Commissioner Of Income Tax v. M/S Steel Strips Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. Commissioner of Income Tax. Vs. M/s Steel Strips Ltd. ITR No.5 of 2005(O&M) Date of decision: 7.1.2011 -----Applicant. -----Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE ALOK SINGH Present:-Ms. Urvashi Dhugga, Standing Counselfor the applicant. for the applicant. Mr. Akshay Bhan, Advocatefor the respondent. --- ADARSH KUMAR GOEL, J. 1.This reference has been made at the instance ofrevenue by the Income Tax Appellate Tribunal, Chandigarh inpursuance of order of this Court dated 16.9.2003 in I.T.C. No.9 of1998. The referred question has arisen from the order of theTribunal dated 13.12.1996 in I.T.A. No.314/Chandi/1991 for theassessment year 1985-86 and is as under:- “Whether, on the facts and in the circumstances of thecase, the Income-tax Appellate Tribunal was right inlaw in holding that provisions of section 154 are notapplicable to rectify the mistake of law and thatprovisions of section 80VVA are not applicable?” 2. Assessment of the assessee for the assessment year1985-86 was completed on 29.3.1988. Thereafter, the assesseesought rectification under Section 154 of the Act to claimdepreciation. The application was allowed vide order dated30.6.1988 and income was recomputed on that basis.Thereafter, the Assessing Officer noticed that while recomputingthe income, provision of Section 88VVA was overlooked anddeduction allowed was in excess of limit stipulated in the saidprovision. Accordingly, notice dated 28.8.1989 was issued. Theobjection of the assessee was that the said provision stoodomitted w.e.f. 1.4.1988 and the issue being debatable, wasoutside the scope of Section 154 of the Act. On merits, it couldnot be disputed that deductions allowed were beyond thespecified limit. The Assessing Officer rejected the objection andallowed the rectification as per the statutory limit. On appeal, theCIT(A) set aside the order of the Assessing Officer on the groundthat the rectification did not relate to a ‘mistake apparent onrecord’, as is required for invoking Section 154 of the Act and wason a debatable issue and was thus, not permissible in view of lawlaid down by the Hon’ble Supreme Court inT.S. Balaram, I.T.O.v. Volkart Bros.82 ITR 50. 3. The findings recorded by the Assessing Officer, CIT(A) and the Tribunal on the issue are as under:- Finding of the Assessing Officer: “2.The second objection by the assessee isthat the provisions of section 80-VVA werebrought on the statute book by the Finance Act,1983 w.e.f. 01.04.1984 therefore, all deductionsadmissible under the Act which were broughtforward in a particular case on 01.04.1984 forsetting off and which deduction pertained to anyyear upto assessment 1983-84, are admissiblewithout any limit thereon, to determine the totalincome in respect of assessment year 1984-85to 87-88, notwithstanding the fact that theprovisions of section 80-VVA had beenintroduced w.e.f. 01.04.1984. The contention of the assessee is clearly ill-conceived since if that were the interpretationand scope of section 80-VVA, the veryexistence of section 80-VVA is negated. In fact,the provisions of section 80-VVA wereintroduced only with a view to bring thosecompanies within the tax brackets which werethenceforth avoiding the payment of taxes byreasons of claims under chapter VI-A. Therefore, restriction imposed by section 80-VVAwere applicable even in respect of the deductionsbrought forward from earlier assessment years.” -Finding of the CIT(A): The contention of the assessee is clearly ill-conceived since if that were the interpretationand scope of section 80-VVA, the veryexistence of section 80-VVA is negated. In fact,the provisions of section 80-VVA wereintroduced only with a view to bring thosecompanies within the tax brackets which werethenceforth avoiding the payment of taxes byreasons of claims under chapter VI-A. Therefore, restriction imposed by section 80-VVAwere applicable even in respect of the deductionsbrought forward from earlier assessment years.” -Finding of the CIT(A): “The succeeding Assessing Officer passed this orderu/s 154 withdrawing the claim previously allowed,thereby entertaining another interpretation of theprovisions of Section 80-VVA. The mistake apparenton record which could be rectified by invoking provisionof Section 154, must be an obvious and patent mistakeand not something which can be established by along- drawn process of reasoning on points on which theremay be conceivably two opinions. Thus a decision ona debatable point of law is not a mistake apparent onrecord which has been clearly laid down by the Hon’bleSupreme Court in the case of T.S. Balaram, ITO Vs.Volkart Brothers cited supra” -Finding of the Tribunal: 7.We have considered the rival submissions.Section 154 of the Income Tax Act, 1961 empowersthe ITO to amend any order passed by him under theprovisions of the Act to rectify any mistake apparentfrom the record either suo motu or on an application.The jurisdiction of the AO to amend his order thusdepends on whether or not there is a mistakeapparent from the record. If, in his order, there is nomistake which is patent and obvious on the face of therecord, the exercise of the jurisdiction by the AO u/s154 will be illegal and improper. Section 154 does notempower an AO to review the order passed by thepredecessor AO because the normal rule is theremedy by way of review is a creature of the statuteand unless clothed with such power by the statute, noauthority can exercise the power. From the orderpassed by the AO as well as the first appellateauthority, it is clear that the DCIT, Spl. Range,Chandigarh had passed an order u/s 154 on30.6.1988 in which the assessee company was givenbenefit of brought forward of investment allowance,depreciation etc. for earlier years. This benefit wasallowed after due consideration by the Ld. DCIT, Spl.Range, Chandigarh and thereafter the case was transferred to the Asstt. Commissioner, Central Circle,Chandigarh, who passed an order u/s 154 on21.3.1990 and applied the provisions of section80VVA in respect of the brought forward investmentallowance etc. by observing that “the provisions ofsection 80VVA were not applied at the time of givingbenefit of brought forward investment allowance for1981-82.” 3. We have heard learned counsel for the parties. 4. It is clear from the order of the Assessing Officer thatdepreciation was allowed overlooking Section 80VVA of the Act.Overlooking of a statutory provision is clearly a mistake apparenton record and on that basis, rectification under Section 154 of theAct was clearly admissible. Impermissibility of deduction is notdebatable if Section 80VVA is applied. This being so, the CIT(A)as well as the Tribunal erred in law in holding that rectificationwas beyond the scope of Section 154 of the Act. It is clear thatthe statutory provision having come into force w.e.f. 1.4.1984, thesame could have been applied for the assessment year 1984-85and thereafter. However, while applying the said provision for theassessment year 1984-85, claim or carry forward or set off, hadto be considered in accordance with law as in force during thesaid assessment year even if it relates back to an earlier year.The question is accordingly answered in favour of the revenueand against the assessee. The reference is disposed of. January 07, 2011ashwani (ADARSH KUMAR GOEL) JUDGE