Itxa 409.18.Docx v. The Following Substantial Questions Of Law Are Proposed

Digitally signedby URMILAURMILAPRAMODPRAMODINGALEDate:INGALE2023.07.0313:51:03+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 409 OF 2018 Pr. Commissioner of Income Tax-14 ….. Appellant Vs.M/s. Godrej Industries Ltd. ….. Respondent Mr. Suresh Kumar, for Appellant.Jasani, for Respondent. Mr. P.J.Pardiwala, Sr. Advocate a/w Mr. Jeet Kamdar i/b Mr.Atul K. CORAM:K.R.SHRIRAM, J &FIRDOSH P. POONIWALLA, J. DATED : JUNE 28, 2023 P.C. 1.The Principal Commissioner of Income Tax (‘PCIT’) has filed thisappeal aggrieved by the order dated 07/04/2017 passed by the IncomeTax Appellate Tribunal (‘ITAT’) dismissing the appeal of Revenue. 2.Assessee-respondent filed on 30/10/2001 its return of income forAssessment Year 2001-02 declaring income of nil, after set off of broughtforward losses and depreciation and declared a book profit ofRs.33,13,25,132/-. The return was processed under Section 143(1) of theIncome Tax Act, 1961 (‘the Act’). The case was selected for scrutiny andnotice under Section 143(2) of the Act was issued to the assessee. In theassessment order made under Section 143(3) of the Act, the Assessing Officer (‘AO’) made various additions and deletions. The assessment orderdated 27/02/2004 was impugned in the appeal filed by respondent beforeCIT(A). By an order dated 05/10/2004, CIT(A) partly allowed the appealof respondent. This order dated 05/10/2004 was impugned by respondentin appeal filed before ITAT. Revenue also filed appeal before ITATimpugning order passed by CIT(A) which came to be disposed on30/08/2007. ITAT disposed the appeal filed by respondent on05/09/2007 by giving partial relief. 3.Consequent to the order of ITAT, the order giving effect to ITAT’sorder was passed on 25/08/2008 by which the AO determined the totalincome in accordance with the normal provisions at nil and the book profitat Rs.33,13,25,132/-. The AO passed an order dated 13/04/2009 givingeffect to ITAT’s order in department’s appeal in which he determined thetotal income in accordance with the normal computation at nil butincreased the book profit to Rs.33,51,66,399/- on account of change indeduction that he allowed under Section 80HHC of the Act. 4.On 29/03/2014, the AO passed an order under Section 154 of theAct rectifying the order dated 13/04/2009 and redetermined the bookprofit at Rs.53,02,83,061/- as he added the provision for depreciation inthe value of the long term investment as a consequence of the retrospectiveamendment introduced by the insertion of clause (i) to Explanation 1below Section 115JB(2). 5.This was challenged by respondent in an appeal before CIT(A).CIT(A) allowed respondent’s appeal by order dated 10/04/2015 and heldthat the notice under Section 154 seeking to rectify the error ought to havebeen issued by 31/03/2008 and therefore the same was barred bylimitation. In doing so, he followed his order for Assessment Year 2005-06. This order of CIT(A) was taken in appeal by Revenue before ITAT andITAT, by order dated 07/04/2017, which is impugned in this appeal,dismissed the appeal of the Revenue. The ITAT held the rectification orderwas passed to give effect to the retrospective amendment made by theFinance Act, 2009. The issue which was sought to be rectified was neverthe subject matter of the appeal either before the CIT(A) or before theITAT. The ITAT followed its earlier order in the case of 1ACIT Vs. M/s.Godrej Sara Lee Ltd. (now amalgamated into Godrej Consumers ProductsLimited) and came to the conclusion that it was not permissible for the AOto rectify the order dated 13/04/2009 on an issue which was not thesubject matter of the appeal before it. 6.The following substantial questions of law are proposed:- (a) Whether on the facts and in thecircumstances of the case and law, the Hon’bleTribunal was justified in holding that theRectification order u/s. 154 of the I.T. Actpassed on 29/03/2014 is not in the preview ofsection 154(1A) of the I.T.Act ? 6.The following substantial questions of law are proposed:- (a) Whether on the facts and in thecircumstances of the case and law, the Hon’bleTribunal was justified in holding that theRectification order u/s. 154 of the I.T. Actpassed on 29/03/2014 is not in the preview ofsection 154(1A) of the I.T.Act ? (b) Whether on the facts and in thecircumstances of the case and in law, theHon’ble Tribunal was justified in holding thatthe rectification order u/s. 154 of the I.T. Actpassed on 29.03.2014 is barred by timelimitation within meaning of section 154(7) ofthe I.T. Act ? (c) Whether on the facts and in thecircumstances of the case and in law, theHon’ble Tribunal was justified indistinguishing the judgement of the Hon’bleApex Court in the case of Hind Wire IndustriesLtd with the present case ? 7.Mr. Suresh Kumar submitted, adopting what was submitted beforethe ITAT, even though the order giving effect to the ITAT’s order dated13/04/2009 was passed by the AO to give effect to the express directionsof the ITAT, the fact remained that the AO was required to determine thecorrect total income as per the provisions of the Act. While doing so, theAO cannot ignore the clear provisions of the Act which even though maynot be arising out of ITAT’s order but are vital for the determination of thecorrect total income. Hence, the claimsof respondent that there is nomistake apparent from records in the order giving effect to the ITAT’s orderis not valid. Mr. Suresh Kumar submitted that, therefore, the AO hasrectified the order dated 13/04/2009 giving effect to the order of ITAT.Mr. Suresh Kumar also submitted that the only requirement under Section154(7) of the Act is that the amendment under Section 154 should bemade within four years from the financial year in which order sought to be amended is passed and since four years has not elapsed from the date ofpassing the order giving effect to the ITAT’s order, the notice under Section154 of the Act is not at all barred by limitation. 8.Mr. Pardiwala submitted, relying on the judgment of the Bombay2High Court in case of CIT Vs. Sakseria Cotton Mills Ltd. that period oflimitation under Section 154(7) of the Act in respect to the points notsubject matter of order under Section 154 of the Act will apply from thedate of original assessment order and not from the date of assessmentorder of the AO giving effect to appellate order. Mr. Pardiwala submittedthat period of limitation will be reckoned from the date of originalassessment order in respect of points not subjected to appellatejurisdiction. He also relied upon the judgment of the Apex Court in 3CITVs. Alagendran Finance Ltd. He added, ITAT has after hearing the parties,correctly come to the conclusion that when the issue that was sought to berectified was never the subject matter of the appeal either before theCIT(A) or before the Tribunal, it was not permissible for the AO to rectifyunder Section 154. 9.Therefore, the settled position is that the AO, while giving effect tothe ITAT’s order cannot go beyond the directions of the ITAT and since inthis case, the issue of calculation of book profit qua diminution in the value 2(1980) 124 ITR 5703(2007) 293 ITR 1 (SC)3(2007) 293 ITR 1 (SC) of an asset was not the subject matter of the appeal, the Revenue was notjustified in contending that the order is within the time limit. We say thisbecause under Section 154(1A) of the Act, the AO can rectify the order inrespect of a matter other than the matter which has been considered anddecided by the appellate/revisional authority. In the instant case, since theissue of diminution in value of an asset for calculating book profit was nota subject matter of appeal or revision, the original order under Section143(3) of the Act dated 27/02/2004 is the order which can be rectified bythe AO and since the order passed in 2004 cannot be rectified after aperiod of 4 years, the order passed under Section 154 of the Act dated29/03/2014 is barred by Section 154(7) of the Act. of an asset was not the subject matter of the appeal, the Revenue was notjustified in contending that the order is within the time limit. We say thisbecause under Section 154(1A) of the Act, the AO can rectify the order inrespect of a matter other than the matter which has been considered anddecided by the appellate/revisional authority. In the instant case, since theissue of diminution in value of an asset for calculating book profit was nota subject matter of appeal or revision, the original order under Section143(3) of the Act dated 27/02/2004 is the order which can be rectified bythe AO and since the order passed in 2004 cannot be rectified after aperiod of 4 years, the order passed under Section 154 of the Act dated29/03/2014 is barred by Section 154(7) of the Act. 10.In the circumstances, we do not find any reason to interfere. 11. Appeal dismissed. 11. Appeal dismissed. (FIRDOSH P. POONIWALLA, J) (K.R.SHRIRAM, J)