DEPUTY COMMISSIONER OF INCOME TAX v. JUSTICE DILIP KUMAR SETH
[Citation -2005-LL-0902-2]

Citation 2005-LL-0902-2
Appellant Name DEPUTY COMMISSIONER OF INCOME TAX
Respondent Name JUSTICE DILIP KUMAR SETH
Court ITAT
Relevant Act Income-tax
Date of Order 02/09/2005
Assessment Year 1999-2000
Judgment View Judgment
Keyword Tags rectification of mistake • revenue authorities • mistake apparent • outstanding fee • debatable issue • legal liability • speaking order • mistake of law • receipt basis • annual value • tax effect • cash basis
Bot Summary: Being aggrieved, the assessee carried the matter before the learned CIT(A), wherein it was submitted that on identical facts the Hon ble Calcutta High Court in case of Justice R.M. Datta has held that sum received by an assessee by way of receipts of professional fees for professional services rendered before he was appointed as a Judge, were not taxable under s. 28 or under s. 56 or under s. 176(4) of the IT Act, 1961. The assessee further submitted before the learned CIT(A) that the AO was competent under s. 154 of the Act to rectify the mistake and pointed out that the AO cannot assess an amount which is not taxable in law even if the same is shown by the assessee as taxable and relied on the judgment of the Hon ble Calcutta High Court in case of CIT vs. Bhaskar Mitter 73 TAXMAN 437. The assessee further submitted that even otherwise s. 143(1)(ii) provides that if any refund is due on the basis of return made it shall be granted to the assessee and an intimation to that effect shall be made to the assessee. The learned CIT(A) after considering the above submission of the assessee observed that outstanding professional fees received by the assessee was not taxable either under the head Profits and gains of business or profession or under the head Income from other sources. The learned Departmental Representative submitted that the provision of s. 154 has no application in this case as this section is enacted for rectification of mistake and in case of mistake committed by assessee, the only remedial measure available with the assessee for rectification of mistake was to file a revised return which the assessee has failed to do, and since the Department also did not do any mistake in processing the return under s. 143(1), the AO did not have any power to alter the total income as declared by the assessee. So far as the taxability of the above receipt in the hands of the assessee is concerned, in our considered opinion, the learned CIT(A) was justified in holding that the above receipt was not taxable under s. 28 or 56 or under s. 176(4) of the IT Act keeping in view the decision of the Hon ble Calcutta High Court on identical issue in case of Justice R.M. Datta, wherein it was held as under: Held, that it was admitted that the assessee had been maintaining his accounts on receipt basis. In view of the above facts and circumstances and considering the decision b y the Hon ble Supreme Court and Calcutta High Court, it is apparently clear that the above amount received by the assessee prior to his elevation could not be taxed and the assessee has rightly moved a petition under s. 154 t o rectify the intimation sent by AO, and the AO was well-competent to rectify such intimation in view of the provision as laid down in ss.


Jugal Kishore, A.M.: This is appeal filed by Revenue against order of learned CIT(A)-XXXVII, Kolkata, dt. 31st March, 2005 for asst. yr. 1999-2000 on following grounds of appeal: (i) That learned CIT(A) erred in law as well as in facts of case by accepting reference to Court judgment as part of records for purpose of s. 154 of IT Act, 1961. (ii) That learned CIT(A) erred in law as well as in facts of case by directing AO to consider rectification petition afresh in contradiction to provisions of s. 143(1) of IT Act, 1961. Briefly Stated facts of case are that during previous year relevant to asst. yr. 1999-2000 assessee received, on receipt basis, sum of Rs. 3,36,575 representing outstanding fees for professional services rendered by him during period prior to his elevation to Hon ble Calcutta High Court Bench w.e.f. 19th Dec., 1994. assessee included above receipt in his return for asst. yr. 1999-2000 under head "Income from other sources" which was processed and intimation under s. 143(1)(a) was issued by AO accepting returned income. assessee thereafter by letter dt. 12th Feb., 2003 requested AO to rectify said intimation under s. 154 of Act in light of judgment of Hon ble Calcutta High Court in case of CIT vs. Justice R.M. Datta (1989) 180 ITR 86 (Cal), wherein it was held that income received by assessee prior to his elevation could not be taxed. AO vide his order under s. 154 dt. 1st Aug., 2003 rejected application of assessee with observation that outstanding fee for professional services was not taxable under s. 28 but was taxable under s. 56 of IT Act. AO further observed that even otherwise rectification under s. 154 was not possible as AO has no power under s. 143(1) to alter total income declared by assessee in light of decision of Hon ble Supreme Court in case of CIT vs. Keshri Metal (P) Ltd. (1999) 155 CTR (SC) 531: (1999) 237 ITR 165 (SC). Being aggrieved, assessee carried matter before learned CIT(A), wherein it was submitted that on identical facts Hon ble Calcutta High Court in case of Justice R.M. Datta (supra) has held that sum received by assessee by way of receipts of professional fees for professional services rendered before he was appointed as Judge, were not taxable under s. 28 or under s. 56 or under s. 176(4) of IT Act, 1961. assessee further contended that Hon ble Calcutta High Court followed judgment of Hon ble Supreme Court in case of Nalinikant Ambalal Mody vs. S.A.L. Narayan Row, CIT (1966) 61 ITR 428 (SC). assessee also relied on recent judgment of Hon ble Supreme Court in case of CIT vs. D.P. Sandu Bros. Chembur (P) Ltd. (2005) 193 CTR (SC) 578: (2005) 273 ITR 1 (SC), wherein it was held that if particular income could not be taxed under s. 45, it cannot otherwise be taxed under s. 56 or it could not be taxed at all. assessee further submitted before learned CIT(A) that AO was competent under s. 154 of Act to rectify mistake and pointed out that AO cannot assess amount which is not taxable in law even if same is shown by assessee as taxable and relied on judgment of Hon ble Calcutta High Court in case of CIT vs. Bhaskar Mitter (1994) 73 TAXMAN 437 (Cal). assessee further submitted that even otherwise s. 143(1)(ii) provides that if any refund is due on basis of return made it shall be granted to assessee and intimation to that effect shall be made to assessee. assessee also submitted that AO was well within his jurisdiction to have taken action under s. 154(1)(b) of Act to rectify order under s. 143(1). learned CIT(A) after considering above submission of assessee observed that outstanding professional fees received by assessee was not taxable either under head "Profits and gains of business or profession" or under head "Income from other sources". CIT(A) further held that AO was competent to rectify intimation under s. 143(1) for purpose of withdrawing inclusion of outstanding fee and directed AO to consider rectification petition afresh in light of above observation. Revenue is aggrieved with such order of learned CIT(A) and has now come in appeal before us. In appeal before us, learned Departmental Representative for Revenue, while defending order of AO and assailing order of learned CIT(A), has submitted that since assessee has himself included outstanding fee received by him in return of income under head "Income from other sources", which was processed by AO under s. 143(1)(a) of Act. Hence application by assessee to rectify earlier intimation under s. 154 in view of decision of Hon ble Calcutta High Court in case of Justice R.M. Datta (supra) was rightly rejected by AO as such return could not be rectified by him as assessee had not filed revised return and Department did not commit any mistake while processing return under s. 143(1). learned Departmental Representative submitted that provision of s. 154 has no application in this case as this section is enacted for rectification of mistake and in case of mistake committed by assessee, only remedial measure available with assessee for rectification of mistake was to file revised return which assessee has failed to do, and since Department also did not do any mistake in processing return under s. 143(1), AO did not have any power to alter total income as declared by assessee. learned Departmental Representative has further Stated that scope of s. 154 is limited and could not be invoked in case of debatable issue and relied on judgment of Hon ble Supreme Court in case of T.S. Balaram, ITO vs. Volkart Bros. (1971) 82 ITR 50 (SC). It has, therefore, been pleaded by learned Departmental Representative that CIT(A) was not justified in directing AO to rectify intimation and, therefore, such order of CIT(A) was liable to be set aside and order of AO ought to be restored. In his rival submission, learned counsel for assessee has relied heavily on order of learned CIT(A) and has reiterated his submission made before him. learned counsel has further relied on judgment as cited before learned CIT(A). learned counsel has submitted that in view of above facts it is apparently clear that above receipt was neither taxable under s. 28 nor under s. 56 of Act and, therefore, so far as taxability of above case is concerned, same could not be taxed in hands of assessee as held by Hon ble Calcutta High Court in case of Justice R.M. Dutta (supra). Arguing on technical aspect of case, learned counsel for assessee has submitted that AO cannot assess amount which is not taxable in law, even if same is shown by assessee as taxable as held by Hon ble Calcutta High Court in case of Bhaskar Mitter (supra). learned counsel has further pointed out that Hon ble Calcutta High Court in case of CIT vs. Premier Polymers (P) Ltd. (1992) 107 CTR (Cal) 310 has held that in case where point of law in dispute was settled by judgment of Hon ble Court, Department had to follow law laid down by Court, and if that was not done then obvious and glaring mistake of law has been committed n d such mistake can be rectified under s. 154 of IT Act. learned counsel has further relied on ss. 143(1)(ii) and 154(2) in support of his contention that AO has jurisdiction available with it to rectify such glaring mistake apparent from record. learned counsel has, therefore, submitted that learned CIT(A) was justified in taking care to relevant provision of Act and decisions of various High Courts and Hon ble Supreme Court while deciding issue in favour of assessee. Lastly, it has also been pointed out by learned counsel for assessee that even otherwise tax effect in this case was less than Rs. 1 lakh which could well nullify appeal of Revenue in view of decision of Hon ble Bombay High Court in case of CIT vs. Camco Colour Co. (2002) 173 CTR (Bom) 255: (2002) 254 ITR 565 (Bom). We have given our careful consideration to rival submissions made before us and have perused orders of tax authorities. We have also considered various case laws relied by both parties. AO in this case has rejected application filed by assessee for rectification of intimation observing that jurisdiction was not available with him to rectify such intimation as there was no mistake on part of Department while processing return and assessee could have rectified mistake vide revised return which was not filed by him in this case. AO has also held that so far as taxability of above receipt is concerned, same was taxable in view of provision contained in s. 56 of IT Act. learned CIT(A), however, so far as taxability of amount is concerned has held that above receipt could not be taxed in hands of assessee either under s. 28 or under s. 56 of Act in view of decision by Hon ble Calcutta High Court in case of Justice R.M. Dutta (supra). learned CIT(A) has further observed that AO has jurisdiction to rectify intimation under s. 143(1)(a) under s. 154 in present case. We first take up issue regarding taxability of receipt by assessee. So far as taxability of above receipt in hands of assessee is concerned, in our considered opinion, learned CIT(A) was justified in holding that above receipt was not taxable under s. 28 or 56 or under s. 176(4) of IT Act keeping in view decision of Hon ble Calcutta High Court on identical issue in case of Justice R.M. Datta (supra), wherein it was held as under: "Held, that it was admitted that assessee had been maintaining his accounts on receipt basis. It was also admitted that sums in question had been received by assessee by way of receipts of professional fees for professional services rendered by assessee before he was appointed as Judge in 1967. income was not taxable under s. 28, 56 or 176(4) of Act." We also find that while passing such order, Hon ble Calcutta High Court followed judgment of Hon ble Supreme Court in case of Nalinikant Ambalal Mody (supra), wherein it was held as under: "That receipts were not chargeable to tax at all. receipts were outstanding dues of professional work done and were clearly fruits of assessee s professional activity. They were profits and gains of profession and they fell under fourth head, namely, "Profits and gains of business, profession or vocation". They were not, however, chargeable to tax under that head because under corresponding computing section, i.e., s. 10 of IT Act, 1922, income received by assessee, who kept his accounts on cash basis, in accounting year in which profession had not been carried on at all was not chargeable to tax. Nor could receipts be brought to tax under s. 12 as "Income from other sources". As heads of income were mutually exclusive and receipts could be brought under fourth head, they could not be brought under residual head "Income from other sources". Apart from above judgment, case law relied by learned Authorised Representative in case of D.P. Sandu Bros. Chembur (P) Ltd. (supra) of Hon ble Supreme Court, also strengthened above ratio laid down by Hon ble Calcutta High Court, wherein it was held that if particular income could not be taxed under s. 45 then it cannot otherwise be taxed under s. 56 or it could not be taxed at all. Coming to jurisdictional aspect whether AO was competent under s. 154 of Act to rectify mistake and we find weightage in contention of learned Authorised Representative while relying on s. 143(1)(ii) and s. 154(2) of Act. So far as s. 143(1)(ii) is concerned, it reads as under: "if any refund is due on basis of such return, it shall be granted to assessee and intimation to this effect shall be sent to assessee." above definition clearly laid down intention of legislature that AO is well competent to rectify intimation under s. 143(1) and thereafter making refund thereof. Further, provision as laid down in s. 154(2)(b) reads as under: "Subject to other provisions of this section, authority concerned (b) shall make such amendment for rectifying any such mistake which has been brought to its notice by assessee." above definition clearly laid down that AO is well-competent to rectify any mistake, which is brought to its notice by assessee also and, therefore, observation of AO and learned Departmental Representative, that such mistake committed by assessee could be rectified vide revised return only, does not stand at all. As above provision laid down in s. 154(2)(b) clearly suggests jurisdiction is available to AO under s. 154, in case mistake is brought to his notice by assessee also. Even otherwise AO cannot assess amount which is not taxable in law even if same is shown by assessee as held by Hon ble Calcutta High Court in case of Bhaskar Mitter (supra), wherein it was held as under: "The Revenue authorities, in our view, cannot be heard to say that merely because assessee has returned figure which is higher than annual value determined in accordance with correct legal principles, such higher amount and not correct amount should be lawfully assessed. assessee is liable to pay tax only upon such income as can be in law included in his total income and which can be lawfully assessed under Act. law empowers ITO to assess income of assessee according to law and determine tax payable thereon. In doing so he cannot assess assessee on amount, which is not taxable in law, even if same is shown by assessee. There is no estoppel by conduct against law nor is there any waiver of legal right as much as legal liability to be assessed otherwise than according to mandate of law (sic). It is always open to assessee to take plea that figure, though shown in his return of total income, is not taxable in law." judgment relied by learned counsel in case of Premier Polymers (P) Ltd. (supra) also laid down ratio in favour of assessee as laid down by Hon ble Calcutta High Court vide para 5 of its order which reads as under: "It is well-settled that obvious glaring mistake can be corrected under provisions of s. 154 of IT Act, 1961. In instant case, point of law in dispute was settled by judgment of this Court. It was not case of Department that judgment was under appeal or that judgment had been set aside or that even contrary view had been taken in some other case on this point. Department was bound to apply principles of law laid down by Calcutta High Court. Since point of law had already been decided by Calcutta High Court ITO had to follow law laid down by this Court. If that was not done then obvious and glaring mistake of law had been committed. Such mistake can be rectified under s. 154 of Act." In view of above facts and circumstances and considering decision b y Hon ble Supreme Court and Calcutta High Court, it is apparently clear that above amount received by assessee prior to his elevation could not be taxed and, therefore, assessee has rightly moved petition under s. 154 t o rectify intimation sent by AO, and AO was well-competent to rectify such intimation in view of provision as laid down in ss. 143(1)(ii) and 154(2)(b) of Act and in view of decision by Hon ble Calcutta High Court in case of Bhaskar Mitter (supra) and in case of Premier Polymers (P) Ltd. (supra). We, therefore, in light of above discussion, are of considered opinion that learned CIT(A) while deciding above two issues has passed well-reasoned and speaking order which does not call for any interference from our side. We, therefore, uphold same and reject grounds raised by Revenue. In result, appeal filed by Revenue is dismissed. *** DEPUTY COMMISSIONER OF INCOME TAX v. JUSTICE DILIP KUMAR SETH
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