2009 (11) TMI 24 - SC - Income Tax

Section 154 cannot be used to change view on power tariff subsidy treatment under section 264; rectification set aside

SC held that the rectification under s.154 of an order passed under s.264 was impermissible as it amounted to a change of opinion. The Commissioner sought ... Rectification u/s 154 of an order passed u/s 264 - Change of opinion - HELD THAT:- Following the judgement of this Court in the case of [2008 (9) TMI 14 - SUPREME COURT], delivered on 19th September, 1997, the CIT Tax passed an order of rectification dated 30th March, 1998. The only ground on which rectification was sought to be made by the Commissioner of Income Tax was that Power Tariff Subsidy given to the appellant herein was admissible only after commencement of production – the present case is an example of change of opinion - in each case, one has to examine the nature of the subsidy - The judgement of this Court in Sahney Steel and Press Works Limited & Ors.[1997 (9) TMI 3 - SUPREME COURT] was on its own facts; so also, the judgement [2008 (9) TMI 14 - SUPREME COURT]. Therefore, the Department has erred in invoking Section 154 of the Act. – rectification order set aside. Issues:1. Scope of Section 154 of the Income Tax Act.2. Whether a 'rectifiable mistake' existed enabling the Department to invoke Section 154 of the Act.3. Change of opinion in the context of rectification under Section 154.4. Application of the judgment in Sahney Steel and Press Works Limited case to the present scenario.Analysis:1. Scope of Section 154 of the Income Tax Act:The Supreme Court examined the scope of Section 154 of the Income Tax Act, focusing on rectification of mistakes apparent from the record. Section 154 allows Income Tax Authorities to amend orders to rectify such mistakes. It was noted that Section 154 is distinct from Section 147, which deals with escaped assessment. The Court emphasized the need to establish a 'rectifiable mistake' for invoking Section 154.2. Existence of a 'Rectifiable Mistake':In the case under consideration, the Court analyzed whether there was a 'rectifiable mistake' justifying the Department's use of Section 154. The Court highlighted that the Department's change in opinion regarding the nature of the subsidy from capital to revenue receipt did not constitute a 'rectifiable mistake.' It was concluded that the situation presented a classic example of a change of opinion rather than a mistake apparent from the record, rendering Section 154 inapplicable.3. Change of Opinion in Rectification:The Court delved into the concept of change of opinion in the context of rectification under Section 154. It was emphasized that the Department's altered view on the nature of the subsidy, post the Sahney Steel case judgment, did not qualify as a 'rectifiable mistake.' The judgment cited examples where rectification based on debatable issues or change of opinion was not permissible under Section 154.4. Application of Sahney Steel Case Judgment:The Court examined the relevance of the Sahney Steel case judgment to the present scenario. It was highlighted that the nature of subsidies varied in different cases, such as production subsidy, loan repayment subsidy, and industry setup subsidy. The Court emphasized the need to analyze the specific circumstances of each case to determine the nature of the subsidy. The judgment underscored that the present case illustrated a change of opinion rather than a rectifiable mistake under Section 154.In conclusion, the Court ruled in favor of the appellant-assessee, setting aside the impugned judgment and allowing the appeals. The judgment emphasized the importance of establishing a 'rectifiable mistake' that is apparent from the record for invoking Section 154 of the Income Tax Act. The decision reiterated that a change of opinion or a debatable point of law does not qualify as a mistake warranting rectification under Section 154.