TaxTMI 
TaxTMI 
2023 (10) TMI 41
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.... 3. With consent of the parties, the matters are taken up for final hearing. 4. RULE returnable forthwith. Mr.Varun Patel waives service of Rule on behalf of the respondent. 5. Challenge in all these petitions, except in Special Civil Application No.3981 of 2019, are to the notices issued by the respondent under Section 154 of the Income Tax Act, 1961. Special Civil Application No.3981 of 2019 is challenging a notice under Section 263 of Income Tax Act. 6. Special Civil Applications No.3971 of 2019, 3973 of 2019, 3972 of 2019, 3977 of 2019 and 3981 of 2019 pertain to Assessment Years 2008-2009, 2009-2010, 2011-2012, 2012-2013 and 2013- 2014 respectively. The only other distinction in the other two petitions namely Special Civil Application Nos.3973 and 3977 of 2019 is that there were no orders giving effect. 7. FACTS OF SCA NO.3971 OF 2019 7.1 The petitioner is a public limited company and a Global Information Technology Service Provider offering a wide range of software development and related services. A return of income was filed for A.Y. 2008-2009 on 30.09.2008 declaring a total income of Rs.1,76,66,295/- after claiming a deduction under Section 10A of the Income....
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....id year, deduction u/s 10A has been allowed only after clubbing the business profits and losses of all the units. b) However, CIT(A) has directed that benefit of 10A deduction should be given on the basis of individual eligible unit and not after clubbing the business profits and losses of all the units. c) While passing the OGE, the Respondent has committed a mistake in allowing set-off of losses against the income from House Property and Other income. d) The Respondent has referred the decision of Honorable Supreme Court in case of CIT v. Yokogawa India Ltd. (supra) as mentioned in para 2.10 and based on his interpretation of the decision, the profits of eligible undertaking shall be excluded from the computation of total income and thereby intended to rectify the mistake u/s 154 of the Act by not allowing set off of loss (negative profit) of the eligible unit amounting to Rs.4,46,67,531/- against any other income. 8.2 The issuance of notice under Section 154 is illegal and without jurisdiction. 8.3 That the issue of deduction under Section 10A was not a subject matter of appeal before the CIT(A) for the said year and therefore there was no questi....
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....s in the OGE passed for the A.Y 2008-09 i.e undertaking specific and allowed from "Total Business income", which is as per the principle laid down by Honorable Supreme Court. Hence, notice issued by Respondent is bad in law. 8.7 Mr.Soparkar would further submit that the issues raised by the respondent due to incorrect interpretation of the decision of the Hon'ble Supreme Court is a legal and debatable issue and such issue cannot be considered as mistake apparent from the record to become a subject matter of rectification under Section 154 of the Act. The notice under Section 154 is therefore void ab initio. 8.8 That the petition is maintainable. Alternative remedy is not a bar when the notice is ex-facie without jurisdiction. 8.9 In support of his submissions, Shri Soparkar would rely on the following decisions: I. Calcutta Discount Co. Ltd v. Income Tax Officer; [1961] 41 ITR 191 (SC) II. Jeans Knit (P.) Ltd v. Deputy Commissioner of Income-tax, Banglore; [2017] 390 ITR 10 (SC)) III. JMC Projects (India) Ltd v. Principal Commissioner of Income-tax (Central); [2016] 67 taxmann.com 258 (Gujarat) IV. Engineering Professional Co. (P.) Ltd; ....
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.... interpretation of the decision in the case of Yokogawa India Ltd. (supra). 10. Mr.Varun Patel learned Senior Standing Counsel for the Revenue would support the notice. He would submit that only a notice under Section 154 of the Act is issued. In an order passed under Section 154 of the Act appeal could lie to the CIT(A) and therefore in view of the alternative remedy, the petition is not maintainable. 10.1 Making further submissions, Shri Patel would submit as under. 10.2 Subject notices u/s 154 of the Act were issued to rectify the order giving effect of the CIT(A)'s order. Further, it is also noticed from the order of the CIT(A) for A.Y. 2006-07 and A.Y. 2009-10 in the appellant's case that the CIT(A) has directed to give benefit of section 10A to the assessee, on the basis of individual eligible unit and not after clubbing the income. Hence the CIT(A) clearly directed to give the benefit of the section 10A of the Act on individual unit basis and not after clubbing the income in the preceding years as well as succeeding years. The A.O. made an apparent mistake while passing the order of appeal effect by allowing the setoff of losses from 10A eligible against the non....
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.... is not acceptable. 11. Having considered the submissions made by the learned counsel, we take up the discussion thereon. 11.1 The rectification of mistakes is empowered by virtue of the provisions of Section 154 of the Income Tax Act, 1961. Section 154 of the Act, reads as under: Rectification of mistake. 154. [(1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,- (a) amend any order passed by it under the provisions of this Act ; [(b) amend any intimation or deemed intimation under sub-section (1) of section 143;]] [(c) amend any intimation under sub-section (1) of section 200A.] (d) amend any intimation under sub- section (1) of section 206CB. [(1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.] ....
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...., the authority shall pass an order, within a period of six months from the end of the month in which the application is received by it,- (a) making the amendment; or (b) refusing to allow the claim.]" 11.2 Sub-section (7) of Section 154 provides that no rectification is permissible under the Section after expiry of four years from the end of the financial year in which the order sought to be amended was passed. In the facts on hand, the order of assessment is dated 02.02.2012. In terms of Section 154(7) of the Act, time to rectify the error expired on 31.03.2016. The rectification is sought in 2018. According to the Revenue, the period of four years has not expired as after the order of assessment was passed on 02.02.2012, the assessee preferred an appeal before the CIT(A). The CIT(A) passed an order on 27.08.2014. The Assessing Officer thereafter passed an order giving effect on 30.01.2015. Notice issued under Section 154 was dated 20.03.2018 and hence was within a period of four years as provided under Section 154(7). 11.3 In the case of Poonjabhai Vanmalidas (supra), the assessment order passed under the Wealth Tax was dated 23.02.1971. The assessee went....
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....5, sub-section (1), that the power to rectify a mistake in an order is conferred only on the authority which passed the order. The Income-tax Officer can rectify a mistake only if it is a mistake in the order of assessment made by him and similarly the Appellate Assistant Commissioner can rectify a mistake only if it is in the order passed by him in appeal." Under section 35(1) of the Wealth-tax Act also the same scheme is preserved because under section 35(1)(a) the Wealth-tax Officer may amend any order of assessment or of refund or any other order passed by him. Proceeding further with the quotation from Karsandas Bhagwandas Patel's case [1975] 98 ITR 255 at 259-60 (Guj): "It would, therefore, seem that if the order of assessment made by the Income-tax Officer has ceased to exist by reason of having merged wholly in the order of the Appellate Assistant Commissioner, the Incometax Officer cannot rectify a mistake in the order of assessment; the . mistake, if any, which vitiated the order of assessment would then be a mistake in the order of the Appellate Assistant Commissioner who alone would be entitled to rectify it. The question is whether this hypothesis....
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....on of this court in Commissioner of Income-tax v. Karamchand Premchand P. Ltd. [1969] 74 ITR 254 , 264 (Guj): "But it is apparent, and this indeed was not disputed on behalf of the assessee, that the Appellate Assistant Commissioner was under no obligation to examine the correctness of every decision recorded by the Income-tax Officer in the course of the assessment. The entire assessment was of course before him and he had the power, if he so chose, to examine any particular decision of the Income-tax Officer and to correct it if the found it wrong but there being no obligation on him to do so, no inference can be drawn from his omission to reverse the decision of the Income-tax Officer on any particular matter." The Division Bench then proceeded to observe ([1975] 98 ITR 255 , 263 (Guj)): "There being no decision of the Appellate Assistant Commissioner, express or implied, in regard to the particular item, we have to turn to the order of assessment made by the Income-tax Officer in order to see what is the decision in regard to that matter in the process of assessment. The ultimate assessment in such a case consists partly of decisions of the Appellate ....
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....exure "E" is the order of the Appellate Assistant Commissioner whereas annexure "F" is in respect of assessment years 1966-67 and 1967-68. In annexure "E" in connection with assessment year 1965-66, there was an additional point on the ground that, admittedly, the tax liability of Rs. 94,023 was claimed as a deduction from the total wealth of the appellant and that claim was rejected by the Appellate Assistant Commissioner. It was held by him that since the liability was disputed, this could not be a "debt owed" as per the provisions of the Act and the second point was regarding the deduction of Rs. 15,000 because of the ornaments of the female member of the family. Beyond these two points no other point was touched by the Appellate Assistant Commissioner and, therefore, there was no reversal, express or implied, or no review in the sense of affirmed, modified or reversed nor was it considered and re- examined irrespective of whether it was ultimately affirmed, modified or reversed. Under these circumstances it is obvious that the question as to whether the additional amount mentioned in clause (c) of Paragraph A of Part I of the Schedule to the Wealth-tax Act should or should not ....
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....nal assessment and not from the date of reassessment order. The relevant observations are as under: "One of the contentions put forward before the Tribunal was that there was no mistake apparent from the records which could be rectified by the Income-tax Officer under section 154. Another objection raised was that the proceedings under section 154 were barred by limitation. The Tribunal rejected these contentions and dismissed the appeals. It is thereafter, at the instance of the assessee, the above two questions have been referred to this hon'ble court for its opinion. As far as the first question is concerned, we are clearly of the opinion that the answer to the said question must be in the affirmative. Section 154 of the Act enables the Income-tax Officer to rectify any mistake apparent from the record. In this case, as we already pointed out, the Income- tax Officer had deducted the wealth-tax paid by the assessee from the business income for computing the assessable income from the business. The decision of this court referred to above, viz., Kumbakonam Electric Supply Corporation Ltd. v. Commissioner of Income-tax [1963] 50 ITR 809 (Mad) held that wealth-tax paid....
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....f assessment, namely, May 27, 1960, but from the date of the subsequent order by which the assessment was reopened under section 147(b) of the Income-tax Act. That order was dated November 23, 1962, and if the contention of the learned counsel for the revenue is correct on this point, certainly the notice under section 154 dated February 16, 1965, will be well within the period of four years from the date of November 23, 1962. On the other hand, the argument advanced on behalf of the assessee is that the error had crept into the order dated May 27, 1960, itself, and notwithstanding the subsequent reopening of the assessment, that error remained untouched and, therefore, that error cannot be said to have crept into the order dated November 23, 1962, so as to enable the Income-tax Officer to compute the period of limitation from that date and that the period of limitation should be computed only from the date of the original order, viz., May 21, 1960. This was sought to be countered by the learned counsel for the revenue by putting forward the argument that once the Income-tax Officer took proceedings under section 147 and passed a fresh order of reassessment the original order has c....
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....pened under section 147 of the Income-tax Act, 1961, and a fresh order was passed on October 16, 1969, the four year period prescribed under section 154(7) has to be computed from October 16, 1969, and if it is so done the notice dated April 14, 1971, was within four years. The reasoning advanced on behalf of the revenue in that case was that the original assessment order had merged in the order passed under section 148 by the Incometax Officer, and, therefore, the limitation should be counted from the date of the later order. The Bench of the Allahabad High Court rejected this contention. The Bench said: "An order under section 148 is a separate order dealing with an item of income which had escaped assessment. The original assessment order does not merge into an order passed under section 148. Where reassessment is made under section 148 (corresponding to section 34 of the Indian Income-tax Act, 1922) the Income-tax Officer's jurisdiction is confined to the income which had escaped assessment and does not extend to revising, reopening and reconsidering the whole assessment. See Kashi Nath Bagla v. Commissioner of Income-tax [1950] 4 ITC 472 (All) and Kevaldas Ranchho....
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.... land. The Income-tax Officer, accordingly, realised that depreciation on land had wrongly been allowed to the assessee and to that extent a part of the assessee's income had escaped assessment. He, accordingly, issued a notice under section 148 of the Income-tax Act on November 15, 1968, and passed a supplementary assessment order on October 16, 1969, withdrawing the depreciation on the value of land. Thereafter, the Income-tax Officer felt that the development rebate had also wrongly been allowed to the assessee inasmuch as the assessee had not created a reserve for the same during the year the machinery was installed. He issued a notice under section 154 of the Act on April 14, 1971, treating it as a case of rectification of mistake. He finally passed an order under that section on September 10, 1971, withdrawing the development rebate which had been allowed to the assessee in the original assessment order after overruling the assessee's contention that the order was time-barred. The present petition is directed against that order. The original assessment order under which the development rebate was allowed to the assessee was passed on 9th February, 1967. This order cou....
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....be quashed." 11.7 Even in the case of Shree Naw Durga Bansal Cold Storage & Ice Factory (supra), the High Court of Allahabad has held that the period of limitation would commence from the date of the original order. Paras 23 to 28 read as under: 23. We also find that judgment relied by learned counsel for Assessee in Hind Wire Industries Ltd. (supra) also supports the aforesaid view expressed by us. Therein an assessment order was passed on 21.09.1979. On a rectification petition filed under Section 154, assessment order was rectified on 12.07.1982. Assessee again filed rectification on 04.07.1986 contending that he was entitled for depreciation allowance on the factory building at the rate of ten percent, while he was allowed depreciation only to five percent. This application was rejected by Assessing Officer being barred by time under Section 154 (7) and order was confirmed by Commissioner in appeal. Tribunal took the view that for the purpose of Section 154 (7), limitation would commence from rectified order 12.07.1982 but on a Reference, High Court reversed the view taken by Tribunal and held that period of four years could be calculated from initial order of asses....
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....Industries Ltd. (supra) Supreme Court has used word "including" in the amended or rectified order would mean that word "order" as the case may be can be either "original order" or "amended order" or "rectified order" depending upon the fact as to in which order Assessee is seeking rectification. To read it as if, once rectified order is passed, original order would disappear, would result in nullifying the effect of word "including" in the observations made by Supreme Court, while reading meaning of word "order" in Section 54 (7) of Act 1961. 28. In our case there may exist more than one orders. As is evident from the fact that Section 154 (7) used expression "order sought to be amended" meaning thereby for the purpose of attracting Section 154 (7), such order which is sought to be amended, would determine period of limitation." 11.8 Coming to the issue of the order being bad because when there is a legal or debatable issue such cannot be considered to be a mistake apparent from record and therefore cannot become a subject matter of rectification. The Supreme Court in the case of Volkart Brothers (supra) explaining such meaning, held as under: "The first questi....
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....essary for us to spell out the distinction between the expressions "error apparent on the face of the record" and "mistake apparent from the record". But suffice it to say that the Income-tax Officer was wholly wrong in holding that there was a mistake apparent from the record of the assessments of the first respondent. 11.9 In facts of the present case, the issue was with regard to the interpretation of the decision in the case of Yokogawa India Ltd. (supra). In the case the Supreme Court has settled the controversy on whether the provisions of Sections 10A/10B/10AA are deduction provisions or exemption provisions. A question of interpretation therefore would not make it an issue of a mistake apparent from record. 11.10 Also in the case of Hero Cycles (P.) Ltd (supra), in para 3, the Apex Court has held as under: "3. The ITO thereafter entertained assessee's prayer for rectification of the order and allowed the assessee's claim in respect of matters like Coloured Albums, Export Staff Travelling Expenses, Export Sales Commission, E.C.G.C, Foreign Dealers Visiting Expenses. Rectification under section 154 of the Act can only be made when glaring mistake of fac....
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.... may be some features of deduction brought in by the amendment to Section 10A, as for example, disallowance of profits in regard to domestic sales, the legislative intent in retaining Section 10A in Chapter III of the Act would clearly demonstrate the true nature of the said provision of the Act even after amendment thereof by the Finance Act of 2000. Deductions from the total income which is nowhere envisaged under the Act and the reference to the total income of the undertaking, referred to in several sub- sections of Section 10A, would indicate that the total income referred to in Section 2(45) has no application to the computation under Section 10A and the reference therein is only to the total income of the eligible unit/undertaking. The provisions of Section 10A(6), as amended by Finance Act of 2003 retrospectively with effect from 1.4.2001, has also been stressed upon to contend that with effect from the assessment year 2001- 02 losses and unabsorbed depreciation of eligible units would be allowable for set off immediately on the expiry of the period of tax holiday i.e. 10 years. The provisions of Sections 32, 32A, 33, 35 and part of 36 do not separately apply to an eligible....
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.... difference between the two expressions 'exemption' and 'deduction', though broadly may appear to be the same i.e. immunity from taxation, the practical effect of it in the light of the specific provisions contained in different parts of the Act would be wholly different. The above implications cannot be more obvious than from the case of Civil Appeal Nos. 8563/2013, 8564/2013 and civil appeal arising out of SLP(C) No. 18157/2015, which have been filed by loss making eligible units and/or by non-eligible assessees seeking the benefit of adjustment of losses against profits made by eligible units. 15. Sub-section 4 of Section 10A which provides for pro rata exemption, necessarily involving deduction of the profits arising out of domestic sales, is one instance of deduction provided by the amendment. Profits of an eligible unit pertaining to domestic sales would have to enter into the computation under the head "profits and gains from business" in Chapter IV and denied the benefit of deduction. The provisions of Sub-section 6 of Section 10A, as amended by the Finance Act of 2003, granting the benefit of adjustment of losses and unabsorbed depreciation etc. commencing from th....
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....ted 09.08.2000) understood the situation, it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression "total income of the assessee" in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression "total income of the assessee" in Section 10A as 'total income of the undertaking'." 11.14 In the perception of the Revenue, the view is otherwise. If the interpretation of the Revenue is permitted to hold then such treatment would ....
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.... must also fail. 11.18 Challenge to such a notice is maintainable under Article 226 of the Constitution of India. 11.19 In the case of JMC Projects (India) Ltd (supra), the Court held as under: "1. This petition is filed by the assessee challenging a notice dated 11.02.2015, as at Annexure-I to the petition, issued by the Commissioner of Income Tax initiating revisional proceedings under section 263 of the income-tax Act, 1961 ("the Act" for short) for assessment years 2008-09 to 2012-13. Brief facts are as under: 3. Despite resistance from the assessee, the assessing officer held that the expenses claimed by the assessee under profit & loss account to the tune of Rs.105.36 crore (rounded off), which represented the payments made to such vendors for sub- contracts, were not verifiable. The assessee had claimed such expenditure in the profit & loss account. The assessing officer, therefore, was not satisfied with the correctness of the accounts of the assessee and rejected the books of accounts of the assessee in terms of section 145 (3) of the Act. He thereafter proceeded to compare the gross profit ratio of various other agencies in the similar business and....
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....ssing officer so that the same can be sustained. Merely because the assessing officer has made certain additions by itself would not preclude the Commissioner from exercising the powers under section 263 of the Act, particularly when it is found that the assessing officer has not made additions on proper premises. Counsel for the revenue also submitted that in view of the statutory mechanism provided under the Act, the order of the Commissioner that may be passed on the basis of the impugned notice is appealable. This Court, therefore, in exercise of its extraordinary jurisdiction would not interfere at this stage. In this context, reliance was placed on the decision of the Supreme Court in case of CIT v. Chhabil Dass Agarwal [2013] 357 ITR 357/217 Taxman 143/36 taxmann.com 36. 9. The Commissioner does not dispute this aspect of the matter. Though in the impugned notice there is no such clear-cut admission to detailed assertion made by the petitioner in the petition backed by materials on record, there is no denial in the reply filed by the Commissioner. We would, therefore, proceed on the basis that against the proposed addition of Rs.105.36 crore suggested by the Commiss....
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.... fact proposition, we would notice the principle of law as laid down by this Court. It is settled law that non-entertainment of petitions under writ jurisdiction by the High Court when an efficacious alternative remedy is available is a rule of self-imposed limitation. It is essentially a rule of policy, convenience and discretion ather than a rule of law. Undoubtedly, it is within the discretion of the High Court to grant relief under article 226 despite the existence of an alternative remedy. However, the High Court must not interfere if there is an adequate efficacious alternative remedy available to the petitioner and he has approached the High Court without availing the same unless he has made out an exceptional case warranting such interference or there exist sufficient grounds to invoke the extraordinary jurisdiction under article 226. (See: State of U.P. v. Mohammad Nooh, AIR 1958 SC 86; Titaghur Paper Mills Ltd. v. State of Orissa, (1983) 2 SCC 433; Harbanslal Sahnia v. Indian Oil Corpn. Ltd. (2003) 2 SCC 107; State of H.P. v. Gujarat Ambuja Cement Ltd., (2005) 6 SCC 499). 16. The Constitution Benches of this Court in K.S. Rashid and Sons v. Income Tax Investigati....
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....ed with great clarity by Willes, J. in Wolverhampton New Waterworks Co. v. Hawkesford, 141 ER 486 in the following passage: (ER p. 495) '... There are three classes of cases in which a liability may be established founded upon a statute. ... But there is a third class viz. where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it. ... The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to.' The rule laid down in this passage was approved by the House of Lords in Neville v. London Express Newspapers Ltd., 1919 AC 368 and has been reaffirmed by the Privy Council in Attorney General of Trinidad and Tobago v. Gordon Grant and Co. Ltd., 1935 AC 532 (PC) and Secy. of State v. Mask and Co., AIR 1940 PC 105. It has also been held to be equally applicable to enforcement of rights, and has been followed by this Court throughout. The High Court was therefore justified in dismissing the writ petitions in limine." 14. In Mafatlal Indus....
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.... when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case, Titaghur Paper Mills case and other similar judgments that the High Court will not entertain a petition under article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation. 20. In the instant case, the Act provides complete machinery for the assessment/reassessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assessee could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). The remedy under the statute, however, must be effective and no....