Wp/27977/2021 Of Ms Educational And Welfare Trust v. The Assistant Commissioner Of Income Tax

HIGH COURT FOR THE STATE OF (Special Original Jurisdiction)MONDAY,THE TWENTY EIGHTH DAY OF TWO THOUSAND AND TWENTY TWO PRESENT THE HONOURABLE SRI JUSTICE UJJAL BHUYAN THE HONOURABLE SRI JUSTICE A.VENKATESHWARA REDDY WRIT PETITION NO: 27977 OF 2021 Betwee n: MS Educational and Welfare Trust, Rep., by its lvanaging Trustee /ChairmanMohammed Lateef Khan S/o Gulam Rasool Khan R/o. H.No 12-2-83711lEl1,Asif Nagar, Hyderabad- 500028. ...PETITIONER AND 1. The Assistant Commissioner of lncome Tax, Circle 7(1), Signature [Towers]Opp- Botanical Gardens, Kondapur, Hyderabad [- ]500084Opp- Botanical Gardens, Kondapur, Hyderabad [- ]500084 2. The Assistant Commissioner of lncome Tax, Circle 3(1), Signature [Towers]Opp- Botanical Gardens, Kondapur, Hyderabad [- ]500084Opp- Botanical Gardens, Kondapur, Hyderabad [- ]500084 3. The Principal Commissioner of lncome Tax- [1, l. ][T. ][Towers, A.C. Gaurds,]Masab Tank, Hyderabad - 500004.Masab Tank, Hyderabad - 500004. ,..RESPONDENTS Petition under Article 226 of the Constitution of India [praying ][that in ][the]circumstances stated in the affidavit filed therewith, the [High Court may ][be]pleased to issue a writ, order or direction, more particularly one in the nature ofWrit of Mandamus, declaring the action of 1st and 2nd [respondents ][in ][not]disposing of the rectification application dt. [2611212019, ][filed ][u/s ][154 ][of ][the ][Act]vide Acknowledgement No. 72589191001 [1 ], [after ][considering ][the ][information]furnrshed on 2311212019 by the Petitioner herein, [as ][illegal ][and ][arbitrary on ][the]part of the 1st and 2nd respondents and consequently direct the respondents [to]dispose of the rectification application dt. [2611212019 ][as expeditiously as ][possible,] lA NO: 1 OF 2021 Petition under Section 151 CPC [praying ]that [in ][the ][clrcumstances stated ][in]the affidavit filed in support of the [petition, ]the [High Court may be pleased ][pleased]to grant stay of collection of outstanding [demand arising out ][o-f ][the ][assessment]order vide its Order No. ITBA/AST/S/143(3y2019- [2011022954460(1) ][dt.]2311212015, till the date of disposal of the [rectification application ][filed ][u/s ][154 ][of]the lncome Tax Act, ['1961 ]vide Acknowledgement [No. ][72589191001 ][1 ][dt.] / 2611212019 for the Assessment Year 2017- 18, in the interests of substantialjustice, as otherwise the petitioner would be put to irreparable loss and severehardship. Counsel for the Petitioner:SRl. DUNDU MANMOHAN Counsel for the Respondents: SRl. J,V.PRASAD, SC FOR lT The Court made the following: HONOURABLE AndHONOURABLE [SRI JUSTICE A'VENKATESHWARA ] WRIT PETI [No.][27977][ of][ 202t] ORDER:( [Per ][Hon'ble ][Sri ][Justice Ujjal ][Bhuyan)] HeardSriManmohanDundu,Iearnedcounselforthepetitioner [and ][Mr.J'V'Prasad' ][learned Standing Counsel for ][Income]Tax Department, [for the respondents']2. By filing [this ][petition under ][Article 226 ][ol ][Constitution ][of]lndia, [petitioner ][seeks ][the following ][reliefs:] "...... [Hon'ble ][Court ][may ][be ][pleased to ][issue ][a ][writ']order, or [direction, ][more ][particularly ][one ][in the nature ][of ][Writ]ofMandamus,rleclaringtheactionofl*&2,drespondentsinnot disposing [of ][the ][rectification ][application dt'26'12'2019 ][']filed u/s 154of the [Act ][vide]Acknolwedgmentthe [information]aiter [considering]No.725891910011,furnished [on ][23J22019 by the ][Petitioner ][herein' ][as ][illegal]and arbitrary [on ][the ][part ][of ][the l"t ][& ][2nd ][respondents ][and]consequently [direct ][the ][respondents ][to ][dispose ][of ][the]rectification [application ][dt'26'12'2olg ][as ][expeditiously ][as]and [may pass ][such ][other order ][or ][orders ][the]possible Honourable [High ][Court ][may ][deems ][Iit in ][the circumstances ][of]the case." "...... [Hon'ble ][Court ][may ][be ][pleased to ][issue ][a ][writ']order, or [direction, ][more ][particularly ][one ][in the nature ][of ][Writ]ofMandamus,rleclaringtheactionofl*&2,drespondentsinnot disposing [of ][the ][rectification ][application dt'26'12'2019 ][']filed u/s 154of the [Act ][vide]Acknolwedgmentthe [information]aiter [considering]No.725891910011,furnished [on ][23J22019 by the ][Petitioner ][herein' ][as ][illegal]and arbitrary [on ][the ][part ][of ][the l"t ][& ][2nd ][respondents ][and]consequently [direct ][the ][respondents ][to ][dispose ][of ][the]rectification [application ][dt'26'12'2olg ][as ][expeditiously ][as]and [may pass ][such ][other order ][or ][orders ][the]possible Honourable [High ][Court ][may ][deems ][Iit in ][the circumstances ][of]the case." 3. Petitioner [is ][an ][assessee ][under the ][Income ][Tax ][Act' ][1961](briefly "the Act" [hereinafter) ][assessed ][under ][the ][jurisdiction ][of ][the]afirst resPondent.Status [of ][the ]Petitioner [as ][assessee ][is ][that ][of] l \ UB.J&AVI(,Jwp_27911_2021 2 Trust. For the assessment year 2Ol7-18, first [respondent]as the assessing officer passed assessment [order]dated 23.72.2019 under Section 143(3) of the Act. By the said assessment order, [two additions ][were ][made,]one on account of unexplained [cash ][credits ][under ][Section ][69 ][of the]Act amounting to Rs.4,02,|2,OOO l-, [and ][the ][second ][addition ][was]on account of lack of information [regarding ][Tax ][Deducted ][at]Source (TDS) with the Central Government. [Under ][this ][head, ][an]amount of Rs.4,66,79,904/ - was added. 4. Petitioner liled an application on [26.12.2019 ][before ][the ][first]respondent for rectification of the order [of ][assessment under]Section 154 of the Act. With the [grievance ][that ][the ][first]respondent not acting on the representation [of ][the ][petitioner,]petitioner approached this Court by filing a [writ ][petition ][being]WP.No. 1734 of 2O2O. This Court by order, [dated ][O3.O2.2O2O,]disposed of the writ petition by directing the [first ][respondent ][to]dispose of petitioner's application for rectilicationdated 26.1220 19 and till [disposal ][of ][such ][application ][stayed]recovery of dues [as ][per the ][assessment order.] 5. First respondent by [letter ][dated 28.O2.2020 addressed ][to ][the]petitioner stated that assessment [was ][completed ][on ][23' ][12'2019]based on materials [avaiiable ][on ][record. ][On ][the ][date of ][passing ][the] r assessment order, [there ][appeared no response ][from ][the ][assessee ][in]the Assessment Portal. [Thus, ][the order ][was ][passed based ][on ][the]materials on record. [Accordingly, request ][for ][rectification ][under]Section 154 ol the Act [was ][not ][considered ][and ][rejected'] 6. It appears that there [were ][a ][serLes]of correspondencebetween the [petitioner ][and ][first ][respondent']In the meanwhile,against the assessment [order ][dated ][23'12'2O19, ][petitioner ][has]before [the ][Commissioner of ][Income ][Tax ][(Appeals)']preferred appeal Hyderabad. Finally [on ][28.08.2021, ][first ][respondent passed ][an]order under Section [154 read ][with ][Section ][i43 ][(3) ][ofthe ][Act' ][First]respondent held that [assessee ][(petitioner) ][had filed ][rectification]for [deletion ][of the ][additions ][made ][under ][Section ][69]application read with Section [115 ] [of the Act, while ][passing ][the ][order ][of]assessment. Taking [the view ][that ][this ][was ][not ][a ][mistake apparent]from the record [within the ][ambit ][of ][Section 154 ][of ][the ][Act']rectification application [was ][rejected ][Aggrieved ][thereby' ][present]writ petition has [been ][filed ][seeking ][the relief ][as ][indicated ][above'] 7. On 09. ll.2O2l , [the foilowing ][order was ][passed:] " Heard learned [counsel ][for ][the parties] Mr.J.V.Prasad, [learned ][Standing Counsel ][for]Income Tax, to [obtain ][instructions ][regarding order ][passed]on the rectification [petition ][filed by the petitioner following] )) r ull,.r&Avlr..rwp_27977 _20?1\ 7. On 09. ll.2O2l , [the foilowing ][order was ][passed:] " Heard learned [counsel ][for ][the parties] Mr.J.V.Prasad, [learned ][Standing Counsel ][for]Income Tax, to [obtain ][instructions ][regarding order ][passed]on the rectification [petition ][filed by the petitioner following] )) r ull,.r&Avlr..rwp_27977 _20?1\ the order passed by this Court dated 03.02.2020 inWP.No.1734 of 2O20.If any order has been passed, copy of the sameWP.No.1734 of 2O20.If any order has been passed, copy of the samemay be furnished to the learned counsel for thepetitioner."petitioner." 7 .l Thereafter, on 03.12.2021, the following order came to bepassed: "Learned counsel for the petitioner submits thaton 29.7L.2O27, the Assessing Officer has passed anorder of rectification. The grievance is that theon 29.7L.2O27, the Assessing Officer has passed anorder of rectification. The grievance is that therectification is not in terms of the earlier order passed bythis Court.this Court. However, Mr.J.V.Prasad, learned Senior StandingCounsel for Income Ta-x Department seeks adjournment.Be that as it may, and without expressing anyopinion at this stage, list this matter again ont7.t2.2021."Counsel for Income Ta-x Department seeks adjournment.Be that as it may, and without expressing anyopinion at this stage, list this matter again ont7.t2.2021." 7 .2 . Finally on 07 .O2.2O22, Mr. Prasad sought time to obtaininstructions. Thereafter, memo has been filed by Mr.J.V.Prasad,learned counsel enclosing therewith rectification order dated29.11.2021 passed by the l-rrst respondent under Section 154 readwith Section 143 (3) ofthe Act. The said order reads as under:RECTIFION ORDERinstructions. Thereafter, memo has been filed by Mr.J.V.Prasad,learned counsel enclosing therewith rectification order dated29.11.2021 passed by the l-rrst respondent under Section 154 readwith Section 143 (3) ofthe Act. The said order reads as under:RECTIFION ORDER Assessee, M/s M.S.Educational trust had filed itsreturn for the assessment year 2017-2018 declaring totalincome of Rs,2,29,43,54O I -. The case was selected for thescrutiny and on completion of the assessment proceedings,the order under section 143(3) of the Income Ta-x Act, 1961income of Rs,2,29,43,54O I -. The case was selected for thescrutiny and on completion of the assessment proceedings,the order under section 143(3) of the Income Ta-x Act, 1961 \ was passed on 23.72.2079. in the said assessment order theaddition was made on following two grounds:1 Unexplained Cash credit arrd additionunder section 69 read with section 11SBBE of theIncome Tax Act, 1961.2. Disallowance under section 4O i(a) of theIncome Tax Act, 1961.addition was made on following two grounds:1 Unexplained Cash credit arrd additionunder section 69 read with section 11SBBE of theIncome Tax Act, 1961.2. Disallowance under section 4O i(a) of theIncome Tax Act, 1961. Consequent upon the addition made on theaforementioned grounds, the total income was assessed ataforementioned grounds, the total income was assessed atRs. 10,98,35,440 arld assessee was asked to pay the demand ofRs.6,42,43,723 vide demand notice dated 23.12.2019 issuedunder section 156 of the Income Ta-x Act, 196 1 .Rs.6,42,43,723 vide demand notice dated 23.12.2019 issuedunder section 156 of the Income Ta-x Act, 196 1 . On perusal of the Material on record, inter-alia,rectilrcation petition dated 26.12.2019 petition filed by theassessee and Form 24 Q and Form 26Q submitted during theassessment proceedings, it is found that payments made to thevarious parties and tax deducted thereof has been clearlyreflected therein . Hence, I am of view that disa.llowing 3O percent of theexpenditure of Rs.15,55,99,680/- pertaining to salary, rent,contract and professional fee as per the section 40 (a) (ia) of theIncome Tax Act, 1961 is mistal<e apparent on record. On perusal of the Material on record, inter-alia,rectilrcation petition dated 26.12.2019 petition filed by theassessee and Form 24 Q and Form 26Q submitted during theassessment proceedings, it is found that payments made to thevarious parties and tax deducted thereof has been clearlyreflected therein . Hence, I am of view that disa.llowing 3O percent of theexpenditure of Rs.15,55,99,680/- pertaining to salary, rent,contract and professional fee as per the section 40 (a) (ia) of theIncome Tax Act, 1961 is mistal<e apparent on record. Further, it is reiterated that issue regarding unexplainedcash credit and its addition under section 69 read with i 1sBBEof the Income Tax Act, 1961 has been already disposed off videthe order passed under section 154 of the Income Tax Act dated28.08.2021 .cash credit and its addition under section 69 read with i 1sBBEof the Income Tax Act, 1961 has been already disposed off videthe order passed under section 154 of the Income Tax Act dated28.08.2021 . Thus considering the direction of the Hon'ble High Court inthe case of Writ 1734 of 2O2O read with the section 154 of theIncome Tax Act, 1961, the assessed income of the assessee isrectilied as under: 8. From a perusal ofthe above, it is seen that Assessing Officerhas taken the view that disaliowing 30% of the expenditurepertaining to salary, rent, contract and professional fee as perSection a0 (a) (ia) of the Act is a mistake apparent on the lace ofrecord. Accordingly, the same has been rectified. Insofar issueregarding unexplained cash credit and addition under Section 69of the Act is concerned, first respondent referred to his order dated2a.Oa.2O21 saying that this issue was disposed of by the aforesaidorder; i.e not a mistake which can be rectified under Section 154 ofthe Act. 9. Learned counsel for the petitioner submits that order,dated 28.08.2021, does not provide any reasons. That apart, it isnot in accordance with the order passed by this Court datedO3.O2.2O2O in WP.No. 1734 of 2O2O. 10. We are afraid, we can acceptthe submission made bviearned counsel for the petitioner.Rectification order dated29.11.2021 came to be passed during the pendency of the present writ petition. Earlier order dated 28.08..2021 would have to be readin conjunction with the order dated 29 .ll.2o2l . On a conjointreading of both the orders, it is evident that the two issues raisedby the petitioner for rectification has been gone into by theassessing authority. While on the issue pertaining to unexplainedcash credit and consequently the addition under Section 69 of theAct the view taken is that this is not a mistake apparent on theface of the record and therefore, rectillcation under Section 154 ofthe Act is not warranted. Regarding disallowance under Section 40i (a) of the Act is concerned, the same has been rectified in themanner indicated above. 1 1. The power of rectification of an order of assessment underSection 154 of the Act lies within a very narrow compass. The orderSection 154 of the Act lies within a very narrow compass. The orderto be rectified must be an order which reflects an error apparent onthe face of the record. The error or mistake which would requiredetermination after long drawn hearing would not come within theambit of Section 154 of the Act.the face of the record. The error or mistake which would requiredetermination after long drawn hearing would not come within theambit of Section 154 of the Act. 12. That being the position, we are of the view that prayer ofthe petitioner for rectification has been gone into by the AssessingOfficer following which the assessment order would stand rectified.If the petitioner is still aggrieved by such assessment order as 1 To PIVBS UB,J&AVR,J.wp-27977 _2021 8 rectified he can assail the same [in ][appropriate ][appellate]proceedings, which he has already availed [of.] 13. For the reasons indicated [above, ][we are ][not ][inclined ][to]entertain the writ [petition.] 12. That being the position, we are of the view that prayer ofthe petitioner for rectification has been gone into by the AssessingOfficer following which the assessment order would stand rectified.If the petitioner is still aggrieved by such assessment order as 1 To PIVBS UB,J&AVR,J.wp-27977 _2021 8 rectified he can assail the same [in ][appropriate ][appellate]proceedings, which he has already availed [of.] 13. For the reasons indicated [above, ][we are ][not ][inclined ][to]entertain the writ [petition.] 14. Writ Petition is, [accordinSly, ][dismissed. ][Miscellaneous]applications, if any, [pending ][in this ][writ ][petition ][sha1l ][stand ][closed'] SD/.B.SATYAVATHIASSISTANT REGISTRAR IL:r, //TRUE COPY' SECTION OFFICER 1. One CC to Sri. Dundu lVlanmohan, Advocate 2. One CC to Sri. J.VPrasad, SC for lT 3. Two CD Copies. HIGH COURT DAIED:.2810212022 ORDERWP.No.27977 [ol ][2021] Dismissing [the ][WP.]Without costs. V,xt bSTAI€\t'I1Jif,17-\.a'*