crores for the period from 1st April, 2002 to 28th June, 2006.

4. The Commissioner of Income-tax in his administrative capacity by a communication dated 21st August, 2006 directed the Assessing Officer not to allow interest under Section 244A of the said Act till the date of the CIT(A) order i.e. 29th March, 2006. By the above communication, the Commissioner of Income-tax also directed the Assessing Officer to rectify the mistake in granting interest in his order dated 28th June, 2006. Consequent to the above, on 22nd September, 2006, the Assessing Officer passed an order under Section 154 of the said Act, rectifying the order dated 28th June, 2006 and withdrawing the interest granted to the Respondent-Assessee. In First Appeal, the CIT(A) upheld the order dated 22nd September, 2006 of the Assessing Officer.

5. Further appeal by the Respondent-Assessee before the Tribunal was allowed by the impugned order on the following two grounds:

(a) the Assessing Officer incorrectly exercised jurisdiction under Section 154 of the said Act on 26th September, 2006 to rectify the order dated 28th June, 2006. This was on the ground that the issue of rectification was debatable and therefore, not open to rectification proceedings; and

(b) the Respondent-Assessee was entitled to interest under Section 244A of the said Act as the refund arose out of the appellate proceedings and no delay in appellate proceedings was even attributed to the Respondent-Assessee by the Revenue. Thus, the Respondent-Assessee was entitled to interest on the refund.

6. In respect of Question (a), the grievance of the Revenue is that the rectification proceedings under Section 154 of the said Act was warranted as the question of delay was not a debatable issue, in view of the communication of the Commissioner of Income-tax dated 21st August, 2006. The Tribunal in the impugned order held that whether or not, there was a delay in the proceedings and to whom is such delay is attributable is a question of fact, requiring investigation. This investigation of the cause for the delay would itself make it a debatable issue as both the Respondent-Assessee and the Revenue would have different perspective on the same. Further, the communication made by the Commissioner of Income-tax dated 21st August, 2006 was a communication based on his perspective of the reasons for the delay and the Respondent’s perspective had not even been considered by the Commissioner of Income-tax. The Respondent-Assessee perspective on the issue would be considered only in rectification proceedings by the Assessing Officer. In the above view of the matter, the issue of delay, if any, attributable to whom, is itself a debatable issue and the Apex Court in the case of T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50 has held that 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 could be two possible opinions. In view of the fact that the impugned order has relied upon the decision of the Apex Court in the matter of Volkart Bros. (supra), we see no reason to entertain proposed Question (a).

7. So far as Questions (b) to (d) are concerned, the same would not arise for consideration, as they are consequent to Question (a). In view of the fact that we have held that the rectification itself is not maintainable, Questions (b) to (d) all dealing with the Question whether or not the Respondent-Assessee is responsible for the delay in grant of refund becomes academic and need not be answered.

8. Accordingly, the appeal is dismissed with no order as to costs.

[Citation : 358 ITR 233]