Commissioner Of Income Tax, Chennai v. M/S.m M Forgings Ltd., Guindy House, 95, Anna Salai, Chennai-600 032

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 11.09.2018 CORAM : THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal Nos.1075 and 1076 of 2008 Commissioner of Income Tax,Chennai. .. Appellant in both theappealsVs. M/s.M M Forgings Ltd.,Guindy House,95, Anna Salai,Chennai-600 032. .. Respondent in boththe appeals* * * Prayer : Tax Case Appeals filed under Section 260A of the Income Tax Act, 1961 against the order ofthe Income Tax Appellate Tribunal Madras 'B' Bench, dated 06.12.2007 in ITA Nos.526 and527/Mds/2007.* * * For Appellant in : Mr.Karthik Ranganathan,both the appeals Senior Standing Counsel For Respondent in : Mr.M.P.Senthil Kumarboth the appeals C O M M O N J U D G M E N T [Judgment of the Court was delivered by T.S.Sivagnanam, J.] These appeals filed by the Revenue are directed against the common order passed by the IncomeTax Appellate Tribunal, Chennai �B� Bench, in I.T.A.Nos.526 and 527/Mds/2007, dated 06.12.2007for the Assessment Years 2001-2002 and 2002-2003. 2. The above appeals have been admitted vide order dated 31.07.2008 on the following substantialquestion of law: �Whether in the facts and circumstances of the case, the Tribunal was right in holding that the issueof exclusion of export incentive from total turnover for the purpose of deduction under Section80HHC is not a debatable issue and is rectifiable under Section 154 ?� 3. Heard Mr.Karthik Ranganathan, learned Senior Standing Counsel for the Revenue andMr.M.P.Senthil Kumar, learned counsel for the respondent/Assessee. 4. The short issue, which falls for consideration, is whether the application filed by the Assessee under Section 154 of the Income Tax Act, 1961 (in short, "the Act") to rectify the intimation dated21.11.2005 was maintainable and whether the Assessee should be permitted to rectify the mistake,which had occurred, while computing the total turnover. 5. The Assessing Officer vide order dated 21.11.2005 rejected the application dated 03.11.2005 onthe ground that non-exclusion of export incentives from the total turnover is not deemed to be amistake committed by the Department. On appeal, the Commissioner took note of an order passed inthe Assessee's own case for the Assessment Year 2000-2001, wherein, the Assessee appears to havecommitted the same mistake in not excluding export incentives from the total turnover and at theappeallate stage before the Commissioner (Appeals), the Assessee filed a memo raising additionalground, which was allowed in I.T.A.No.282/2005-06. The Commissioner (Appeals) in the instant casefor the subject assessment years took note of the said order passed by his predecessor and aftertaking note of Clause (ba) of Explanation to Section 80HHC of the Act, held that the Assessee shouldbe permitted to make the necessary rectification and accordingly, allowed the appeal and issued adirection to the Assessing Officer to pass necessary rectification order under Section 154 of the Actto modify the original claim made under Section 80HHC in the return of income. Accordingly, theAssessing Officer rectified the original claim and considered the documents and has passed theorder dated 12.02.2007. 6. The Revenue preferred appeals before the Tribunal against the orders passed by the CIT (A) dated27.11.2006. The appeals were dismissed by the impugned order dated 06.12.2007. 7. The Revenue's contention is that the scope of Section 154 of the Act to rectify the intimation is very much limited and even according to the Assessee, they have omitted to deduct the exportincentives from the total turnover, the only remedy available to the Assessee is to file a revisedreturn under Section 139(5) of the Act and the time expired in March, 2003, whereas, therectification application was filed in November 2005. Therefore, it is submitted that the orderspassed by the Commissioner (Appeals) as well as the Tribunal call for interference. 6. The Revenue preferred appeals before the Tribunal against the orders passed by the CIT (A) dated27.11.2006. The appeals were dismissed by the impugned order dated 06.12.2007. 7. The Revenue's contention is that the scope of Section 154 of the Act to rectify the intimation is very much limited and even according to the Assessee, they have omitted to deduct the exportincentives from the total turnover, the only remedy available to the Assessee is to file a revisedreturn under Section 139(5) of the Act and the time expired in March, 2003, whereas, therectification application was filed in November 2005. Therefore, it is submitted that the orderspassed by the Commissioner (Appeals) as well as the Tribunal call for interference. 8. We have examined the factual position in the instant case and we find that the assessee has madea claim for deduction under Section 80HHC of the Act. However, while calculating the totalturnover, the Assessee has failed to exclude the export incentives. Thus, we find that the error isonly a computation error and not an omission to make a claim for deduction, which is permissible inthe light of the plain language of Section 154 of the Act. Learned Senior Standing Counsel for theRevenue referred to the decision of the High Court of Bombay in the case of Khatau Junkar Ltd. V.K.S.Pathania, (1992) 196 ITR 55. On going through the facts of the case and the decision renderedby the Court, we find that the said decision supports the case of the Assessee, wherein, it has beenheld as follows : �..... On a plain reading of Section 143(1)(a) of the Act, therefore, it is clear that if, on the basis ofthe return which is filed by the assessee, any tax or interest is found due after adjustments, as setout in the section, an intimation shall be sent to the assessee specifying the sum so payable.Similarly, if any refund is due to the assessee on the basis of such return, it shall be granted to theassessee. Therefore, such an intimation can be sent to the assessee only on the basis of the return.The proviso, however, to the section permits certain adjustments to be made while calculating thetax or interest payable or while granting a refund. These permissible adjustments are :(1) any arithmetical error in the return, accounts or documents accompanying it can be rectified;(2) any loss carried forward, deduction, allowance or relief which, on the basis of the informationavailable in such return, accounts or documents, is prima facie admissible but is not claimed in thereturn, can be allowed; and similarly (3) any such loss carried forward, deduction, allowance or relief which is claimed in the return butwhich, on the basis of the information available in such return, accounts or documents, is prima Apart from these provisions, sub-section (2) of Section 143 empowers the Income-tax Officer, if heconsiders it necessary or expedient to ensure that the assessee has not understated the income orhas not computed excessive loss or has not underpaid the tax in any manner, to serve on theassessee a notice requiring him to produce before him any evidence on which the assessee may relyin support of the return. Thereafter, under sub-section (3), he can proceed to make a regularassessment. The other relevant provision of Section 143 is sub-section (1A) under which, where,after making the adjustments under Section 143(1)(a), it is found that the total income exceeds theincome declared in the return by any amount, the Assessing Officer shall further increase theamount of tax payable by additional income-tax calculated at the rate of twenty per cent. of the taxpayable on such excess amount. This additional income-tax shall be specified in the intimation whichis to be sent under Section 143(1)(a). .....� 9. As pointed out earlier, in the instant case, it is only a computation error and it is not an omissionto make a claim for deduction. Furthermore, the identical relief was granted in respect of theassessment year 2000-2001 at the stage, when an appeal was filed against the assessment orderbefore the Commissioner (Appeals) and additional ground was raised by the Assessee, which waspermitted by the Commissioner (Appeals) and accordingly, the original claim made under Section80HHC of the Act was modified by the Assessee. 10. Thus, we are of the considered view that the Commissioner (Appeals) as well as the Tribunalrightly held that the Assessee was entitled to file an application under Section 154 of the Act toamend the intimation issued under Section 143(1) of the Act. 11. For the above reasons, the appeals filed by the Revenue are dismissed and the substantialquestions of law are answered in favour of the Assessee and against the Revenue. (T.S.S., J.) (V.B.S., J.) 11.09.2018 gg To 1.The Income Tax Appellate Tribunal Madras 'B' Bench. 2.The Commissioner of Income Tax,Chennai. 3.The Commissioner of Income Tax (Appeals),Chennai. T.S.SIVAGNANAM, J.and V.BHAVANI SUBBAROYAN, J. gg T.C.A.Nos.1075 and 1076 of 2008 11.09.2018