ASSISTANT COMMISSIONER OF INCOME TAX v. SATIA PAPER MILLS LTD
[Citation -2006-LL-0131-14]

Citation 2006-LL-0131-14
Appellant Name ASSISTANT COMMISSIONER OF INCOME TAX
Respondent Name SATIA PAPER MILLS LTD.
Court ITAT
Relevant Act Income-tax
Date of Order 31/01/2006
Assessment Year 2001-02
Judgment View Judgment
Keyword Tags reassessment proceedings • regular books of account • revenue authorities • interest chargeable • show-cause notice • levy of interest • mistake apparent • prescribed time • issue of notice • advance tax
Bot Summary: The learned Authorised Representative relied on the judgment of Andhra Pradesh High Court in the case of CIT vs. K. Venkateswara Rao 67 CTR 136: 169 ITR 330 in support of the contention that if the judgment of jurisdictional High Court did not exist on the date when order under s. 154 was passed, the subsequent judgment of jurisdictional High Court on the issue would make the matter debatable and the same is not a mistake apparent from record. The undisputed facts of the case are that in the return of income filed, income was declared as per provisions of s. 115JB. The same was processed under s. 143(1)(a) and interest under ss. Co. Ltd., the Hon ble jurisdictional High Court of Punjab Haryana has dissented from the view taken by the Karnataka High Court in the case of Kwality Biscuits Ltd. vs. CIT and has held that interest under ss. The Court further held that power under 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. The learned counsel has relied on the later judgment of Punjab Haryana High Court in the case of CIT vs. P.K. Bhardwaj where it was held that the decision rendered by jurisdictional High Court on subsequent date on 27th Oct., 1998 would not justify invoking of provisions of s. 154 to assess amount in November, 1993. In a later case the Hon ble Punjab Haryana High Court did not have the benefit of referring to earlier judgment which was specifically on the issue of scope of powers under s. 154 and the effect of subsequent judgment of the jurisdictional High Court or Supreme Court. With utmost respect to the judgment of Andhra Pradesh High Court in the case of CIT vs. K. Venkateswara Rao and the judgment of Division Bench of the Punjab Haryana High Court in the case CIT vs. P.K. Bhardwaj, we rely on the judgment of Full Bench of Punjab Haryana High Court in the case of CIT vs. Smt. Aruna Luthra and hold that view taken by the CIT(A) is erroneous and contrary to the provisions of law.


By this order, we shall dispose of this appeal filed by Revenue against order of CIT(A), Bathinda, for asst. yr. 2001-02. only effective issue raised in this appeal relates to fact that CIT(A) was not justified in cancelling order passed by AO under s. 154 for charging interest under ss. 234B and 234C of IT Act, 1961 (in short "the Act"). facts of case are that assessee had filed return of income declaring therein income under s. 115JB and paid tax to tune of Rs. 9,88,658. This included amount of TDS of Rs. 3,72,942 and payment made under s. 140 amounting to Rs. 6,12,040. return was processed under s. 143(1)(a) and interest under ss. 234B and 234C was not charged. Subsequently, AO issued show-cause notice under s. 154 of Act proposing to charge interest under ss. 234B and 234C. In response to such show-cause notice, assessee by relying on judgment of Karnataka High Court in case of Kwality Biscuits Ltd. vs. CIT (2000) 159 CTR (Kar) 316: (2000) 243 ITR 519 (Kar) and decision of Tribunal, Delhi Bench, in case reported in Tej International (P) Ltd. vs. Dy. CIT (2000) 69 TTJ (Del) 650 submitted that interest under ss. 234B and 234C could not be charged in case where income was computed under s. 115J or 115JB. However, AO referred to CBDT s Circular No. 13, dt. 9th Nov., 2001 as per which interest under ss. 234B and 234C was specifically directed to be charged in case where income was computed as per provisions of s. 115JB and accordingly rectified order under s. 154 and charged interest under ss. 234B and 234C amounting to Rs. 56,614 and 46,360, respectively. Being aggrieved, assessee filed appeal against order of AO before CIT(A). It was argued before CIT(A) that exercise of computing income as per provisions of s. 115JB could be made only after close of accounting year and, therefore, assessee could not ascertain liability for advance tax at time when same was due. Reliance was placed on judgment of Karnataka High Court in case of Kwality Biscuits Ltd. vs. CIT (supra). After considering submissions of assessee, learned CIT(A) held that issue whether interest under ss. 234B and 234C should be charged or not was debatable where two views were possible. Therefore, same fell outside scope of provisions of s. 154 of Act. relevant findings recorded by CIT(A) on p. 4 of impugned order are as under: "I have examined legal position discussed by learned counsel for appellant as well as details of order under s. 154. I am in agreement with learned counsel to effect that two views are clearly available on issue as to whether interest under ss. 234B and 234C should be charged or not. This is apparent from various case laws cited above by learned counsel. I, therefore, hold that provisions of s. 154 are not applicable on account of various judgments, mistake is not apparent from records. issue becomes debatable on account of various judgments quoted as above including Tax Commentary by Dr. Avadesh Ojha. In view of above, I hereby cancel order under s. 154 and restore original position before this order." Revenue is aggrieved by order of CIT(A). Hence, this appeal before us. learned Departmental Representative referred to order passed by AO under s. 154 of Act and submitted that as per Board s Circular No. 13, dt. 9th Nov., 2001 [(2001) 171 CTR (St) 45] interest under ss. 234B and 234C is chargeable in case where income is computed as per provisions of s. 115JB. He submitted that Board s instructions are binding on Revenue authorities and, therefore, AO was justified in rectifying order passed under s. 143(1)(a) under s. 154 of Act. learned counsel for assessee, on other hand, heavily relied on order of CIT(A) and reiterated submissions made before authorities below. He submitted that it is settled law that scope of powers of AO under s. 154 of Act is limited only to mistakes of law or facts which are apparent from record. issue which is debatable and where two views are possible falls outside purview of s. 154. In this regard, he relied on judgments of Supreme Court in cases of T.S. Balaram, ITO vs. Volkart Brothers (1971) 82 ITR 50 (SC) and Keshavji Ravji & Co. vs. CIT (1990) 82 CTR (SC) 123: (1990) 183 ITR 1 (SC) and Kerala High Court in case of ITO vs. Travancore Rayons Ltd. (1980) 14 CTR (Ker) 151: (1980) 122 ITR 425 (Ker). He further relied on judgment of Punjab & Haryana High Court in case of CIT vs. Rajesh Talkies (1996) 133 CTR (P&H) 474: (1996) 220 ITR 107 (P&H) where it was held that whether interest chargeable in case of returns filed pursuant to notices under s. 148 was debatable and, therefore, rectification for deletion of interest was not possible. He further stated that issue whether interest under ss. 234B and 234C could be charged in case where profit is determined as per provisions of s. 115JB was also debatable. He relied on judgment of Karnataka High Court in case of Kwality Biscuits Ltd. vs. CIT (supra) where it was held that interest under ss. 234B and 234C could not be charged in such case. He further submitted that this decision was followed by Tribunal, Delhi Bench in case reported in (2000) 69 TTJ (Del) 650 (supra). When attention of learned Authorised Representative was drawn to recent judgment of jurisdictional High Court of Punjab & Haryana in case of CIT vs. Upper India Steel Mfg. & Engg. Co. Ltd. (2004) 192 CTR (P&H) 385: (2005) 279 ITR 123 (P&H) where it was held that charging of interest under ss. 234B and 234C in case where income was computed as per provisions of s. 115J was mandatory and could be charged at time of processing return under s. 143(1)(a), learned Authorised Representative still maintained that this issue was debatable at time when return was processed as judgment of Punjab & Haryana High Court did not exist on date when AO passed order under s. 154 of Act. He also relied on recent judgment of Punjab & Haryana High Court in case of CIT vs. P.K. Bhardwaj (2005) 279 ITR 326 (P&H) where High Court held that since order of jurisdictional High Court came later than date when AO passed order under s. 154, issue was debatable when AO passed order under s. 154. He further submitted that Revenue has already initiated reassessment proceedings against assessee by issue of notice under s. 148 on 18th June, 2004 and, therefore, there would be no loss to Revenue. His attention was drawn to judgment of Punjab & Haryana High Court, Full Bench in case of CIT vs. Smt. Aruna Luthra (2001) 170 CTR (P&H)(FB) 73: (2001) 252 ITR 76 (P&H)(FB) where it was held that if there is judgment of jurisdictional High Court or Supreme Court, same would relate back to date when particular section was inserted in statute and provisions of s. 154 of Act would be applicable even though such judgment did not exist on date when order in dispute was passed. learned Authorised Representative relied on judgment of Andhra Pradesh High Court in case of CIT vs. K. Venkateswara Rao (1988) 67 CTR (AP) 136: (1988) 169 ITR 330 (AP) in support of contention that if judgment of jurisdictional High Court did not exist on date when order under s. 154 was passed, subsequent judgment of jurisdictional High Court on issue would make matter debatable and same is not mistake apparent from record. We have heard both parties at some length and given our thoughtful consideration to rival submissions, examined facts, evidence and material placed on record and gone through orders of authorities below. undisputed facts of case are that in return of income filed, income was declared as per provisions of s. 115JB. same was processed under s. 143(1)(a) and interest under ss. 234B and 234C which was otherwise chargeable on basis of income declared under s. 115JB, same was not charged. AO charged same as per order dt. 23rd June, 2003 passed under s. 154 of IT Act, 1961. learned CIT(A) has deleted same by relying on judgment of Karnataka High Court in case of Kwality Biscuits Ltd. vs. CIT (supra). However, in case of CIT vs. Upper India Steel Mfg. & Engg. Co. Ltd. (supra), Hon ble jurisdictional High Court of Punjab & Haryana has dissented from view taken by Karnataka High Court in case of Kwality Biscuits Ltd. vs. CIT (supra) and has held that interest under ss. 234B and 234C is inescapable even in case where income is computed as per provisions of s. 115J (now s. 115JB). Court has further held that charging of interest under these sections does not fall in category of adjustments mentioned under s. 143(1)(a) and, therefore, it cannot be equated with adjustments. relevant findings recorded by Hon ble High Court on p. 125 of 279 ITR (headnotes) are as under: "Held, that Tribunal was required to resolve issue solely on merits and could not have granted relief on ground that issue was debatable. If explanation of assessee that profits under s. 115J could only be determined after close of year were to be accepted, then no assessee who maintains regular books of account, would be liable to pay advance tax as in those cases also, income could only be determined after close of books of account at end of year. Tribunal had wrongly close of books of account at end of year. Tribunal had wrongly equated AO s action in levying interest under ss. 234B and 234C with adjustment referred to in s. 143(1)(a). Thus, tests applicable to examine validity of adjustments permissible under s. 143(1)(a) had been wrongly applied by Tribunal for quashing levy of interest under ss. 234B and 234C." Therefore, as per judgment of Punjab & Haryana High Court in above case, order of CIT(A) deserves to be set aside. Now next question that requires to be considered by this Bench is whether judgment of Hon ble Punjab & Haryana High Court in above case which was delivered on 25th Sept., 2004 and order under s. 154 was passed by AO on 23rd June, 2003 and therefore, judgment could be held to apply to date when AO passed order under s. 154 of Act. This issue came to be considered by Hon ble Punjab & Haryana High Court (Full Bench) in case of CIT vs. Smt. Aruna Luthra (supra) where it was held that s. 154 does not provide that error has to be seen in order with reference to date on which it was passed. Court further held that power under s. 154 can be invoked even when issue is decided by jurisdictional High Court or superior Court after order had been passed. It was held that if order of jurisdictional High Court or Supreme Court is of later date, same would relate back to date when section was inserted in statute and order giving rise to such dispute was passed. In this respect, it would be appropriate to reproduce herein relevant paras on p. 80 of 252 ITR where Court observed as under: "There is another aspect of matter. In given case, on interpretation of provision, authority can take view in favour of one of parties. Subsequent to order, jurisdictional High court or their Lordships of Supreme Court interpret same provision and take contrary view. apparent effect of judgment interpreting provision is that view taken by authority is rendered erroneous. It is not in conformity with provision of statute. Thus, there is mistake. Should it still be perpetuated? If contention raised on behalf of assessee were accepted, result would be that even though order of authority is contrary to law declared by highest Court in State or country, still mistake could not be rectified for reason that decision is subsequent to date of order. Only dead make no mistake. Exemption from error is not privilege o f mortals. It would be folly not to correct it. Sec. 154 appears to have been enacted to enable authority to rectify mistake. legislative intent is not to allow it to continue. This purpose has to be promoted. legislature s will has to be carried out. By placing narrow construction, object of legislation shall be defeated. Such consequence should not be countenanced. Still further, it deserves mention that Parliament has prescribed period of four years for correction of mistake. While assessment under s. 143 or 144 has to be normally made within period of one or two years, mistake can be rectified at any time during period of four years. obvious intention of legislature is that if mistake has come to notice of authority within prescribed time, it should not be allowed to continue. It should be rectified. Regardless of fact that limitation for passing order of assessment or filing appeal has elapsed. Still further, provision has in-built safeguards. It provides for issue of notice. It ensures grant of opportunity. It limits jurisdiction of authority. action can benefit assessee as well as Revenue. In this situation, there appears to be no ground for placing unduly restricted interpretation on provision." Thus, it is clear that even if impugned order of CIT(A) was passed before date of judgment of Punjab & Haryana High Court, yet same was erroneous and contrary to provisions of Act as interpreted by Punjab & Haryana High Court. Therefore, same deserves to be set aside and that of AO is to be restored. learned counsel has relied on later judgment of Punjab & Haryana High Court in case of CIT vs. P.K. Bhardwaj (supra) where it was held that decision rendered by jurisdictional High Court on subsequent date on 27th Oct., 1998 would not justify invoking of provisions of s. 154 to assess amount in November, 1993. This judgment is no doubt in favour of assessee because in this case also order under s. 154 was passed on 23rd June, 2003. AO had not relied on judgment of Punjab & Haryana High Court in case decided by High Court on 25th Sept., 2004 (supra). But in present case of CIT vs. P.K. Bhardwaj (supra), judgment of Full Bench of Punjab & Haryana High Court in case of CIT vs. Smt. Aruna Luthra (supra) was not cited before High Court. Therefore, in later case Hon ble Punjab & Haryana High Court did not have benefit of referring to earlier judgment which was specifically on issue of scope of powers under s. 154 and effect of subsequent judgment of jurisdictional High Court or Supreme Court. Moreover, it is settled law that judgment of Full Bench/larger Bench gets precedence over judgment of Division Bench/smaller Bench of same High Court. It is also settled law that judgment of jurisdictional High Court is binding on all authorities falling in its jurisdiction even though there is judgment of some other High Court taking contrary view. Therefore, with utmost respect to judgment of Andhra Pradesh High Court in case of CIT vs. K. Venkateswara Rao (supra) and judgment of Division Bench of Punjab & Haryana High Court in case CIT vs. P.K. Bhardwaj (supra), we rely on judgment of Full Bench of Punjab & Haryana High Court in case of CIT vs. Smt. Aruna Luthra (supra) and hold that view taken by CIT(A) is erroneous and contrary to provisions of law. Therefore, order of CIT(A) is set aside and that of AO is restored. grounds of appeal of Revenue are allowed. In result, appeal of Revenue is allowed. *** ASSISTANT COMMISSIONER OF INCOME TAX v. SATIA PAPER MILLS LTD.
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