T.C.A. Nos. 370 & 371 of 2019 IN HIGH COURT OF JUDICATURE AT MADRAS RESERVED ON : 04.03.2020 DELIVERED ON : 10.03.2020 CORAM HON'BLE Mr. JUSTICE M. SATHYANARAYANAN AND HON'BLE Mr. JUSTICE ABDUL QUDDHOSE T.C.A. Nos. 370 & 371 of 2019 M/s. Nagaraj and Company Pvt. Ltd., 156, Developed Industrial Estate, Perungudi, Chennai 600096 Appellant in both TCAs. Versus Assistant Commissioner of Income Tax, Company Circle-IV(4), Chennai 600034. Respondent in both TCAs. PRAYER in TCA. No.370 of 2019: Tax Case Appeals filed under Section 260A of Income Tax Act, 1961 to set aside order of Income Tax Appellate Tribunal, D Bench, Chennai dated 11th October, 2012 in ITA.No.200/Mds/2012 AY-2004-05. PRAYER in TCA.No.371 of 2019: Tax Case Appeals filed under Section 260A of Income Tax Act, 1961 to set aside order of Income Tax Appellate Tribunal, D Bench, Chennai dated 11th October, 2012 in ITA.No.199/Mds/2012 AY-2003-04. 1/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 For Appellant in both TCAs. Mr. R. Venkatnarayanan For Respondent in both TCAs Mr.Karthik Ranganathan COMMON JUDGEMENT Judgement delivered by ABDUL QUDDHOSE,J. assessee has filed these appeals under Section 260-A of Income Tax Act, 1961 aggrieved by common order dated 11.10.2012 passed by Income Tax Appellate Tribunal D Bench, Chennai. Brief facts leading to filing of these Tax Case Appeals: 2. assessee who is Appellant herein has filed returns of income tax for Assessment Years 2003-04 and 2004-05. It is case of Appellant/Assessee that they omitted to claim deduction for interest amounts paid by them to Industrial Development Bank of India (in short IDBI ) under Section 43B of Income Tax Act. It is their case that after noticing mistake of omitting to claim deduction for interest payments, they filed separate petitions under Section 154 of Income Tax Act, 1961 seeking rectification of mistake on account of said omission. Assessing Officer rejected rectification petitions on 06.06.2007 by separate orders on ground that 2/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 mistake is not apparent from record as it involves debatable point of law. Aggrieved by separate orders dated 06.06.2007 passed by Assessing Officer, Appellant/Assessee preferred statutory appeals before Commissioner of Income Tax (Appeals)-VI, Chennai in ITA.No.194/10-11 & ITA.No.193/10-11. Commissioner of Income Tax (Appeals)-VI, Chennai confirmed orders of Assessing Officer by dismissing appeals on 28.11.2011 by separate orders on ground that merely by relying on figures given in financial statements, one cannot arrive at amount allowable under Section 43B especially when quantum of principal and interest waived in one time settlement is not apparent from record. Aggrieved by separate orders dated 28.11.2011 for respective assessment years, Appellant/Assessee preferred separate Appeals before Income Tax Appellate Tribunal, 'D' Bench, Chennai in ITA.No.200/Mds/2012 & ITA.No.199/Mds/2012. Income Tax Appellate Tribunal by common order dated 11.10.2012 for both Assessment Years dismissed Appeals and confirmed findings of Assessing Officer as well as Commissioner of Income Tax (Appeals)-VI on ground that when Assessments have been completed based on computation of income filed by 3/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 Appellant/Assessee, it cannot be stated that such assessments suffered from any mistake apparent from record on item of expenditure never claimed by Assessee for allowance. Aggrieved by common order dated 11.10.2012 passed by Income Tax Appellate Tribunal, these Tax Case Appeals have been filed under Section 260-A of Income Tax Act, 1961. 3. following substantial questions of law have been raised by Appellant/Assessee in grounds of both tax case appeals: 1.Whether on facts and circumstances of case, Tribunal was right in holding that Appellant's claim for allowing outstanding interest on loans paid to IDBI under section 43B was not rectifiable issue coming within purview of Sec 154 of Act? 2.Whether on facts and circumstances of case, Tribunal was right in holding that CBDT Circular No.669 dt 25.10.1993 is not applicable to facts of case? 4/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 4. Heard Mr.R.Venkatnarayanan, learned counsel for Appellant and Mr.Karthick Ranganathan, learned counsel for respondent. Submissions of learned Counsels: 5. According to learned counsel for Appellant/Assessee , Appellant/Assessee while filing their returns for Assessment years 2003-04 & 2004-05 omitted to claim deduction under Section 43B of Income Tax Act, for interest amounts paid by them to IDBI which is apparent from returns. According to him, only in such circumstances, Appellant/Assessee filed applications under Section 154 of Income Tax Act, 1961 for rectification of mistake committed in original returns. According to him, interest payments are undisputed as it is reflected in ledger extract which is filed as document in typed set of papers. According to him, omission to claim deductions for interest payments is not deliberate and only by mistake, deductions towards interest payments were not claimed by Appellant/Assessee in their original returns for Assessment Years 2003-04 & 2004-05. According to learned counsel for Appellant since mistake 5/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 committed by Appellant/Assessee is apparent from record namely ledger extract, application for rectification under Section 154 of Income Tax Act is maintainable. According to him, authorities below have erroneously rejected applications under Section 154 of Income Tax Act filed by Appellant/Assessee. 6. learned counsel for Appellant drew attention of this Court to following authorities: (a) Commissioner of Income Tax Vs. Pruthvi Brokers & Shareholders (P) Ltd., reported in (2012) 252 CTR 0151(Bombay High Court) (b) Commissioner of Income Tax vs. Lakshmi Vilas Bank reported in (2010) 329 ITR 0591 (c) Anchor Pressings (P) Ltd vs. Commissioner of Income Tax reported in (1986) 161 ITR 159 (SC) 7. Relying on aforesaid decisions, learned counsel for Appellant/Assessee would submit that since mistakes committed by Appellant/Assessee in their returns filed for assessment years 6/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 2003-04 & 2004-05 is not deliberate and is apparent from record, authorities below have erroneously rejected applications filed by Appellant/Assessee under Section 154 of Income Tax Act, 1961. 8. Per contra, learned standing counsel for respondent would submit that Assessing Officer having completed Assessments for Assessment years 2003-04 & 2004-05, based on returns filed by Appellant/Assessee, it cannot be stated that such assessments suffer from any mistake apparent from record. According to him, when assessments have been completed, only remedy that was available to assessee is to file revision of assessment under Section 139(5) of Income Tax Act, 1961 before completion of Assessment or within one year from end of assessment year whichever is earlier. According to him, Appellant/Assessee having failed to file revision of Assessment to rectify mistake within prescribed period, Appellant/Assessee cannot resort to section 154 of Income Tax Act, which is meant to rectify mistakes apparent from record and not meant to rectify omissions committed in original returns. 7/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 Discussion: 9. Any rectification of mistake under Section 154 of Income Tax Act, 1961 can be sought for only when it is apparent from record. As evident from section, mistake must be one which is patent, which is obvious and whose discovery is not dependent on further investigation. 10. We shall now examine as to whether omission to claim deduction for interest payments in original returns for Assessment Years 2003-04 & 2004-05 will enable Appellant/Assessee to file applications under Section 154 of Income Tax Act to rectify said omission. It is admitted fact that Appellant/Assessee did not claim deduction under Section 43B of Income Tax Act, 1961 for interest payments to IDBI in original returns filed by them for Assessment Years 2003-04 & 2004-05. It is also admitted fact that Assessments of Appellant/Assessee for assessment years 2003-04 & 2004-05 have been completed based on computation of income submitted by Appellant/Assessee along with its returns. Appellant/Assessee has also not filed revision of Assessment for 8/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 respective Assessment Years under Section 139(5) of Income Tax Act to rectify alleged omission to claim deduction for interest payments to IDBI in their original returns filed for Assessment years 2003-04 & 2004-05. 11. Section 139(5) of Income Tax Act which deals with revision of Assessment and enables Assessee to seek revision of Assessment in case of any omission or mistake committed under original return filed for Assessment Year. ledger extract filed by Appellant/Assessee along with applications under Section 154 of Income Tax 1961 seeking rectification of mistake is self serving statement of account. Though, payment of interest is disclosed in statement submitted by Appellant/Assessee, same has not been admitted by respondent/Revenue. Whether interest payments claimed by Appellant/Assessee is allowable or not is matter for investigation and there is no element of mistake apparent from record. 9/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 12. Under Section 139(5) of Income Tax Act, assessee can file revised return before completion of Assessment or within one year from end of respective assessment year whichever is earlier. In case on hand, admittedly assessments have been completed based on original returns filed for respective assessment years by Appellant/Assessee and no revised returns have been filed to rectify omission to claim deduction for interest payments within prescribed period. Section 139(5) of Income Tax Act enables assessee to file revised return in case assessee discovers any omission or any wrong statement under original returns. Appellant/Assessee has failed to file revised returns to rectify alleged omission. As observed earlier, allowability of interest payments is debatable issue and it requires further investigation. Therefore, omission to claim deduction under Section 43B of Income Tax Act for interest payments in original returns is not mistake coming within purview of section 154 of Income Tax Act. 13. Hon'ble Supreme Court had occasion to consider similar provision under another taxing statute namely Orissa Sales Tax 10/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 Act in case of Master Construction Private Limited vs. State of Orissa reported in AIR 1966 SC 1047. Rule 83 of Orissa Sales Tax Rules (1947) is akin to section 154 of Income Tax Act. material part of Rule 83 of Orissa Sales Tax Rules reads as follows: Commissioner of Sales Tax....... may at any time correct any arithmetical or clerical mistakes or any error apparent on face of record arising or occurring from accidental slip or omission in order passed by him, or it. Interpreting above provision, Hon'ble Supreme Court held as follows: Rule 83 provides summary remedy within narrow compass. jurisdiction of Commissioner under this rule is limited and is confined only to correction of mistakes or omissions mentioned therein. arithmetical mistake is mistake of calculation; clerical mistake is mistake in writing or typing. error arising out of or occurring from accidental slip or omission is error due to careless mistake or omission unintentionally made. There is another qualification namely, such error,shall be apparent on face of record, that is to say, it is not error which 11/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 depends for its discovery, on elaborate arguments on questions of fact or law. accidental slip or omission is accidental slip or omission made by court. obvious instance is slip or omission to embody in order something which court in fact ordered to be done.. This is sometimes described as decretal order not being in accordance with judgment. 'But slip or omission may be attributed to Judge himself. He may say something or omit to say something which he did not intend to say or omit. This 'is described as slip or omission in judgment itself. cause for such slip or omission may be Judge's inadvertence or the, advocate's mistake. But, however wide said expressions are construed, they cannot countenance re- argument on merits on questions of fact or law, or permit party to raise new arguments which he has not advanced at first instance. 14. case on hand does not fall within above referred parameters laid down by Hon'ble Supreme Court for rectification of mistake as mistake alleged by Appellant/assessee company is not apparent on face of record. Further, assessments for respective assessment years having been completed and 12/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 Appellant/assesse company having not filed any revised returns to rectify mistakes committed in original returns for respective assessment years, they cannot fall back on section 154 of Income Tax Act as said section is meant only to rectify mistakes which is apparent on face of record. case on hand does not fall in said category as interest payments are debatable and requires further investigation. It would have never been intention of legislature to give two options either under section 139(5) or under section 154 for Assessee to rectify omission to claim deduction for interest payments. As observed earlier, objects of section 139(5) and section 154 are different. In case of omission, only remedy available is under section 139(5) by filing revised returns. Instead in case on hand, Appellant/Assessee having failed to file revised returns to rectify alleged omission has filed applications under section 154 of Income Tax Act which is meant only to correct mistakes which are apparent from records and not to cases involving omissions which are debatable and requires further investigation. ratio decidendi in Master Construction Private Limited vs. State of Orissa reported in AIR 1966 SC 1047 referred to supra is also applicable to case on 13/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 hand as section 154 of Income Tax Act is pari materia to Rule 83 of Orissa Sales Tax Rules. Therefore, only mistakes which are patent, obvious and whose discovery is not dependent on any further investigation can be rectified under section 154 of Income Tax Act. case on hand does not fall in said category for above mentioned reasons. Division Bench of this Court had also occasion to consider scope of section 154 of Income Tax Act in case of Commissioner of Income Tax vs. Lakshmi Vilas Bank reported in 2010 329 ITR 0591 and held that expression used in section 154 of Act regarding mistake apparent from record will have to be construed to be mistake which is very clear, distinct and apparent. relevant portion of aforesaid decision is extracted hereunder: 10.The expression used in s.154 of IT Act regarding mistake apparent from record will have to be construed to be mistake which is very clear, distinct and apparent. said mistake should be manifest and could be identified by mere look and which does not need long drawn out process of reasoning. It is no doubt true that mere mistake by itself cannot be ground to invoke section 154 of IT Act, 1961. It is also true that issue which is 14/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 debatable also cannot be decided under section 154. However, when mistake is glaring and in case where facts are not in dispute then said mistake being one apparent on face of record will have to be rectified under section 154. 15. Hon'ble Supreme Court in case of Anchor Pressings (P) Ltd. vs. Commissioner of Income Tax U.P. and other reported in 1986 3 SCC 439 has also held that omission of relief while making assessment would not amount to mistake apparent from record within meaning section 154 of Income Tax Act. In that decision, Assessee claimed relief under section 84 of Income Tax Act which was rejected by assessing officer and Hon'ble Supreme Court held that application filed under section 154 of Income Tax Act to rectify alleged mistake is not maintainable as omission of relief while making assessment would not amount to mistake apparent from record . 16. In case on hand, claim for interest deductions under section 43B of Income Tax Act, which was omitted by 15/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 Appellant/assessee company while filing original returns can be adjudicated by assessing officer only through process of investigation. Even as seen from computation of income filed along with rectification applications filed under section 154 of Income Tax Act, Assessee has produced self serving statement of account disclosing interest payments which does not exactly tally with computation of income filed along with section 154 applications. Therefore, unless and until complete investigation is done by assessing officer, quantum of deduction for interest payments cannot be ascertained. Hence, omission claimed by Appellant/Assessee will not fall under category of mistake apparent from record . judgment relied upon by learned counsel for Appellant/Assessee in case of Commissioner of Income Tax vs. Pruthvi Brokers and Shareholders Pvt. Ltd. reported in (2012) 252 CTR 0151 referred to supra will not apply to case on hand as it was not decision rendered under Section 154 of Income Tax Act as its scope falls on narrow compass involving mistakes apparent from record . 16/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 17.Circular No.14 (XL-35 1955 dated 11.04.1955) has no bearing to facts of present case as payment of interest to IDBI was never disclosed by Appellant/Assessee in income tax returns. Unless and until, tax returns disclosed interest payments, it is impossible for assessing officer to assist Appellant/Assessee to rectify alleged mistake of omission to claim deduction for interest payments under section 43B of Income Tax Act. 18. For foregoing reasons, concurrent findings of authorities below does not suffer from any perversity or illegality and substantial questions of law raised by Appellant/assessee in these tax case appeals does not deserve any merit and are answered against Appellant/Assessee and Tax Case Appeals are dismissed. No costs. [M.S.N.J] [A.Q.J] 10.03.2020 Index : Yes Internet : Yes Speaking orders nl 17/18 http://www.judis.nic.in T.C.A.Nos.370 & 371 of 2019 M.SATHYANARAYANAN, J. and ABDUL QUDDHOSE, J. nl T.C.A. Nos.370 & 371 of 2019 10.03.2020 18/18 http://www.judis.nic.in Nagaraj And Company Pvt. Ltd. v. Assistant Commissioner of Income-tax, Company Circle-IV(4), Chennai