Haryana State Coop. Supply And Marketing Federation Ltd., Panchkula v. Commissioner Of Income Tax, Panchkula

ITA No. 269 of 2003 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 269 of 2003 (O&M) Date of Decision: 29.3.2016 Haryana State Coop. Supply and Marketing Federation Ltd., Panchkula Versus ....Appellant. Commissioner of Income Tax, Panchkula ...Respondent. 1.Whether the Reporters of the local papers may be allowed to see the judgment?the judgment? 2.To be referred to the Reporters or not? YES 3.Whether the judgment should be reported in the Digest? CORAM:-HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE RAJ RAHUL GARG. PRESENT: Mr. Divya Suri, Advocate and Mr. Sachin Bhardwaj, Advocate for the appellant. Mr. Yogesh Putney, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of a bunch of four appeals bearingITA Nos. 269 to 272 of 2003 as according to the learned counsel for theparties, the questions of law and facts involved therein are identical. Forbrevity, the facts are being extracted from ITA No. 269 of 2003. 2.ITA No. 269 of 2003 has been filed by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) against theorder dated 22.7.2003 (Annexure A-1) passed by the Income TaxAppellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafterreferred to as “the Tribunal”) in MA No. 3/CHANDI/99 in ITA No. ITA No. 269 of 2003 1326/Chandi/96 for the assessment year 1992-93, claiming the followingsubstantial questions of law:- a. Whether under the facts and circumstances ofthe case, the ld. Tribunal was justified in makinga rectification u/s 254(2) on the basis of theamendment on dated 08.01.1999 by the IncomeTax (Second Amendment) Act, 1998 withretrospective on the basis of amendment inSection 80P(2)(a)(iii) which issue as a questionof law or interpretation of said Section 80P(2)(a)(iii) as unamended in the appellant case hadbecome final on dated 13.5.1998 in the decisionin the case of the appellant itself along with theKerala State Cooperative Marketing FederationLtd. and others reported in 231 ITR 814 and forwhich the necessary effect had already given bythe ld. Tribunal on dated 21.09.1998 and23.09.1998 for the respective years and also bythe respondents? b. Whether under the facts and circumstances ofthe case the issue having become final on theinterpretation of the unamended provisions oflaw of Section 80P(2)(a)(iii) in case of theappellant itself whether the principles of resjudicata shall not apply for the other years i.e.for the A.Y. 1990-91, 1992-93, 1993-94 and c. d. 1995-96 when issue involved the same and thefacts remain the same? Whether under the facts and circumstances ofthe case the ld. Tribunal has erred in law byinitiating the proceedings for rectification andconsidering that the petitions filed are not ofreview but are of rectification and whether forthe purpose of initiating, processing andfinalizing the rectification on necessary legalrequirements as laid down under the IncomeTax (Appellate Tribunal) Rules, 1963, 34A hasbeen followed, in the absence of which thenecessary orders passed need to be quashed?Whether proceedings initiated for rectificationwere mechanical and whether examining thesame issue though already finalized and not isa case of review for which the Tribunal does notpowers and hence unjurisdictional order? Whether the learned Tribunal is correct in law inpassing the rectification orders impugned in thepresent appeal when the very basis of therectification proceedings was debatable beforethis Hon'ble High Court as well as Hon'bleSupreme Court of India at the time of initiationof proceedings of rectification and hence theproceedings are bad? ITA No. 269 of 2003 f. g. h. Whether the learned Tribunal is correct in law inpassing the rectification orders impugned in thepresent appeal when the very basis of therectification proceedings was debatable beforethis Hon'ble High Court as well as Hon'bleSupreme Court of India at the time of initiationof proceedings of rectification and hence theproceedings are bad? ITA No. 269 of 2003 f. g. h. Whether under the facts and circumstances ofthe case, the Tribunal was justified in makingrectification in view of retrospective amendmentin Section 80P(2)(a)(iii) wherein the decisions ofthe Tribunal of dated 21.9.1998 for A.Y. 1995-96and 1990-91 had become final which was notunder dispute by way of an appeal u/s 260-A orreference u/s 256(1) by the respondents? Whether the Tribunal could at all issue thenotices for rectification of its earlier orders whenthe vires of the retrospective amendment ofSection 80P(2)(a)(iii) was debatable before thisHon'ble Court in CWP No. 3242 of 1999? Whether the judicial decisions having becomefinal inter parties can be set at naught in view ofthe fact that Special Leave Petition filed by theRevenue against the decision of this Hon'bleCourt in appellant's own case in CIT v. HaryanaState Cooperative Supply and MarketingFederation Ltd. 182 ITR 53 (P&H) on theproposition and interpretation of provision ofSection 80P(2)(a)(iii) that income arising frommarketing of agricultural produce of itsmembers (and not grown by its member asamended) is exempt having been dismissed bythe Hon'ble Supreme Court vide its judgment ITA No. 269 of 2003 dated 13.5.1998 (231 ITR 814)? 3.A few facts necessary for disposal of the present appeal asmentioned therein are that Haryana State Coop. Supply and MarketingFederation Ltd. (in short “the HAFED”) had been making purchase offoodgrain from its member societies as an agent of the Government andselling the same to Food Corporation of India (FCI). The income arisingtherefrom was exempt from tax under Section 80P(2)(a)(iii) of the Act, asheld by this Court in the assessee's own case in Commissioner ofIncome Tax v. Haryana State Coop. Supply and MarketingFederation Ltd. (1990) 182 ITR 53. The appeal filed by the revenuebearing Civil Appeal No. 15430 of 1996 against the order of this Courtwas dismissed by the Supreme Court on 13.5.1998 while deciding thecase of Kerala State Coop. Supply and Marketing Federation Ltd. and others v. Commissioner of Income Tax, (1998) 231 ITR 814(Annexure P-3) holding that the agricultural produce of its members asdefined in Section 80P(2)(a)(iii) of the Act means that it should belong toits members and not that it should be produced by its members. TheTribunal, for the assessment years 1990-91 to 1993-94 in ITA Nos.421/Chd/97, 562/Chd/95 and 1326/Chd/95, following the judgment ofthe Hon'ble Supreme Court in Kerala State Coop. Supply & Marketing Federation Ltd's case (supra) allowed deduction to the assessee forthe income derived by it from marketing an agricultural produce of itsmembers which belonged to them vide order dated 23.9.1998 (AnnexureA-2). The Parliament by Income Tax (Second Amendment) Act, 1998which came into force on 8.1.1999, amended the provisions of Section80P(2)(a)(iii) of the Act with retrospective effect from 1.4.1968. However, Federation Ltd's case (supra) allowed deduction to the assessee forthe income derived by it from marketing an agricultural produce of itsmembers which belonged to them vide order dated 23.9.1998 (AnnexureA-2). The Parliament by Income Tax (Second Amendment) Act, 1998which came into force on 8.1.1999, amended the provisions of Section80P(2)(a)(iii) of the Act with retrospective effect from 1.4.1968. However, the revenue filed miscellaneous applications before the Tribunal after8.1.1999 from which date the necessary amendment was brought byintroducing the word “the marketing the agricultural produce grown by itsmembers or” with retrospective effect, i.e. 1.4.1968 pleading that if theissue is not debatable, the same can be rectified and is a mistakeapparent from the record under Section 254(2) of the Act. Notice dated29.1.1999 (Annexure A-8) was issued in the applications for 19.2.1999.The assessee filed CWP No. 3242 of 1999 challenging the saidamendment and this Court vide order dated 10.3.1999 (Annexure A-9)while issuing notice of motion stayed passing of the final order pursuantto the notice, Annexure A-8. The retrospective amendment was alsochallenged by the National Agricultural Cooperative MarketingFederation of India Ltd. before the Delhi High Court who upheld the saidamendment. The Apex Court in National Agricultural CooperativeMarketing Federation of India Ltd. v. Union of India and others(2003) 260 ITR 548(SC) upheld the retrospective amendment anddismissed the appeal. This Court vide order dated 16.5.2003 (AnnexureA-10) passed in CM No. 9016 of 2003 and CWP No. 3242 of 1999dismissed the writ petition in terms of National AgriculturalCooperative Marketing Federation of India Ltd's case (supra). Inpursuance to the judgment of the Supreme Court in NationalAgricultural Cooperative Marketing Federation of India Ltd's case(supra), the Tribunal vide order dated 22.7.2003 (Annexure A-1) passedin MA Nos. 1 to 4 for the assessment years 1995-96 and 1990-91 to1993-94 filed by the revenue under Section 254 of the Act, reversed itsearlier order dated 23.9.1998 (Annexure A-2) and denied the deduction which was earlier granted under Section 80P(2)(a)(iii) of the Act. Hence,the present appeals. 4.We have heard learned counsel for the parties. 5.The point for consideration in this appeal is as to whetherthe order of the Tribunal dated 23.9.1998 (Annexure A-2) could berectified in view of retrospective amendment made by the Income Tax(Second Amendment) Act, 1998 effective from 1.4.1968. 6.The Tribunal while rejecting the contention of the assessee,following the decision of the Apex Court in the case of J.M. Bhatia Appellate Assistant Commissioner of Wealth Tax and others v. J.M.Shah (1985) 156 ITR 474, held that the order dated 23.9.1998(Annexure A-2) could be rectified as there was mistake of law whichwas apparent on the record. The observation of the Tribunal readsthus:- “There is no dispute in this case that in view of theretrospective amendment u/s 80P(2)(a)(iii), theassessee is not entitled for deduction. We feel thatwhen the law is amended with retrospectiveamendment, the fiction is that all the authorities underthe statute must proceed on the basis that the law atthe relevant time was the law as amendedsubsequently with retrospective effect. That being so,the legal fiction is apparently capable of being carriedforward to hold that when the earlier order waspassed, it was passed in contravention of theamended law which by fiction is deemed to be in force “There is no dispute in this case that in view of theretrospective amendment u/s 80P(2)(a)(iii), theassessee is not entitled for deduction. We feel thatwhen the law is amended with retrospectiveamendment, the fiction is that all the authorities underthe statute must proceed on the basis that the law atthe relevant time was the law as amendedsubsequently with retrospective effect. That being so,the legal fiction is apparently capable of being carriedforward to hold that when the earlier order waspassed, it was passed in contravention of theamended law which by fiction is deemed to be in force at that time. This clearly is an error apparent on theface of the record. Section 80P(2)(a)(iii) has beenamended with retrospective effect, i.e. w.e.f. 1.4.68.The apex court has upheld the constitutional validityof the retrospective amendment of the section in thecase of National Agricultural Coop MarketingFederation of India Ltd. (supra). Once the law ismade applicable with retrospective effect, it is deemedto be in existence from the date when it is madeapplicable and if an order is passed contrary to theamended law, there is a mistake of law crept in theorder and such a mistake must be rectified. The apexcourt has also taken the same view in the aforesaidtwo decisions and the reasoning given therein issquarely applicable to the facts of the case before us.In view of the above discussions and the case law, weaccept the plea of the Revenue and rectify our ordersby which both the assessee were allowed deductionu/s 80P(2)(a)(iii) by holding that both the assesseesare not entitled for deduction u/s 80P(2)(a)(iii) and tothat extent our orders in aforesaid ITAs standamended.” 7. Further, Full Bench of this Court in Commissioner of Income Tax v. Smt. Aruna Luthra [2001] 252 ITR 76 was consideringthe scope of power given under Section 154 which is analogous toSection 254 of the Act for rectification of any mistake apparent on the record. It was held as under:- “The power given to the authority is wide. It cancorrect “any mistake” provided it is “apparent from therecord”. The first question that arises forconsideration is – when a mistake can be said to beapparent from the record? The plain language of the provision suggeststhat the mistake should be apparent. It must bepatent. It must appear ex facie from the record. Itmust not be a mere possible view. The issue shouldnot be debatable. Mr. Sawhney contended that when the viewtaken by an authority is ex facie contrary to thedecision of the jurisdictional High Court or a superiorcourt, the case would fall within the mischief of section 154. However, Mr. Bansal submitted that whiledeciding a matter, an authority cannot anticipate theview that may be taken by the High Court or theSupreme Court on a subsequent date. If at the timeof the passing of the order, the authority takes aparticular view, which is not contrary to the existinginterpretation of law, the provision of section 154cannot be invoked. Apparently, the argument of Mr. Bansal appearsto be attractive. If the issue of error in the order is tobe examined only with reference to the date on which it was passed, it may be possible to legitimatelycontend that it was legal on the date on which it waspassed. The subsequent decision has only renderedit erroneous or illegal. However, there was no errormuch less an apparent error on the date of itspassing. Thus, the provision of section 154 is notapplicable. However, such a view shall be possibleonly if the provision were to provide that the error hasto be seen in the order with reference to the date onwhich it was passed. Such words are not there in thestatute. Resultantly, such a restriction cannot beintroduced by the court. Thus, the contention raisedby counsel for the assessee cannot be accepted. it was passed, it may be possible to legitimatelycontend that it was legal on the date on which it waspassed. The subsequent decision has only renderedit erroneous or illegal. However, there was no errormuch less an apparent error on the date of itspassing. Thus, the provision of section 154 is notapplicable. However, such a view shall be possibleonly if the provision were to provide that the error hasto be seen in the order with reference to the date onwhich it was passed. Such words are not there in thestatute. Resultantly, such a restriction cannot beintroduced by the court. Thus, the contention raisedby counsel for the assessee cannot be accepted. There is another aspect of the matter. In agiven case, on an interpretation of a provision, anauthority can take a view in favour of one of theparties. Subsequent to the order, the jurisdictionalHigh Court or their Lordships of the Supreme Courtinterpret the same provision and take a contrary view.The apparent effect of the judgment interpreting theprovision is that the view taken by the authority isrendered erroneous. It is not in conformity with theprovision of the statute. Thus, there is a mistake.Should it still be perpetuated? If the contention raisedon behalf of the assessee were accepted, the resultwould be that even though the order of the authority is contrary to the law declared by the highest court in theState or the country, still the mistake could not berectified for the reason that the decision is subsequentto the date of the order. Only the dead make no mistake. Exemptionfrom error is not the privilege of mortals. It would be afolly not to correct it. Section 154 appears to havebeen enacted to enable the authority to rectify themistake. The legislative intent is not to allow it tocontinue. This purpose has to be promoted. TheLegislature's will has to be carried out. By placing anarrow construction, the object of the legislation shallbe defeated. Such a consequence should not becountenanced.” 8.In view of the above, no illegality or perversity could befound in the order dated 22.7.2003 (Annexure A-1) passed by theTribunal. Accordingly, the substantial questions of law are answeredagainst the assessee and in favour of the revenue. The appeals standdismissed. (AJAY KUMAR MITTAL) JUDGE March 29, 2016 (RAJ RAHUL GARG) gbs JUDGE