The Commissioner Of Income Tax-11 v. M/S. Sri Adhikari Bros Television Network Ltd

SNC IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGNAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 6072 OF 2010WITHINCOME TAX APPEAL NO. 6073 OF 2010 The Commissioner of Income Tax-11 ..Appellant versus M/s. Sri Adhikari Bros Television Network Ltd. ..Respondent. Mr. Vimal Gupta for Appellant. Mr. Madhukar Agarwal i/by Mint & Conferers for Respondent....... CORAM : S.J.VAZIFDAR &M.S. SANKLECHA, JJ. DATE : 15 June 2012. P.C. : (PER M.S.SANKLECHA, J.) These two Appeals are filed by the Revenue under Section 260A of the Income Tax Act, 1961 (hereinafter will be referred to the said Act) from a common order of the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal) dated 21.05.2010 relating to the assessment year 2000-2001 (previous year ending on 31.03.2000) and assessment year 2001-2002 (previous year ending 31.03.2001). Both the appeals are being disposed of by this Order as the facts are SNC similar and the questions raised in both the appeals are identical. Both the appeals seek to raise the following questions for consideration of this court as substantial questions of law : a)Whether on the facts and circumstances of the case the Hon ble Tribunal was justified in’upholding the order of the CIT(A) in holding that the matter could not have been rectified under Section 154 and deleting the addition made by the Assessing Officer? b)Whether on the facts and circumstances of the case Hon ble Tribunal erred in holding that’the issue whether the expenses incurred in connection with private placement of equity share are not entitled for deduction under Section 35D is debatable issue and could not be rectified under Section 154? c)On the facts and circumstances of the case whether the Tribunal was correct to draw the inference that the issue being debatable from the various proceeding which dealt with a different aspect of deduction under Section 35D. The issue under consideration in the present appeal is that the tribunal has failed to appreciate that the deduction under Section 35D is for public subscription of share and not for private placement of shares and this is not a debatable issue and therefore the mistake is amenable to rectification under Section 154 of the Income Tax Act, 1961? 2 The facts relating to Assessment year 2000-01 relevant for the present appeals are set out hereunder: (a) On 30.11.2000, the Respondent filed its return of income for the assessment year 2000-2001 declaring its income at Rs.9,75,307/-. Thereafter, the assessing Officer passed an order under Section 143(3) of the said Act enhancing the income to Rs.10,09,23,600/-. The Respondent/assessee took the matter in Appeal and consequent to the order of the CIT(Appeals), the income was revised to Rs.2,27,26,200/-. (b) Thereafter, consequent to an audit query, the Commissioner of Income Tax commenced proceedings under Section 263 of the said Act seeking to revise the assessment on the ground that for the A.Y. 2000-01, the Respondent was allowed a deduction of Rs. 79,79,314/- under Section 35D of the said Act and the same was erroneous and prejudicial to the interest of revenue. This was on the basis that the aforesaid expenses were incurred in connection with SNC private placement of equity shares, while the deduction under Section 35D(2)(c)(iv) of the said Act is available only in respect of public issue of shares. The Respondent responded to the notice and the Commissioner of Income Tax by an order dated 29.03.2003 dropped the proceeding under Section 263 of the said Act. However the above Order dropping the Section 263 proceedings did record that the same was without prejudice to any action that may be taken by the department under Section 147 of the said Act. SNC private placement of equity shares, while the deduction under Section 35D(2)(c)(iv) of the said Act is available only in respect of public issue of shares. The Respondent responded to the notice and the Commissioner of Income Tax by an order dated 29.03.2003 dropped the proceeding under Section 263 of the said Act. However the above Order dropping the Section 263 proceedings did record that the same was without prejudice to any action that may be taken by the department under Section 147 of the said Act. (c)Thereafter, on 31.03.2005 a notice under Section 148 of the said Act was issued to the Respondent. The Respondent responded to the same and pointed out that out of the amount of Rs.79,79,304/- an amount of Rs.2,74,053/- relates to preliminary expenses incurred at the time of incorporation and the balance of Rs.77,05,341/- is in respect of share issue. The Assessing Officer by an order 30.01.2006 confirmed the re-opening of the assessment and disallowed the claim for deduction on account of Amortisation under Section 35D of the said Act amounting Rs.77,05,341/-. Being aggrieved by the order dated 30.01.2006, the Respondent filed an appeal to the CIT (Appeal). SNC (d)By an order dated 15.06.2006, the CIT (Appeals) held that reopening of assessment under Section 147 of the said Act is not sustainable in as much as the assessing officer could have no reason to believe that income chargeable to tax had escaped assessment. The CIT(Appeal) held that the present proceeding for reopening is only on account of a change of opinion and therefore outside the purview of Section 147 of the said Act. However, the CIT (Appeals) in his order did observe that once an order under Section 143(3) of the said Act has been passed by an Assessing Officer he is precluded from interfering with the said order except by way of rectification of mistake under Section 154 of the said Act. At the hearing, Counsel for the Respondent informed us that the Appellant herein had filed an appeal against the Order dated 15.06.2006 of the CIT(Appeals) and the Tribunal by Order dated 20.04.2012 dismissed the Appeal of the Revenue and filed a copy of the Order the Tribunal dated 28.04.2012 before this court. (e) Pending the challenge to the order dated 15.06.2006 of the CIT (Appeals) before the Tribunal, the assessing officer by an order dated 08.03.2007 rectified the order dated 31.03.2003 passed under Section 143 (3) of the said Act by disallowing a deduction of Rs. SNC 77,05,341/- under Section 35D of the said Act and adding the same to the Income. This was on the basis that the above expenses were incurred with regard to private placement of equity shares and not public issue of shares and that therefore the assesse was not entitled to the benefit of Section 35D(2)(c ) (iv) of the said Act. (f) Being aggrieved from the order dated 08.03.2007, the Appellant preferred an Appeal to the CIT (Appeals). By an Order dated 8.04.2008 the CIT(Appeals) held that the disallowance of the benefit of Section 35D of the said Act was not amenable to rectification under Section 154 of the said Act as the same could entail more then one opinion. Consequently, the addition of Rs.77,05,341/- was deleted and the appeal of the Respondent allowed. (g)Being aggrieved by the order dated 8.04.2008 of the CIT(Appeals), the Revenue preferred an Appeal to the Tribunal. By an order dated 21.5.2010 the Tribunal dismissed the appeal of the Revenue as the issue being debatable would not make it a mistake apparent on the face of the record for invoking Section 154 of the said Act. (f) Being aggrieved from the order dated 08.03.2007, the Appellant preferred an Appeal to the CIT (Appeals). By an Order dated 8.04.2008 the CIT(Appeals) held that the disallowance of the benefit of Section 35D of the said Act was not amenable to rectification under Section 154 of the said Act as the same could entail more then one opinion. Consequently, the addition of Rs.77,05,341/- was deleted and the appeal of the Respondent allowed. (g)Being aggrieved by the order dated 8.04.2008 of the CIT(Appeals), the Revenue preferred an Appeal to the Tribunal. By an order dated 21.5.2010 the Tribunal dismissed the appeal of the Revenue as the issue being debatable would not make it a mistake apparent on the face of the record for invoking Section 154 of the said Act. 3. In support of the appeal, Mr. Vimal Gupta the Advocate for the Revenue submits that in view of Section 35D(2)(c) (iv) of the said Act, the benefit of the same is available only where expenditure is incurred in connection with a public issue and admittedly in this case it is not a public issue but a private placement. Therefore the deduction granted was clearly an error apparent on record warranting rectification under Section 154 of the said Act and no question of the issue being debatable arises. 4. As against the above, Mr. Madhur Agarwal Advocate for the Respondent submits that in view of Section 154(1A) of the said Act, in the present facts the exercise of jurisdiction under Section 154(1) of the said Act to rectify a mistake is barred as the same issue was a subject matter of both appellate and Revisional proceedings under the said Act. Further he contends that whether the nature of the issue by the Respondent was public or private is a subject matter of examination and consequently debatable. Therefore Section 154 of the said Act can not be invoked as it is not a mistake apparent from the record. SNC to reproduce Sub-Section (1A) of Section 154 of the said Act which reads as under: “(1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided. ” 6. It would be noticed that sub Section 1(A) of Section 154 of the said Act prohibits exercise of jurisdiction to rectify an error apparent from the record under Section 154(1) of the said Act where the same matter has been considered and decided in any proceeding by way of appeal or revision. In the present facts, the notice for Revision under Section 263 of the said Act with regard to the same issue viz. allowability of deduction under Section 35D(2) of the said Act was considered and dropped by an order dated 29.03.2005 after the Respondent responded to the notice under Section 263 of the said Act. Therefore no rectification proceeding would lie in such a case in view of Sub Section (1A) to Section 154 of the said Act. SNC 9ITXA 6072 & 6073-10.doc 6. It would be noticed that sub Section 1(A) of Section 154 of the said Act prohibits exercise of jurisdiction to rectify an error apparent from the record under Section 154(1) of the said Act where the same matter has been considered and decided in any proceeding by way of appeal or revision. In the present facts, the notice for Revision under Section 263 of the said Act with regard to the same issue viz. allowability of deduction under Section 35D(2) of the said Act was considered and dropped by an order dated 29.03.2005 after the Respondent responded to the notice under Section 263 of the said Act. Therefore no rectification proceeding would lie in such a case in view of Sub Section (1A) to Section 154 of the said Act. SNC 9ITXA 6072 & 6073-10.doc Similarly, the reassessment order under Section 147 passed on 30.01.2006 by which this very issue viz. allowability of deduction of Rs.77,05,041/- under Section 35D of the said Act was considered and decided against the Respondent by the Assessing Officer. However, being aggrieved the Respondent took the matter in appeal to CIT(Appeals). On 15.06.2006, the CIT(Appeals) held that the proceeding for reopening the assessment under Section 147 of the said Act is not valid as the proceedings have been initiated merely on the basis of change of opinion. The aforesaid decision of the Commissioner (Appeals) was carried by the Revenue in Appeal to the Tribunal and the Tribunal by its order dated 20.04.2012 dismissed the Revenue Appeal. Thus, this very matter (issue) viz. availability of deduction under Section 35D of the said Act has been subject matter of appeal and the same has been considered and decided by the Appellate Authorities. Consequently, no rectification proceeding would lie in such a case in view of Sub Section 1(A) to Section 154 of the said Act. 7.Besides as contended by the Respondent and as found by the CIT(Appeals) in his Order dated 15.06.2006 and upheld by the Tribunal in its Order dated 20.4.2012 the issue of allowability of deduction under Section 35D(2) (iv) of the said Act in the facts of the present case is a matter of opinion depending upon the exact nature of the issue. Consequently, it becomes debatable even on questions of fact and therefore outside the purview of Section 154 of the said Act as it is not a mistake apparent from the record. 8. In view of the above, in both the appeals no substantial question of law arises for consideration by this court. Therefore the Appeal is dismissed. No order as to costs. (S.J.VAZIFDAR J.) (M.S. SANKLECHA, J.)