AAR-New Delhi : Application for advance ruling cannot be admitted if applicant has already filed return of income

Authority For Advance Rulings (Income Tax) , New Delhi

SEPCOIII Electric Power Construction Corporation, In Re

Section : 245R

Justice P.K. Balasubramanyan, Chairman And V.K. Shridhar, Member

Application No. 1 Of 2011 A.A.R. No. 1009 Of 2010

November 15, 2011


1. This is an application made by the applicant in AAR/1009/2010 under Rule 19 of the Authority for Advance Rulings(Procedure) Rules 1996. The applicant feels aggrieved by the order of this Tribunal declining to allow its application under section 245R(2) of the Income-tax Act and refusing to admit it for a ruling under section 245R(4) of the Act. In the order dated 25.8.2011 this authority had given its reasons to find that the application was hit by the bar contained in clause (i) of the proviso to section 245R(2) of the Act. The applicant submits that the reasoning leading to the invocation of the bar contained in section 245R(2) of the Act is incorrect and requires to be corrected.

2. Even at the threshold, the Revenue has raised the objection that Rule 19 of the Rules is not attracted since that Rule relates only to rectification of mistakes apparent from the record or amending an order vitiated by any such apparent error. What is really sought for, is at best, a review of the order passed by this Authority and rule 19 of the Rules does not confer any such power of review. We may straightway say that there is considerable merit in this contention raised on behalf of the Revenue. But, after all, if we had made any clear mistake in passing the order on the main application, we feel that it would be proper for us to correct such a mistake. To find out whether we had made any such mistake, we permitted Senior Counsel for the applicant to argue the matter as if he were arguing an appeal against our order dated 25.8.2011, that is sought to be rectified.

3. In our order we had held that the applicant having filed a return of income for the relevant year even before filing the application under section 245Q of the Act, it must be taken that the question that is posed before us for a ruling was already pending before the Assessing Officer. Learned Counsel contends that merely because the applicant had filed a return of income before he approached this authority that would not mean that the question raised in the application before the Authority was already pending before the Assessing Officer within the meaning of clause (i) of the proviso to section 245R(2) of the Act. Counsel emphasized that the bar was only where the question raised in the application was already pending before the Assessing Officer. He submitted that mere filing of a return would not mean that the question was already pending before the Assessing Officer. Obviously, Parliament did not enact words in the statute to the effect that the filing of a return would operate as a bar to the allowing of an application under section 245R(2) of the Act. He also relied on the Hand Book on Advance Rulings published by this authority to support his submission in that behalf. He referred to the passage in the Hand Book that “In a case where a notice under section 142(1) is issued for submission of an income-tax return by the applicant, unless there is any indication in the notice or some other material to show that the issue of this notice was in such circumstances as to show that the questions posed before the Authority has already been agitated by the assessee before, or had already arisen in the mind of, or discussed by, the Assessing Officer, it is difficult to say that the terms of clause (a) of the proviso to section 254R(2) are attracted. From the forgoing it is quite clear that the Authority would refuse to admit an application only if the question raised by the applicant is already pending before the Income-tax Authorities and not simply because assessment proceedings are pending in that case. It is also clear that for rejection of the application, the question should be pending consideration by that other Authority.”

4. As regards the passage from the Hand Book relied on, this Hand Book itself says that it should not be construed as an exhaustive statement of law. Even otherwise, what is stated in the Hand Book cannot control the rendering of a decision with reference to the relevant provisions. We also find on a reference to the passage relied on, that it nowhere states that on a return being filed, the question cannot be said to be pending. What was referred to was an issuance of a notice under section 142(1) of the Act. Section 142 itself covers three different situations and one of them is to call upon a person to file a return of income if he had not filed a return within the time allowed under section 139(1) of the Act. The observations relied on, even if understood as a correct reflection of the legal position, it is confined to a situation where a notice is issued calling upon the applicant to file of a return. It does not deal with a situation where a return has been filed.

5. Learned Counsel submitted that the applicant has not shown the income in respect of which the ruling is sought in its return and unless the Assessing Officer conducts roving enquiry, he would not be able to discover the arising of any such income or the question that is now involved in the application before this Authority. This is countered on behalf of the Revenue by pointing out that on an application made in connection with this payment under section 197(2) of the Act, an order was made directing the withholding of tax in terms of section 195 of the Act and there was no need for going in for any roving enquiry. We have some difficulty in appreciating how, without claiming that the particular income is not taxable, the applicant could have an assessment of the income for the relevant year completed under the Act. We put it to Counsel whether in case we rule that the income was not taxable, would not the Assessing Officer be compelled to give effect to our ruling and exclude this income from the assessment of the liability of the applicant to tax and he answered ‘yes’. If that be so, how can one say that the question raised before us is not a question pending before the Assessing Officer in respect of the return already filed by the applicant? After all, what we have held in our order dated 25.8.2011 is that once the return was filed by the applicant, the question that is raised before us, has come within the purview of the Assessing Officer and the assessment on that return.

6. Counsel relied on section 153 of the Act and clauses (vi)(vii)of explanation 1 thereto to point out that the period of pendency of an application before us would stand excluded while computing the period of limitation for completing the assessment and that would show that the filing of an application for advance ruling even while a return had been filed, is contemplated by the statute, so long as the question raised is not specifically raised before the Assessing Officer. We find it difficult to read or understand explanation 1 to section 153 of the Act, as an aid to understand the bar created by section 245R(2) of the Act with particular reference to clause (i) of the proviso. We see nothing in section 153 which would militate against what we have stated in our order rejecting the application.

7. Counsel relied on a ruling of this Authority in Amir Zai Sangin, In re [1999] 238 ITR 189/ 104 Taxman 179 (AAR-New Delhi). We find therefrom that this Authority had only stated:

“To hold that the subsequent act of filing the return would vitiate and render infructuous the application filed earlier under section 245Q(1) would render the entire procedure of seeking an advance ruling otiose. Such an interpretation of the Act would not be correct. What the clause prohibits is the attempt to raise before the Authority questions which, on the date of the application before the Authority, were being agitated in other fora.”

8. This authority therein noticed the earlier ruling in Monte Harris v. CIT [1996] 218 ITR 413/[1995] 82 Taxman 365 (Delhi). We see nothing in this passage to indicate or support the contention that the filing of a return does not give rise to a question as having arisen before the Assessing Officer. We had also noticed the ruling in Monte Harris (supra) in our order dated 25.8.2011. With respect, we find nothing in the above ruling to indicate that we have committed an error, let alone an error apparent on the face of the record, in our order dated 25.8.2011.

9. It is not necessary to reiterate the reasons given by us in the earlier order in support of the view we have taken therein. Suffice it to say that, we are not satisfied that we have committed any mistake in refusing to entertain the application made by the applicant under section 245Q of the Act on the facts and in the circumstances of the case.

[Citation : 340 ITR 231]

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