Pawan Kumar (Huf v. The Commissioner Of Income Tax,Karnal

Income Tax Appeal No. 220 of 2009 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 220 of 2009Date of decision: 18.4.2011 Pawan Kumar (HUF) --- Appellant Versus The Commissioner of Income Tax,Karnal --- Respondent *** CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Brij Mohan Monga, Advocatefor the appellant-assessee. Mr. Vivek Sethi, Standing Counsel for the respondent-Revenue. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-TaxAct, 1961 (for short “the Act”) has been filed by the assesseeagainst the order dated 27.11.2008, passed by the Income TaxAppellate Tribunal Delhi Bench ‘F’, New Delhi (in short “the Tribunal”) in ITA No. 503/Del/2008, relating to the assessmentyear 2001-02. 2. The appeal was admitted by this Court, on 30.4.2010, for determination of the following substantial questions of law: “ (i) Whether in the facts and circumstances of the case,the Hon’ble ITAT has erred in law to hold thatintimation under Section 143(1) of the Income TaxAct, 1961 cannot be rectified under Section 154(1) (b)of the Income Tax Act, 1961 by interpreting theprovisions of Section 154(1)(b) of the Act differentlyfrom its clear and unambiguous meaning?the Hon’ble ITAT has erred in law to hold thatintimation under Section 143(1) of the Income TaxAct, 1961 cannot be rectified under Section 154(1) (b)of the Income Tax Act, 1961 by interpreting theprovisions of Section 154(1)(b) of the Act differentlyfrom its clear and unambiguous meaning? (ii)Whether in the facts and circumstances of the case,the Hon’ble ITAT has erred in law to hold thatintimation under Section 143(1) of the Income TaxAct, 1961 cannot be rectified under Section 154(1) (b)of the Income Tax Act, 1961 since under Section 143(1) of the Income Tax Act, 1961, the Assessing Officerhas no jurisdiction to compute the income by allowingor disallowing an expenditure or to vary the claim ofthe assessee in any way, whereas the application ofrectification had been made by the appellant forclaiming credit of TDS deducted at the later stage andfor getting refund of the doubly charged tax on thesame income and not for revision of the returnedincome?” the Hon’ble ITAT has erred in law to hold thatintimation under Section 143(1) of the Income TaxAct, 1961 cannot be rectified under Section 154(1) (b)of the Income Tax Act, 1961 since under Section 143(1) of the Income Tax Act, 1961, the Assessing Officerhas no jurisdiction to compute the income by allowingor disallowing an expenditure or to vary the claim ofthe assessee in any way, whereas the application ofrectification had been made by the appellant forclaiming credit of TDS deducted at the later stage andfor getting refund of the doubly charged tax on thesame income and not for revision of the returnedincome?” 3.The facts, in brief, necessary for adjudication asnarrated in the appeal, are that the appellant-Pawan Kumar, theassessee, is the Karta of his Hindu Undivided Family (HUF). Heis co-owner of a house property at Panipat with the HUFs histwo brothers. During the assessment year 2001-02, theassessee along with brothers rented out the said property to theCanara Bank, Panipat. The tenant-bank paid an amount of Rs.2,53,608/- as rent to the appellant and his two brothers. Thebank, however, did not deduct any tax at source under Section194-I of the Act. The appellant in his return for the assessmentyear under consideration, declared his share of rental incomealong with his other income. 3.The facts, in brief, necessary for adjudication asnarrated in the appeal, are that the appellant-Pawan Kumar, theassessee, is the Karta of his Hindu Undivided Family (HUF). Heis co-owner of a house property at Panipat with the HUFs histwo brothers. During the assessment year 2001-02, theassessee along with brothers rented out the said property to theCanara Bank, Panipat. The tenant-bank paid an amount of Rs.2,53,608/- as rent to the appellant and his two brothers. Thebank, however, did not deduct any tax at source under Section194-I of the Act. The appellant in his return for the assessmentyear under consideration, declared his share of rental incomealong with his other income. 4.The return was processed under Section 143(1) of theAct and the assessing officer vide order dated 26.12.2001allowed credit of pre-paid taxes of Rs. 96,635/- and refundedRs. 395/- to the appellant. Later on the Income TaxDepartment observed that since the tenant-Canara Bank hadpaid rent of more than Rs. 1,20,000/-, Tax at source wasdeductible under Section 194-I of the Act. The assessing officer,thus, passed an order dated 19.3.2002 under Sections 201(1)/201(A) and raised a demand of Rs. 89,730/- which included theamount of Tax deduction at source, interest and penalty againstthe tenant-bank on account of its failure to deduct the tax atsource from the amount of rent of the property. The details ofRs. 89,733/- are as under: =B) Interest u/s 201(1A)Rs.15,556c) Penalty u/s 221= Rs.14,835------------------------ = Rs.89,733 The Canara Bank deposited the amount so demanded and inturn, deducted the said amount from the amount of rent payableto the three co-owners of the house property. 5.The appellant took a plea that he was being subjected to double taxation, inasmuch as he had paid tax on the rentalincome shown by him in the return and still the tenant bank hadbeen deducting tax on the said rent. According to the appellant,the only remedy available to him was to get refund after gettingrectification of the order of demand, by moving an applicationunder Section 154 of the Act. The tenant-bank issued first TDScertificate on 30.11.2003, and the appellant filed application forrectification on 8.6.2004 for claiming refund of the TDS inrespect of the TDS certificate dated 30.11.2003, for an amountof Rs. 44,867/-, but the said application was dismissed on22.6.2004. The appellant filed appeal before the Commissionerof Income-tax (Appeals) {in short “the CIT(A)”} which was dismissed on 17.11.2004. The assessee did not challenge thatorder before the Tribunal as the tenant-bank by that time hadnot deposited the entire amount of TDS and issued TDScertificate for the same, to the assessee. Thereafter, secondTDS certificate of Rs. 44,866/- dated 27.8.2005 was issued bythe tenant-bank whereupon, the assessee filed anotherapplication dated 9.9.2005 under Section 154 of the Act forrectification requesting the assessing officer to give credit of hisshare of TDS deducted by the tenant-bank on the rental incomedeclared by him in his return of income. The assessing officerrejected this application of the assessee, vide order dated16.9.2005, whereby a request for the credit of TDS of Rs.19,780/- had been made. 6.The assessee filed appeal before the CIT(A)challenging the order of the assessing officer, but the same wasdismissed vide order dated 9.1.2008. The appeal of theassessee before the Tribunal also met with the same fate andcame to be dismissed vide the order under appeal. 7.We have heard learned counsel for the parties andhave perused the record. 8.Learned counsel for the assessee submitted thatunder clause (b) of sub-section (1) of Section 154 of the Act, anintimation or deemed intimation under Section 143(1) of the Actcould be rectified by an Income Tax Authority. The tenant-bankhad paid total principal amount of Rs. 59,432/- as TDS on the 6.The assessee filed appeal before the CIT(A)challenging the order of the assessing officer, but the same wasdismissed vide order dated 9.1.2008. The appeal of theassessee before the Tribunal also met with the same fate andcame to be dismissed vide the order under appeal. 7.We have heard learned counsel for the parties andhave perused the record. 8.Learned counsel for the assessee submitted thatunder clause (b) of sub-section (1) of Section 154 of the Act, anintimation or deemed intimation under Section 143(1) of the Actcould be rectified by an Income Tax Authority. The tenant-bankhad paid total principal amount of Rs. 59,432/- as TDS on the rent in which the assessee had 1/3[rd] share. Accordingly,assessee was entitled to refund of TDS of Rs. 19,780/-. 9.Elaborating further, it was submitted that the tenant,namely, the Canara bank, Panipat had deducted the tax atsource and at the same time, the assessee had already paid taxon the amount of rental income at the time of filing of return.Reliance was also placed on the following submissions madebefore the CIT(A) as recorded in para 6 of its order dated9.1.2008, which read thus: “Subsequently, the bank made the balance paymentof TDS, interest and penalty of Rs. 44,866/- on1.3.2005 and thereby the entire demand, penalty andinterest of Rs. 89,733/- stands paid by the bank andissued another TDS certificate to the assessee andother co-owners for Rs. 44,866/- dt. 1.12.2005,therefore, the assessee again filed application u/s 154before the AO for claiming refund of the said TDSclaiming that it amounts to double payment becausethe tax on rental income has already been paid by theassessee and now payment of the TDS by bank, whichhas been recovered by the bank from the assesseeamounts to double payment of tax on the sameincome. The assessee has submitted that it hadclaimed only the tax part of the said demand of Rs.89,733/- and no claim for interest and penalty levied on the bank has been made. The assessee filed itssubmissions dt. 11.11.2005, the relevant portion ofwhich is reproduced below:- “The appellant as Karta of his HUF derivesincome from Property, Business, Income andAgricultural income etc. The appellant is owner of1/3[rd] share in co-owner property which is rented outto Canara Bank branch of Panipat along with his twobrothers, Sh. Anil Garg and Vinod Garg. The rentalincome derived by the appellant was duly declared inhis return of income and tax on the same was paid.The rental income as part of his total rent receivedand declared at Rs. 5,26,077/-. The appellant filedhis return of income declaring income at Rs.3,54,467/- and agricultural income of Rs. 1,02,500/-on which tax was at Rs. 61,520/- under TDS and Selfassessment tax was paid on 28.6.2001 at Rs.35,115/-. The return of income was processed u/s143(1) on 26.12.2001. On verification of TDS return of tenant CanaraBank the Income Tax Officer, TDS Circle observed thatno TDS has been deducted in respect of co-ownershipproperty and the Bank pointed out that since sharerent of each co-owner was less than Rs. 1,20,000/-,as such TDS was not deductible. The Income Tax Officer, TDS Circle, raised demand of Rs. 89,730/- as per details under:A) Demand u/s 201(1)= Rs. 50,720 Surcharge @ 17%= Rs. 8,682________ = Rs.59,432=B) Interest u/s 201(1A)Rs.15,556c) Penalty u/s 221= Rs.14,835--------------------- --- = Rs.89,733 The Deptt. realised demands from the Bank asunder:- =7.11.2003, SBI, G.T. Road, Panipat Rs.44,867 1.3.2005 SBI, G.T. Road, Panipat= Rs. 44,866 The said bank issued Form No. 16A to the assesseeowners as under: a) Certificate dated 30.11.2003= Rs. 44,867b) Certificate dated 27.8.2005= Rs. 44,866 The appellant moved rectification application u/s154 in respect of credit for tax certificate dated30.11.2003 which was rejected by the departmentvide orders dated 22.6.2004. Officer, TDS Circle, raised demand of Rs. 89,730/- as per details under:A) Demand u/s 201(1)= Rs. 50,720 Surcharge @ 17%= Rs. 8,682________ = Rs.59,432=B) Interest u/s 201(1A)Rs.15,556c) Penalty u/s 221= Rs.14,835--------------------- --- = Rs.89,733 The Deptt. realised demands from the Bank asunder:- =7.11.2003, SBI, G.T. Road, Panipat Rs.44,867 1.3.2005 SBI, G.T. Road, Panipat= Rs. 44,866 The said bank issued Form No. 16A to the assesseeowners as under: a) Certificate dated 30.11.2003= Rs. 44,867b) Certificate dated 27.8.2005= Rs. 44,866 The appellant moved rectification application u/s154 in respect of credit for tax certificate dated30.11.2003 which was rejected by the departmentvide orders dated 22.6.2004. The appeal against said orders was also rejectedin appeal No. IT/26/PPT/CIT(A)/KNL/2004-05 videorders dated 17.11.2004. Now after the receipt of second certificate dated 27.8.2005, the appellant-owner moved rectificationapplication on 9.9.2005 requesting for giving credit for1/3[rd] share in original demand of Rs. 59,342/- i.e. Rs.19,780/-. The appellant made only claim in respect ofshare in original demand and conceded that claims inrespect of interest and penalty were not to be allowed. The learned ACIT has rejected the claim ofassessee, on the plea that there is no provision bywhich Manager Canara Bank could have issued TDSCertificate and the provisions are not applicable. Thelearned ACIT has not appreciated the fact thatapplicant has been forced to pay tax twice on thesame assessed income which is illegal, void anduncalled for.” 10. We find substantial force in the submissions of learned counsel for the assessee. Section 154(1)(b) of the Actreads thus: “154, (1) With a view to rectifying any mistakeapparent from the record an income-tax authorityreferred to in section 116 may:- (a)amend any order passed by it under the provisions of this Act; (b)amend any intimation or deemed intimation under sub-section (1) of Section 143.” 11.The Full Bench of this Court in Commissioner of Income Tax vs. Smt. Aruna Luthra, (2001) 252 ITR 76,analysing the intent of the legislation in enacting Section 154 ofthe Act for rectifying any mistake which is apparent on the faceof the record had observed as under: “Only the dead make no mistake. Exemption from error is not the privilege of mortals. It would be a follynot to correct it. Section 154 appears to have beenenacted to enable the authority to rectify the mistake.The legislative intent is not to allow it to continue.This purpose has to be promoted. The Legislature’swill has to be carried out. By placing a narrowconstruction, the subject of the legislation shall bedefeated. Such a consequence should not becountenanced. Still further, it deserves mention that Parliamenthas prescribed a period of four years for correction ofthe mistake. While an assessment under Section 143or 144 has to be normally made within a period of oneor two years, the mistake can be rectified at any timeduring the period of four years. The obvious intention of the Legislature is that if the mistake has co0me tothe notice of the authority within the prescribed time,it should not be allowe4d to continue. It should berectified. Regardless of the fact that the limitation forpassing an order of assessment of filing an appeal haselapsed. Still further, the provision has inbuilt safeguards. Itprovides for the issue or notice. It ensures the grantof an opportunity. It limits the jurisdiction of theauthority. The action can benefit the assessee as wellas the Revenue. In this situation, there appears to beno ground for placing an unduly restrictedinterpretation on the provision.” 12.following words: Further, the scope of Section 154 was explained in the of the Legislature is that if the mistake has co0me tothe notice of the authority within the prescribed time,it should not be allowe4d to continue. It should berectified. Regardless of the fact that the limitation forpassing an order of assessment of filing an appeal haselapsed. Still further, the provision has inbuilt safeguards. Itprovides for the issue or notice. It ensures the grantof an opportunity. It limits the jurisdiction of theauthority. The action can benefit the assessee as wellas the Revenue. In this situation, there appears to beno ground for placing an unduly restrictedinterpretation on the provision.” 12.following words: Further, the scope of Section 154 was explained in the “On a perusal of section 154, we find that theprovision does not provide for rectification only whena mistake in the order is detected. The mistake hasto be on the record of the case. The record wouldinclude everything on the case file. The return, theevidence and the order are a part of the record. Themistake can be detected from anything on the file.Thus, even in the case of an assessment underSection 143(1), it has not to be assumed that therecan be no error apparent from the record. As for the decision in the case of Hero Cycles (1997) 227 ITR463 (SC), the rule laid down by their Lordship is thatthe mistake can be of fact and law. However, therectification can be made only when: “a glaringmistake of fact or law committed by the officerpassing the order becomes apparent from the record.Rectification is not possible if the question isdebatable”. We cannot read this decision to mean thatonly the order has to be seen and not the record.” 13.Adverting to the factual matrix, it is not disputed thatthe assessee had paid tax amounting to Rs. 19,780/- on theshare of its rent received from the tenant, Canara Bank and thesame had been duly reflected in the return which was processedunder Section 143(1) of the Act on 26.12.2001. It is also anadmitted fact that the Canara Bank had issued Tax Deduction atSource certificate amounting to Rs. 89,733/- which included Rs.59,432/- as principal amount on account of tax. The assesseehad 1/3[rd] share in the rental income and, therefore, the share ofthe assessee in the TDS was Rs. 19,780/-. The Revenue bydeclining the rectification application has sought to levy taxagain which amounted to double taxation inasmuch as theassessee had already paid tax on the rental income and at thesame time, the Canara Bank which was tenant had alsodeducted tax at source on the same income. This is legally notpermissible. Moreover, learned counsel for the Revenue was unable to show any justification as to how the rectificationapplication could be rejected and the assessee required to paytax twice on the same amount. 14.In view of the above, the substantial questions of laware answered in favour of the assessee and against theRevenue. The appeal is accordingly allowed. (AJAY KUMAR MITTAL) JUDGE April 18, 2011*rkmalik* (ADARSH KUMAR GOEL) JUDGE