We Have Heard The Arguments Of Sri.a.shankar v. Volkart Brothersand Others Reported In 1971 (82) Itr 50 Co

1 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 3 DAY OF JULY, 2015) PRESENT| THE HON'BLE MR. JUSTICE VINBBT SARAN ANT) THR HON’BLE MR. JUSTICE ARAVIND KUMAR ITA NO.416/2009 BETWEEN; K.S.VBNKATKSHNO.29, WEST PARK ROADMALLBKBSWARABBNGALURU-560 010 APPELLANT (BY SRI.A.SHANKAR & SRI.M.LAVA, ADVOCATES) AND: THER DBRPUTY COMMISSIONEROF INCOME TAXCENTRAL CIRCLE-1(3), —CHNTRAL REVBNUBK BUILDINGSQUEENS ROAD,BBENGALURU-5b6000 1 RESPONDENT. (BY SRI.K.V.ARAVIND, ADVOCATE)| ‘THIS ITA IS FILED UNDER SECTION 260-A OF]INCOME TAX ACT, 1961 ARISING OUT OF ORDER.DATED 09-04-2009 PASSED IN ITA NO.60/BNG/2009,| 2 FOR THE ASSESSMENT YEAR 2004-05, PRAYING THAT|THIS HON'BLE COURT MAY BERK PLKASKD TO I FORMULATE THE SUBSTANTIAL QUESTIONS OF)LAW STATED THEREIN, Il ALLOW THR APPKAL AND SET ASIDE THR ORDER|PASSBHDBY.THKITATBANGALOREBENCH,BANGALORE IN ITA NO.60/BANG/2009,DATED 09-04-2009, IN THE INTEREST OF JUSTICE AND EQUITY. THIS APPEAL COMING ON FOR FINAL HEARING,THIS DAY,ARAVIND KUMAR J.,DELIVERBD THR.FOLLOWING:| JUDGMENT Assessee is in appeal questioning the correctness ofthe order passed by Income Tax Appellate Tribunal| (ITAT), Bangalore Bench in ITA No.60/BANG/2009. 2. Facts in brief which has led to the filing of thisappeal are as under: Return of income came to be filed for the|assessment.YCal2004-05claiming|aloss ot|424,23,/60/- and the jurisdictional Assessing Officer)after issuing notice under section 143(2) of the Income. oO Tax Act (for short“Act?) framed the assessment orderunder section 143(3) of theAct on 30.11.2006|whereunder the carried forward loss of424,23,/60/-came to be accepted by the Assessing Officer and was|allowed to be set off against total income of the assesseecomprising “Income from Other Sources”, “Income fromHouseProperty~apart|from“DUSINESSincome”subsequently by issuance of notice under section 104|the said order of assessment was sought to be rectified towhich the assessee filed his objections contending that.the issue involves long drawn process of reasoning and|as such assessment order cannot be rectified under.section 154. However, it was noticed by the authority —that assessee had himself shown interest income earned.from the Banks, NSCs and Fixed Deposits had beenindicated as “Income from Other Sources” in the return.of income and as such it came to be held that it is an.error apparent on the face of the record and as suchorder passed by the Assessing Officer dated 30.11.2006|came to be rectified and the business loss as determined| 4 for the assessment year 2003-04 at=21,43,917/- wasbrought forward to the assessment year 2004-05 andwas allowed to be set off only against business income of,46,23,596/- for the current year as per provisions ofsection 72 of the Act. Being aggrieved by the said order|assessee filed an appeal before ClT(Appeals) who byorder dated 24.11.2008 dismissed the appeal andaffirmed the order passed by the jurisdictional AssessingOfficer. Assessee carried the matter further in appeal|before the Tribunal in ITA No.60/BANG/2009 and the}appellate Tribunal after considering the rival contentionsheld that one cannot change the “head” in proceedings|under section 154 and therefore Assessing Officer couldnot have changed the head from “income from other|sources” as claimed by assessee to that of “income frombusiness” and could not have allowed to set off against|the carry forward business. As such the Tribunal|dismissed the appeal filed by the Assessee by order dated09.04.2009 and confirmed the orders passed by the|authorities. Hence, this appeal by the assessee which 5 has been admitted by order dated 19.12.2009 to.consider the following substantial questions of law: (y“Whether the Tribunal was justified in law in|holding that the provisions of section 154 ofthe Act are applicable to the facts andcircumstances of the case?|holding that the provisions of section 154 ofthe Act are applicable to the facts andcircumstances of the case?| 5 has been admitted by order dated 19.12.2009 to.consider the following substantial questions of law: (y“Whether the Tribunal was justified in law in|holding that the provisions of section 154 ofthe Act are applicable to the facts andcircumstances of the case?|holding that the provisions of section 154 ofthe Act are applicable to the facts andcircumstances of the case?| (it)Whether the Tribunal erred in law in holding|that the appellant was not entitled to set offof the carry forward business loss on the|facts of the appellant’s caseP”|that the appellant was not entitled to set offof the carry forward business loss on the|facts of the appellant’s caseP”| 4. We have heard the arguments of Sri.A.Shankar, learned counsel appearing for appellant-assessee and_ori.K.V.Aravind, learned counsel appearing for the.respondent-revenue. 6 >. It is the contention of Sri.A.Shankar, learnedcounsel appearing for the assessee that jurisdictionalAssessing Officer could not have invoked section 154 ofthe Act since there was no error apparent on the record.of the assessment order dated 30.11.2006 and if two (2),views are possible and one view has been adopted by theAssessing Officer, rectification proceedings cannot be|initiated to take a different view and as such relies onthe decision of Apex Court in T.S.Balaram, Income Tax)Officer, Company Circle IV, Bombay Vs Volkart Brothersand others reported in 1971 (82) ITR 50 contending it is.squarely applicable to the facts on hand whereunder it)has been held if issue involves long drawn process Ofreasoning same cannot be construed as ground to hold)there 1S error apparent on the face of the record for being|rectified under section 154 of the Act. He has also|contended that the word “head” found in sub-section (1).of Section 72 preceding the words “profits and gains ofbusiness or profession” is conspicuously absent in sub-clause (i) of section 72 and as such there is no. 7 impediment on the part of the assessee to seek for set off,of the business loss for the assessment year in question|against “profits and gains” and such business loss|cannot be restricted to business profits only. Hence, he.would pray for order of the authorities being set aside byanswering substantial questions of law in favour otfassessee. In support of his submission he has relied|upon the following Judgments: 1.(1971) 82 ITR 9O —- T.S.Balaram, Income TaxOfficer, Company Circle IV, Bombay Vs VolkartBrothers and othersOfficer, Company Circle IV, Bombay Vs VolkartBrothers and others oO(2012)210TAXMANQO(Delhi)LavishApartment (P) Ltd., Vs Assistant Commissionerot Income TaxApartment (P) Ltd., Vs Assistant Commissionerot Income Tax Cn(2003) 259 ITR 26 (Madras) — Commissioner ofIncome tax Vs Ramnath GoenkaIncome tax Vs Ramnath Goenka 4 Unreported Judgment of this court rendered on 09.06.2015)1nITA|No.432/2009The|Commissioner ot [ncome Jax and anr Vs_M/s.Crane Software International Ltd.09.06.2015)1nITA|No.432/2009The|Commissioner ot [ncome Jax and anr Vs_M/s.Crane Software International Ltd. 8 6. Per contra, Sri.K.V.Aravind, learned counselappearing for respondent-revenue would support the.orders passed by the authorities and contend that when|the assessee himself had declared in his return otincome filed for the assessment year 2004-05 that the.income earned was from “other sources” Assessing|Officer had committed an error in giving a set off towardsloss in respect of the income earned from business and|this being an error apparent on the face of the record.and Assessing officer having no jurisdiction to change.the head of income had committed an error in doing so in the assessment order dated 30.11.2006 and as such|rectificationproceedingWa Sinitiated againsttheassessee by issuance of notice under section 154 and as.such it cannot be faulted with. Hence, he prays for|answering the substantial questions of law against the,assessee and in favour of the revenue and prays for.dismissal of the appeal. In support of his submissions|he has relied upon the following Judgments: 9 9 1. (1997) 93 TAXMAN 502 —- Tuticorin AlkaliChemicalsandFertilizersLtd.,VsCommissioner of Income Tax. 2. (2003) 128 TAXMAN OO11 — Commissioner|of Income Tax Vs Menon Impex (P) Ltd. /. Atter having heard the learned Advocatesappearing for the parties and on perusal of the case|papers we find from the records that undisputedly the.assessment order which came to be passed on|30.11.2006 for the assessment year 2004-05 was under)section 143(3) whereunder the assessee had claimed“income from other sources” at=20,41,899/- and had|also sought for business loss to the tune of|424,23,/60/- being set off against total income of=27,07,925/- whichcomprised “Income from Other Sources”, “Income from)House Property” apart trom “Income trom Business”.This came to be accepted by the Assessing Officer and)accordingly assessment order came to be framed on|30.11.2006. It is also not in dispute that assessee is. carrying on the business of money lending and had.deposited money in Fixed Deposits, NSCs, Banks and.had earned interest and in the return of income filed hadshown the interest income earned under the head§“Income from other sources”. As to whether the interest|earned on the Fixed Deposits, NSCs is an income which|can be set off under section 7/72 would arise foexamination by us while answering substantial question|of law No.2 formulated above only in the event of this.court arriving at a conclusion that substantial question|of law No.1 is to be answered in the affirmative. As suchat this juncture without examining said issue we are.examining substantial question of law No.1. RE: SUBSTANTIAL QUESTION OF LAW NO.1: 8. A bare reading of section 154 of the Act wouldclearlyindicatethatAssessingOfficerwouldbe|empowered to invoke section 154 namely amend any'order passed by it under the provisions of the Act,amend with intimation or deemed intimation under sub- section(1) of Section 143 or on intimation under sub-section(1)ot|section 2OQOOas|indicated undersection 1(a)(2) to (8) of Section 154 in order to rectify anymistake apparent from the record. Thus, keeping in)mind this tenor of the language used in section 194, the,facts on hand are required to be examined. 9. In the instant case the rectification proceeding|was invoked by the jurisdictional Assessing officer on thesround that for the assessment year 2004-05 the carriedforward business loss to the tune otf=24,23,/600/- hadbeen allowed to be set off against “Income from Other|sources” and “Income from House Property” sameshould have been restricted to be set off only against“Business Income” as stipulated under section 72 of theAct on the ground that assessee himself had declared theinterest earned from Banks, NSCs and Fixed Deposits as“Income from Other Sources” in his return of income. As.to whether this set off which has been claimed by the|assessee is to be construed as one falling within four| corners of Section 72 of the Act itself would be asdebatable point and as such if the issue involves.examination in detail, we are of the considered view that.the Assessing Officer could not have resorted to invoking section 154 of the Act so as to bring within the sweep of)“error apparent on the face of the record”. The Hon’ble|Apex Court in 17.8.Balaram Vs Volkart Brothers andothers reported in 1971 (82) ITR 50 has observed that a.mistake apparent on the record must be obvious and)patent mistake and not something which is established|by long drawn process of reasoning. It has been held by|the Hon’ble Apex Court in the said case as under: “From what has been said above, it is clearthat the question whether section 17(1) of theIndian Income-tax Act, 1922, was applicableto the case of the first respondent is not freefrom doubt. Therefore, the Income-tax Officerwas not justified in thinking that on thatquestion there can be no two opinions. It was 13| “From what has been said above, it is clearthat the question whether section 17(1) of theIndian Income-tax Act, 1922, was applicableto the case of the first respondent is not freefrom doubt. Therefore, the Income-tax Officerwas not justified in thinking that on thatquestion there can be no two opinions. It was 13| not open to the Income-tax Officer to go into thetrue scope of the relevant provisions of the Actin a proceeding under section 154 of theIncome-tax Act, 1961. A mistake apparent onthe record must be an obvious and patentmistake and not something which can beestablished by a long drawn process ofreasoning on points on which there mayconceivably be two opinions. As seen earlier,the High Court of Bombay opined that theoriginal assessments were in accordance withlaw though in our opinion the High Court wasnot justified in going into that question. InsatyanarayanLaxminarayanHegdeVs.Mallikarjun Bhavanappa Tirumale, this courtwhile spelling out the scope of the power of aHighCourt|underArticle|296.oftheConstitution ruled that an error which has tobe established by a long drawn process ofreasoningOTLpointswhere.there conceivably be two opinions cannot be said tobe an error apparent on the face of the record. ©A decision on a debatable point of law is not amistake apparent from the record —- seeSidhramappaAndannappaManvt1Vs.Commissioner of Income tax. The power of theofficers mentioned in section 154 of the IncomeTax Act, 1961, to correct “any mistakeapparent from the record” is undoubtedly notmore than that of the High Court to entertain awrit petition on the basis of an “error apparenton the face of the record”. | 10. Thus, keeping in mind the dicta laid down in)the above referred case when the facts on hand areperused yet again, we are left with irresistible conclusion that in the instant case the Assessing Officer sought to.rectify the original assessment order on the ground that|carried forward business loss was to the tune otf=24,23,/60/- and same had been set olf against the total income which was inclusive of the income earned by the.assessee under the head “Income from Other Sources”|and “Income from House Property” as declared by him inthe return of income and carried forward loss could havebeen set off against “Business Income” only. As already.observed by us herein above the issue as to whether thesaid income earned by way of interest on Fixed Deposits,NSCs, would be available to the assessee to seek for set.otf as business loss or not under section 72 of the Act is|qa debatable issue and as such we are oft the considereview that said issue could not have been gone into in a|proceeding under section 154 of the Act. The “broughtforward loss’ came to be set-off against the total incomeearned by the assessee as per the assessment order.dated 30.11.2006. As to whether income earned by way|of interest would form part of total income so as to allow,the assessee to seek set-off is an issue which will have tobe gone into in detail and mere declaration in the return|of income by assessee would not alter its status and as.such it cannot be held that an error had occurred in the assessment order so as to enable the Assessing Officer to.invoke section 154 of the Act for rectification. In that|view of the matter we are of the view that substantial|question of law No.1 formulated herein above is required to be answered in the negative i.e., in favour of assesseeand against the revenue. 11. Since we have answered substantial question|of law No.1 in the negative i.e., in favour of assessee.examining second substantial question of law which|relates to the merits of the claim does not arise.Accordingly we proceed to pass the following: ORDER 1.ITA 416/2009 is hereby allowed. ?)Order|dated09.04.2009passedin.TTA| No.60/Bang/2009 by IITAT, Bangalore Bench,Bangalore, Order dated 24.11.2008 passed in ITANo.42/DCIT CC 1(3)/Biore/CIT(A)-VI/2007-03 andOrder|dated14.12.2007|passedbyDeputy 17| Commissioner ot Income.Tax,Circle| -1(3), Bangalorein.No.DCIT.CC-1(3) /2007 11. Since we have answered substantial question|of law No.1 in the negative i.e., in favour of assessee.examining second substantial question of law which|relates to the merits of the claim does not arise.Accordingly we proceed to pass the following: ORDER 1.ITA 416/2009 is hereby allowed. ?)Order|dated09.04.2009passedin.TTA| No.60/Bang/2009 by IITAT, Bangalore Bench,Bangalore, Order dated 24.11.2008 passed in ITANo.42/DCIT CC 1(3)/Biore/CIT(A)-VI/2007-03 andOrder|dated14.12.2007|passedbyDeputy 17| Commissioner ot Income.Tax,Circle| -1(3), Bangalorein.No.DCIT.CC-1(3) /2007 2008/154/Venkatesh are hereby set aside byanswering the substantial question of law No.1 in favour oft the assessee. 3,Costs made easy. Sd/-.JUDGE Sd/- JUDGE SBN