2019 (2) TMI 323 - HC - Income Tax

Court upholds use of Section 154 for rectification of assessment errors. Legal precedents key.

The Court dismissed the writ petition challenging three notices under Section 154 of the Income Tax Act for assessment years 1991-92, 1992-93, and ... Rectification of mistake - impact of subsequent decision passed by the High court after the order of assessment - The question as to whether blending of tea is production or manufacture is debatable. - Held that:- The assessment orders were passed subsequent to the law being settled in Apeejay [1991 (9) TMI 6 - CALCUTTA HIGH COURT]. The assessment orders are not prior to Apeejay (supra) so as to attract the ratio of Geo Miller & Co. Ltd. [2003 (2) TMI 38 - CALCUTTA HIGH COURT]. Tara Agencies [2007 (7) TMI 4 - SUPREME COURT OF INDIA] has held that, processing of tea would fall short of either manufacturing or production. Purtabpore Co. Ltd. [1985 (7) TMI 49 - CALCUTTA HIGH COURT] has held that, a rectification under Section 154 of the Act of 1961 is permissible in order to bring the order of assessment in terms of an authoritative pronouncement of the Court. The Income Tax authorities are preparing to bring the orders of assessment in time with the ratio of Apeejay through the process initiated by the impugned show cause notices. They are entitled to do so. Section 154 can be invoked to correct an error apparent on the face of the record. An order of assessment must be in tune with the law laid down by a binding precedent. The subject orders of assessment not being in terms of the ratio of Apeejay (supra) contains errors. An error in an order not in consonance with a binding precedent is an error apparent on the face of the record. Issues involved:Challenging three notices under Section 154 of the Income Tax Act, 1961 for assessment years 1991-92, 1992-93, and 1993-94; Jurisdiction of invoking Section 154 based on errors apparent on the face of the record; Debate on whether blending of tea constitutes production or manufacture; Binding nature of High Court judgments on authorities; Interpretation of legal precedents for invoking Section 154; Show cause notices issued for withdrawing deductions under Section 80 I of the Act; Contention of debatable issues in show cause notices; Application of legal precedents for rectification under Section 154; Errors in assessment orders in light of binding precedents.Analysis:The petitioner challenged three notices issued under Section 154 of the Income Tax Act, 1961 for assessment years 1991-92, 1992-93, and 1993-94, arguing that the notices lacked jurisdiction as there were no errors apparent on the face of the record. The petitioner contended that the issue of whether blending of tea constitutes production or manufacture was debatable, citing legal precedents and ongoing appeals, thus preventing the invocation of Section 154. The petitioner emphasized the need for errors to be clear for Section 154 to apply, relying on various judgments to support this argument.The respondent, on the other hand, defended the show cause notices, asserting that they were not inherently lacking jurisdiction and were based on the binding precedent of a High Court judgment. The respondent argued that the authorities were required to correct errors in assessment orders based on the legal precedent, and thus, the notices were valid. The respondent highlighted the need for the petitioner to reply to the show cause notices and present defenses as per the law.The Court considered the arguments presented, emphasizing the importance of errors in assessment orders being in line with binding precedents. The Court noted that errors not conforming to legal precedents could be considered errors apparent on the face of the record. The Court dismissed the writ petition, finding no merit in challenging the show cause notices and upheld the validity of invoking Section 154 for rectification based on the binding legal precedents cited in the case.