Wp/11383/2001 Of Tci Industries Ltd. (Formerly) v. Commissioner Of Income Tax

*THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYAND *THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM+W.P.No.11383 of 2001 % Dated 09.07.2014 TCI Industries Ltd. ….Petitioner $ Commissioner of Income Tax and another. ….Respondents ! Counsel for the petitioner : Sri Y.Ratnakar ^ Counsel for respondents : Sri J.V.Prasad < GIST: > HEAD NOTE: ? Cases referred: THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYAND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAMW.P.No.11383 of 2001 ORDER: (Per LNR,J) This writ petition is filed with a prayer to quash the orderdated 26.05.1999 passed by the 2[nd] respondent in exercise ofpower under Section 154 of the Income Tax Act (for short ‘theAct’) as well as the order, dated 21.08.2000 passed by the 1[st]respondent in a revision filed under Section 264 of the Act. Thebrief facts are as under: The petitioner is an assessee under the Act. For theassessment year 1996-97, it filed returns furnishing thenecessary particulars of income, expenditure, deductions etc. The assessing officer, 2[nd] respondent herein gave an intimationdated 11.03.1997 under Section 143(1)(a) of the Act declaringthe income of Rs.3,18,81,420/-, making provisional adjustments. The petitioner realised that instead of claiming depreciation ofabout Rs.10,38,90,681/-, it claimed the depreciation of onlyRs.5,83,52,311/-. Therefore, it filed an application under Section154 of the Act, before the 2[nd] respondent for rectification. Theapplication was entertained and after verification, the 2[nd]respondent allowed the depreciation to the extent ofRs.10,38,90,681/-. Since that resulted in the refund ofRs.1,98,93,254/-, the same was directed. A sum ofRs.58,90,495/- was directed to be paid as interest under Section244-A of the Act. This was followed by an order of assessment,dated 15.03.1999 by the 2[nd] respondent. Two months thereafter,the 2[nd] respondent passed the impugned order in exercise ofpower under Section 154 of the Act, taking the view that theinterest under Section 244-A was wrongly allowed from 1996,though it was payable only from the date on which an applicationfor rectification was filed under Section 154. He accordinglyrecomputed the refundable amount and it was shown atRs.1,69,99,893/-. Aggrieved by this order, the petitioner filed arevision under Section 264 of the Act before the 1[st] respondent. The revision was rejected through order, dated 21.08.2000. Sri Y.Ratnakar, learned counsel for the petitioner submitsthat the 2[nd] respondent was entitled to invoke his jurisdictionunder the provisions of the Act, if only there existed any errorapparent on the face of the record and that it was not evenalleged that such an error exists in any orders passed by himearlier. He further submits that through the impugned order, the2[nd] respondent sought to rectify the order, dated 15.03.1999passed by him and the crucial proceedings viz., assessmentorder passed under Section 143(3) of the Act remained untouched. He contends that the impugned order was passedwithout furnishing any notice much less conducting any enquiry. It is also pleaded that in the revision filed under Section 264 ofthe Act, the 1[st] respondent did not address procedural lapses,but has chosen to decide the matter on merits. untouched. He contends that the impugned order was passedwithout furnishing any notice much less conducting any enquiry. It is also pleaded that in the revision filed under Section 264 ofthe Act, the 1[st] respondent did not address procedural lapses,but has chosen to decide the matter on merits. Sri J.V.Prasad, learned Standing Counsel for the IncomeTax Department, on the other hand submits that the first order ofrectification in exercise of power under Section 154 of the Actwas passed on 15.03.1999 at the instance of the petitioner andan error crept into it in the context of awarding interest. Hesubmits that the component of interest is referable to the allowingof depreciation to the extent of about Rs.4,55,00,000/- and sincethat claim was made for the first time on 29.04.1998, interest waspayable only from that date. He contends that the order ofassessment passed under Section 143(3) of the Act was entirelybased upon the order, dated 15.03.1999 passed in exercise ofpower under Section 154 of the Act and once the latter wasfound to be defective, the effect thereof must naturally bereflected in the order. He pleaded that no defect has crept intothe orders and the writ petition is liable to be dismissed. In its declaration, the petitioner claimed depreciation ofRs.5,83,52,311/-. That, as well as some other claims wereallowed by the 2[nd] respondent through the intimation dated11.03.1997 under Section 143(1)(a) of the Act. It is thereafter,that the petitioner realised that depreciation of aboutRs.4,55,00,000/- ought to have been claimed. Stating thereasons resulted in such a lapse, it filed an application before the2[nd] respondent for rectification under Section 154 of the Act. The claim was found to be acceptable and an order was passedon 15.03.1999. One of the amounts that was held to berefundable to the petitioner, is Rs.58,90,495/-, towards interest.That figure represented the interest calculated from 1996. In theorder of assessment passed under Section 143(3) of the Act,extensive reference was made to the order, dated 15.03.1999. Itis two months thereafter that the 2[nd] respondent took the viewthat the interest was payable to the petitioner only from 29.04.1998, when he claimed depreciation of a further sum ofRs.4,55,00,000/-. A perusal of the order dated 26.05.1999 discloses that the2[nd] respondent did not put the petitioner on notice before takingsuch a view. Another aspect is that he rectified the order, dated15.03.1999 in exercise of power under Section 154 of the Act. He did not make any attempt to undertake the correspondingrectification in the order of assessment, dated 15.03.1999. The2[nd] respondent seems to have felt that once the order dated15.03.1999 is rectified, the effect thereof would automatically fallupon the order of assessment. The 1[st] respondent dismissedthe revision before him. The ultimate controversy is as towhether the petitioner is entitled to be paid interest under Section244-A of the Act vis-a-vis the amount of Rs.4,55,38,370/- fromthe date on which the application in respect of that amount wasmade or any date anterior to that. Admittedly, the figure Rs.58,90,495/- was arrived at, bycalculating the interest from the relevant date in the assessmentyear, which is referable to 1996. Once the 2[nd] respondentallowed the interest from that date, valuable rights accrued to thepetitioner. In case, the 2[nd] respondent wanted to take anydifferent view, in exercise of power under Section 154 of the Act,he ought to have issued a notice to the petitioner. Admittedly, nosuch notice was issued. Though this ground was not specificallypleaded, we cannot ignore such a serious lapse, which crept intothe proceedings. We are of the view that the exercise can beredone by the 2[nd] respondent after issuing notice, only on thelimited aspect of the interest, payable under Section 244-A of theAct. Admittedly, the figure Rs.58,90,495/- was arrived at, bycalculating the interest from the relevant date in the assessmentyear, which is referable to 1996. Once the 2[nd] respondentallowed the interest from that date, valuable rights accrued to thepetitioner. In case, the 2[nd] respondent wanted to take anydifferent view, in exercise of power under Section 154 of the Act,he ought to have issued a notice to the petitioner. Admittedly, nosuch notice was issued. Though this ground was not specificallypleaded, we cannot ignore such a serious lapse, which crept intothe proceedings. We are of the view that the exercise can beredone by the 2[nd] respondent after issuing notice, only on thelimited aspect of the interest, payable under Section 244-A of theAct. Hence, we allow the writ petition and set aside the order,dated 26.05.1999 passed by the 2[nd] respondent as affirmed bythe 1[st] respondent in his order, dated 21.08.2000. It is left opento the 2[nd] respondent to pass fresh order, after issuing notice tothe petitioner. The assessment proceedings for the year 1996-97 shall remain intact in all respects, except that the payment of interest under Section 244-A of the Act. This exercise shall becompleted within a period of three months from the date ofreceipt of a copy of this order. The miscellaneous petition filed in this writ petition shallalso stand disposed of. There shall be no order as to costs. ____________________ L.NARASIMHA REDDY, J ______________________ CHALLA KODANDA RAM, J Date: 09.07.2014Note: L.R.Copy to be marked.JSU THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYAND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM JSU W.P.No.11383 of 2001 Date: 09.07.2014