Case Law Details
DCIT Vs Kashmir Steel Rolling Mills (ITAT Amritsar)
The undisputed facts in the present case are that the assessee claimed excise duty refund and interest subsidy as revenue receipt in the return of income and the assessment order was passed on 17.12.2009. The Hon’ble Jurisdictional High Court of J & K in the case of Shree Balaji Alloys vs CIT (supra) vide order dated 31.03.2011, has held the said excise duty refund and interest subsidy as capital receipt. The assessee moved an application u/s 154 of the Act before the AO which was rejected. The arguments made by the Ld. DR that there cannot be any rectification, if the mistake is committed by the assessee and it can only be rectified when it is a mistake done by the AO. Now, the question arises whether power u/s 154 can be invoked when the issue is decided in favour of assessee by the Jurisdictional High Court after the order by an authority has been passed.
HC held that section 154 has been enacted to enable the authorities to rectify the mistake whether the mistake is done by assessee or by AO. The legislative intent in section 154 is not to allow a mistake to continue. A liberal construction of the statute has to be made else the object of the legislation shall be forfeited. Accordingly, the arguments by Ld. DR cannot help the Revenue. Therefore, in the circumstances and facts of the present case, Hon’ble Jurisdictional Court of J & K having held the Excise Duty Refund and Interest Subsidy received by the assessee as capital receipts is a decision subsequent to the decision of AO dated 17.12.2009 where such receipts have been accepted as revenue as returned by the assessee. Accordingly, in view of the decision in the case of Smt. Arun Luthra (supra) and Kil Kotagiri Tea and Coffee Estates Ltd. (supra), we are of the view that there is a mistake apparent from record which is rectifiable u/s 154 of the Act and the Ld. CIT(A) has rightly directed the AO to carry out the necessary rectification and the order of the Ld. CIT(A) is found to be well reasoned one and we find no infirmity in the same.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal of the Revenue arises from the order of the CIT(A)- 1, Ludhiana, dated 16.12.2013 for the assessment year 2007-08. The Revenue has raised the following grounds of appeal:
1.(a) That the Ld. CIT(A) has erred in law and on facts in directing the AO to carry out the rectification as requested by the assessee treating the amounts of interest subsidy and excise duty refund as capital receipts in view of the order passed by the Hon’ble Court of Jammu & Kashmir, in the case of M/s. Shree Balaji Alloys reported as (2011) 333 ITR 335 (J&K).
1.(b) That the Ld. CIT(A) has erred in law and on facts by not appreciating the facts reported by the AO in his order u/s 154 that the return of income has been processed at an income declared by the assessee firm itself and SLP has also been filed before the Hon’ble Supreme Court of India against the order passed by the Hon’ble High Court of Jammu and Kashmir in the case of Shree Balaji Alloys.
1.(c) That the Ld. CIT(A) has erred in law and on facts by not appreciating the facts that the excise duty refund of Rs.6,82,37,951/- and interest subsidy of Rs.13,86,605/- was shown as revenue receipt by the assessee itself.
2. The appellant craves leave to add or amend the grounds of appeal on or before the appeal is heard and disposed off.
3. It is prayed that the order of the Commissioner of Income Tax (Appeals), be set aside and that of the AO be restored.”
2. The brief facts of the case are that while filing the return of income the assessee claimed excise duty refund of Rs.6,82,37,95 1/- and interest subsidy of Rs.13,86,605/- as revenue receipt and the assessment order was passed on 17.12.2009. In the meantime, the Hon’ble High Court of Jammu and Kashmir in the case of M/s. Shree Balaji Alloys reported in (2011) 333 ITR 335 (J&K) held that the excise duty refund and interest subsidy as capital receipts. The assessee moved an application u/s 154 of the Act for treatment of said excise duty refund and interest subsidy as capital receipt, which was rejected by the ACIT, Central Circle, Jammu vide order dated 12.04.2013, which is reproduced hereinbelow:
“Order u/s 154 of the Income Tax Act, 1961.
The return of income was processed u/s 143(1) on 27.03.2009 at an income of Rs.1,02,50,470/- as declared by the assessee creating Nil demand. Further, the case was assessed u/s 143(3) of the Income tax Act, 1961 on 17.12.2009 at an income of Rs.1,03,20,568/- creating a refund amounting to Rs.26,097/-. The addition is on account of petty expenses claimed under the head “Truck Expenses”.
Aggrieved with the order u/s 143(1) of the Income Tax Act, 1961 on 2 7.03.2009 the assessee moved an application u/s 154 of the Income Tax Act, 1961 on 15.03.2013 with the plea that interest subsidy and Excise Duty refund received by the assessee should be treated as capital receipt and not revenue receipt. As the return of income has been processed at an income declared by the assessee, the application u/s 154 as moved by the assessee is hereby rejected.
Moreover, the department has already filed an SLP before Hon ’ble Supreme Court of India by respectfully not accepting the decision of Hon ’ble J & K High Court in the case of Shree Balaji Alloys reported as (2011) 333 ITR 335 ( J&K) decided on 31.03.2011 regarding the issue of treating Excise Duty refund and interest subsidy as capital receipt.”
3. The Ld. CIT(A) allowed the claim of the assessee and the relevant findings of the ld. CIT(A) are reproduced here in below:
“2. The appellant is aggrieved against the order of the Assessing Officer passed u/s 154 of the Income Tax Act, 1961 wherein the assessee ’s claim of interest and excise duty subsidy being capital receipt had been rejected. The AO has recorded in the impugned order that the assessee had itself categorized the impugned items as revenue receipts and also the Income Tax Department had filed an SLP before Hon ’ble Supreme Court of India against the decision of Hon ’ble Jammu & Kashmir High Court in the case of Shree Balaji Alloys reported as 333 ITR 335. The appellant during the course of appellate proceedings has reiterated its claim that on the basis of decision of Hon ’ble Jurisdictional High Court of Jammu & Kashmir in the case of Shree Balaji Alloys, the receipts on account of excise duty refund and interest refund subsidy were held to be in the nature of capital receipts and not taxable at all. I have perused the judgment of Hon ’ble jurisdictional High Court of Jammu & Kashmir relied upon by the AR and it is seen that the facts of the case are on the same footings as in the case of the assessee and that is why the Assessing Officer has not been able to distinguish the two. However, it is incorrect in law on the part of the Assessing Officer not to give effect to the order of the Hon ’ble Jurisdictional High Court on the ground that SLP in the Hon ’ble Supreme Court against the said decision has been filed. I am in agreement with the claim of the appellant on the issue as, as far as the assessee is concerned the impugned receipts are clearly in the nature of capital receipts in view of the categorical decision of Hon ’ble Court of Jammu & Kashmir. As such, the Assessing Officer is directed to carry out the rectification as requested by the appellant.”
4. The Ld. DR argued that the assessee himself had declared in the return of income, the excise duty refund and interest subsidy as revenue receipt and the said return of income has been processed u/s 143(1) of the Income Tax Act, 1961. It was argued that rectification u/s 154 of the Act, can be done, if there is a mistake of the AO and the same cannot be rectified if there is a mistake of the assessee. In the present case, the assessee has committed a mistake by not including excise duty refund and interest subsidy mentioned hereinabove, as capital receipt in the return of income. Accordingly, the Ld. CIT(A) is not justified in directing the AO to carry out the rectification u/s 154 of the Act.
5. The Ld. Counsel for the assessee, Mr. Tarun Bansal, Advocate, on the other hand, strongly relied on the decision of the Ld. CIT(A) and argued that the order of the Ld. CIT(A) is well reasoned one and prayed to confirm the same. He mainly relied upon the decision of the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Smt. Aruna Luthra (2001) 252 ITR 76 (P&H) and the decision of the Hon’ble Kerala High Court in the case of Kil Kotagiri Tea and Coffee Estates Co. Ltd vs. Income Tax Appellate Tribunal & Others (1988) 174 ITR 579 (Ker).
6. We have heard the rival contentions and perused the facts of the case. The undisputed facts in the present case are that the assessee claimed excise duty refund and interest subsidy as revenue receipt in the return of income and the assessment order was passed on 17.12.2009. The Hon’ble Jurisdictional High Court of J & K in the case of Shree Balaji Alloys vs CIT (supra) vide order dated 31.03.2011, has held the said excise duty refund and interest subsidy as capital receipt. The assessee moved an application u/s 154 of the Act before the AO which was rejected. The arguments made by the Ld. DR that there cannot be any rectification, if the mistake is committed by the assessee and it can only be rectified when it is a mistake done by the AO. Now, the question arises whether power u/s 154 can be invoked when the issue is decided in favour of assessee by the Jurisdictional High Court after the order by an authority has been passed. In this regard, the Ld. Counsel for the assessee, Mr. Tarun Bansal, relied upon the decision of the Hon’ble Punjab & Haryana High Court (FB) in the case of CIT vs. Smt. Aruna Luthra (supra), where the facts and the decision of the Hon’ble High Court are reproduced for the sake of convenience hereinbelow
“The power given to the authority under section 154 of the Income-tax Act, 1961, is very wide. It can correct “any mistake” provided it is “apparent from the record”. Section 154 does not provide that the error has to be seen in the order with reference to the date which it was passed. The mistake has to be on the record of the case. The record would include everything on the case file. The return, the evidence and the order are a part of the record. Thus, even in he case of an assessment u/s 143(1), it cannot be assumed that there can be no error apparent from the record. Section 154 has been enacted to enable the authority to rectify the mistake. The legislative intent is not to allow it to continue. This purpose has to be promoted. The legislature’s will has to be carried out. By placing a narrow construction, the object of the legislation would be defeated. Parliament has prescribed a period of four years for correction of mistake. While an assessment u/s 143 or 144 has to be normally made within a period of one or two years, the mistake can be rectified at any time during the period of four years. The obvious intentions within the prescribed time, it should not be allowed to continue. Section 154 clearly provides for the intervention of the authority within the specified time, subject to the condition that the mistake is apparent and the issue is not debatable. Thus, any right under an order is subject to the provisions of the statute. That being so there is no vested right which can be said to have been taken away. The provision has inbuilt safeguards. It provides for the issue of notice. It ensures the grant of an opportunity to be heard. It limits the jurisdiction of the authority. The action can benefit the assessee as well as the Revenue. In this situation, there is no ground for placing an unduly restricted interpretation on the provision. The power u/s 154 can be invoked even when an issue is decided by the jurisdictional High Court or a superior court after the order had been passed.
In her return for the assessment year 1987-88, the assessee claimed a deduction from the profits of business, of a sum representing loss in chit fund. This was allowed in an assessment u/s 143(1). Subsequently, on the basis of a judgment of the High Court hold that the transactions did not involve any taxable income or revenue expenditure, the Assessing Officer added the sum in question, in proceedings u/s 154. The Tribunal held in favour of the assessee. On appeal:
Held, that the dispute related to the assessment year 1987-88. The parties had been litigating for more than 13 years. The ultimate tax effect was limited. Thus, even though the decision on the question of law was in favour of the Revenue, the order passed by the Tribunal was not being interfered with.”
6.1. Also the decision of the Hon’ble Kerala High Court, in the case of Kil Kotagiri Tea and Coffee Estates Co. Ltd. (supra) relied upon by the Ld. Counsel for the assessee, Mr. Tarun Bansal, Advocate, is reproduced for the sake of convenience (Head Note) here in below:-
“An order of assessment, based upon an interpretation or application of law which is ultimately found to be wrong in the light of judicial pronouncements rendered subsequently, discloses a mistake apparent from the record When the court decides a matter, it does not make the law in any sense but all it does is that it interprets the law and states what the law has always been and must be understood to have been Where an order is made by an authority, on the basis of a particular decision, the reversal of such decision in further proceedings will justify a rectification of the order based on that decision.
A binding decision rendered by a court is always retrospective and the decision which is overruled was never the law. The overruling decision should be deemed to have been in force even on the day when the order sought to be rectified was passed. A subsequent binding decision of the Supreme Court or of the High Court has retrospective operation as in the case of subsequent legislation and overruling is always retrospective.
Section 254(2) and section 154 of the Income-tax Act enable the concerned authorities to rectify any mistake apparent from the record The said expression has a wider content than the expression error apparent on the face of the record” occurring in Order 47, rule 1 of the Civil Procedure Code The restrictions on the power of review under Order 47, rule 1, Civil Procedure Code, 1908. The restrictions on the power of review u/s 47, rule 1, I do not hold good in the case of section 254(2) and section 154 of the Income-tax Act.
Even for the purpose of order 47, rule 1 of the Civil Procedure Code, 1908, which is more restrictive, a subsequent binding authority taking a different view of law is a good ground for review, on the ground that the order sought to be reviewed passed on an antecedent decision, which stands overruled, constitutes an error apparent on the face of the record.
For the assessment year 1974-75, the assessee claimed interest on the advance tax paid by it in excess but beyond the due dates. The income tax officer disallowed the claim of the assessee. The Commissioner (Appeals) upheld the claim of the assessee. The Tribunal following the decision of a single judge of the Kerala High Court in A.Sethumadhavan v. CIT (1980) 122 ITR 587 (Ker.) by order dated October 31, 1981, held that the belated payments were not to be taken into account as advance tax for the purpose of section 214 of Income-tax Act, 196, and hence interest was not admissible for such belated payments. A Division Bench of the High Court by order dated January 22, 1982 in Santha S. Shenoy v. Union of India (1982) 135 ITR 39 (Ker) reversed the decision of the single judge in A Sethumadhavan v. CIT (1980) 122 ITR 587 and held that payments of tax made within the financial year, though not within specified dates should be treated as advance tax and the assessee was entitled to interest on the excess tax paid. The assessee filed an application u/s 154 for rectification of the order of the Tribunal dated October 31, 1981, in view of the decision of the Division Bench in Santha S.Shenoy v. Union of India (1982) 135 ITR 39 (Ker.), holding that interest was admissible even for belated payments of advance tax. The Tribunal dismissed the application on the ground that rectification u/s 154 of the Act must be of a mistake which was a mistake in the light of the law in force at the time when the order sought to be rectified was passed and the subsequent decision of the Division Bench of the High Court had no retrospective operation as in the case of subsequent legislation or the decision of the Supreme Court. On an original petition filed by the assessee challenging the order of the Tribunal:
Held: that the order passed by the Appellate Tribunal dated October 31, 1981, relying on the decision of the single judge in Sethumadhavan’s case (1980) 122 ITR 587 (Ker.), disclosed a mistake apparent from the record, in the light of the subsequent overruling of the very decision relied on by the Appellant Tribunal, by a Division Bench in the decision reported in San tha S. Shenoy’s case (1982) 135 ITR 39 (Ker). When the Bench of the High Court overruled the decision of the single judge in Sethumadhavan’s case (1980) 122 ITR 587 (Ker.), the earlier decision was never the law. The law on the point at all times was as stated by the Bench in the decision reported in San tha S. Shenoy’s case (1982) 135 ITR 39 (Ker.) The application for rectification, dated June 17, 1982 was within four years from the date of the order of the Tribunal, and was one filed within the time allowed by law. The order passed by the Appellate Tribunal in the appeal disclosed a mistake apparent from the record, as it held that the assessee was not entitled to interest on the advance-tax paid beyond the due date, which had to be rectified. This should have been done by the Appellate Tribunal in exercise of the powers vested in it u/s 254(2) read with section 154 of the Income-tax Act.
{The Appellate Tribunal was directed to dispose of the application for rectification in the light of section 254(2) read with section 154 of the Income tax Act and in accordance with the law.”
7. Further, lately, vide order dated 24.11.14, passed in CWP Nos. 2548, 2722 and 2152 of 2014, in the case of ‘Supreme Industries Ltd. vs. The Additional Commissioner of Income-Tax and Others’, the Hon’ble Bombay High Court has held, following the decision of the Hon’ble Supreme Court in ‘Grindlays Bank Ltd. vs. Central Government Industrial Tribunal’, 1980 SCC 420, while dealing with a similar situation, though under section 254 of the Income Tax Act, that:
“12. It is a settled position in law that every authority exercising quasi judicial powers has inherent/incidental power in discharging of its functions to ensure that justice is done between parties i.e. no prejudice is caused to any of the parties. This power has not to be traced to any provision of the Act but inheres in every quasi judicial authority. This has been so held by the Supreme Court in Grindlays Bank Ltd. vs. Central Government Industrial Tribunal 1980 SCC 420. Therefore, the aforesaid principle of law should have been adopted by the Tribunal. It is expected from the Tribunal to adopt a justice oriented approach and not defeat the legitimate rights o the altar of procedures and technicalities. This is particularly so when there is no specific bar in the Act to correct an order passed on rectification.
It is fundamental principle of law that no party should be prejudiced on account of any mistake in the order of the Tribunal. Though not necessary for the disposal of this Petition, we express our disapproval of the stand taken in the impugned order that section 254(2) of the Act are meant only for rectifying the mistakes of the Tribunal and not of the parties. The Tribunal and the parties are not adversarial to each other. In fact, the Tribunal and the parties normally represented by Advocates/Chartered Accountants are comrades in arms to achieve justice. Therefore, a mistake from any source be it-the parties or the Tribunal so long as it becomes a part of the record, would require examination by the Tribunal under section 254(2) of the Act. It cannot be dismissed at the threshold on the above ground.”
8. Thus, this issue, it is seen, has been decided in favour of the assessee by the Hon’ble Supreme Court as well as by various Hon’ble High Courts across the country. The Department has not been able to cite any decision to the contrary. Thus, the legal position in this regard is unanimous and there is no divergence or cleavage of opinion interse amongst the Courts with regard thereto.
9. In the facts and circumstances and in view of the decision of the Hon’ble Punjab & Haryana High Court in the case of ‘CIT vs. Smt. Aruna Luthra’ (supra), the decision of the Hon’ble Kerala High Court, in the case of ‘Kil Kotagiri Tea and Coffee Estates Co. Ltd.’ (supra) and also in the case of ‘Supreme Industries’ (supra), in the present case, we find that there is a mistake apparent from record u/s 154 of the Act. By deriving the support of the decisions of both the Hon’ble Courts hereinabove, we are of the view that section 154 has been enacted to enable the authorities to rectify the mistake whether the mistake is done by assessee or by AO. The legislative intent in section 154 is not to allow a mistake to continue. A liberal construction of the statute has to be made else the object of the legislation shall be forfeited. Accordingly, the arguments by Ld. DR cannot help the Revenue. Therefore, in the circumstances and facts of the present case, Hon’ble Jurisdictional Court of J & K having held the Excise Duty Refund and Interest Subsidy received by the assessee as capital receipts is a decision subsequent to the decision of AO dated 17.12.2009 where such receipts have been accepted as revenue as returned by the assessee. Accordingly, in view of the decision in the case of Smt. Arun Luthra (supra) and Kil Kotagiri Tea and Coffee Estates Ltd. (supra), we are of the view that there is a mistake apparent from record which is rectifiable u/s 154 of the Act and the Ld. CIT(A) has rightly directed the AO to carry out the necessary rectification and the order of the Ld. CIT(A) is found to be well reasoned one and we find no infirmity in the same.
10. The assessee has also filed C.O. Nos. 10 & 11(Asr)/2014 for the assessment year 2007-08. The Ld. Counsel for the assessee has withdrawn O. bearing No.10(Asr)/2014 and the same is dismissed as withdrawn.
11. As regards C.O. bearing No.11(Asr)/2014, the same is supportive to the order of the Ld. CIT(A) and the assessee, in fact, does not have any grievance in the said C.O. and accordingly, the same is dismissed.
12. In the result, the appeal of the Revenue in ITA No. 130(Asr)/2014 and C.Os. bearing Nos. 10 & 11(Asr)2014 of the assessee are dismissed.
Order pronounced in the open court on 16th January, 2015.
