Case Law Details
HIGH COURT OF BOMBAY
Commissioner of Income-tax
versus
V.S. Dempo & Co. Ltd.
TAX APPEAL NO. 50 OF 2012
OCTOBER 19, 2012
ORDER
1. This is an appeal under Section 260A of the Income Tax Act 1961, against an order of the Income Tax Appellate Tribunal (ITAT) dated 23rd March, 2011 in ITA No. 110/PNJ/2000 pertaining to the Assessment Year 1983-84, allowing the respondent’s appeal against the order of the Commissioner of Income Tax (Appeals).
2. (A) The question that falls for consideration is whether an Assessing Officer is entitled to invoke Section 154 to correct an assessment order which gives effect to the orders of the appellate authorities based on his opinion that the orders of the CIT (Appeals) and the Tribunal are erroneous and contrary to law, including a subsequent judgment of the Supreme Court. We have answered the question in the negative.
(B) The appellant seeks to raise the question as follows :
“Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in quashing the order of the Commissioner of Income Tax (Appeals) and the AO rectifying the order under section 154 in view of the subsequent judgment of the Hon’ble Supreme Court particularly when the Hon’ble Supreme Court in the case of S.A.L. Narayana/Row v. Model Mills Nagpur Ltd. (SC) 64 ITR 67 and ACIT v. Saurashtra Kutch Stock Exchange Ltd. (SC) 305 ITR 227, wherein it is clearly held that “to give effect to an existing decision of the Hon’ble Supreme Court/Jurisdictional Hon’ble High Court or to apply a subsequent decision of the Hon’ble Supreme Court/jurisdictional Hon’ble High Court rectification under section 154 can be made?”
3. The Assessing Officer, on 25th March, 1986, made an assessment order under Section 143(3) of the Act for the assessment year 1983-84, disallowing a claim for depreciation on the amount incurred by the assessee on account of the customs duty payable by it in respect of its vessel. The assessee challenged this order and ultimately, the Tribunal by an order dated 3rd December, 1991, held that the assessee was entitled to the depreciation. It held that the customs duty in the sum of Rs. 3,76, 74,867/- was an ascertained liability and, therefore, formed a part of the cost. The Assessing Officer was directed to allow the depreciation on this amount, provided the assessee had made the necessary entries in the books of accounts in the year in which the relevant notification was issued, entitling the respondent to the benefit in that regard.
4. (A) The Assessing Officer, contrary to the directions of the Tribunal, determined the cost by excluding the customs duty, holding that the same would be contrary to the decisions of the Supreme Court in Asstt. Collector of Central Excise v. Dunlop India Ltd. [1985] 154 ITR 172 and CIT v. V.D. Swami & Co. (P.) Ltd. [1991] 188 ITR 325 (SC).
(B) The Commissioner of Income Tax (Appeals) by an order dated 19th March, 1997 rightly held that the Assessing Officer was bound by the decision of the Tribunal, till it was held to be incorrect in appropriate proceedings. He rightly held that the Assessing Officer was not entitled to ignore the orders of the Tribunal and, therefore, directed the Assessing Officer to implement the directions of the Tribunal.
(C) The Assessing Officer, accordingly, by an order dated 11th March, 1988 gave effect to the order of the Tribunal and revised the earlier order dated 27th October, 1992.
5. The orders attained finality and the matter in this regard stood concluded.
6. The Assessing Officer issued a notice dated 15th May, 1998 and passed an order dated 16th June, 1998, purportedly in the exercise of powers under Section 154 of the Act. He held that in the order dated 11th March, 1998, a mistake had crept in, as the decision of the Commissioner of Income Tax (Appeals) directing implementation of the order of the Tribunal to allow depreciation was taken into consideration. The error, he held, was on account of the fact that a decision of the Supreme Court in the case of Saharanpur Electric Supply Co. Ltd. v. CIT [1992] 194 ITR 294 had to be applied to the case. He held the order dated 11th March, 1998 giving effect to the order of the Commissioner of Income Tax (Appeals) to be incorrect. He recorded that the Supreme Court on 15th January, 1992 delivered the said Judgment and the decision of the Tribunal was dated 3rd December, 1991. He, therefore, proceeded to rectify in effect the order of the Tribunal, the order of the CIT (A) and the order of the AO, giving effect to these orders. By the order dated 16th June, 1998, the AO dealt with the matter on merits, effectively set aside the order of the Tribunal and considered himself free to criticize the Tribunal in the following terms :
“Since the Supreme Court’s decision quoted above was pronounced after the ITAT issued its directions, the ITAT had no benefit of the decision of the Supreme Court and accordingly directed to grant depreciation on the vessel by including the custom duty payable while determining the actual cost even though the ITAT was aware that such custom duty was not payable by a subsequent notification by the Govt. of India in 1987. As the decision of the Supreme Court is correct interpretation of law any action taken or directed contrary to such finding by the Supreme court constitute a mistake apparent from the record and the same is rectifiable u/s 154. In view of this the order dated 11-3-1998 giving effect to the CIT (Appeals)’s order is rectified as under withdrawing depreciation allowed on the custom duty payable.”
7. Surprisingly, even the CIT (A) confirmed this action. The Tribunal, however, by the impugned judgment set aside the orders of the AO and the CIT(A) which dismissed the assessee’s appeal. It is against this order of the Tribunal that the present appeal is filed.
8. Ms. Dessai tried to support the order of the AO dated 16th June, 1998 by relying upon Section 154(1)(1A). Section 154(1)(1A) reads as under :-
“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.
(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.
(2) Subject to the other provisions of this section, the authority concerned –
(a) may make an amendment under sub-section (1) of its own motion, and”
9. A plain reading of sub-section (1)(1A) of Section 154, makes it clear that the authority passing the order may amend the order. Thus, for instance, an order passed by the CIT(A) cannot be amended by the AO and an order passed by the Tribunal cannot be amended by the CIT(A) or the AO. In any event, neither the AO nor the CIT(A) can sit in judgment over the decision of the Tribunal and they cannot correct an order of the Tribunal. In the present case, the Revenue did not challenge the order of the Tribunal. The matter should have ended by the AO implementing the order of the Tribunal. In fact, upon remand, the AO erroneously did not implement the order of the Tribunal. The AO, ultimately, did so only when the CIT(A) by the said order dated 19th March, 1997 directed him to do so, stating that the AO was bound by the judgment of the Tribunal. The Revenue did not challenge this Order of the CIT(A) either. The matter regarding the claim for depreciation stood concluded, as far as the AO, the CIT(A), as well as the Tribunal are concerned. If the Revenue considered the order of the Tribunal incorrect, it was bound to challenge the same in accordance with law. The AO was not entitled suo motu under Section 154 to do so.
10. A view to the contrary would result in a totally chaotic situation, leaving it open to the AO, the CIT(A) to ignore the orders of the Tribunal and, in fact, set them aside and rendered them nugatory. As rightly held by the Tribunal, Section 154 can be invoked in respect of an order by the AO who passes the order. The AO cannot invoke Section 154 in respect of the orders passed by the appellate authorities – whether it is the CIT(A) or the ITAT. In other words, the AO can rectify a mistake in his own orders and not in the orders passed by the appellate authorities.
11. Indeed in this case, the AO had not only stated that the Tribunal did not have the benefit of the decision of the Supreme Court as it was rendered earlier, but has taken liberty of criticizing the Tribunal stating that the Tribunal granted depreciation “even though the ITAT was aware that such custom duty was not payable by a subsequent notification by the Govt. of India in 1987.” He ought not to have done so.
12. Added to this, the AO held : “As the decision of the Supreme Court is correct interpretation of law any action taken or directed contrary to such finding by the Supreme Court constitute a mistake apparent from the record and the same is rectifiable u/s 154.” It is not for the AO or for that matter even for this Court to consider whether a decision of the Supreme Court is a correct interpretation of the law or not. Decisions of higher Courts are bound to be followed, irrespective of the personal views of the lower Courts or authorities.
13. Mr. Dessai relied upon the judgments of the Supreme Court referred to in the question as raised in the appeal which is set out earlier.
14. The judgment of the Supreme Court in S.A.L. Narayana Row, CIT v. Model Mills Nagpur Ltd. [1967] 64 ITR 67 does not support the Department’s contention. In that case, after the assessment order was made, this Court had, in Khatau Makanji Spg. & Wvg. Co. Ltd. v. CIT [1956] 30 ITR 841, held that the levy of tax on the excess dividend was illegal. The respondent, therefore, applied for a refund. The application did not expressly state that the respondent had sought rectification under Section 35 of the 1922 Act. The Supreme Court observed that the request, in substance, was that the tax should be declared to be unlawfully collected and on that account be refunded and that, that could only be a request for rectification. The Income-tax Officer rejected the application. The Commissioner of Income-tax (Appeals) dismissed the respondent’s appeal. The respondent challenged this order under Article 226 of the Constitution, for an order compelling the Income-tax Officer to revise the order declining the request for rectification. The High Court granted the application. The Supreme Court dismissed the appeal. The Supreme Court held that the application to the Income-tax Officer was one in which the request for rectification of the order was implicit and that the Commissioner in dealing with the application for refund treated that application in that light.
Thus, this was a case where an application for rectification was made before the Income-tax Officer who had made the order sought to be rectified. In other words, it was not a case where the respondent sought an order from the Income-tax Officer for rectification of an order passed by the appellate authorities.
15. The reliance upon the judgment in Asstt. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227 is entirely misplaced. Firstly, it was a case under Section 254 of the Act. Secondly, in that case the Tribunal corrected its own order in exercise of powers under Section 254(2). The AO did not correct the order of the Tribunal.
16. The issue sought to be raised is not a substantial question of law.
17. The appeal is, accordingly, dismissed.
