Principal Commissioner Ofincome Tax-1, Kolkata v. Lanshree Products & Serviceslimited

OD – 5 ITAT/54/2023 IA No.GA/1/2023 GA/2/2023 IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE PRINCIPAL COMMISSIONER OFINCOME TAX-1, KOLKATA -Versus- LANSHREE PRODUCTS & SERVICESLIMITED BEFORE :THE HON’BLE ACTING CHIEF JUSTICE T.S. SIVAGNANAMAndTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYADate : 31[st ]March, 2023 Appearance :Mr. Soumen Bhattacharjee, Adv....for the appellant Mr. J. P. Khaitan, Sr. Adv.Ms. Nilanjana Banerjee Pal, Adv....for the respondent. The Court : There is a delay of 69 days in filing theappeal. We have heard Mr. Soumen Bhattacharjee, learnedstanding counsel for the appellant/revenue and Mr. J.P.Khaitan, learned senior counsel for the respondent/assessee andperused the affidavit filed in support of the application forcondonation of delay and we find sufficient cause has been shown for not preferring the appeal within the period oflimitation. Accordingly, the application for condonation of delay(IA No.GA/1/2023) is allowed and the delay of 69 days in filingthe appeal is condoned. This appeal filed by the revenue under Section 260A ofthe Income Tax Act, 1961 (the ‘Act’ for brevity) is directedagainst the order dated July 12, 2022 passed by the Income TaxAppellate Tribunal, “A” Bench, Kolkata (the Tribunal) in ITANo.8/Kol/2022 for the assessment year 2013-14. The revenue has raised the following substantialquestions of law for consideration: (A)Whether the Learned Tribunal has committedsubstantial error in law by holding that theclaim of the assessee of Rs.49,44,871/- whilecomputing net profit under 115JB is consonancewith Clause (iii) of Explanation 1 in the saidSection and further please to observe that theclaim of the assessee is correct and to thatextent the finding of the Learned CIT (Appeals)cannot be sustained ?(B)Whether the Learned Tribunal has committedsubstantial error in law by not appreciatingthat neither the department nor the assesseedebated on any aspect of set off of book profitagainst book loss on book unabsorbeddepreciation in instant case right from the assessee’s appeal before the CIT(A) andtherefore there was neither any debate nor evenan offer for debate from assessee’s side on theissue ? (C)Whether the Learned Tribunal has committedsubstantial error in law by not appreciatingthat the order under Section 154 of the Act inthis case aimed only at nullifying assessee’sclaim of set off of book loss or unabsorbeddepreciation upto Assessment Year 2014-15against book profit beyond assessment year 2012-13 which was not permitted under the provisionof law and it was a mistake apparent on the faceof record arising out of the books of account ofthe assessee ? We have heard Mr. Soumen Bhattacharjee, learnedstanding counsel for the appellant/revenue and Mr. J.P.Khaitan, learned senior counsel for the respondent/assessee.Though three substantial questions of law have beensuggested by the revenue. If substantial questions of law (B)and (C) are considered and an answer is arrived at, thensubstantial question of law (A) need not be examined.Substantial questions of law (B) and (C) are with regard to thejurisdiction of the Assessing Officer under Section 154 of theAct. The said provision deals with rectification of mistake.Sub-section (1) of Section 154 says that with a view to rectify We have heard Mr. Soumen Bhattacharjee, learnedstanding counsel for the appellant/revenue and Mr. J.P.Khaitan, learned senior counsel for the respondent/assessee.Though three substantial questions of law have beensuggested by the revenue. If substantial questions of law (B)and (C) are considered and an answer is arrived at, thensubstantial question of law (A) need not be examined.Substantial questions of law (B) and (C) are with regard to thejurisdiction of the Assessing Officer under Section 154 of theAct. The said provision deals with rectification of mistake.Sub-section (1) of Section 154 says that with a view to rectify any mistake apparent from the record, an Income Tax authorityreferred to in Section 116 may do any one of the Acts asmentioned in Clauses (a) to (d) of Section 154(1). The otherSub-sections deal with matters where the issue has beenconsidered and decided in a proceeding by way of an appeal orrevision relating to the orders referred in Sub-section(1) ofSection 154 of the Act. Thus, the Section empowers theauthority only to rectify mistakes by amending an order passedby it or amending any intimation or deemed intimation underSub-section (1) of Section 154 or amending an intimation underSection 200A(1) or amending an intimation under Section 206CB.However, in the instant case the Assessing Officer sought toinvoke the said power and revise the entire assessment. Beforethe Commissioner of Income Tax (Appeals) the assessee hadplaced reliance on the decision of this Court in the case ofDCIT vs. Binani Industries Limited in ITA 144/Kol/2013 whereina more or less identical question was considered by this Courtand it was held as follows: “3.3. We have heard the rival submissions and perusedthe materials available on record. We are inagreement with the arguments of the Learned AR thatthe losses (both cash loss and depreciation loss)would continue to remain in the books of accounts tillit is wiped off by earning profits by the assesseecompany and accordingly the same would be available for reduction from book profits u/s 115JB of the Act.we hold that the least of the cash loss ordepreciation loss once adjusted/reduced from bookprofits in earlier assessment years, do not vanish outof the books until it is wiped out by profits insubsequent years. Till such time, the losses wouldonly continue to remain in the books. We hold thatfor the purpose of computation of book profits u/s115JB of the Act, every year the situation of least ofcash loss and depreciation loss needs to be worked outand reviewed and accordingly the understanding of theLearned Assessing Officer that such loss once adjustedin earlier year is no longer available for set off ismisconceived. Hence we do not find any infirmity inthe order of the Learned CIT(A) in this regard. TheGround No.2 raised by the revenue is dismissed.” Though the assessee relied upon the aforementioneddecision, the Commissioner of Income Tax (Appeals) did notaccept the same and the apepal was dismissed. The assesseecarried the matter on appeal to the learned Tribunal and theTribunal after noting the issue involved in the case and havingexamined the evidences and records and the income tax return ofthe assessee in respect of the earlier years, found that theclaim made by the assessee is correct to the extent and thefinding of the Commissioner of Income Tas (Appeals) cannot besustained. More importantly, the Tribunal, in our view,rightly held so far as the issue of allowing of book loss or Though the assessee relied upon the aforementioneddecision, the Commissioner of Income Tax (Appeals) did notaccept the same and the apepal was dismissed. The assesseecarried the matter on appeal to the learned Tribunal and theTribunal after noting the issue involved in the case and havingexamined the evidences and records and the income tax return ofthe assessee in respect of the earlier years, found that theclaim made by the assessee is correct to the extent and thefinding of the Commissioner of Income Tas (Appeals) cannot besustained. More importantly, the Tribunal, in our view,rightly held so far as the issue of allowing of book loss or unabsorbed depreciation while computing the book profit underSection 115JB, the issue being a debatable issue, cannot besubject mater of proceedings under Section 154 of the Act. Atthis juncture, it will be beneficial to refer to the decisionof the Hon’ble Supreme Court in the case of T.S. Balaram,Income-tax Officer vs. Volkart Brothers reported in (1971) 82ITR 50 (SC) wherein the Hon’ble Supreme Court has held asfollows :“From what has been said above, it is clearthat the question whether section 17(1) of the IndianIncome-tax Act, 1922, was applicable to the case ofthe first respondent is not free from doubt.Therefore, the Income-tax Officer was not justifiedin thinking that on that question there can be no twoopinions. It was not open to the Income-tax Officerto go into the true scope of the relevant provisionsof the Act in a proceeding under section 154 of theIncome-tax Act, 1961. A mistake apparent on therecord must be an obvious and patent mistake and notsomething which can be established by a long drawnprocess of reasoning on points on which there mayconceivably be two opinions. As seen earlier, theHigh Court of Bombay opined that the originalassessments were in accordance with law though in ouropinion the High Court was not justified in goinginto that question. In Sathyanarayan LaxminarayanHegde v. Mallikarjun Bhavanappa Tirumale [1960] 1 SCR890, this court while spelling out the scope of the power of a High Court under Article 226 of theConstitution ruled that an error which has to beestablished by a long drawn process of reasoning onpoints where there may conceivably be two opinionscannot be said to be an error apparent on the face ofthe record. A decision on a debatable point of lawis not a mistake apparent from the record – seeSidhramappa Andannappa Manvi v. Commissioner ofIncome tax [1952] 21 ITR 333 (Bom.) The power of theofficers mentioned in Section 154 of the Income TaxAct, 1961, to correct “any mistake apparent from therecord” is undoubtedly not more than that of theHigh Court to entertain a writ petition on the basisof an “error apparent on the face of the record.” Inthis case, it is not necessary for us to spell outthe distinction between the expressions “errorapparent on the face of record” and “mistakeapparent from the record”. But suffice it to saythat the Income Tax Officer was wholly wrong inholding that there was a mistake apparent from therecord of the assessments of the first respondent.” In the above decision, the Hon’ble Supreme Court haspointed out that it was not open to the income tax officer togo into the true scope of the relevant provisions of the Act ina proceeding under Section 154 of the Act. In the case onhand, this is precisely what the Assessing Officer has done andthe learned Tribunal rightly allowed the assessee’s appeal. We find no ground to interfere with the order passed by theTribunal on the said count. Accordingly, substantial questions of law (B) and (C) are answered against the revenue. Consequently, the appeal (ITAT/54/2023) stands dismissed and substantial question of law (A) is unanswered as being unnecessary. Consequently, the connected application for stay (IANo.GA/2/2023) also stands closed. (T.S. SIVAGNANAM) ACTING CHIEF JUSTICE (HIRANMAY BHATTACHARYYA, J.) As./S.Pal