The Commissioner Of Lncome Tax-, Aayakar Bhavan, Basheerbagh, Hyderabad-500 001 v. Prasad (Sr. Sc For Rncome Tax)The Court Delivered The Following Judgment

IN THE HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD THURSDAY, THE TWENTY EIGHTH DAY OF NOVEIVEERTWO THOUSAND AND TWENTY FOUR PRESENT THE HON'BLE THE CHIEF JUSTICE ALOK ARADHE THE HON'BLE SRI JUSTICE J. SREENIVAS RAO INCOME TAX TRIBUNAL APPEAL NO: 228 OF 2oo7 lncome tax Tribunar Appear under Section 260-4 of the rncome tax Act, .1g6i,against the order of the Income Tax ,A,,Appeflate Tribunar, Hyderabad Bench Hyderabad in lrA No. 188 tHyd.r zoo4 for Assessment year 1999 - 2000 dated27 -02-2007 preferred against the order of the commissioner of lncome Tax(Appeals) -ll , Hyderabad dated 06-1r-2002 in trA No. 33 / ctr (A) -ill 02_03,preferred against the order of the Asst. commissioner of rncome Tax , circre 1 (3),Hyderabad dated 28-03-2002 in pAN /GtR No. A_i61. Between: Andhra Bank Financiar services Limited, First Froor, 4-5-1 to 23, Andhra BankBuildings, Sultan Bazar, Hyderabad-195Buildings, Sultan Bazar, Hyderabad-195 ..APPELLANT AND The Commissioner of lncome Tax-|, Aayakar Bhavan, Basheerbagh, Hyderabad-500 001 ...RESPONDENT Counsel for the Appellant: SRl. C. p. RAMASWAMI counsel for the Respondent: sRr J. v. PRASAD (sr. SC FoR rNcoME TAX)The Court delivered the following Judgment: THE HON' BLE THE CHIEF JUSTICE ALOK ARADHEAND THE HON'BLE SRI WSTICE J.SREENIVAS RAO INCOME TA)( TRIBUNAL APPEAL No.228 of 2OO7 JUDGMENT: per the Hon,ble Sn Justice J.sreeniuos Rao) Dr. C.P.Ramaswami, learned counsel for theappellarlt Mr. J"!'.Prasad, Iearned Senior Standing Counsel forIncome Tax Department for the respondent. 2. This appeal under Section 260A of the Income TaxAct, I 96 1 (hereinafter referred to as, ,,the Act.), has beenfiled by the ,assessee. The subject matter of the appealpertains to the assessment year 1999_2OOO. The appea_lwas admitted by a Bench of this Court on the foltowingsubstantial questions of law: "i) Whether on the facts and rn and rn thecrrcumstances of the case, the Income Tax AppellateTribunal was correct in law in holding that there was ncrdebatable issue with regard to the amount of interestdisallowable u/s. l4A of the I.T.Act, 196l when the issue Whether on the facts and rn and rn the got conciuded [before ][the ][lLrst appellate ][authority ][at ][the]time [when the ][ground was dismissed ][as ][not ][pressed?]ii) Whether [on the ][facts ][and in ][the]circumstarces [of the ][case, ][the ][Income ][Tax ][Appellate]Tribunal [was ][correct ][in ][law ][in ][holding ][that the ][lirst]appellate [authority ][was justified ][in ][passing ][the]Rectification [Order ][u/ ][s' i ][54 when ][the ][matter ][is ][highly]debatable?" 3. Facts [giving ][rise ][to filing ][of ][this ][appeal ][briefly ][stated]arethattheassesseewasincorporatedinFebruary'1991'as a Private [Limited ][Company ][and ][since ][April' ][1991' ][as ][a]Public Limited [Company' ][The ][assessee ][is a ][100%]subsidiary [company of ][Andhra ][Bank' ][a nationalised ][bank']which is [now ][merged ][with ][Union ][Bank ][of ][India' ][The]assessee [is a ][non-banking ][financial ][services ][company]engaged [in ][the ][business of ][financial ][services ][like ][leasing']hire Purchase [activities ][etc'] The assessee assessee [[filed ][the ][return ][of ][income ][for ]][[the ][return ][of ][income ][for ]][[return ][of ][income ][for ]][[of ][income ][for ]][[income ][for ]][[for ]][[the]] 4. The assessee assessee [[filed ][the ][return ][of ][income ][for ]][[the ][return ][of ][income ][for ]][[return ][of ][income ][for ]][[of ][income ][for ]][[income ][for ]][[for ]][[the]]assessment Year [1999-2OOO ]['][ In ][the ][Previous ][Year ][relevant]to the assessment Year1999-2000, [the ][assessee ][had]earned [income ][of ][Rs' ][10,73'07 ]'123 [l'][ on ][tax ][free ][bonds']The assessee [claimed ][that ][the ][aforesaid income ][is ][exempt] The assessee assessee [[filed ][the ][return ][of ][income ][for ]][[the ][return ][of ][income ][for ]][[return ][of ][income ][for ]][[of ][income ][for ]][[income ][for ]][[for ]][[the]] 4. The assessee assessee [[filed ][the ][return ][of ][income ][for ]][[the ][return ][of ][income ][for ]][[return ][of ][income ][for ]][[of ][income ][for ]][[income ][for ]][[for ]][[the]]assessment Year [1999-2OOO ]['][ In ][the ][Previous ][Year ][relevant]to the assessment Year1999-2000, [the ][assessee ][had]earned [income ][of ][Rs' ][10,73'07 ]'123 [l'][ on ][tax ][free ][bonds']The assessee [claimed ][that ][the ][aforesaid income ][is ][exempt] from tax in lieu of Section 1O(5) of the Act. An order ofassessment was passed by the Assessing Offlcer on28.O3.2OO2 try which the total income of the assessee wasassessed at Rs.7,44,42,610 l- as against the loss returnedin the revised return of Rs.2,13,12,326/-. The AssessingOfficer made, disallowance of Rs. I , 10,6g0 / - . The saiddisa-llowance was computed without taking into accountthe payment made to M/s.Tamil Nadu Newsprint andPapers Limited. Since the claim to deduct the amount incomputation of income was rejected entirely, the assesseefiled an appeal before the Commissioner of Income Tax(Appeals)-Il, Hyderabad (hereinafter referred to as, ,,theCIT (A)"). The claim with regard to disallowance madeunder Section 14A of the Act was not pressed by theassessee before the CIT (A). By an order dated 06. Il.2OO2,the CIT (A) partly allowed the appeal preferred by theassessee. The CIT (A) issued a notice on Ol.OS.2OO3 to theassessee seeking to rectify the order passed in appeal. Theassessee objected to the proposed rectification and filed astatement on I 9.08.2O03. 5. The CIT [(A), ][in ][an ][order ][passed ][under ][Section 154 ][of]theAct,d,ated'29.|2.2003,rejectedtheobjectionspreferredthe [assessee ][and ][directed ][the ][Assessing ][Offrcer ][to]by enhance [disallowance ][under ][Section ][14A ][of ][the Act'] 6. The [assessee ][thereupon ][filed ][an ][appeal ][i'e'']I.T.A.No.188 llydl2}Oa [before ][the ][Income ][Tax ][Appellate]Tribunal, [Bench ]['A', Hyderabad (hereinafter referred ][to ][as']"the Tribunal"). [The ][Tribunal' ][by an ][order ][dated]27 .O2.2OO7 [has dismissed ][the ][appeal' ][Hence' ][this ][appeal'] Learned [[counsel ][for ][the ][assessee ][submitted ]][[for ][the ][assessee ][submitted ]][[the ][assessee ][submitted ]][[assessee ][submitted ]][[submitted ]][[that ][the]][[the]] 7. Learned [[counsel ][for ][the ][assessee ][submitted ]][[for ][the ][assessee ][submitted ]][[the ][assessee ][submitted ]][[assessee ][submitted ]][[submitted ]][[that ][the]][[the]]issue with [regard to disallowance ][of ][amount under ][Section]14A of the [Act ][was ][highly ][debatable ][issue ][and ][therefore']the same [could ][not ][have been ][taken ][up ][in ][exercise ][of]under [Section ][154 ][of ][the ][Act' It is ][further]powers submitted [that ][an ][order ][of ][enhancement ][could ][not ][have]been [passed ][by the ] [(A) ][in ][the ][garb ][of ][an ][order ][of]rectification [under ][Section 154 ][of ][the ][Act' ][It ][is ][urged that]the issue [with ][regard ][to ][the ][disallowance ][under ][Section]l4AoftheActattainedfinalityonadjudicationofthe/Jappeal [by ][an ][order ][oated ][06 ][' ][1 ][| ]['2OO2 ][passed ][by the ] [(A) ]['] It is also contended that the length of show cause notice It is also contended that the length of show cause notice issued by the CIT (A) itself shows that the a_lleged mistakeis not a mistake apparent from the record. In support ofthe aforesaid submissions, reliance has been placed on thedecisions in T.S.Balaram, Income_Tax Oflicer, CompanyCircle fV, Bombay v. M/s. Volkart Brothers, Bombayl,MEPCO Industries Limited, Madurai v. Commissioner ofIncome Taxz, Maxopp Investment Ltd. v. Commissionerof Income Taxs and South Indian Bank Limited v.Commissioner of Income Taxa.is not a mistake apparent from the record. In support ofthe aforesaid submissions, reliance has been placed on thedecisions in T.S.Balaram, Income_Tax Oflicer, CompanyCircle fV, Bombay v. M/s. Volkart Brothers, Bombayl,MEPCO Industries Limited, Madurai v. Commissioner ofIncome Taxz, Maxopp Investment Ltd. v. Commissionerof Income Taxs and South Indian Bank Limited v.Commissioner of Income Taxa. B. On the other hand, the other hand, hand, learned counsel for the Revenuethe RevenueRevenuesubmitted that the assessee has accepted the disallowanceunder Section 14A of the Act and therefore it rvas not adebatable issue. It is contended that.the proviso to Sectionl4A(3) of thr: Act was incorporated with a ,/iew ro putquietus to completed assessment and the same does notapply to an ongoing assessment. It is submitted that theorders passed by the CIT (A) as well as the Tribunal have On the other hand, the other hand, hand, learned counsel for the Revenuethe RevenueRevenue I lq7tl82 tTR 50 ( s{t): ( tqT t) 2 scc 526'(20r0) | scc 4j4'G02I) ] l:llti t0 tt scc [52r ]I5-l[; ][t2ot8t 4o2nR ][640 ][(sc)]lq7tl82 tTR 50 ( s{t): ( tqT t) 2 scc 526'(20r0) | scc 4j4'G02I) ] l:llti t0 tt scc [52r ]I5-l[; ][t2ot8t 4o2nR ][640 ][(sc)] been passed [by ][assigning ][valid ][and ][cogent reasons ][and ][no]substantial [questions ][of ][lar'v ][arise for ][consideration'] We have considered [the ][submissions made ][on ][both] g. sides and [have ][perused ][the ][record' ][Before ][proceeding]further, it is [apposite ][to ][take note of the ][relevant ][statutory]which [are ][reproduced beiow ][for the facility ][of]provisions, reference. "154. [Rectification ][of mistake'] [(1) [With ][a ][view ][to ][rectifying ][any ][mistake ][apparent]from the [record an income-tax ][authority ][referred ][to ][in]section 116 [maY,-] (a) amend any [order ][passed ][by ][it ][under ][the provisions]of this Act;] [(b) [amend ][any ][intimation or ][deemed ][intimation ][under]sub-section [(1) ][of ][section ][143'l|] [{c) [amend ][any ][intimation under ][sub-section ][(1) ][of]section 20OA.l [(d) [amend ][any intimation under ][sub-section ][(1] ][of]section 206CBl [(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]conained [in ][any law ][for the ][time ][being ][tn]anything force, zrmend the order under that sub_section inrelation ro any matter other than the matter whichhas been so considered and decided.l (2) Subject to the other provisions of this section, theauthority concerned-authority concerned- (a) maly make an amendment under sub_section (i) of it.s own motion, and (b) shall make such amendment for rectifyrngany such mistake which has been brought to itsnotice by the assessee, and where the authorit5zconcerned is the t- " *] [Commissioner(Appeals)l by the [Assessing Oflicer] also. lt (3) An amendment, which has the effect of enhancingan assessment or reducing a refund or otherwiseincreasing the liability of the assessee, shall not bemade under this section unless the authorilymade under this section unless the authorilyconcerned has given notice to the assessee of i1.sintention so to do and has allowed the assessee areasonable opportunit5r of being heard.reasonable opportunit5r of being heard. (2) Subject to the other provisions of this section, theauthority concerned-authority concerned- (a) maly make an amendment under sub_section (i) of it.s own motion, and (b) shall make such amendment for rectifyrngany such mistake which has been brought to itsnotice by the assessee, and where the authorit5zconcerned is the t- " *] [Commissioner(Appeals)l by the [Assessing Oflicer] also. lt (3) An amendment, which has the effect of enhancingan assessment or reducing a refund or otherwiseincreasing the liability of the assessee, shall not bemade under this section unless the authorilymade under this section unless the authorilyconcerned has given notice to the assessee of i1.sintention so to do and has allowed the assessee areasonable opportunit5r of being heard.reasonable opportunit5r of being heard. (4) Where an amendment is made under this section,an order shall be passed in writing by the income_taxauthoriLy concerned.an order shall be passed in writing by the income_taxauthoriLy concerned. (5) Subject to the provisions of section 24 1, where anysuch amendment has the effect of reducing theassessmenl., the [Assessing Officer] shall make anvassessmenl., the [Assessing Officer] shall make anvrefund which may be due to such assessee. (6) Where any such amendment has the effect otenhancing the assessment or reducing a refund already made, the [Assessing Ofhcer] shall serve onthe assessee a notice of demand in the prescribedform specifying the sum payable, and such notice ofthe assessee a notice of demand in the prescribedform specifying the sum payable, and such notice ofdemand shall be deemed to be issued under section156 and the provisions of this Act shall applyaccordingly.applyaccordingly. (7) Save as otherwise provided in section 155 or sub_section (4) of section 186, no amendment under thissection shall be made after the expiry of four years[from [the ][end ]of the financial year in which the ordersought to be amended was passedl.section (4) of section 186, no amendment under thissection shall be made after the expiry of four years[from [the ][end ]of the financial year in which the ordersought to be amended was passedl. (8) Without prejudice to the provisions of sub_section(7), where an application for amendment under thissection is made by the assessee on or after the lst dayof June, 20O 1 to an income-tax authority referred to inof June, 20O 1 to an income-tax authority referred to insub-section (1), the authorit5r shall pass an order,within a period of six months from the end of thewithin a period of six months from the end of themonth in which the application is received by it,_ (a) making the amendment; or (b)refusing to allow the claim.l" [.] 10. After having noticed the relevarrt statutory provisions, we may advert to the facts of the case in hand. Theassessee had furnished three different calculations ofinterest to be disallowed under Section 14A of the Actbefore the Assessment Officer depending upon thetaxability of interest and financial chq{ggs paid to the (a) making the amendment; or (b)refusing to allow the claim.l" [.] 10. After having noticed the relevarrt statutory provisions, we may advert to the facts of the case in hand. Theassessee had furnished three different calculations ofinterest to be disallowed under Section 14A of the Actbefore the Assessment Officer depending upon thetaxability of interest and financial chq{ggs paid to the M/s.Tamil Nadu Newsprint and papers Limited of anamount of Rs.9,35,33,906/_ through letter dated2l .O3.2OO2. The Assessing Officer has disa_llowed anamount of Rs.i,L0,680/- under.section 14A of the Actaccepting the third alternative calculation method, by itsorder dated '.28.O3.2OO2. Aggrieved by the same, theassessee liled appeal belore the appellate authoritl. aldduring the course of appeal, the assessee has not pressedthe ground of disallowance made by the Assessing Officeraled the appellate authority passed order on 06.ll.2OO2 inLT.A.No.33/CIT(A)-ill02-03. Therea_fter, the appellateauthority while exercising the powers conferred underSection 154 of the Act, issued notice on O1.OS.2OO3 to theassessee. Pursuant to the said notice, the assessee filedstatement on 19.O8.2003 objecting the proposedrectification. The appellate authority after considering thesaid objections, and after perusal of the records partlyallowed the appeal, by its order dated 29.12.2003.Questioning the said order, the assessee filed appea) uid.eLT.A.No. 188/H''rd/2004 and the same was dismisseci on27.O2.2007. 11. It is relevant [to ][place ][on ][record ][that ][the ][appellate]Tribunal aJter [considering the contentions ][of ][the ][respective]parties and evidence [on ][record ][specifically ][held ][the]appellate authority [while ][discharging ][his ][quasi ][judicial]functions rightly [passed ][the ][order ][basing ][upon ][the]calculations made [by the ][assessee ][holding ][that]disallowalce under [Section 14A ][of ][the ][Act ][is ][limited ][to]- [and the ][same ][cannot be treated as ][an]Rs.2,77,80,538/ enhalcement [of ][assessment ][and ][further ][held ][that ][neither]assessee nor [Assessing ][Officer ][have ][mentioned particular]without [linking the ][same ][to ][the ][allowance ][of ][the]figure interest paid and [when ][the ][allowances ][of interest has ][not]reached linality, [it ][cannot ][be ][said ][that ][quantum ][of]disallowanceunderSectionl4Ahaslinallybearrivedatand also held that [the ][first ][appellate ][authority ][has omitted]to consider [the ][aspect ][of ][amount ][disallowable ][under]Sectionl4A [of ][the Act and the ][said ][mistake ][was ][rectified ][by]the Commissioner [in ][the ][appeal ][while ][exercising the ][power]conferred under [Section 154 ][of the Act and the ][same ][is]permissible. 12. In South Indian Bank Limited (supra) by relying thejudgment of Maxopp Investment Ltd (supra), the Hon,bleSupreme Court held that the purpose behind Section 14Aof the Act, bv not permitting deduction of the expenditureincurred in relation to income, which does not form part oftotal income, is to ensure that the assessee does not getdouble benefit. Once a particular income itself is not to beincluded in the total income and is exempted from tax,there is no reasonable basis for giving benefit of deductionof the expenditure incurred in earning such as income. 13. In T.S.Balaram (supra) and MEPCO tndustriesLimited (supra) , the Hon,ble Supreme Court held that amistake appar.ent on the record must be an obvious andpatent mistake and not something which czut beestablished by a long drawn process of reasoning on pointson which there may be conceivably two opinions. Adecision on a debatable point of law is not .,mistakeapparent from the record". 14. The above said judgments are not applicable to thefacts and circumstances of the case on the ground that the 13. In T.S.Balaram (supra) and MEPCO tndustriesLimited (supra) , the Hon,ble Supreme Court held that amistake appar.ent on the record must be an obvious andpatent mistake and not something which czut beestablished by a long drawn process of reasoning on pointson which there may be conceivably two opinions. Adecision on a debatable point of law is not .,mistakeapparent from the record". 14. The above said judgments are not applicable to thefacts and circumstances of the case on the ground that the assessee had [filed ][three calculations of ][the ][interest ][to ][be]allowed under [Section ][14A ][of ][the Act ][before ][the ][Assessing]Officer to determine [the ][total ][income ][ald ][allowance ][of]interest [paid ]to [the M/s.Tamil ][Nadu Newsprint ][and ][Papers]Limited. Hence, the [contention of the ][learned counsel ][for]that [the ][provisions ][of ][Section ][l4A ][of ][the ][Act]the appellant is not applicable [to the ][assessee ][is not ][tenable ][under ][law']the [appellate ][authority ][passed ][order ][dated]especially 2g.12.2OO3 rectifying [the ][disallowance ][amount ][under]Section 14A of [the ][Act basing ][upon ][the ][ca-lculations ][made]by the assessee [and ][the ][sarne ][cannot ][be ][treated ][as]enhancement [of ][assessment.] 15. It is pertinent [to mention ][here ][that the ][assessee ][itself]had accepted [the ][disallowance ][under ][Section ][14A ][of ][the]Act and therefore [it ][was ][not ][debatable ][issue' ][The ][appellate]authority after [foltowing ][the due ][procedure ][as]contemplated [under ][the ][law ][including ][the ][issuance ][of]notice and after [considering ][the ][objections ][of the ][parties]rectified the error [and made ][disa]lowance ][of]- [and ][the ][same ][is ][within ][the purview ][of ][the]Rs.2,77,80,5 [281 ] ) ... :t rtm. .[,il.it*i,.] ry/ l3 provrsions of the Act. Hence, substantia-l questions of laware answered. against the assessee.are answered. against the assessee. 76. In view of the preceding analysis, we do not find anymerit in this lncome Tax Tribunal AppeaJ. Accordingly, thesame fails and is hereby dismissed. Miscella.neous applications pending, if any, shallstald closed.stald closed. Sd/- K, SRINIVASA RAOJOrNT REGTSTRAR //TRUE COPY/i 9'SECTION OFFICER To1.The lncome Tax Appellate Tribunal, Hyderabad Bench "A" Hyderabad2The Commissioner of lncome Tax (Appeals) -ll , Hyderabad4.JThe One CC Asst. Commissioner of lncome to SRI. C. P. RAMASWAIvII, Tax Advocate , Crrcle 1 (3), Hyderabad One CC to SRI .1. V. PRASAD (Sr SC FOR INCOI/E TAX), AdvocateloPUCl6Two CD Copies kul/DL ! HIGH COURT DATED:2811112024 JUDGMENTITTA.No.228 ot 2007 DISMISSING TIIE I1'TA 01\I 1t\Y(rI)\'24o? B 0Ei [2[]1l[t]DEjilai r;lri