Punjab State Coop. Supply & Marketing Federation Ltd.,Chandigarh v. Deputy Commissioner Of Income-Tax, Circle 4(1), Chandigarh

IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH Date of decision: 31.03.2008 Punjab State Coop. Supply & Marketing Federation Ltd.,Chandigarh. ..... Appellant-assessee Versus Deputy Commissioner of Income-Tax, Circle 4(1), Chandigarh ..... Respondent-revenue CORAM: HON'BLE MR. JUSTICE SATISH KUMAR MITTALHON'BLE MR. JUSTICE RAKESH KUMAR GARG Present:-Mr. M.L. Garg, Advocate for the appellant-assessee. RAKESH KUMAR GARG, J. The assessee has filed the present appeal underSection 260-A of the Income-Tax Act, 1961 ( hereinafterreferred to as the “Act” ) against the order dated 27.02.2007passed by the Income-Tax Appellate Tribunal, Chandigarh,Bench-B in I.T.A. No. 844/Chandi/2004 for the assessmentyear 1998-99. The return of income was processed under Section143(1)(a) of the Act on 15.3.1999 at an income ofRs.35,38,62,548/- after making various adjustments. It isrelevant to mention here that during the financial year 1996-97corresponding to assessment year 1997-98, the appellant hadmade a provision of Rs.7.00 crores for payment of arrears ofthe salary to the employees. Since it was only a provision andthe exact liability had not been quantified, it was added back asincome in the return filed and the amount of Rs.7.00 croreswas taxed. In the next financial year i.e. 1997-98, the liabilitywas quantified and an amount of Rs.4,99.37,406/- was paidduring the next year i.e. 1998-99. Since the amount was paidout of the provision made in financial year 1996-97, it was notcharged to Profit & Loss account for the financial year 1997-98. While computing the income for filing its return for theassessment year 1998-99, the appellant did not claim the saidamount i.e. Rs.7.00 crores as expenses. As a result, the incomeof Rs.7.00 crores was assessed in excess for assessment year1998-99. It is further pleaded in the appeal that thereafterthe appellant filed an application under Section 154 of the Actbefore the Assessing Officer claiming that since the omission to claim the expenditure of Rs.7.00 crores was a mistakeapparent from the record, this may be rectified and the incomeassessed be reduced by the said amount of Rs.7.00 crores.However, the Assessing Officer did not agree with thecontention of the appellant and rejected the same vide orderdated 08.12.2003 on the ground that the said deduction had notbeen claimed either in the return of income or during the courseof assessment proceedings and therefore the said claim ofdeduction, which is not apparent from the record, can beallowed in the rectification application. Aggrieved against the said order, the assessee filedan appeal submitting therein that the provision of Section 154of the Act does not provide for rectification only when amistake in the order is detected. The mistake has to be on therecord of the case and the record would include everything onthe case file i.e. the return, the evidence and the order are a partof the record. The mistake can be detected from anything onthe file and therefore, the appellant is entitled for rectificationas prayed for. The Commissioner of Income-Tax ( Appeal )accepted the appeal and directed the Assessing Officer to giverelief as claimed by the appellant after verification vide orderdated 06.05.2004. Aggrieved against the said order, the assessee filedan appeal submitting therein that the provision of Section 154of the Act does not provide for rectification only when amistake in the order is detected. The mistake has to be on therecord of the case and the record would include everything onthe case file i.e. the return, the evidence and the order are a partof the record. The mistake can be detected from anything onthe file and therefore, the appellant is entitled for rectificationas prayed for. The Commissioner of Income-Tax ( Appeal )accepted the appeal and directed the Assessing Officer to giverelief as claimed by the appellant after verification vide orderdated 06.05.2004. Aggrieved against the order of the Commissionerof Income-Tax ( Appeals ), Chandigarh dated 06.05.2004, therevenue filed an appeal before the Tribunal, wherein it wascontended on behalf of the revenue that the decision of theCommissioner of Income-Tax ( Appeals ), Chandigarh wascontrary to the well settled principles of law regarding thescope of provisions of Section 154 of the Act. It was furthercontended that the assessee never made a claim either in thereturn of income or in the course of assessment proceedingsunder Section 143(3) and further the assessee had also not fileda revised return. On the basis of these facts, it was argued thatthe Hon'ble Supreme Court in case ofGoetze (India) Ltd. v.CIT, 284 ITR 323 (SC)has held that no deduction can beallowed to the assessee unless the same is claimed in the returnof income or in the revised return of income. The revenuealso placed reliance on the decision of this Court in the case ofM/s Mittal Allys & Steels, Ludhiana v. CIT, Patiala ITRNo. 74 of 1988 decided on 17.01.2007, where similar viewhas been expressed by this Court. The Tribunal vide impugnedorder dated 27.02.2007 held that when the Assessing Officercould not allow the deduction in the course of assessmentproceedings unless the claim was made by the assessee by filing the revised return, it cannot be said that there is a mistakein the assessment made by him under Section 143(3) of the Actand therefore, there was no mistake apparent from the record,which could be rectified by the Assessing Officer. Mr. M.L. Garg, learned counsel for the appellantargued that for the purpose of Section 154, the record does notmean the return of income and the assessment record of thesame assessment year only. Since the provision had been madein the preceding year in respect of the arrears of salary payableto the employees and in the year under appeal, the assessee hadmade the payment out of the payment of the salary and thesame was liable to be deducted to the assessee on paymentbasis. However, inadvertently the assessee had failed to makethe said claim in the return of income and this was a mistake,which is apparent from the record, which could be rectifiedunder Section 154 of the Act. Shri M.L. Garg, learned counselfor the assessee placed strong reliance upon the judgment ofthis Court in Commissioner of Income-Tax v. Smt. ArunaLuthra, 252 ITR 76 and the judgment of the Hon'ble SupremeCourt in Anchor Pressing ( P. ) Ltd. v. Commissioner ofIncome-Tax, U.P. and others 161 ITR 159in support of itscase. We have heard Shri M.L. Garg, learned counselfor the assessee and perused the record. We have heard Shri M.L. Garg, learned counselfor the assessee and perused the record. We find no force in the arguments raised by thelearned counsel for the assessee. The facts of the case are not in dispute. In assessment year 1997-98, the assessee had madea provision for the payment of salary of Rs.7.00 crores to theemployees on account of the arrears. The provision was addedback in the statement of computation of income for thepreceding year. In the assessment year i.e. 1998-99, theassessee had made a payment of Rs.4,99,37,406/- only as perthe statement placed on record. This amount was adjustedagainst the provision made for the assessment year 1997-98. Itappears that the assessee had also made a provision for the yearunder appeal of Rs.2,20,80,925/- . Thus, the total outstandingpayable as on 31.3.1998 was reflected at Rs.4,21,43,519/-.This amount was claimed to have been paid in assessment year1999-2000. Undisputedly the assessee did not make any claimon the basis of payment of arrears of salary either in theoriginal return of income or during the course of assessmentproceedings. It is not disputed that as per the books of account,no debit was made to the profit and loss account in so far asthe amount paid was adjusted against the provision made. Therefore, it is evident that the assessee had not made a claimfor the amount of Rs.7.00 crores either in the original return orduring the course of assessment proceedings. The assessee hadalso not filed revised return at any stage of proceedings. TheHon'ble Supreme Court in the case of Goetze (India) Ltd. v.CIT ( supra ), held that deduction on account of any claimcannot be allowed to the assessee if such a claim is not made inthe original return or unless a revised return is filed inaccordance with the provisions of the Act. Relying upon thedecision of the Hon'ble Supreme Court in the said case, thisCourt in case of M/s Mittal Alloys & Steels (supra) reiteratedthis principle. The facts of the judgment of this Court in case ofCommissioner of Income Tax v. Smt. Aruna Luthra ( supra ),relied upon by the counsel for the appellant, aredistinguishable. The precise question, which was before theFull Bench of this Court in that case was “Can proceedings forrectification of an order passed under the provisions of Income-Tax Act, 1961 be initiated on the basis of judgment deliveredby the jurisdictional or statutorily Court, after passing of thesaid order?” In that case the assessee filed her return for theassessment year 1987-88 declaring an income of Rs.44,380. While computing the profit from business, the assessee claimeda deduction of Rs.74,205/- on account of loss in chit fund. TheAssessing Officer framed the assessment under Section 143(1)(a) of the Income-Tax Act, 1961. Vide order dated March 30,1988, the income as declared by the assessee was accepted. On April 4, 1989, a Division Bench of this Courtdecided the case of Soda Silicate and Chemical Works v. CIT(1989) 179 ITR 588 holding that contributions made to thechit fund could not be treated as revenue expenditure nor couldthe payment or receipt of any amount to and from the chit fundbe treated as the business activity of the assessee. Thetransactions involved did not give rise to any incomeassessable to income tax nor any revenue loss in respect ofwhich any deduction could be claimed. Thus, the order of theTribunal, disallowing the assessee's claim for deduction onaccount of loss in the chit fund was upheld. After the above decision, the Assessing Officerissued a notice under Section 154 of the Act to the assesseeand vide order dated 13.2.1992 the order of assessment wasrectified and the assessee's claim for deduction of Rs.74,205/-on account of loss in chit fund by debiting the amount to her profit and loss account, was, thus, disallowed. The appeal After the above decision, the Assessing Officerissued a notice under Section 154 of the Act to the assesseeand vide order dated 13.2.1992 the order of assessment wasrectified and the assessee's claim for deduction of Rs.74,205/-on account of loss in chit fund by debiting the amount to her profit and loss account, was, thus, disallowed. The appeal filed by the assessee was dismissed by the Commissioner ofIncome-Tax ( Appeals ), Faridabad, vide order datedSeptember 17, 1992. The assessee challenged the orderbefore the Income-tax Appellate Tribunal and vide order datedJuly 5, 1999, the Tribunal took the view that the issueregarding the admissibility of the deduction was “debatablethus, it goes out of the purview of the provisions of Section154.” Aggrieved against the said order, the Revenuefiled the appeal before this Court and maintains that in view ofthe decision of the jurisdictional of this Court, the Tribunalcould not have held that issue was debatable. In thebackground of these facts, the following questions of law cameup for consideration of this Court:- “(i) Whether the Income Tax Appellate Tribunal wasjustified in law in holding that as there was no mistakeon the part of the Assessing Officer, the rectificationsought by the appellant cannot be rectified? (ii) Whether the order of the Income Tax AppellateTribunal is against the law laid down by theJurisdictional High Court wherein it was held thatmistake can be committed by anybody and the same should be rectified when detected from the record whichmeans record of all years and would include every thingon the case file?” The question as posed at the outset is answered infavour of the Revenue. Similarly the reliance of appellant on thejudgment of the Hon'ble Supreme Court in Anchor Pressing ( P. )Ltd. v. Commissioner of Income-Tax, U.P. and others (supra) isalso misplaced. In that case the appellant had not made any claim forrelief under Section 84 of the Income Tax Act, 1961 and theassessment for the year 1963-64 was made without granting the relief.The application filed by the assessee for rectification for the grant ofrelief under Section 84 of the Act was rejected by the authorities. Thewrit petition filed by the assessee was also dismissed by this Court.On an appeal filed before the Hon'ble Supreme Court, it was held asunder:- “The jurisdiction under Section 154 of the Income-taxAct, 1961, to rectify mistake is wider than that providedin Order XLVII, rule 1, of the Code of Civil Procedure,1908. None the less, there must be material to support theclaim for relief under Section 84 and unless such materialcan be referred to, no grievance can be made if the ITOrefuses relief.” Thus,from the above discussion, it is crystal clear thatthe omission of the assessee to claim deduction on account ofpayment of the salary to its employees in the income tax return orduring the course of assessment preceding is not a mistake apparenton the record of the case to which proceedings provision of 154 ofthe Act can be attracted. Thus, even in this case, the claim of the assessee wasdeclined as the assessee failed to show that all the material requiredfor satisfying the conditions requisite for the grant of relief underSection 84 existed in the income tax record at the time of assessment,was completed and therefore, it cannot be said that the Income TaxOfficer committed a mistake apparent from the record in the grant ofrelief under the said section. Therefore, we find no error in theorder of the Tribunal. No substantial questions of law are arising fordetermination of this Court in this appeal and the same is herebydismissed. ( RAKESH KUMAR GARG )JUDGE ( SATISH KUMAR MITTAL )JUDGE