EIH Ltd. v. The Commissioner of Income-tax, Kol III
[Citation -2015-LL-0217-11]

Citation 2015-LL-0217-11
Appellant Name EIH Ltd.
Respondent Name The Commissioner of Income-tax, Kol III
Court HIGH COURT OF CALCUTTA
Relevant Act Income-tax
Date of Order 17/02/2015
Judgment View Judgment
Keyword Tags mistake apparent from record • carried forward depreciation • unabsorbed depreciation • depreciation allowance • revisional proceeding • barred by limitation • doctrine of merger
Bot Summary: 2 The original order dated 22nd March, 1996 was amended on 21st December, 1999 in order to give effect to an appellate order arising out of an appeal preferred by the assessee. The deduction allowed by the order dated 22nd March, 1996 under Chapter VIA without setting off unabsorbed depreciation was rectified under Section 154 by an order dated 9th September, 2003. The learned advocate submitted that the order rectified on 9th September, 2003 is the order dated 27th December, 1999 as would appear from the following sentences: The assessment order u/s.143(3) for assessment year 1993-94 was passed vide order dated 22.03.1996. The order arising out of an appeal which necessitated the order dated 27th December, 1999, he contended, was preferred by the assessee and it is because the assessee s appeal succeeded that the order was passed on 27th December, 1999. Once the order dated 22nd March, 1996 was amended in order to give effect to the appellate order, it is the order dated 27th December, 1999 which became the operative order. The order of assessment passed on 22nd March, 1996 was admittedly amended on 27th December, 1999 in order to give effect to the appellate order. The order dated 22nd March, 1996 merged into the order dated 27th December, 1999.


ORDER SHEET IN HIGH COURT AT CALCUTTA Special Jurisdiction [Income Tax] ORIGINAL SIDE ITA 266 of 2006 E I H LIMITED Versus COMMISSIONER OF INCOME TAX, KOL III & ANOTHER BEFORE: Hon'ble JUSTICE GIRISH CHANDRA GUPTA Hon'ble JUSTICE ARINDAM SINHA Date : 17th February, 2015. Mr. Sourav Bagaria, Advocate for appellant Mr. P.K. Bhowmick, Advocate .for respondent Court : subject matter of challenge in this appeal is judgment and order dated 28th April, 2006 by which learned Tribunal relying upon judgment of Apex Court in case of Hind Wire Industries Ltd. held that rectification proceedings started by Assessing Officer were within period of limitation. It is against this order that assessee has come up in appeal. few facts necessary for disposal of appeal are as follows :- Original assessment under Section 143(3) of Income Tax Act for assessment year 1993-94 was passed on 22nd March, 1996 allowing deduction of sum of Rs. 12,05,20,580/- under Chapter VIA without setting off unabsorbed depreciation. 2 original order dated 22nd March, 1996 was amended on 21st December, 1999 in order to give effect to appellate order arising out of appeal preferred by assessee. deduction allowed by order dated 22nd March, 1996 under Chapter VIA without setting off unabsorbed depreciation was rectified under Section 154 by order dated 9th September, 2003. Contention raised by assessee was that rectification by order dated 9th September, 2003 was barred by limitation since original order sought to be rectified was passed on 22nd March, 1996. This contention has been rejected by learned Tribunal relying on judgment of Apex Court in case of Hind Wire Industries Ltd. vs. C.I.T. reported in (1995) 212 ITR 639 SC wherein sub-section (7) of section 154 was construed which provides as follows :- Rectification of mistake. 154 .. (7) Save as otherwise provided in section 155 or sub-section (4) of section 186 no amendment under this section shall be made after expiry of four years [from end of financial year in which order sought to be amended was passed..] It is true that Their Lordships in aforesaid judgment construed un- amended sub-section (7) of section 154 which provided for period of limitation for four years from date of order sought to be amended. Sub-section (7) has since then undergone change but expression order sought to be amended remains same. material change is that period of four years does no longer commence from date of order sought to be amended, but it commences from end of financial year in which order sought to be amended was passed. Their Lordships held that expression any would mean even rectified order. What had happened in that case was that original assessment order was passed on 21st September, 1979; assessee applied for rectification on ground that shift allowance was not given to him; his prayer was allowed 3 and order dated 21st September, 1979 was rectified on 12th July, 1982. assessee once again applied for rectification on 4th July, 1986 contending that depreciation allowance was receivable by him at rate of 10% whereas only 5% was allowed. Appellate Tribunal held that application made on 4th July, 1986 was within period of four years from fresh order of assessment made on 12th July, 1982. High Court in reference set aside order of Tribunal. Supreme Court held that word order was not qualified in any way and it did not necessarily mean original order and therefore, view taken by Tribunal was correct view. In present case, order under section 154 was passed on 9th September, 2003 which is evidently within period of four years even from 27th December, 1999. Therefore, it was squarely within period of limitation. learned advocate appearing for appellant drew our attention to paragraph from judgment of Apex Court in case of CIT vs. Alagendran Finance Ltd., reported in [2007] 293 ITR 1 (SC), which reads as follows: bare perusal of order passed by Commissioner of Income-tax would clearly demonstrate that only that part of order of assessment which related to lease equalisation fund was found to be prejudicial to interests of Revenue. proceedings for reassessment have nothing to do with said head of income. doctrine of merger, therefore, would not apply in case of this nature. Furthermore, Explanation (c) appended to sub-section (1) of section 263 of Act is clear and unambiguous as in terms thereof doctrine of merger applies only in respect of such items which were subject-matter of appeal and not which were not. There may not be any doubt or dispute that once order of assessment is reopened, previous underassessment will be held to be set aside and whole proceedings would start afresh but same would not mean that even when subject- matter of reassessment is distinct and different, entire proceeding of assessment would be deemed to have been reopened. 4 aforesaid discussion in judgment cited by learned advocate is with regard to interpretation of explanation (c) appended to sub-section (1) of Section 263 which merely means that power of Commissioner to revise order does not extend to such matters which have been considered and decided in appeal. reason is very simple. original order can be subjected to revisional proceeding or to appellate proceeding but appellate order cannot be subjected to revisional proceeding. This is what has been sought to be clarified by clause (c). judgment cited has no manner of application to facts and circumstances of this case before us. learned advocate submitted that order rectified on 9th September, 2003 is order dated 27th December, 1999 as would appear from following sentences: assessment order u/s.143(3) for assessment year 1993-94 was passed vide order dated 22.03.1996. In this order A.O. allowed deduction under Chapter-VIA amounting to Rs.12,05,20,518/- before setting off carried forward depreciation of Rs.33,53,199/-. As per provisions of Act carried forward depreciation should have been set off from business income before allowing any deduction under Chapter-VIA. However, this was not done by A.O. Subsequently assessment for assessment year 1992-93 went in appeal and after giving effect to order of CIT(A) amount of carried forward unabsorbed depreciation got increased from Rs.33,53,199/- to Rs.12,75,84,184/-. assessment for assessment year 1993-94 also went in appeal and effect to order of CIT(A) was given u/s.251 vide order dated 27.12.1999. Therefore, there was mistake apparent from record inasmuch as that A.O. allowed deduction under Chapter VIA before setting off carried forward unabsorbed depreciation in original order dated 22.03.1996. This mistake continued in order u/s. 143(3)/251 dated 27.12.1999. A.O. sought to correct this mistake by order u/s.154 although section was not specifically mentioned, vide order dated 09.09.03. Against this order assessee went in appeal and CIT(A) vide order dated 19.02.2004 held that order u/s. 5 154 dated 09.09.03 was beyond limitation provided by Section 154(7) and was therefore, barred by limitation. order was accordingly quashed. In doing so CIT(A) failed to consider decision of Supreme Court in Hind Wire & Industries Ltd. (Supra) He laid stress on fact that CIT(A) observed that mistake continued in order under Section 143(3)/251 dated 27th December, 1999. But, order arising out of appeal which necessitated order dated 27th December, 1999, he contended, was preferred by assessee and it is because assessee s appeal succeeded that order was passed on 27th December, 1999. question of any mistaken allowance was not subject matter of appeal. Therefore, order dated 27th December, 1999 could not have given starting point of limitation. This submission, according to us, is equally fallacious. Once order dated 22nd March, 1996 was amended in order to give effect to appellate order, it is order dated 27th December, 1999 which became operative order. original order dated 22nd March, 1996 lost its existence. law well settled is that two operative orders cannot co- exist in same field. order of assessment passed on 22nd March, 1996 was admittedly amended on 27th December, 1999 in order to give effect to appellate order. order dated 22nd March, 1996 merged into order dated 27th December, 1999. What he wants to submit is that appeal did not contain any question as regards mistaken deduction granted to him under Chapter VIA. That may be true, but question for consideration is whether period of four years provided in sub-section (7) of Section 154 shall start from date of original order or from date of amended order. To that, view expressed by Supreme Court in case of Hind Wire is against him as we have indicated earlier which we need not reiterate. Explanation (c ) appended to sub-section [1] of Section 263 even on basis of pari materia has no application as rectificatory power was not exercised by A.O. in respect of any appellate or revisional order. 6 Income Tax Act is special legislation. Therefore, questions arising out of aforesaid Act have to be answered taking recourse to provisions contained therein. But in case of doubt or difficulty assistance can be taken from general law of land. cause of action for rectification is evidently mistake. It is mistake, which is sought to be rectified. cause of action to rectify mistake, in general law of land, does not arise until mistake has been discovered. Therefore, Section 17 of Limitation Act provides that period of limitation in suit or application governed by Limitation Act shall commence from date of discovery of mistake. revenue in this case is however armed with judgment of Apex Court in case of Hind Wire (supra). For aforesaid reasons, we are of opinion that proceedings under Section 154 were within prescribed time and Tribunal took correct view of matter. appeal is, therefore, dismissed. (Girish Chandra Gupta, J.) (Arindam Sinha, .) ANC/sm EIH Ltd. v. Commissioner of Income-tax, Kol III
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