Tc/206/2003 Of Commissioner Of Income Tax v. Nonmag Wires Pvt.ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR.JUSTICE P.D.DINAKARAN THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN Appeal against the order of the Income Tax AppellateTribunal Madras 'B' Bench, dated 25.03.2003, in ITA No.943/Mds/1999for the Assessment year 1994-95. against the order of the Commissioner of Income Tax (Appeals) II,121 Mahatma Gandhi Road, Chennai IT/WT/GT.Appeal No.707-C/97-98,dated 16.3.1999 against the order of the Deputy Commissioner ofIncome Tax, Special Range Salem 7, dated 24.2.1997 inG.I.no.101/DC/SR/SLM/94-95. (Judgment of the Court was delivered by CHITRA VENKATARAMAN,J.) This appeal is by the Revenue, challenging the order ofthe Tribunal, on the question of rectification made to restrict theunabsorbed business loss to the extent of business income only. 2. The case of the revenue is that the assessment of theassessee was originally completed under Section 143 (1) (a), bydisallowing set off of the unabsorbed loss and depreciation. 3. The assessment was taken up for rectification on theview that the assessee could set off of carry forward loss onlyto the extent of business income and that only the carried forwardhttps://hcservices.ecourts.gov.in/hcservices/ depreciation loss could be adjusted against the short terms capitalgains. On notice, the assessee contended that the losses relatingthe earlier years were determined and allowed to be carried forwardfor setting off against the taxable income and, as such, theassessment was rightly done. The Assessing Officer rejected thecontention of the assessee and rectified the assessment. Theassessee preferred an appeal before the Commissioner of Income Tax(Appeals) and submitted before the Appellate Authority that theproceedings under Section 154 were not maintainable, since theissue sought to be touched under section 154 was an arguable issue,not amenable to Section 154. The assessee submitted that there wasno error, requiring rectification. In view of the conflictingviews expressed in several of the decisions relating to similarclaim, the assessee further submitted that it was not open toinvoke the provisions under Section 154. 4. Accepting the plea made by the assessee, theCommissioner of Income Tax (Appeals) allowed the appeal andcancelled the rectification. Aggrieved of the same, the Revenuepreferred an appeal before the Tribunal and, by an order dated25.03.2003, the Tribunal agreed with the view expressed by theCommissioner that considering the conflicting views on thisquestion, the error was not a rectifiable error, amenable toSection 154 of the Income Tax Act. Consequently, the appeal byrevenue was dismissed. Aggrieved, the Revenue has preferred thepresent appeal before this Court. 5. Learned Standing Counsel appearing for the Revenuesubmits that when the assessment is apparently contrary to the law,it could not be said that there existed arguable points, to takethe proceedings outside the scope of Section 154; even otherwise,if the power is traceable to any of the provisions of the Act, theorder could not be said to be bad in law. 5. Learned Standing Counsel appearing for the Revenuesubmits that when the assessment is apparently contrary to the law,it could not be said that there existed arguable points, to takethe proceedings outside the scope of Section 154; even otherwise,if the power is traceable to any of the provisions of the Act, theorder could not be said to be bad in law. 6.Percontra,learnedcounselfortherespondent/assessee submitted that given the jurisdiction underSection 154, considering the fact that there were conflicting viewsand the arguable issue before the Assessing Officer, the provisionsof Section 154 were not available for purposes of correcting anyerror apparent. In any event, the decision on the question of setoff came much later to the proceedings taken under Section 154 andhence this was total lack of jurisdiction under Section 154. It isfurther submitted that considering the scope of Section 154 and thefailure to exercise jurisdiction under any other provision, anyreference, at this stage to any other provisions of the Act to drawsupport would be totally unjustified, since the contemplation wasnever to bring it under any other Section, other than Section 154.In the circumstances, it is submitted that the order of theTribunal should be confirmed. 7. It is an admitted case, that on the date ofproceedings taken under Section 154, there were conflictingopinions on the question of working of relief under Section 115(J). Admittedly, the officer embarked on only under Section 154 tocorrect the assessment, which, according to him, was erroneous.With such a view in contemplation and aware of the jurisdictionavailable under the Act to correct the fundamental error, theproceedings taken under Section 154 are totally unjustified. 8. We agree with the contention of the assessee that whenthe order was passed in no unmistakable terms referring to Section154, the plea of the appellant to sustain the order of assessmentunder any of the provisions of the Act cannot be accepted. 9. It must be noted that the jurisdiction to correct amistake under Section 154 is a limited one, in the sense that thedebatable issue, including a point of law, is not a mistakeapparent from the record. While interpreting the scope of Section154 of the Act in the case of BALARAM (T.S.), ITO Vs. VOLKARTBROTHERS reported in [1971] 82 ITR 50 , it was held that a mistakeapparent on the record within the meaning of Section 154 of the Actmust be "obvious" and "patent" and not something which could beestablished by long drawn process of reasoning of issues on pointson which there may be more than one reason. A decision on adebatable point of law certainly is not a mistake apparent from therecord. 10. In the recent decision of this Court reported in[2004] 265 ITR 479 (COMMISSIONER OF INCOME TAX Vs. INDIA CEMENTSLTD.), this Court, while considering the disallowance under Section43B on the sales tax collected and shown as outstanding liability,held that this was a case wherein it could not be said that onlyone view was possible on the facts, hence, it could not be saidthat it was a mistake apparent from the records, which called forexercise of the power of jurisdiction under Section 154 of the Act. 11. This Court, in the recent decision reported in [2006]283 ITR 200 (COMMISSIONER OF INCOME TAX Vs. SESHASAYEE PAPER ANDBOARDS LTD.), to which one of us is a party, held that the questionof relief under Section 80 HHC of the Act as regards the losses tobe deducted from the profit available was a debatable issue whichdid not fall within the purview of prima facie adjustment underSection 143(1)(a) of the Act which could be taken up forconsideration only in the regular assessment under Section 143(3)and not under Section 154 of the Act to rectify the intimationunder Section 143(1)(a) of the Act. 11. This Court, in the recent decision reported in [2006]283 ITR 200 (COMMISSIONER OF INCOME TAX Vs. SESHASAYEE PAPER ANDBOARDS LTD.), to which one of us is a party, held that the questionof relief under Section 80 HHC of the Act as regards the losses tobe deducted from the profit available was a debatable issue whichdid not fall within the purview of prima facie adjustment underSection 143(1)(a) of the Act which could be taken up forconsideration only in the regular assessment under Section 143(3)and not under Section 154 of the Act to rectify the intimationunder Section 143(1)(a) of the Act. 12. In the light of the interpretation made by the ApexCourt having regard to the admitted fact that the claim itself wasconsidered and settled long after the invoking of the jurisdictionunder Section 154 of the Act in the decision reported in KarnatakaSmall Scale Industries Development Corporation Ltd. v. CIT,reported in (2002) 258 ITR 770, we do not find any justification toaccept the plea of the Revenue. Consequently, the appeal fails andis, accordingly, dismissed. No costs. dixit Sd/Asst.Registrar/true copy/Sub Asst.RegistrarTo1. The Asst Registrar,the Income Tax Appellate Tribunal,"B" Bench Madras.2. The Commissioner of Income Tax,(Appeals II) 121, Mahatma Gandhi Road,Chennai.3. The Deputy Commissioner of Income Tax,Special Range, Salem 7. 4. The Assistant Registrar,Income Tax, Appellate Tribunal,Rajaji Bhavan, III floor,Besant Nagar, Chennai 90. 5. The Commissioner of Income Tax, Salem. + 1 cc to Mr. M. muralikumaran, Senior Standing Counsel for IncomeTax Chennai 14 SR no. 5749 BV(CO)SR/26.2.2007 https://hcservices.ecourts.gov.in/hcservices/