Commissioner Of Income-Tax, -I, Patna v. For The Revenue/Appellant:- Mrs. Archana Sinha, Advocate

MISC. APPEAL No.190 OF 2002 (Application is directed against order dated 29.11.2001 passed by Shri K.K. Gupta, Accountant Member and Dr. R.K. Yadav, Judicial Member of Income-tax Appellate Tribunal in ITA No. 394/Pat/ 2001 relating to Assessment year 1995-96). 1. COMMISSIONER OF INCOME-TAX, -I, PATNA 2. JOINT COMMISSIONER OF INCOME-TAX, SPECIAL RANGE-I, PATNA --------------------- (Appellants) PATNA --------------------- (Appellants) Versus 1. M/S BIHAR STATE FINANCIAL CORPORATION, FRASER ROAD, PATNA ---------------------(Respondent) ROAD, PATNA ---------------------(Respondent) For the Revenue/Appellant:- Mrs. Archana Sinha, Advocate For the Assessee/Respondent:- Mr. A.K. Rastogi, Advocate & Mr. Ashish Agrawal, Advocate P R E S E N T THE HON'BLE MR. JUSTICE CHANDRAMAULI KUMAR PRASADTHE HON'BLE MR. JUSTICE (DR.) RAVI RANJAN Prasad & Ranjan, J.J. Assessee Bihar State Financial Corporation, “”(hereinafter referred to as the assessee) is a Government of Bihar undertaking. It filed its return of income for the Assessment year 1995-96 on 30.11.1995 showing total loss of Rs. 72,42,25,660/- (Rupees Seventy two Crores Forty two Lakhs Twenty Five thousand six hundred sixty). The return was processed under Section 143 (1) (a) of the Income-tax Act (hereinafter referred to as the Act) on total loss of Rs. 72,38,08,710/- on 14.3.1996 and after disallowing Rs. 4,16,951/- in relation to the Staff Provident Fund and interest on borrowing from IRBI, additional tax of Rs. 38,360/- was charged in the intimation given under Section 143 (1) (a) of the Act. Assessee on 14.6.1996 filed petition for rectification of additional tax charged. The application for rectification found favour with the Assessing Officer and the additional tax amounting to Rs. 38,360/- was deleted in exercise of the power under Section 154 of the Act. The return was picked up for scrutiny and notice under Section 143 (2) was given to the assessee on 19.11.1996. Ultimately total income under Section 143 (3) of the Act was determined on 11.03.1998 which made addition of Rs. 63,15,73,000/- claimed by the assessee under head “reserved for bad and doubtful debts”. Another rectification order was passed in which rectification in the following manner has been ordered :- Total income as per order u/s 154 dt. 8.8.97 (-) Rs. 72,42,25,660/- Deduct: Provision for bad and doubtful debts as discussed above (+) Rs. 63,15,73,000/-- Adjusted loss for the year … Rs. 9,26,52,660/- Loss returned for the year … Rs. 72,42,25,660/Variation in the returned loss…Rs. 63,15,73,000/- The assessee carried the matter in appeal inter alia contending that order of rectification has been passed after the period of limitation and further there being no mistake apparent on the face of the record, power of rectification under Section 154 of the Act was not fit to be exercised. The Commissioner of Income-tax (Appeals) negatived both the contentions and dismissed the appeal. Thereafter the assessee preferred appeal before the Patna Bench of the Income Tax Tribunal (hereinafter referred to as the “Tribunal”) which allowed the appeal inter alia holding that there being no mistake apparent from the record, power under Section 154 of the Act was not fit to be exercised. While doing so the Tribunal observed as follows:- “It had become a technical exercise for trying to extract additional tax u/s 143 (1) (a) . The ld. CIT (A) then accepting the ratio in the citations relied upon by him, examined whether there was a mistake in the order u/s 143 (1) (a) read with sec. 154 dt. 8.8.97. He considered that the assessee had incurred loss. Therefore, no deduction was allowable under the “It had become a technical exercise for trying to extract additional tax u/s 143 (1) (a) . The ld. CIT (A) then accepting the ratio in the citations relied upon by him, examined whether there was a mistake in the order u/s 143 (1) (a) read with sec. 154 dt. 8.8.97. He considered that the assessee had incurred loss. Therefore, no deduction was allowable under the provisions of sec. 36 (1) cited above being the provision for Bad & Doubtful Debts in this case of amount exceeding 5% of its total income. This remained to be adjusted even in the rectification order dated 8.8.97. Therefore, by no stretch of imagination can one conclude that the action of the ld. AO was proper and fair inasmuch as after having undergone the exercise of framing assessment u/s 143 (3) and having issued notice u/s 143(2) this matter remained superficial matter to be dealt with u/s 143 (1) (a) read together with sec. 154. We do not find reason on which the ld. CIT (A) has based his decision confirming the demand of additional tax after the matter has been thoroughly examined u/s 143 (3). In our view, therefore, the submission of the ld. Counsel for the assessee is justified and the contention of the ld. CIT (A) fails.” Aggrieved by the same, the Commissioner of Income-tax has preferred this appeal under Section 260A of the Act. By order dated 22.07.2008, this appeal has been admitted for hearing on the following substantial questions of law:- “(1) Whether the period of limitation in terms of section 154 (7) of the Income-Tax Act shall be reckoned from the date of the first rectification order or from the original assessment order? (2) Whether in the facts and circumstances of the case Tribunal erred in holding that there is no mistake apparent on face of record while setting aside the order of the Assessing Officer and the C.I.T. (appeal)?” Mrs. Archana Sinha appears on behalf of the appellants. Respondent is represented by Mr. Ajay Kumar Rastogi. With the consent of the party, we have taken for consideration the second question of law formulated for our answer at the first instance. Mrs. Sinha, contends that the Tribunal erred in holding that there is no mistake on the face of the record for exercise of the power under Section 154 of the Act. She submits that the mistake being apparent, the Tribunal ought not to have interfered with the order dated 30[th] of March, 2001. Mr. Rastogi, however, submits that sine quo non for exercise of power under Section 154 of the Act is existence of mistake apparent from the record. In support of the submission, he has placed reliance on a Bench decision of this Court in the case of Parikh Engineering and Body Building Co. Ltd. And Another Vrs. Union of India And Others ,238 ITR 554 and our attention has been drawn to the following passage from the said judgement:- “It is true that the provisions of section 115J obliged the Assessing Officer to compute the income of the petitioner-company in a particular manner but this only meant that the Assessing Officer should have issued notice 2001. Mr. Rastogi, however, submits that sine quo non for exercise of power under Section 154 of the Act is existence of mistake apparent from the record. In support of the submission, he has placed reliance on a Bench decision of this Court in the case of Parikh Engineering and Body Building Co. Ltd. And Another Vrs. Union of India And Others ,238 ITR 554 and our attention has been drawn to the following passage from the said judgement:- “It is true that the provisions of section 115J obliged the Assessing Officer to compute the income of the petitioner-company in a particular manner but this only meant that the Assessing Officer should have issued notice under Section 143 (2) to it and proceeded to assess the income accordingly. As a matter of fact, as stated above, the Assessing Officer did issue notice and made regular assessment. If such assessment was not in accordance with section 115J, remedy could be else where but certainly not by way of recourse to rectification power under Section 154 of the Act. It is to be kept in mind that 100 per cent. depreciation onbottles and crates was allowedpursuant to the appellate orders of the Appellate Tribunal or the Commissioner in the light of which the Assessing Officer had also passed consequential orders, giving effect to them, as already mentioned above. In the circumstances, I find merit in the submission made on behalf of the petitioners that the effective and operative orders in these cases were the ones which had been passed giving effect to the said appellate orders and, therefore, they alone could be subjected to rectification of any “apparent mistake”. Perhaps, as pointed out by learned counsel for the petitioners, one reason -why the respondents chose to correct the socalled mistake in the intimation was that otherwise, they would not have been able to charge additional interest under sub-section (1A) of section 143 of the Act.” (underlining ours) Mr. Rastogi, points out that income was determined under Section 143 (3) of the Act and according to him, the debatable point of law is not an error on the face of the record and hence power of rectification under Section 154 of the Act is not fit to be exercised. Reliance has been placed on a decision of the Supreme Court in the case of T.S. Balaram, Income-Tax Officer, Company Circle IV, Bombay Vrs. Volkart Brothers and Others, 82 ITR 50 and our attention has been drawn to the following passage from the said judgment:- “It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under Section 154 of the Income-tax Act, 1961. 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 conceivably be two opinions.” Having appreciated the rival submissions, we find substance in the submission of Mr. Rastogi. We have no manner of doubt that power under Section 154 of the Act for rectification of mistake can be exercised only when there is mistake apparent on the face of the record. Decision on a debatable question of law cannot be considered as a mistake apparent on the face of the record. A debatable question of law or fact in no circumstances can be said to be mistake apparent from the record. Here in the present case, the return was picked up for scrutiny and after due notice to the assessee the income was determined under Section 143 (3) of the Act. If the assessment was not in accordance with Patna High Court, Dated 19[th] day of November, 2008 P.K./N.A.F.R. law, we are of the opinion that remedy lies elsewhere, but certainly not by way of recourse to rectification power under Section 154 of the Act. In view of aforesaid, we are of the opinion that the Tribunal did not err in holding that there is no mistake apparent on the face of record. Accordingly, the second question of law formulated is answered in the negative, against the Revenue and in favour of assessee and it is held Patna High Court, Dated 19[th] day of November, 2008 P.K./N.A.F.R. law, we are of the opinion that remedy lies elsewhere, but certainly not by way of recourse to rectification power under Section 154 of the Act. In view of aforesaid, we are of the opinion that the Tribunal did not err in holding that there is no mistake apparent on the face of record. Accordingly, the second question of law formulated is answered in the negative, against the Revenue and in favour of assessee and it is held that the Tribunal is right in holding that there is no mistake apparent on the face of the record enabling exercise of power of rectification under Section 154 of the Act. In view of our answer aforesaid answer to first question has been rendered academic and hence we decline to adjudicate the same. In the result, the appeal is dismissed but without any order as to cost. (Chandramauli Kumar Prasad, J.) (Dr. Ravi Ranjan, J.)