M/S R.b.l. Banarsi Dass & Co. (P) Ltd., Ambala v. Commissioner Of Income Tax, Ambala

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH I.T.A. No. 603 of 2006 Date of Decision: March 12, 2008 M/s R.B.L. Banarsi Dass & Co. (P) Ltd., Ambala ...Appellant Versus Commissioner of Income Tax, Ambala ...Respondent CORAM:HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE RAKESH KUMAR JAIN Present:Mr. Pankaj Jain, Advocate,for the assessee-appellant. Mr. Yogesh Putney, Advocate,for the revenue-respondent. M.M. KUMAR, J. This appeal filed by the assessee under Section 260A ofthe Income-tax Act, 1961 (for brevity, ‘the Act’), is directed againstorder dated 17.5.2006, passed by the Income Tax Appellate Tribunal,Chandigarh Bench ‘A’, Chandigarh (for brevity, ‘the Tribunal’), inITA No. 1281/Chandi/1996, in respect of assessment year 1989-90.The assessee-appellant has claimed that following questions of lawwould arise for consideration of this Court:- i.Whether under the facts and circumstances of thecase the Tribunal is justified in taxing amount received in pursuance of the insurance claimgiving two divergent treatments as a capital receiptand as a revenue receipt? ii. Whether under the facts and circumstances of thecase the Tribunal is justified in overlooking thedoctrine of merger being the substance of thecontroversy on the interpretation of order in CWPNo. 4637 of 1996 and ITA No. 122 of 2002 by thisCourt? iii. Whether the Tribunal is justified in applying theprovisions of Section 45(1A) retrospectively,which were inserted in the statute w.e.f.01.04.2000 having prospective application? iv. Whether the Tribunal is justified in taking anadverse inference overlooking and ignoring that amistake of fact and law cannot be an estoppelwhich is nonest in eyes of law? v. Whether on the true and correct interpretation ofthe provisions of Section 50 a non obstante clausethe scope stands fulfilled on the acquisition of theasset as distinct from the user of the same? Brief facts of the case necessary for disposal of theinstant appeal are that the assessee-appellant is a company, which wassubsequently wound up somewhere in 1996. The assessment for theyear 1989-90 was completed on 27.3.1991, assessing the income under Section 143(3) of the Act at an amount of Rs. 67,010/-.However, the Commissioner of Income Tax in exercise of hisrevisional power under Section 263 of the Act, vide order dated23.3.1993, set aside the assessment on the ground that the AssessingOfficer committed serious error causing prejudice to the interests ofthe revenue. He expressed the view that the Assessing Officer failedto give proper treatment to the sale of scrap of machinery and directedthe Assessing Officer to complete the assessment afresh.Accordingly, the Assessing Officer in the course of assessment underSection 143(3) of the Act took cognizance of the fact that there was afire in the factory and the assessee had lodged a claim with theInsurance Company for the loss due to fire. The claim to the extent ofRs. 15,34,177/- was received. The assessee had also sold scrap of themachinery for a sum of Rs. 13,04,995/-. The Whittle Down Value(WDV) of the machinery was Rs. 1,42,042/-, which by adding themachinery of previous year of Rs. 20,06,705/-, came to the total ofRs. 21,48,747/-. The short term capital gain was calculated by theassessee at Rs. 6,90,425/- after deducting the aforementioned amountfrom the insurance claim and scrap value received from the sale of thesame, which was set aside by the Commissioner of Income Tax inexercise of power under Section 263 of the Act, vide order dated23.3.1993. During the course of assessment proceedings underSection 143(3) of the Act, the submission made by the assessee thatinsurance claim was in lieu of damage/destruction by the fire, was During the course of assessment proceedings underSection 143(3) of the Act, the submission made by the assessee thatinsurance claim was in lieu of damage/destruction by the fire, was rejected by the Assessing Officer on the ground that insurance claimwas to be considered as short term capital gain in terms of provisionsof Section 50 of the Act. Fresh assessment was made on 28.2.1995and no appeal was filed against the assessment order under Section143(3) read with Section 263 of the Act. On 10.11.1995, the assessee moved an application under Section 154 of the Act for rectification of a mistake in assessing theshort term capital gain under Section 50 of the Act. The AssessingOfficer rejected the application on the ground that the claim of theassessee having been rejected under Section 143(3) of the Act, couldnot be considered afresh by invoking Section 154 of the Act and onlyan appeal was an appropriate remedy for the assessee against theassessment order dated 28.2.1995. The assessee thereafter preferredan appeal before the CIT (A) against the order of rejection ofapplication under Section 154 of the Act. The CIT (A) afterconferring due consideration on the contention of the assessee thatthe scrap was dumped on the assessee by the insurance company atdetermined value and since such claim was settled in kind, the sameconstituted the capital receipt and accordingly the CIT (A) acceptedthe contention of the assessee and the assessment order made underSection 143(3) of the Act on 28.2.1995, was set aside vide orderdated 4.10.1996, with a direction to the Assessing Officer to examinethe issue in the light of the provisions of Section 50 of the Act. The revenue approached the Tribunal by raising the issuethat the appeal before the CIT (A) was against the order under Section154 of the Act and, therefore, he had no power to set aside the assessment framed under Section 143(3) of the Act, as no appeal wasfiled by the assessee against that order. The revenue raised variousother issues. The assessee also raised the principal issue that theAssessing Officer having ignored the legal provisions of Section 50of the Act committed a mistake apparent on record, which isrectifiable under Section 154 of the Act and that Section 45(1A) ofthe Act was incorporated w.e.f. 1.4.2000 and it was not applicable tothe assessment year 1989-90. The Tribunal took the view that theassessee had made a specific claim during the course of assessmentproceedings under Section 143(3) read with Section 263 of the Actthat the amount received from the insurance company was a capitalreceipt which was rejected by the Assessing Officer by observing thatthe judgment of Hon’ble the Supreme Court in the case ofVania SilkMills (P) Ltd.v. Commissioner of Income-tax, Ahmedabad, AIR1991 SC 2104, did not apply to the facts of the present case. TheAssessing Officer had further held that the sale of scrap was liable toshort term capital gain in terms of provisions of Section 50 of the Actand that the assessee did not file any appeal against the decision ofthe Assessing Officer. The assessee, however, filed an applicationunder Section 154 of the Act, which was rejected. The CIT (A) didnot decide the issue whether the Assessing Officer was justified inrejecting the application of the assessee under Section 154 of the Acton the ground that the same very issue had already been raised anddecided by the Assessing Officer under Section 143(3) read withSection 263 of the Act and that the issue was highly debatable. The Tribunal further held that the CIT (A) did not pass any speaking orderon the issue but has issued direction to the Assessing Officer toconsider the claim of the assessee under Section 50 of the Act afreshas if he was deciding the appeal against the assessment order dated28.2.1995, passed under Section 143(3) read with Section 263 of theAct. The Tribunal placed reliance on a judgment of Hon’ble theSupreme Court in the case ofT. S. Balaram, I. T. Officer, Company Tribunal further held that the CIT (A) did not pass any speaking orderon the issue but has issued direction to the Assessing Officer toconsider the claim of the assessee under Section 50 of the Act afreshas if he was deciding the appeal against the assessment order dated28.2.1995, passed under Section 143(3) read with Section 263 of theAct. The Tribunal placed reliance on a judgment of Hon’ble theSupreme Court in the case ofT. S. Balaram, I. T. Officer, Company Circle IV, Bombayv. M/s. Volkart Brothers, Bombay, AIR 1971 SC 2204, and went on to observe as under:- “……In our considered view, the powers of theAssessing Officer under section 154 are limited torectification of mistake apparent from record. Themistake must be obvious and patent and not somethingwhich can be established by a long drawn process ofreasoning on points on which there may be conceivablytwo opinions as held by the Supreme Court in the case ofT.S. Balaram, ITO Vs. Volkart Brothers & Others, 82ITR 50 (SC). A decision on a debatable point of law isnot a mistake apparent from record. In the present case,whether the amount received from the InsuranceCompany including the sale of scrap was a capital receiptor not, was highly debatable. More so, such claim wasspecifically rejected by the Income-tax Officer at thetime of completing the assessment under section 143(3).In our considered view, the issue relating to the assessment of short term capital gain in the light ofprovisions of section 50 is highly debatable. TheAssessing Officer had expressed an opinion in theassessment order passed under section 143(3). ……” The Tribunal further observed that the correctness of theview taken by the Assessing Officer relating to his finding in theorder passed under Section 154 of the Act should have been decidedby the CIT (A) and that he had traveled beyond his powers insubstituting his own opinion on the issue relating to the provisions ofSection 50 of the Act, to the opinion of the Assessing Officer in theabsence of any appeal before him against the order dated 28.2.1995,passed by the Assessing Officer under Section 143(3) of the Act.Accordingly, the order of the CIT (A), dated 4.10.1996, was set asideand the order of the Assessing Officer under Section 154 of the Actwas restored. The aforementioned facts and circumstances show thatonly the following question of law would arise for determination: Whether the order dated 28.2.1995, passed by theAssessing Officer under Section 143(3) read withSection 263 of the Income-tax Act, 1961, which hasattained finality, could be reversed while hearing appealagainst the order dated 2.2.1996, passed by the AssessingOfficer under Section 154 of the Act? After hearing learned counsel for the parties we are ofthe considered view that the order passed by the Tribunal is inconformity with law. The order dated 28.2.1995, passed by the The aforementioned facts and circumstances show thatonly the following question of law would arise for determination: Whether the order dated 28.2.1995, passed by theAssessing Officer under Section 143(3) read withSection 263 of the Income-tax Act, 1961, which hasattained finality, could be reversed while hearing appealagainst the order dated 2.2.1996, passed by the AssessingOfficer under Section 154 of the Act? After hearing learned counsel for the parties we are ofthe considered view that the order passed by the Tribunal is inconformity with law. The order dated 28.2.1995, passed by the Assessing Officer under Section 143(3) read with Section 263 of theAct had attained finality and it was only order dated 2.2.1996, passedby the Assessing Officer under Section 154 of the Act, seekingrectification, which was the subject matter of challenge before theCIT (A). However, the CIT (A) illegally set aside the assessmentorder dated 28.2.1995, passed under Section 143(3) of the Act, videits order dated 4.10.1996 (A-2), with a direction to the AssessingOfficer to examine the issue in the light of the provisions of Section50 of the Act. The Tribunal, on further appeal, has rightly held thatas no appeal against the order of assessment passed under Section 143(3) of the Act was filed and the appeal was preferred only against therectification order dated 2.2.1996 (A-3), the CIT (A) did not enjoyany jurisdiction to set aside the aforementioned order. Thejurisdiction of an Assessing Officer to rectify an assessment orderunder Section 154 of the Act is limited as he could make correction oferrors apparent on the face of the record. In that regard reliance hasrightly been placed on the judgment of Hon’ble the Supreme Court inT.S. Balaram’s case (supra). Similar view has been reiterated in thecase of Commissioner of Income Tax, Jabalpur v. M/s KeshriMetal Private Limited, Raipur, JT 1999 (3) SC 45. The order ofassessment, dated 28.2.1995, passed under Section 143(3) of the Act,has attained finality and there was no appeal filed against that order.We find no legal infirmity in the impugned order. Therefore, theappeal fails and the same is dismissed. March ,2008 Pkapoor (M.M. KUMAR)JUDGE (RAKESH KUMAR JAIN) JUDGE C.M. No. 24018-CII of 2006 in I.T.A. No. 603 of 2006 Present:Mr. Pankaj Jain, Advocate,for the assessee-appellant. Mr. Yogesh Putney, Advocate, for the revenue-respondent. In view of the fact that we have dismissed the appealfiled by the assessee-appellant vide our separate order of even date,we do not feel any necessity to pass any order on this application,filed under Section 5 of the Limitation Act, 1963, for condonation ofdelay of two days in filing the appeal. (M.M. KUMAR)JUDGE March 12, 2008 (RAKESH KUMAR JAIN) JUDGE Pkapoor