Case Law Details
JMD Auto India Pvt. Ltd Vs ACIT (ITAT Mumbai)
The issue under consideration is whether decision based on a debatable point of view can be treated as a mistake apparent from the record?
ITAT states that the power of rectification u/s 154 of the Act can be exercised only if there is a mistake apparent from the record of the assessment of the assessee. In other words, in order to attract the power to rectify u/s 154, it is not sufficient, if there is merely a mistake in the order sought to be rectified. The mistake could be rectified must be one apparent from the record. The plain meaning of the word “apparent” is that it must be something which appears to be so ex facie and is incapable of argument or debate. It, therefore, follows that a decision on a debatable point of law or fact or failure to apply the law to a set of facts, which remain to be investigated, cannot be corrected by way of rectification. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions; a decision on a debatable point of law is not a mistake apparent from record.
In the instant case, the mistake as pointed out by the Ld. counsel is not apparent on the record; not obvious and patent mistake. In the instant case, the mistakes can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. In the instant case, the mistakes pointed out by the Ld counsel are rather debatable. Therefore, the appeal is dismissed.
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal filed by the assessee. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-24, Mumbai [in short ‘CIT(A)’] and arises out of the order passed u/s 154 of the Income Tax Act 1961, (the ‘Act’).
2. The grounds of appeal filed by the assessee read as under :
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) legally erred in confirming the order u/s 154 of the Act passed by AO.
1.1 On the facts and circumstances of the case and in law the Ld. CIT(A) confirmed the decision of the AO in not allowing the deduction of the profit on sale of fixed asset amounting to Rs.11,97,269 under the normal provision of the Act. The said gain ought to have been reduced from the computation of profits from business being a capital receipt not chargeable to tax. The said mistake being rectifiable as mistake apparent on record was dismissed by the Ld. CIT(A).
1.2 On the facts and circumstances of the case and in law the Ld. CIT(A) confirmed the decision of the AO in not granting the depreciation @ 60 % on the opening WDV of the software expenses placed at Rs.13,50,985. In A.Y. 2010-11, pursuant to order passed u/s 143(3) of the Act, the AO disallowed the software expenses claimed as revenue and allowed depreciation at Rs.5,78,993/- [being 30% of the total as the asset was put to use on 30/09/2009]. The application was made u/s 154 for consequential effect of the depreciation to be given @60% on the opening WDV of software, which was rejected by the AO and confirmed by CIT(A).
3. Briefly stated, the facts are that the assessee filed its return of income for the assessment year (AY) 2011-12 on 29.09.2011 declaring total income of Rs. Nil and book profit of Rs. 1,04,78,511/-. The assessment u/s 143(3)/115JB was completed by the Assessing Officer (AO) on 15.03.2014, arriving at total income of Rs.87,67,320/-. Thereafter, the assessee filed in application u/s 154 on 01.08.2017 stating that (i) during the relevant year, the company had sold a fixed asset on which a profit of Rs.11,97,269/- had arisen on account of sale of the showroom; as per IT Act, the block of asset of the office premises had not ceased to exist and accordingly the provisions of section 50 were not applicable in terms of the tax liability on short term capital gains (STCG) ; the said amount was required to be reduced from the computation of income, which at the time of filing the return, the assessee had not done so; (ii) at the time of filing the return of income, the assessee had claimed a set off of brought forward loss of AY 2010-11, for which it had filed an appeal with regard to the disallowance made as per the order passed u/s 143(3); in the said order for AY 2010-11, the then AO had disallowed software expenses amounting to Rs.19,25,978/- on which he had allowed depreciation @ 30% as the asset was put to use on or after 30.09.2009; while completing the assessment for AY 2011-12 u/s 143(3), the AO ought to have allowed depreciation @ 60% on the WDV of Rs.13,50,985/-; however, no such depreciation was given while framing the assessment order for the relevant assessment year.
However, the AO rejected the application u/s 154 filed by the assessee on the reason that with regard to the 1st ground there is no mistake apparent from record, which can be rectified. On the 2nd ground, the AO dismissed the rectification application filed by the assessee on the ground that the same issue is pending before the Ld. CIT(A).
4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that vide order dated 06.12.2018, the Ld. CIT(A) by relying on the judgment of the Hon’ble Supreme Court in Volkart Brothers 82 ITR 50 (SC), dismissed the appeal filed by the assessee.
5. Before us, the Ld. counsel for the assessee submits that during the impugned assessment year the appellant had sold a fixed asset on which a profit of Rs.11,97,269/- had arisen on account of sale of the show-room. It is explained that as per the provisions of the Act, the block of asset of the office premises had not ceased to exist and accordingly the provisions of section 50 were not applicable in terms of tax liability on STCG and therefore, the said amount was required to be reduced from the computation of income, which at the time of filing of the return of income, the assessee has not done so. It is further explained that the assessee had requested the AO to carry out such rectification to the return of income during the course of assessment proceedings.
The Ld. counsel also submits that during the course of assessment proceedings completed u/s 143(3), the appellant had brought to the knowledge of the AO vide letter dated 04.09.2013 that the profit on sale of show-room amounting to Rs.11,97,269/- remained to be reduced while computing the profits u/s 115JB; however, the AO without deliberating on the issue passed the order without considering the submission made vide letter dated 04.09.2013.
Further, it is stated that for AY 2010-11, the assessee had incurred software expenses amounting to Rs.19,25,978/- which was claimed as revenue; the then AO while passing order u/s 143(3) treated the said software expenses as capital expenses and allowed depreciation thereon at Rs.5,78,993/- being 30% of software expenses as was purchased after 01.09.2009. It is stated that letters were filed on 11.06.2014 and 01.08.2017 asking the AO to rectify the above mistake and also to grant depreciation on the WDV of the software expenses amounting to Rs.13,50,985/-.
The Ld. counsel submits that the above mistakes being apparent from record are amenable to rectification u/s 154 of the Act.
6. On the other hand, the Ld. Departmental Representative (DR) referring to the decision in CIT v. Titaghar Paper Mills Co. Ltd. (1992) 62 TAXMAN 40 (Cal), CIT v. Sandeep Bipinchandra (1986) 27 TAXMAN 562 (Guj.) and Raja Hari Chand Raj Singh (1978) 114 ITR 727 (All.) submits that the disputed issues herein are not mistakes apparent from record and therefore, not rectifiable u/s 154 of the Act.
7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below.
The power of rectification u/s 154 of the Act can be exercised only if there is a mistake apparent from the record of the assessment of the assessee. In other words, in order to attract the power to rectify u/s 154, it is not sufficient, if there is merely a mistake in the order sought to be rectified. The mistake could be rectified must be one apparent from the record. The plain meaning of the word “apparent” is that it must be something which appears to be so ex facie and is incapable of argument or debate. It, therefore, follows that a decision on a debatable point of law or fact or failure to apply the law to a set of facts, which remain to be investigated, cannot be corrected by way of rectification.
In T.S. Balaram v. Volkart Bros. (1971) 82 ITR 50 (SC), their Lordships of the Hon’ble Supreme Court have held that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions; a decision on a debatable point of law is not a mistake apparent from record.
In the instant case, the mistake as pointed out by the Ld. counsel is not apparent on the record; not obvious and patent mistake. In the instant case, the mistakes can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. In the instant case, the mistakes pointed out by the Ld counsel are rather debatable. Thus the ratio laid down by the Hon’ble Supreme Court in Volkart Bros (supra) is squarely applicable here.
In view of the above factual scenario and position of law, we uphold the order of the Ld. CIT(A).
8. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 30.01.2020, this order thereon is being pronounced today, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon’ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid-19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid-19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial work all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon’ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that “In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Hon’ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020”.
The Hon’ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that “while calculating the time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”.
Viewed thus, the exception to 90 day time limit for pronouncement of orders inherent in Rule 34(5)(c) clearly comes into play in the present case.
9. In the result, the appeal is dismissed. Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board.
