+Ita 57/2002Krishak Bharati Coop. Ltd.through : Ms. Surekha Raman, Advocate v. Commissioner Of Income Tax

$~3 *IN THE HIGH COURT OF DELHI AT NEW DELHI Decided on : 06.04.2015 +ITA 57/2002KRISHAK BHARATI COOP. LTD.Through : Ms. Surekha Raman, Advocate. ..... Appellant versus COMMISSIONER OF INCOME TAX ..... Respondent Through : Sh. P. Roychaudhuri, Advocate. CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE R.K. GAUBA MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT) % 1.Following questions of law arise for consideration: “1.Whether the Tribunal erred in holding that the AssessingOfficer was justified in invoking Section 154 of the Income TaxAct, 1961 and rectifying his order dated 12[th]May 1995? 2.Whether while calculating the eligible business profits forthe purposes of deduction under Section 80I of the Income TaxAct, 1961 the assessee is entitled to include a sum of Rs.91,32,404,the amount actually contributed in the assessment year 1992-93 tothe Cooperative Education Fund under Section 61(1)(b) of theMulti State Cooperative Societies Act, 1984? 3.Whether the Tribunal was justified in holding that thecontribution to the Cooperative Education Fund was not a cessfalling within the purview of Section 43B of the Income Tax Act,1961?” 2.The appellant is aggrieved by the order of the Income Tax AppellateTribunal (ITAT) dated 29.08.2001. The ITAT allowed the Revenue’s appealagainst an order of the CIT(A). 3.The brief facts are that the assessee had inter alia claimed businessexpenditure under Section 43B of the Income Tax Act, 1961 (hereafterreferred to as “the Act”) to the tune of `91,32,404/-. The Assessing Officer(AO), by his original order dated 31.01.1995 disallowed the claim. At thatstage, the assessee had inter alia urged that the relief was to be given underSection 80-I after the benefit of a deduction under Section 43B of the Act.The effect of the order was to bring to tax the said amount. The assesseepreferred an appeal. The CIT(A), by the order dated 29.03.1995 observedthat since the claim for eligible profits would go up in computation underSection 80-I, which directed 20% of the sum claimed, in effect, thededuction would further go up by `18,26,481/-. The assessee had claimedthe benefit and relied upon the ruling of the Supreme Court in CIT v. CanaraWorkshops (P) Ltd. 1986 (161) ITR 320. In the light of these, CIT(A) was ofthe opinion that the AO had to verify the details mentioned by the assesseebefore the claims could be considered and the benefit of Section 80-I given.This remand led to the AO considering the submissions of the appellant,who had provided the necessary details under cover of letter dated24.04.1995. The order of the AO under Section 250 granted the relief interms claimed, i.e. to the tune of `18,26,481/-; revised forms wereapparently issued to the assessee. Whilst so, on 22.05.1995 – after the effectwas given on 12.05.1995, the AO issued a Show Cause Notice stating thatthe relief given on 12.05.1995 was on account of an inadvertent mistake. 4.The assessee contends that this notice was received much later - on30.05.1995 - and that before it could be taken into consideration, the orderwithdrawing/rectifying the previous order dated 12.05.1995 was passed on31.05.1995. The rectification order under Sections 154/250 reads as follows: “Order u/s.154/250 The Ld. CIT(A) has passed an order u/s 250 of the IT Acton 29.03.1995 in the case of the assessee for the Assessment Year1992-1993 in Appeal No.694/94-95. 4.The assessee contends that this notice was received much later - on30.05.1995 - and that before it could be taken into consideration, the orderwithdrawing/rectifying the previous order dated 12.05.1995 was passed on31.05.1995. The rectification order under Sections 154/250 reads as follows: “Order u/s.154/250 The Ld. CIT(A) has passed an order u/s 250 of the IT Acton 29.03.1995 in the case of the assessee for the Assessment Year1992-1993 in Appeal No.694/94-95. Amongst other points, the Ld. CIT(A) has directed in hisorder to verify the claim of the assessee regarding deduction u/s80-I on Rs.91,32,404/- which was paid to Cooperative EducationFund u/s 61 (1)(b) of the Multi State Cooperative EducationFund Act, 1984 after giving an opportunity of being heard andthereafter to allow the same on merit. However, at the time ofgiving effect to the above order of the Ld. CIT(A) on other points,claim was also allowed on this point inadvertently throughoversight whereas the issue is still to be decided and for which aletter dated 03.05.1995 has already been served on the assesseeon 12.05.1995 requesting them to attend and explain the point inquestion. The mistake being apparent on records is rectified u/s154 of the Income Tax Act. OrRs.1,51,16,27,440/- Issue revised forms. Sd/- (VIRENDRA SINGH)Deputy Commissioner of Income TaxSpecial Range-12, New Delhi. Copy to the assessee Date: 31st of May 1995” 5.The assessee again approached the CIT(A) which, after recapitulatingthe facts, reversed the rectification order on the basis of the followingreasoning: “4.After hearing the arguments of the AR, I feel that firstly,the assessing officer has gone wrong in rectifying this order. Itwas correctly argued by the AR that it is not a mistake apparentfrom record and involved debatable point. Therefore, it cannotbe rectified. Secondly, even on merits the assessing officer wasnot right in not allowing full claim of deduction u/s 80 I on thetotalincomeofthisyearandexcludinganamountofRs.91,32,404/-. It must be noted that cess on education has beenallowed this year but it pertains to A.Y. 1990-1991 and cannot goin reducing the total income. In view of this position, theassessing officer was wrong in passing the rectification order u/s154, this order is hereby quashed and the assessee is entitled todeduction u/s 80I of an amount of Rs.18,26,481/-.” 6.The revenue’s appeal was accepted by the impugned order. The ITATwas of the opinion that the AO correctly rectified the order of 12.05.1995 on31.05.1995 since on the merits, the payments to the Cooperative EducationFunds were not in the form of “cess” and benefit of Section 43B could notbe given. 7.Learned counsel for the assessee relies upon the decision of this Courtin its own case for the same assessment year in respect of some otherincome. In that instance too, for A.Y. 1992-93, when the assessment forsubsequent year 1993-94 was taken-up, the AO felt that the order for 1992-93 required rectification and proceeded to do so. On that occasion too, therelief with respect to Section 80-I was in question. The matter eventuallytravelled to this Court by way of revenue’s appeal in CIT v. Krishak BhartiCooperative Ltd. 2004 (266) 208 (Del). Learned counsel relied upon the saidorder to say that once an appeal effect is given, it is open to the authorities –be it AO or the CIT(A) to seek recourse to the rectification proceedings ifthe issue or question of law is debatable. Learned counsel for the revenueurged that this Court should not interfere with the order of the ITAT. Hesubmitted that given the language of Section 43B, the assessee could nothave claimed that the payment to the Cooperative Education Funds were inthe nature of a statutory impost or cess falling within the purview of Section43B. Consequently, the AO, in the rectification order and the ITAT correctlydeduced that the relief was wrongly granted. 8.In Krishak (supra) where for the subsequent year 1993-94, therevenue was of the opinion that the benefit of Section 80-I would not begiven, the power of rectification was sought to be utilized. This Courtaffirmed the findings of the ITAT which had then held that in view of thedecision of the Supreme Court in T.S. Balaram, ITO v. Volcart Brothers1971 (82) ITR 50 (SC), it is only obvious and patent mistake and whichcannot be established by long process of reasoning that fall within thejurisdiction to rectify. This Court had observed as follows: “The only issue which arose for consideration before the Tribunalwas whether a part of the relief granted to the respondent/assesseeunder section 80-I of the Act could be withdrawn by takingrecourse of section 154 of the Act. The Tribunal, by placingreliance on various decisions of the apex court and of this courthas come to the conclusion, and rightly so, that since the questionwhether an assessee is entitled to deduction under section 80-I ornot, is debatable, the relief granted under the section could not besaid to be a mistake apparent from the record, within the meaningof section154 of the Act. While interpreting the scope of Section 154 of the Act, theSupreme Court in T.S. Balaram, ITO v. Volkart Brothers [1971]82 ITR 50, held that a mistake apparent on the record within themeaning of Section 154 of the Act must be an “obvious” and“patent” mistake and not something which can be established by along drawn process of reasoning on points on which there may beconceivably two opinions. A decision on a debatable point of lawis not a mistake apparent from the record. In the light of thesettled legal position, no fault can be found with the impugnedorder. The appeal is accordingly dismissed.” 9.In the present case too, the view canvassed by the revenue isuntenable. The CIT(A) had relied upon the Supreme Court’s ruling inCanara (supra) to hold that the relief was, in the circumstances of the case, admissible. Given that this issue as to the admissibility of relief either beforethe benefit of Section 80-I could be granted or thereafter, was a matterwhich required debate and some process of reasoning, the decision in T.S.Balaram, ITO (supra) clearly held the field. In other words, the revenuecould not legitimately contend that the view expressed by the CIT(A) giveneffect to by the AO in his initial order of 12.05.1995, was utterlyimplausible. Such being the case, the issue was debatable. Therefore,recourse to the power of rectification under Section 154 was unwarranted inthe given facts of this case. The first question of law is answered in favourof the assessee. Consequently, the other questions do not arise forconsideration. The appeal is therefore, allowed. S. RAVINDRA BHAT(JUDGE) APRIL06, 2015ájk R.K. GAUBA(JUDGE)