Punjab State Coop. Supply & Marketing Federation Ltd v. Joint Commissioner Of Income-Tax

ITA No. 42 of 2004 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 42 of 2004 Date of Decision: 5.9.2011 Punjab State Coop. Supply & Marketing Federation Ltd. ....Appellant. Versus Joint Commissioner of Income-tax ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Garg, Advocate for the appellant. Ms. Urvashi Dhugga, Senior Standing Counsel,for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of ITA Nos. 42 and 57 of 2004 filedby the assessee for the assessment years 1992-93 and 1993-94 asaccording to learned counsel for the parties, identical questions of laware involved therein. For brevity, the facts are being extracted from ITANo. 42 of 2004. 2.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 22.7.2003 passed by the Income Tax AppellateTribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as“the Tribunal”) in M.A. No. 5/CHANDI/99 in ITA No. ITA No. 42 of 2004-2- 1327/CHANDI/1995, for the assessment year 1992-93, claiming thefollowing substantial questions of law:- “i)Whether the learned Tribunal is correct in law inpassing the rectification orders impugned in thepresent appeal when the very basis of therectification proceedings was debatable before thisHon'ble Court as well as Hon'ble Supreme Court ofIndia?passing the rectification orders impugned in thepresent appeal when the very basis of therectification proceedings was debatable before thisHon'ble Court as well as Hon'ble Supreme Court ofIndia? ii)Whether the Tribunal could at all issue the notices forrectification of its earlier orders when the vires of theretrospective amendment of Section 80P(2)(a)(iii)were debatable before this Hon'ble Court in CWP No.3242 of 1999?rectification of its earlier orders when the vires of theretrospective amendment of Section 80P(2)(a)(iii)were debatable before this Hon'ble Court in CWP No.3242 of 1999? iii)Whether in view of the fact that the judicial decisionshaving become final in case of the appellant in 182I.T.R. 59, the Revenue not having preferred anappeal against the said decision and allowingexemption claimed by the appellant, the same can beset at naught by way of the present rectificationorder?”having become final in case of the appellant in 182I.T.R. 59, the Revenue not having preferred anappeal against the said decision and allowingexemption claimed by the appellant, the same can beset at naught by way of the present rectificationorder?” 3.Briefly stated, the facts necessary for adjudication asnarrated in the appeal are that the assessee had been making purchaseof food grain from its member-societies as an agent of the Governmentand selling the same to Food Corporation of India (FCI). The income ofthe assessee arising from the same was exempt from tax under Section80P(2)(a)(iii) of the Act, as held by this Court in the assessee's own 3.Briefly stated, the facts necessary for adjudication asnarrated in the appeal are that the assessee had been making purchaseof food grain from its member-societies as an agent of the Governmentand selling the same to Food Corporation of India (FCI). The income ofthe assessee arising from the same was exempt from tax under Section80P(2)(a)(iii) of the Act, as held by this Court in the assessee's own case in Commissioner of Income Tax v. Punjab State CooperativeSupply and Marketing Federation Ltd. 182 ITR 59 following its ownjudgment in the case of Commissioner of Income Tax v. HAFED 182ITR 53. The appeal filed by the revenue bearing Civil Appeal No. 15430of 1996 against the order of this Court was dismissed by the Hon'bleSupreme Court on 31.5.1998 while deciding the case of Kerala StateCoop. Supply & Marketing Federation Ltd. and others v.Commissioner of Income-tax 231 ITR 814 holding that the agriculturalproduce of its members as defined in Section 80P(2)(a)(iii) of the Actmeans that it should belong to its members and not that it should beproduced by its members. The Tribunal following the judgment of theHon'ble Supreme Court in Kerala State Coop. Supply & MarketingFederation Ltd's case (supra) allowed deduction to the assessee forthe income derived by it from marketing an agricultural produce of itsmembers which belonged to them vide order dated 23.9.1998. TheParliament amended the provisions of Section 80P(2)(a)(iii) of the Actwith retrospective effect from 1.4.1968 vide Income-tax (SecondAmendment) Act, 1998 which came into force on 8.1.1999. The saidamendment was challenged by the assessee before this Court videCWP No. 3241 of 1999. This Court admitted the petition and stayedfurther proceedings which were started in pursuance to the amendedlaw. The retrospective amendment was also challenged by the NationalAgricultural Cooperative Marketing Federation in Delhi High Court whoupheld the said amendment against which Special Leave Petition wasfiled in the Hon'ble Supreme Court. The Hon'ble Supreme Court upheldthe retrospective amendment. In pursuance thereof, the Tribunal vide its order dated 22.7.2003 in the misc. application filed under Section254 of the Act, reversed its earlier order dated 23.9.1998 and deniedthe deduction which was earlier granted under Section 80P(2)(a)(iii) ofthe Act. Hence, the present appeal by the assessee. 4.We have heard learned counsel for the parties. 5.The point for consideration in this appeal is as to whetherthe order of the Tribunal dated 23.9.1998 could be rectified in view ofretrospective amendment made by the Income Tax (SecondAmendment) Act, 1998 effective from 1.4.1968. 6.The Tribunal while rejecting the contention of the assessee,following the decision of the Apex Court in the case of J.M. Bhatia AACand others v. J.M. Shah (1985) 156 ITR 474, held that the order dated23.9.1998 could be rectified as there was mistake of law which wasapparent on the record. The observation of the Tribunal reads thus:- “There is no dispute in this case that in view of theretrospective amendment u/s 80P(2)(a)(iii), theassessee is not entitled for deduction. We feel thatwhen the law is amended with retrospectiveamendment, the fiction is that all the authoritiesunder the statute must proceed on the basis that thelaw at the relevant time was the law as amendedsubsequently with retrospective effect. That beingso, the legal fiction is apparently capable of beingcarried forward to hold that when the earlier orderwas passed, it was passed in contravention of theamended law which by fiction is deemed to be in “There is no dispute in this case that in view of theretrospective amendment u/s 80P(2)(a)(iii), theassessee is not entitled for deduction. We feel thatwhen the law is amended with retrospectiveamendment, the fiction is that all the authoritiesunder the statute must proceed on the basis that thelaw at the relevant time was the law as amendedsubsequently with retrospective effect. That beingso, the legal fiction is apparently capable of beingcarried forward to hold that when the earlier orderwas passed, it was passed in contravention of theamended law which by fiction is deemed to be in force at that time. This clearly is an error apparent onthe face of the record. Section 80P(2)(a)(iii) hasbeen amended with retrospective effect, i.e. w.e.f.1.4.68. The apex court has upheld the constitutionalvalidity of the retrospective amendment of the sectionin the case of National Agricultural Coop MarketingFederation of India Ltd. (supra). Once the law ismade applicable with retrospective effect, it isdeemed to be in existence from the date when it ismade applicable and if an order is passed contrary tothe amended law, there is a mistake of law crept inthe order and such a mistake must be rectified. Theapex court has also taken the same view in theaforesaid two decisions and the reasoning giventherein is squarely applicable to the facts of the casebefore us. In view of the above discussions and thecase law, we accept the plea of the Revenue andrectify our orders by which both the assessee wereallowed deduction u/s 80P(2)(a)(iii) by holding thatboth the assessees are not entitled for deduction u/s80P(2)(a)(iii) and to that extent our orders inaforesaid ITAs stand amended.” 7.Further, Full Bench of this Court in Commissioner ofIncome Tax v. Smt. Aruna Luthra [2001] 252 ITR 76 was consideringthe scope of power given under Section 154 which is analogous toSection 254 of the Act for rectification of any mistake apparent on the record. It was held as under:- “The power given to the authority is wide. It cancorrect “any mistake” provided it is “apparent fromthe record”. The first question that arises forconsideration is – when a mistake can be said to beapparent from the record? The plain language of the provision suggeststhat the mistake should be apparent. It must bepatent. It must appear ex facie from the record. Itmust not be a mere possible view. The issue shouldnot be debatable. Mr. Sawhney contended that when the viewtaken by an authority is ex facie contrary to thedecision of the jurisdictional High Court or a superiorcourt, the case would fall within the mischief ofsection 154. However, Mr. Bansal submitted thatwhile deciding a matter, an authority cannotanticipate the view that may be taken by the HighCourt or the Supreme Court on a subsequent date. Ifat the time of the passing of the order, the authoritytakes a particular view, which is not contrary to theexisting interpretation of law, the provision of section154 cannot be invoked. Apparently, the argument of Mr. Bansalappears to be attractive. If the issue of error in theorder is to be examined only with reference to the date on which it was passed, it may be possible tolegitimately contend that it was legal on the date onwhich it was passed. The subsequent decision hasonly rendered it erroneous or illegal. However, therewas no error much less an apparent error on the dateof its passing. Thus, the provision of section 154 isnot applicable. However, such a view shall bepossible only if the provision were to provide that theerror has to be seen in the order with reference to thedate on which it was passed. Such words are notthere in the statute. Resultantly, such a restrictioncannot be introduced by the court. Thus, thecontention raised by counsel for the assessee cannotbe accepted. date on which it was passed, it may be possible tolegitimately contend that it was legal on the date onwhich it was passed. The subsequent decision hasonly rendered it erroneous or illegal. However, therewas no error much less an apparent error on the dateof its passing. Thus, the provision of section 154 isnot applicable. However, such a view shall bepossible only if the provision were to provide that theerror has to be seen in the order with reference to thedate on which it was passed. Such words are notthere in the statute. Resultantly, such a restrictioncannot be introduced by the court. Thus, thecontention raised by counsel for the assessee cannotbe accepted. There is another aspect of the matter. In agiven case, on an interpretation of a provision, anauthority can take a view in favour of one of theparties. Subsequent to the order, the jurisdictionalHigh Court or their Lordships of the Supreme Courtinterpret the same provision and take a contraryview. The apparent effect of the judgmentinterpreting the provision is that the view taken by theauthority is rendered erroneous. It is not inconformity with the provision of the statute. Thus,there is a mistake. Should it still be perpetuated? Ifthe contention raised on behalf of the assessee were accepted, the result would be that even though theorder of the authority is contrary to the law declaredby the highest court in the State or the country, stillthe mistake could not be rectified for the reason thatthe decision is subsequent to the date of the order. Only the dead make no mistake. Exemptionfrom error is not the privilege of mortals. It would bea folly not to correct it. Section 154 appears to havebeen enacted to enable the authority to rectify themistake. The legislative intent is not to allow it tocontinue. This purpose has to be promoted. TheLegislature's will has to be carried out. By placing anarrow construction, the object of the legislation shallbe defeated. Such a consequence should not becountenanced.” 8.In view of the above, no illegality or perversity could befound in the order dated 22.7.2003 passed by the Tribunal.Accordingly, the substantial questions of law are answered against theassessee and in favour of the revenue. The appeals stand dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE ITA No. 42 of 2004 -9- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 57 of 2004 Date of Decision: 5.9.2011 Punjab State Coop. Supply & Marketing Federation Ltd. ....Appellant. Versus Joint Commissioner of Income-tax ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Garg, Advocate for the appellant. Ms. Urvashi Dhugga, Senior Standing Counsel,for the respondent. AJAY KUMAR MITTAL, J. For orders, see ITA No. 42 of 2004 (Punjab State Coop. Supply & Marketing Federation Ltd. v. Joint Commissioner ofIncome Tax). (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE