High Court Of Madras
CIT vs. Palani Andavar Cotton And Synthetic Spinners Ltd.
Section 143(1)(a), 154
Asst. Year 1988-89, 1989-90, 1990-91
K. Raviraja Pandian & Mrs. Chitra Venkataraman, JJ.
Tax Case (Appeal) Nos. 96 to 98 of 2004
27th August, 2007
Counsel appeared :
Muralikumaran, for the Appellant : R. Venkatanarayanan for M/s Subbaraya Ayer, for the Respondent
JUDGMENT
Mrs. Chitra Venkataraman, J. :
These appeals are preferred by the Revenue in respect of the asst. yrs. 1988-89, 1989-90 and 1990-91 against the orders of the Tribunal allowing the appeals of the assessee on the ground that the orders passed under s. 143(1)(a) could not be the subject-matter of rectification under s. 154, as the question raised is a debatable one.
2. The assessee filed returns of income disclosing a loss and a book profit under s. 115J of the IT Act, 1961. The returns were considered and processed under s. 143(1)(a). On going through the records, the Dy. CIT found that the profit available for adjustment had been taken into account after reducing 30 per cent, of book profit by wrongly applying s. 115J(2). Treating this as a mistake apparent on record, proceedings were initiated under s. 154 of the IT Act, 1961. Aggrieved by the orders of rectification, the assessee preferred appeals before the CIT(A) contending that while computing the income for the purposes of s. 115J, a portion of the depreciation had not been allowed in the asst. yrs. 1988-89 to 1990-91; that the said depreciation should be allowed to be carried forward to successive assessment years. The CIT(A), however, dismissed the assessee’s appeals on the ground that the assessable loss had been determined in accordance with the provisions of the IT Act, 1961. However, 30 per cent, of the book profit was taken as deemed total income, as it was higher than the assessable income or loss under the provisions of the Act. The CIT(A) also took the view that it could not be assumed that the depreciation was not allowed to the extent of computation of the book profit. The assessee preferred a second appeal before the Tribunal contending that while computing the profit for the purposes of s. 115J, the depreciation claimed was not allowed, which resulted in an assessment on a higher deemed income. The assessee submitted that the extent of depreciation claimed not allowed for the purpose of s. 115J must be allowed to be carried forward in the subsequent year. The assessee also contended that the issue sought to be touched under s. 143(1)(a) by taking recourse to the proceedings under s. 154 was an arguable issue; as such, the orders of the AO as well as the CIT(A) were totally erroneous.
3. By order dt. 28th Oct., 2002, the Tribunal passed a common order in respect of the asst. yrs. 1988-89 to 1990-91 and allowed the appeals of the assessee, taking the view that the orders passed on rectification were totally unsustainable. The Tribunal took the view that at the time the intimation under s. 143(1)(a) and the order under s. 154 was passed, the issue was a debatable one ; as such, the Tribunal held that what could not have been a possibility under s. 143(1)(a) could not be done by invoking s. 154. The Tribunal further pointed out that this Court rendered a decision on 19th Nov., 2001, in the case of CIT vs. Fab Exports (P) Ltd. (2002) 176 CTR (Mad) 129 : (2002) 258 ITR 56 (Mad) on the question that even where tax is levied on book profits, the loss and depreciation in the computation of statutory profits for the year would not be available for carry forward and set off to the extent to which it is absorbed against statutory income of the year. The Tribunal held that the decision of this Court came much later to the date when the orders under s. 143(1)(a) and s. 154 were passed; as such, the proceedings taken were totally unsustainable. The Tribunal referred to the decision of the apex Court reported in T.S. Balaram, ITO vs. Volkart Brothers (1971) 82 ITR 50 (SC), that a debatable issue could not be made a subject-matter for taking recourse to s. 154.
4. Aggrieved by the said order, the Revenue is on appeal before this Court contending that since the issue is now settled in favour of the Revenue by the decision of this Court reported in CIT vs. Fab Exports (P) Ltd. (supra) as well as by the decision of the Supreme Court reported in Karnataka Small Scale Industries Development Corporation Ltd. vs. CIT (2003) 179 CTR (SC) 1 : (2002) 258 ITR 770 (SC), the law declared by the apex Court is presumed to have always been the law of the land. Consequently, the rectification proceedings taken were maintainable. The Revenue contended that the application of wrong provision or an erroneous application of the provisions of the Act will amount to a mistake apparent from the record amenable for correction or rectification under s. 154. Consequently, the Revenue submitted that the view of the Tribunal merits to be reversed. A perusal of the order of the Tribunal shows that the return was originally processed under s. 143(1)(a) on 18th Sept., 1991. Subsequently, on 31st May, 1993, the order of intimation was rectified taking the view that there were no provisions under s. 115J(2) to reduce the 30 per cent, book profit from the available profit for setting off and carried forward losses. Against this order dt. 31st May, 1993, the assessee preferred appeals before the CIT(A). Learned counsel for the respondent placed reliance on the decision of this Court in the case of CIT vs. Nonmag Wires (P) Ltd. (2008) 214 CTR (Mad) 413 : (2007) 292 ITR 557 (Mad) as well as the order dt. 31st Jan., 2007 in Tax Case (Appeal) No. 144 of 2003 [CIT vs. TTK Pharma Ltd. (2008) 300 ITR 346 (Mad)], wherein, under similar circumstances, this Court held that in a case of adjustment under s. 143(1)(a), a debatable question of law cannot be a subject-matter of rectification under s. 154. This Court further held that the claim, which has to be considered on a debatable question, must necessarily be dealt with by the officer under regular assessment proceedings relevant under the Act. In those circumstances, learned counsel for the assessee submits that the order of the Tribunal has to be upheld on the limited question as to the availability of jurisdiction under s. 154.
A perusal of the order of the Tribunal shows that the Tribunal held that as on the date of the proceedings taken under s. 143(1)(a) as well as under s. 154, admittedly, there was a dispute with reference to s. 115J book profit working and the carry forward of loss and the depreciation. The law on the said question was settled by this Court on 19th Nov., 2001 and again by the Supreme Court on 3rd Dec., 2002. While there is no dispute as to the proposition of law that the law declared dates back to the inception of the provisions, yet, with the uncertainty existing as on the date when the proceedings under s. 143(1)(a) was subjected to s. 154, the jurisdiction under s. 154 is not available to correct the illegality in an assessment. The exposition of law by the Supreme Court does not make an error as one apparent from the record for the authority to assume jurisdiction under s. 154. An apparent error must be one which is glaring, obvious or self-evident mistake. The debatable issue can-not be a ground for invoking jurisdiction under s. 154. It is not denied that there are provisions under the Act which permit the Revenue to take up and keep alive assessments even on debatable issues which are awaiting decisions before the Court of law. An issue, which required a long process of reasoning and where there are already conflicting views, cannot offer a platform for a resort to s. 154 proceedings. In similar circumstances, in a decision reported in CIT vs. Nonmag Wires (P) Ltd. (supra) to which one of us is a party (Mrs. Chitra Venkataraman J.), this Court held that a debatable issue on a point of law is not a mistake apparent from the record. Placing reliance on the decision of the apex Court reported in T.S. Balaram, ITO vs. Volkart Brothers (supra), this Court held that “a mistake apparent on the record within the meaning of s. 154 of the Act must be ‘obvious’ and ‘patent’ and not something which could be established by a long drawn process of reasoning of issues on points on which there may be more than one reason. A decision on a debatable point of law certainly is not a mistake apparent from the record.”
An impression formed on the scope of the provisions could not be a mistake or an error apparent from the record so as to justify the exercise of jurisdiction under s. 154. The invoking of the provisions of s. 154 presupposes a mistake or an error which is patent or obvious and does not involve a long drawn process of reasoning on a point which is already a debatable issue. Considering the fact that the decision of this Court was available much later to the proceedings under s. 143(1)(a), we do not find any error in the order of the Tribunal to set aside the rectification proceedings. In the circumstances, we confirm the order of the Tribunal and thereby dismiss the tax cases. There will be no order as to costs.
[Citation : 326 ITR 339]
