The Lakshmi Mills Co. Ltd v. The Assistant Commissioner Of Income Tax,Company Circle-Iv(1),Coimbatore

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE R.MAHADEVANand THE HONOURABLE MR.JUSTICE MOHAMMED SHAFFIQ T.C.A. No.746 of 2009 The Lakshmi Mills Co. Ltd.,#1100, Avanashi Road,Pappanaickenpalayam,Coimbatore-641 037. ... Appellant Vs. The Assistant Commissioner of Income Tax,Company Circle-IV(1),Coimbatore.... Respondent PRAYER: Appeal under Section 260A of the Income Tax Act, 1961against the order dated 13.02.2009 made in ITA.No.2036(Mds)/2007on the file of the Income Tax Appellate Tribunal, Chennai 'A'Bench for the assessment year 2001-02 preferred against theorder of the Commissioner of Income Tax (Appeals)-I, Coimbatore,order dated 06.06.2007 made in Appeal No.307/06-07 against theorder of the Assistant Commissioner of Income Tax, CompanyCircle IV(I) Coimbatore, order dated 28.03.2006 made in PAN/GIRNo. for the Assessment Year 2001-02. JUDGMENT MOHAMMED SHAFFIQ, J. This is an assessee's appeal. The challenge made herein isto the order dated 13.02.2009 passed by the Income Tax AppellateTribunal, Chennai 'A' Bench, in ITA No.2036(Mds)/2007,pertaining to the assessment year 2001-02. 2.On 14.09.2009, the aforesaid appeal was admitted on thefollowing substantial questions of law: A. Whether on the facts and in the circumstances ofthe case the Income Tax Appellate Tribunal was right inlaw in upholding the jurisdiction of the assessingofficer u/s 154 to adjust the unabsorbed depreciationloss of earlier assessment years against the currentyear's business income, while computing deduction u/s80HHC?. B. Whether on the facts and in the circumstancesof the case the Income Tax Appellate Tribunal wasright in not holding that the issue of setting offbrought forward unabsorbed depreciation of earlieryears against the current year's business income wasa debatable issue and therefore there was no apparentmistake for the assessing officer to exercise thejurisdiction u/s 154 of Income Tax Act, 1961? 3.The appellant is engaged in the business of manufactureand sale of cotton yarn, cotton fabrics and staple fibre yarn.For the assessment year 2001-02, they had filed its returnadmitting a total income of Rs.3,98,17,147/-, which wasprocessed u/s 143(1) of the Income Tax Act, 1961 on 29.10.2001.Subsequently, the appellant filed a revised return admitting netadjusted income of Rs,3,82,35,240/- on 24.06.2002, which wasprocessed under section 143(1) on 29.10.2002. After scrutiny ofthe same, the assessment under section 143(3) was completed on30.03.2004, determining the total income at Rs.4,69,55,518/-.The said assessment was reopened according to the AppellateAuthority's order, at the instance of the assessee and thereassessment order was passed on 28.03.2006 under section 143(3)r/w section 147 of the Income Tax Act, 1961, determining thebusiness income at Rs.4,42,39,895/-, after adjusting unabsorbeddepreciation of the Assessment Years 1999-2000 and 2000-01totalling to Rs.1,57,77,978/-. 4.While so, pointing out that while calculating 80 HHCdeduction, the adjusted business profits was taken atRs.6,00,17,873/- instead of Rs.4,42,39,895/- by mistake and80HHC deduction was allowed excessively, notice under section154 was issued, as the mistake being apparent on the face ofrecord. The appellant filed its objection on 11.12.2006.Rejecting the said objection, the assessing officer held thatthe order dated 28.03.2006 suffers from error apparent on theface of record inasmuch as it was contrary to the decision ofthe Hon'ble Supreme Court in IPCA Laboratories Ltd. v. DeputyCommissioner of Income Tax, 266 ITR 521, in which, it was heldthat “section 80AB would override all other provisions inChapter VI A” and accordingly, revised the assessment. 5.Aggrieved by the rectification of assessment on 5.Aggrieved by the rectification of assessment on 15.12.2006, the appellant preferred an appeal before theCommissioner of Income Tax (Appeals)-1, Coimbatore, whoreferring to the decision of the Hon'ble Supreme Court in IPCALaboratories Ltd (supra), found that the overriding effect ofsection 80AB in the computation of total income over all othersections in Chapter VIA, was a settled issue and thus, held thatthe revision order under section 154 was legal and justified. 6.Being dissatisfied with the order passed by the AppellateAuthority, the appellant carried the matter by way of an appealbefore the Income Tax Appellate Tribunal. After analysing theentire materials and legal position, the Tribunal affirmed theorder of the First Appellate Authority, after having held thatthe exercise of jurisdiction under section 154 was valid andjustifiable. The findings of the Tribunal may be relevant andare extracted hereunder: “It is clear that the decision of the Hon'bleSupreme court in the case of IPCA Laboratory citedsupra, was rendered on 11.03.2004, which was availablebefore the completion of the assessment under section143(3), which was completed on 28.03.2006, wherein thebusiness income was determined at Rs.4,42,39,895/-.Further it seems to be a simple case of arithmeticmistake because in the assessment the business profitwas determined at Rs.4,42,39,895/- and thereforededuction had to be given accordingly in view of thedecision of the Hon'ble Supreme Court in the case ofIPCA Laboratory Ltd., wherein it was clearly held thatsection 80AB will override the provisions of section80HHC. In view of this we find nothing wrong in theorder of the Commissioner(Appeals) upholding therectification order passed by the Assessing Officer.”Therefore, the assessee is before this court with the presentappeal, suggesting the substantial questions of law, as statedsupra. 7.Though the learned counsel for the appellant would agreethat the issue, as to whether it is permissible to adjustunabsorbed depreciation loss of the earlier assessment year,while computing deduction under section 80HHC, stands decidedagainst the appellant/assessee, he attempted to suggest that thesaid issue was debatable, when the assessing officer sought toinvoke his power under section 154 of the Income Tax Act, 1961,on the premise that the said issue was finally resolved infavour of the Revenue by the Hon'ble Supreme Court only on17.05.2007, in the case of Commissioner of Income Tax v. ShirkeConstruction Equipment Ltd, [2007] 291 ITR 380 (SC), in which,the decision rendered on 24.07.2000 by the Bombay High Court, inthe case of Commissioner of Income Tax v. Shirke ConstructionEquipment Ltd, [2000] 246 ITR 429 (Bombay), was reversed. 8.We find that the Hon'ble Supreme Court in the decision inIPCA Laboratories Ltd (supra) had already overruled the decisionof the Bombay High Court in the case of Commissioner of IncomeTax v. Shirke Constructions Equipments Ltd (supra). Importantly,it is to be noted that the said decision in IPCA LaboratoriesLtd. (supra) was delivered on 11.03.2004 much prior to the orderof assessment dated 28.03.2006. Thus, we are of the view thatthe submission of the learned counsel for the appellant that theissue was debatable, when the assessing officer invoked section154, lacks merit. 9.It is trite law that an order contrary to law declared bythe Hon'ble Supreme Court, would constitute an error apparent onthe face of record. Therefore, the order passed by theassessing officer exercising his jurisdiction conferred undersection 154 of the Income Tax Act, 1961, as affirmed by theAppellate Authority as well as the Appellate Tribunal, warrantsno interference at the hands of this court. 10. Accordingly, the appeal filed by the assessee standsdismissed, answering the substantial questions of law, in favourof the Revenue. No costs. Sd/-Assistant Registrar //True copy// Sub Assistant Registrar To 9.It is trite law that an order contrary to law declared bythe Hon'ble Supreme Court, would constitute an error apparent onthe face of record. Therefore, the order passed by theassessing officer exercising his jurisdiction conferred undersection 154 of the Income Tax Act, 1961, as affirmed by theAppellate Authority as well as the Appellate Tribunal, warrantsno interference at the hands of this court. 10. Accordingly, the appeal filed by the assessee standsdismissed, answering the substantial questions of law, in favourof the Revenue. No costs. Sd/-Assistant Registrar //True copy// Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal, 'A' Bench, Chennai. 2.Commissioner of Income Tax (Appeals)-I, Coimbatore. 3.The Assistant Commissioner of Income Tax, Company Circle-IV(1), Coimbatore. +1cc to Mr.M.Swaminathan, Advocate SR.No.3272 +1cc to Mr.M.P.Sethilkumar, Advocate SR.No.2853 CP(CO)GMY(03/02/2022) T.C.A. No.746 of 2009