High Court Of Punjab & Haryana
CIT vs. P.K. Bhardwaj
Asst. Year 1992-93
G.S. Singhvi & Ajay Kumar Mittal, JJ.
IT Ref. No. 189 of 1999
8th October, 2004
Rajesh Bindal, for the Revenue : None, for the Assessee
Ajay Kumar Mittal, J. :
At the instance of the Revenue, the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short “the Tribunal”), has referred the following question of law for the opinion of this Court :
“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the view taken by the Dy. CIT(A) to hold that the question of allowing expenses against the amount of incentive bonus received by a Development Officer of the LIC of India was a highly debatable issue and outside the purview of s. 154 ?”
The assessee, an individual, is a Development Officer with the Life Insurance Corporation of India. He filed his IT return for the asst. yr. 1992-93 declaring total income of Rs. 65,479. The case of the assessee was processed under s. 143(1)(a) of the Act and his income was computed at Rs. 71,970. The assessee filed an application for rectification under s. 154 with a prayer that additions/disallowance, if any, be deleted. The AO also issued notice under s. 154 of the Act for adding income received by the assessee on account of incentive bonus. The assessee raised objections to the proposed addition on the ground that it is a debatable issue as to whether incentive bonus is income or not and, therefore, the same cannot be added under s. 154 of the Act to his total income. The AO, however, did not agree with the contention of the assessee and made the addition. The appeal filed by the assessee was allowed by the Deputy Commissioner of Income-tax (Appeals) [for short, “the Dy. CIT(A)”]. He directed the AO to delete the disallowance of 40 per cent of the amount of incentive bonus received by the appellant.
Shri Rajesh Bindal invited our attention to the judgment of this Court in B.M. Parmar, Development Officer, LIC of India vs. CIT (1998) 150 CTR (P&H) 548 : (1999) 235 ITR 679 (P&H) wherein it has been held that incentive bonus is assessable under the head “Salaries” and not under the head “Profits and gains of business or profession” and argued that the additions made by the AO in the income of the assessee did not suffer from any legal infirmity warranting interference by the appellate authority. He pointed out that in terms of the aforementioned judgment, deduction under s. 16(i) of the Act is admissible under the head “Salaries” and no separate deduction on account of expenditure is permissible and, therefore, 40 per cent cannot be allowed as expenses from incentive bonus and the issue was no longer debatable so far as the authorities under the jurisdictional High Court are concerned. Shri Bindal then argued that the AO did not commit any error by invoking the provisions of s. 154 of the Act for the purpose of making additions in the income of the assessee. In support of this argument, he placed reliance on CIT vs. Hukam Chand Jain (2003) 185 CTR (Raj) 537 : (2003) 262 ITR 373 (Raj).
4. We have considered the submissions of learned counsel for the Revenue, but have not felt inclined to accept the same. Sec. 154 of the Act, which provides for rectification of mistakes apparent from the record, reads as under : “154. (1) With a view to rectifying any mistake apparent from the record an IT authority referred to in s. 116 may,â (a) amend any order passed by it under the provisions of this Act; (b) amend any intimation sent by it under sub-s. (1) of s. 143, or enhance or reduce the amount of refund granted by it under that sub-section. (1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-s. (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided. (2) Subject to the other provisions of this section, the authority concernedâ (a) may make an amendment under sub-s. (1) of its own motion, and (b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee, and where the authority concerned is the Dy. CIT(A) or the CIT(A), by the AO also. (3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard. (4) Where an amendment is made under this section, an order shall be passed in writing by the IT authority concerned. (5) Subject to the provisions of s. 241, where any such amendment has the effect of reducing the assessment, the AO shall make any refund which may be due to such assessee. (6) Where any such amendment has the effect of enhancing the assessment or reducing a refund already made, the AO shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under s. 156 and the provisions of this Act shall apply accordingly. (7) Save as otherwise provided in s. 155 or sub-s. (4) of s. 186 no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed.”
5. In T.S. Balaram, ITO vs. Volkart Bros. (1971) 82 ITR 50 (SC), the Supreme Court, while considering the scope of s. 154 of the Act, categorically laid down 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 may be conceivably two opinions. Their Lordships further held that a decision on a debatable point of law is not a mistake apparent from the record.
6. Following the dictum laid down in T.S. Balaram, ITO (supra), the Calcutta High Court in Vijay Mallya vs. Asstt. CIT (2003) 183 CTR (Cal) 201 : (2003) 263 ITR 41 (Cal) held as under : “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.”
7. In the present case, the intimation under s. 143(1)(a) of the Act was dt. 31st May, 1993, and order under s. 154 was passed on 17th Nov., 1993. The Tribunal dismissed the appeal of the Revenue on 24th Sept., 1997. The decision by this Court in B.M. Parmarâs case (supra) was rendered on 27th Oct., 1998, sub-s. (7) of s. 154 prescribes limitation of four years for initiation of action for rectification of a mistake. Therefore, the action for rectification could have been taken by the AO upto 31st March, 1998, on the basis of the judgment of the jurisdictional Court. However, the fact of the matter is that action initiated under s. 154 had been finalised much before the judgment of this Court in B.M. Parmarâs case (supra). Therefore, the Revenue cannot rely on that judgment to justify the order passed by the AO. The facts of Hukum Chand Jainâs case (supra) are different as in that case, the decision of the jurisdictional High Court had come before the decision of the Tribunal and the High Court had held that in that situation, the issue could not be said to be debatable any longer. Such are not the facts of the present case.
8. In view of the above, the question of law referred by the Tribunal as reproduced above is answered against the
Revenue and in favour of the assessee.
[Citation : 279 ITR 326]