Abhishek Industries Ltd., Ludhiana v. The Commissioner Of Income-Tax, Central Circle,Ludhiana And Another

I.T.A. No. 637 of 2007 [1] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 637 of 2007 Date of decision: 11.8.2008 Abhishek Industries Ltd., Ludhiana v. ... Appellant The Commissioner of Income-Tax, Central Circle,Ludhiana and another ... Respondents. CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE RAJESH BINDAL Present: Ms. Radhika Suri, Advocate for the appellant. Mr. Rajesh Sethi, Advocate for the respondents. .. Rajesh Bindal J. This is an appeal filed by the assessee raising followingsubstantial questions of law, arising out of order dated 28.6.2007 passed bythe Income Tax Appellate Tribunal, Chandigarh Bench `B', Chandigarh (forshort,`the Tribunal') in I.T.A. No. 392/Chandi/2006 for the assessment year1998-99: “i) Whether in the facts and circumstances of the case,Income Tax Appellate Tribunal was justified inupholding the order passed by the Assessing Officerunder Section 154 of the Income Tax Act levying interestunder Section 234(B) and (C)even though the incomewas computed under Section 115JA of the Income TaxAct ?Income Tax Appellate Tribunal was justified inupholding the order passed by the Assessing Officerunder Section 154 of the Income Tax Act levying interestunder Section 234(B) and (C)even though the incomewas computed under Section 115JA of the Income TaxAct ? ii) Whether in the facts and circumstances of the case, theAssessing Officer could levy interest under Section 234Band C even though no interest had been levied whileframing assessment under Section 143(3) of the IncomeTax Act ?”Assessing Officer could levy interest under Section 234Band C even though no interest had been levied whileframing assessment under Section 143(3) of the IncomeTax Act ?” After hearing learned counsel for the parties, we find that first I.T.A. No. 637 of 2007 [2] substantial question of law, as referred to above, does arise for considerationby this Court in the present appeal. With the consent of learned counsel forthe parties, arguments were heard at the motion stage for final disposal ofthe appeal on the first substantial question of law. Briefly, the facts are that assessment of the appellant-assesseewas completed under Section 143(3) of the Income-tax Act, 1961 (for short,`the Act') on 22.12.2000 assessing the income at `nil'. However, the incomeunder Section 115JA of the Act was determined at Rs. 89,15,417/- and taxwas charged thereon. However, no interest under Section 234B of the Actwas charged. Notice under Section 154 of the Act was issued for charginginterest under Section 234B and 234C of the Act for short payment/ non-payment of advance tax on the income assessed under Section 115JA of theAct for 27.8.2002. The contention raised by the assessee is that interest underthese sections can be levied only in case where the assessee is required topay any advance tax and as the tax under Section 115JA of the Act is leviedon the book profits which are calculated on the basis of audited profit andloss account, which are available only after the close of the year when theaccounts are prepared and finally approved, was rejected keeping in viewthe judgment of Gauhati High Court in Assam Bengal Carriers Limitedv.Commissioner of Income-Tax, (1999) 239 ITR 862 holding that interestunder Section 234B and 234C of the Act was leviable for short payment/non-payment of advance tax. The judgment of Gauhati High Court is dated23.7.1999. The order levying interest under Section 234B and 234C of theAct was passed on account of short payment of advance tax on 12.9.2002. In appeal before the Commissioner of Income-tax (Appeals)-I,Ludhiana, the assessee succeeded and the rectification order was set aside. In appeal before the Commissioner of Income-tax (Appeals)-I,Ludhiana, the assessee succeeded and the rectification order was set aside. However, in further appeal by the Revenue before the Tribunal,the stand of the Revenue was accepted and the order passed by theAssessing Officer under Section 154 of the Act was restored. Learned counsel for the assessee submitted that as on the datewhen the notice for rectification was issued to the appellant, the legal issueon the basis of which the rectification was sought to be made was debatable,as there was no judgment of jurisdictional High Court. The only judgmentrelied upon was of Gauhati High Court in Assam Bengal Carriers Limited's I.T.A. No. 637 of 2007 [3] case (supra), whereas contrary thereto, there was already a decision ofKarnataka High Court in Kwality Biscuits Ltd.v. Commissioner of Income-Tax, (2000) 243 ITR 519 taking a view in favour of the assessee. It was forthe first time on 25.9.2004 that this Court in Commissioner of Income-Taxv. Upper India Steel Mfg. and Engg. Co. Ltd., (2005) 279 ITR 123 opinedthat in the case of non payment/ short payment of advance tax even in caseof application of the provisions of Section 115JA of the Act, interest underSection 234B and 234C of the Act was leviable. However, the rectificationorder in the case of the assessee was passed much prior to that, i.e.,12.9.2002, when two different High Courts had given different opinions.Gauhati High Court was taking view in favour of the Revenue, whereasKarnataka High Court had decided the issue in favour of the assessee. Relying upon the judgment of this Court in Commissioner ofIncome-Taxv. P.K. Bhardwaj, (2005) 279 ITR 326 and Andhra PradeshHigh Court in Commissioner of Income-Taxv. T.N. Viswanatha Reddy,(1991) 190 ITR 266, the submission is that when the issue on the date whenrectification was sought to be made was debatable, the power of rectificationunder Section 154 of the Act could not possibly be exercised. On the other hand, learned counsel for the Revenue submittedthat as finally the issue has been determined in favour of the Revenue, thesame would mean that the position of law even as on date was the same andnow at this stage the order passed by the Assessing Officer under Section154 of the Act rectifying the mistake committed in the original order ofassessment cannot be faulted with as the same is strictly in conformity withlaw. After hearing learned counsel for the parties and perusing therecord, we find merit in the submission made by learned counsel for theappellant. This Court in P.K. Bhardwaj'scase (supra), while dealing with asimilar situation, opined as under: “In T. S. Balaram, ITO v. Volkart Bros. [1971) 82 ITR 50, theSupreme Court, while considering the scope of section 154 ofthe Act, categorically laid down that a mistake apparent on therecord must be an obvious and patent mistake and notsomething which can be established by a long-drawn process ofreasoning on points on which there may be conceivably two I.T.A. No. 637 of 2007 [4] opinions. Their Lordships further held that a decision on adebatable point of law is not a mistake apparent from therecord. “In T. S. Balaram, ITO v. Volkart Bros. [1971) 82 ITR 50, theSupreme Court, while considering the scope of section 154 ofthe Act, categorically laid down that a mistake apparent on therecord must be an obvious and patent mistake and notsomething which can be established by a long-drawn process ofreasoning on points on which there may be conceivably two I.T.A. No. 637 of 2007 [4] opinions. Their Lordships further held that a decision on adebatable point of law is not a mistake apparent from therecord. Following the dictum laid down in T. S. Balaram, ITOcase [1971] 82 ITR 50 (SC) the Calcutta High Court in VijayMallya v. Asst. CIT [2003] 263 ITR 41 held as under (page 48):“Section 154 can be invoked for rectification of amistake apparent from the record. The mistakecontemplated under Section 154 must be a mistakeapparent on the face of the records. It must be obvious,clear and patent. It must not be a mistake, to establishwhich a long and elaborate reasoning and arguments isrequired on points on which there may conceivably betwo opinions. It must not be a debatable point of law. Itmust be a patent and apparent mistake in the assessment.It must not be a question with regard to which twodifferent views may be possible or with regard to whichtwo different opinions can be formed. It must be aglaring, obvious or self-evident mistake of fact or amistake of law, in respect of which there cannot be anytwo opinions and it should not be one in order toestablish which a long-drawn process of argument orreasoning is to be advanced.” In the present case, the intimation under Section 143(1)(a) of the Act was dated May 31,1993, and order under section154 was passed on November 17, 1993. The Tribunal dismissedthe appeal of the Revenue on September 24, 1997. The decisionby this Court in B. M. Parmar's case [1999] 235 ITR 679 wasrendered on October 27, 1998, sub-section (7) of section 154prescribes limitation of four years for initiation of action forrectification of a mistake. Therefore, the action for rectificationcould have been taken by the Assessing Officer up to March 31,1998, on the basis of the judgment of the jurisdictional court.However, the fact of the matter is that action initiated undersection 154 had been finalised much before the judgment of I.T.A. No. 637 of 2007 [5] this court in B.M. Parmar's case [1999] 235 ITR 679.Therefore, the Revenue cannot rely on the judgment to justifythe order passed by the Assessing Officer.” No judgment of Hon'ble the Supreme Court or this Court takinga view contrary to what has been opined in P. K. Bhardwaj'scase (supra)has been cited by learned counsel for the Revenue. Keeping in view the law laid down by this Court in theaforesaid case, we are of the considered view that rectification order passedin the case of the assessee on 12.9.2002 when the legal issue on account ofwhich the rectification was sought to be made was highly debatable one asthere was no judgment of the jurisdictional High Court. The two otherjudgments available on the issue were taking a view contrary to each other –the Gauhati High Court was in favour of the Revenue whereas theKarnataka High Court was in favour of the assessee. For the reasons mentioned above, we answer question (i), asreferred to above, in favour of the assessee and against the Revenue byholding that the power of rectification could not be exercised by therespondents in the facts and circumstances of the present case. The appeal is disposed of accordingly. (Rajesh Bindal) Judge 11.8.2008mk (Hemant Gupta) Judge