IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 12.8.2014 CORAM HON'BLE MR.JUSTICE R.SUDHAKAR AND HON'BLE MR.JUSTICE G.M.AKBAR ALI T.C.(A). No.2 of 2004 Commissioner of Income Tax Madurai. Appellant Vs. Sree Ayyanar Spinning and Weaving Mills Ltd. Mallanginar. Respondent PRAYER: Appeal under Section 260A of Income Tax Act, 1961 against order of Income Tax Appellate Tribunal Chennai 'A' Bench, dated 31.1.2003 in M.P.No.4/Mds.2000 in ITA. No.719/Mds/1994, for assessment year 1989-90. For Appellant : Mr. M.Swaminathan Senior Standing Counsel For Respondent : Mr. S.Sridhar JUDGMENT (Delivered by R.SUDHAKAR, J.) matter is taken up for hearing pursuant to order of Supreme Court in Sree Ayyanar Spinning and Weaving Mills Ltd. v. Commissioner of Income-tax, [2008] 171 Taxman 498 (SC), restoring this tax case appeal to file. (2) 2.1. brief facts of case are as under: assessee is engaged in business of manufacture of cotton and man-made fibre yarn. For assessment year 1989-90, assessment was completed on 27.2.1992 determining taxable total income for 21 months ending 31.3.1989 at Rs.45,92,240/- based on book profits under Section 115J of Income Tax Act, 1961 (for brevity, Act ). main reason for determining said amount was that assessee changed its method of claiming depreciation from Straight Line Method to Written Down Value method. 2.2. On appeal by assessee, Commissioner of Income Tax (Appeals), by order dated 28.8.1992 made in I.T.A. No.60 of 1992-93, held against assessee. However, Tribunal set aside orders passed by authorities below and remitted matter to Assessing Officer for reconsideration vide order dated 22.3.1993 made in I.T.No.2531/Mds/92. 2.3. Thereafter, Assessing Officer considered issue afresh and added back depreciation relating to earlier period while calculating book profits for purpose of Section 115J of Act. In other words, Assessing Officer calculated income under Section 115J of Act at same figure as in original assessment order. 2.4. In further appeal preferred by assessee, Commissioner of Income Tax (Appeals) confirmed assessment order holding that disallowing of depreciation while computing income under (3) Section 115J of Act was justified. 2.5. Challenging said order, assessee preferred appeal before Tribunal, which, by order dated 9.12.1996 made in I.T.A.No.719/Mds/1994, dismissed appeal upholding order of Commissioner of Income Tax (Appeals) on computation of income under Section 115J of Act. Tribunal dismissed appeal on ground that profit and loss account of assessee did not reflect correct picture for assessment year 1989-1990. 2.6. Thereafter, on 2.8.2000, assessee filed miscellaneous petition in M.P.No.40 of 2000 praying to recall and rectify order by mainly relying upon decision of Supreme Court in Surana Steels Pvt. Ltd. v. Deputy Commissioner of Income Tax, [1999] 237 ITR 777. Tribunal, after hearing matter at length and relying upon decision of Supreme Court in Surana Steels Pvt. Ltd. case, referred supra, and Board Circular No.68, dated 17.11.1971 passed following order: Applying ratio decidendi out of said decision of Tribunal in 81 ITD 282 to facts of present case we are of opinion that there had been apparent mistake in order of Tribunal in view of subsequent decision of Supreme Court in case of Surana Steels Ltd. and also in case of Apollo Tyres Ltd. and hence original order in appeal requires to be recalled. For above reasons, we are inclined to recall order of Tribunal dated 9.12.1996 in I.T.A.No.719(Mds)/1994, and direct (4) Registry to post case before regular Bench for deciding appeal. To arrive at above conclusion, Tribunal also relied upon decision of Supreme Court in Apollo Tyres Ltd. v. Commissioner of Income Tax, [2002] 255 ITR 273, which decision was rendered by Supreme Court after miscellaneous petition was filed by assessee on 2.8.2000. According to department, Tribunal was not justified in considering decision of Supreme Court in Apollo Tyres Ltd. case, referred supra, as on date when miscellaneous petition was filed, namely on 2.8.2000, such decision was not rendered by Supreme Court and, therefore, order passed by Tribunal is liable to be set aside. 2.7. On this premise, matter was brought on appeal before this Court on two questions of law as under: 1. Whether in facts and circumstances of case, Tribunal was right in rectifying its order under section 254 of Income-tax Act, based on judgment of Supreme Court rendered six years after date of order rectified ? 2. Whether in facts and circumstances of case, Tribunal has power or jurisdiction to rectify its order beyond time limit of four years specified under section 254(2) ? and this Court, by order dated 11.12.2006, allowed appeal filed by Revenue and held as under: 20. In fine, without going into merits of case, we (5) hold that order passed by Appellate Tribunal is barred by limitation. Accordingly, order impugned and consequential order dated June 12, 2003 are set aside as it is settled that when initiation of proceedings under statute lacks jurisdiction, final or consequential order is also liable to be struck down. questions are answered in favour of Revenue and against assessee. appeal stands allowed. No costs. 2.8. assessee filed appeal to Supreme Court and Supreme restored matter to file of this Court holding as under: 9. For aforesated reasons, we set aside impugned judgment of High Court and restore Tax Case (Appeal) No. 2 of 2004 on file of Madras High Court for fresh decision on merits of matter as indicated hereinabove. All contentions on merits are expressly kept open. We express no opinion on merits of case whether rectification application was at all maintainable or not and whether judgment in case of Apollo Tyres Ltd. [2002] 255 ITR 273 was or was not applicable to facts of this case. That question will have to be gone into by High Court in above Tax Case (Appeal) No.2 of 2004. 3. Heard learned counsel on either side and perused orders passed by Supreme Court, Tribunal and authorities below. 4. assessee took matter on appeal before Supreme Court. Supreme Court was of view that miscellaneous petition filed by (6) assessee for rectification was well within time limit prescribed under Section 254(2) of Act. However, Supreme Court observed that it was Tribunal which took its own time to dispose of miscellaneous petition and, therefore, this Court erred in holding that miscellaneous petition could not have been entertained by Tribunal beyond four years. 5. In view of above finding rendered by Supreme Court, second question of law raised before this Court does not survive for our consideration. 6. Now, let us take up first question of law, whether Tribunal was justified in relying upon decision of Supreme Court in Apollo Tyres Ltd. case, referred supra, for purpose of passing rectification order dated 31.1.2003, when such decision was rendered six years after date of order. 7. We find from order passed by Tribunal that Tribunal was guided not only by decision of Supreme Court in Apollo Tyres Ltd. case, referred supra, which was rendered subsequently at time of disposal of miscellaneous petition seeking rectification, but also followed decision in Surana Steels Pvt. Ltd. case, referred supra, and Board Circular No.68, dated 17.11.1971. relevant portion of said order passed by Tribunal is extracted hereunder for better clarity: 5.4.Further decision relied upon by Commissioner (7) (Appeals) in case of V.V.Trans Investments (P) Ltd., 207 ITR 509 (A.P.) has been reversed by Apex Court in decision reported in 237 ITR 777 (Surana Steels, etc.). On this consideration also assessee's stand is correct that mistake had crept in to order of Tribunal in I.T.A.No.719(Mds)/1994. 5.5. Now we have to consider whether subsequent decision of Supreme Court rendered after Tribunal had passed order shall give rise to mistake rectifiable under Section 254(2) of Act. In this connection assessee had relied upon circular of Central Board of Direct Taxes being Circular No.68, dated 17th November, 1971 (83 ITR St.6). He also relied upon decision of Nagpur Bench of Tribunal in case of Bhilai Engg. Corpn. Ltd. vs. DCIT, 81 ITR 282. In that case question was allowability of depreciation on immovable property, sale deed of which was not registered till closing of year. 8. We are, therefore, of firm view that first question of law raised by Revenue is based on misconception of fact, as Tribunal has not only relied upon decision of Supreme Court in Apollo Tyres Ltd. case, referred supra, but also relied on decision in Surana Steels Pvt. Ltd. case, referred supra, and Board Circular No.68, dated 17.11.1971, which were very much available before Tribunal at time of passing rectification order. said fact is also not disputed by Revenue. 9. In such view of matter, we answer first substantial question of law against Revenue. (8) In result, this appeal is disposed of accordingly. No costs. (R.S.J.) (G.M.A.J.) 12.8.2014 Index : Yes Internet : Yes sasi To: 1. Assistant Registrar, Income Tax Appellate Tribunal Chennai Bench "A", Chennai. 2. Secretary, Central Board of Direct Taxes, New Delhi. 3. Commissioner of Income Tax (Appeals)-I Madurai. 4. Deputy Commissioner of Income Tax Special Range-I, Madurai. (9) R.SUDHAKAR,J. and G.M.AKBAR ALI,J. (sasi) T.C.(A).No.2 of 2004 12.8.2014 Commissioner of Income-tax, Madurai v. Sree Ayyanar Spinning and Weaving Mills Ltd