Delhi High Court
Commissioner Ofincome Tax vs Jindal Stainless Limited on 6 October, 2010
Author: Manmohan
#6
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 1500/2010
COMMISSIONER OFINCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal , Advocate
versus
JINDAL STAINLESS LIMITED ..... Respondent
Through: Ms. Kavita Jha, Advocate.
% Reserved on: 30th September, 2010.
Date of Decision: 6th October, 2010
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE MANMOHAN
1. Whether the Reporters of local papers may be allowed to see the judgment? No
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in the Digest?Yes
MANMOHAN, J
1. The present appeal has been filed under Section 260A of Income
Tax Act, 1961 (for brevity, "Act") challenging the order dated 22nd
June, 2009 passed by the Income Tax Appellate Tribunal (in short
"Tribunal") in ITA No. 1847/Del/2008, for the Assessment Year 2004-
2005.
2. Briefly stated the relevant facts of the present case are that the
respondent-assessee filed a return declaring income of ` 71.43 crores.
However, the assessment was completed under Section 143(3)/153A of
the Act wherein respondent-assessee's income was computed at ` 83.06
crores. On 10th April, 2007, the Assessing Officer (in short, "AO")
reduced the income to ` 79.81 crores under Section 154 of the Act.
3. Subsequently, as the AO was of the opinion that the respondent-
assessee had not added a sum of ` 39.28 lacs being provision for
doubtful debts and advances/bad debts to the income, he issued a fresh
notice under Section 154 of the Act. Since the respondent-assessee did
not respond to the said notice, another notice dated 13 th July, 2007 was
issued.
4. In reply to the aforesaid notice, respondent-assessee submitted
that out of ` 39.28 lacs, amount of ` 38,59,820/- were bad debts and a
sum of ` 68,039/- only was towards provision. However, the AO
added the entire amount of ` 39.28 lacs to the income of the
respondent-assessee under Section 154 of the Act.
5. Though the Commissioner of Income Tax (Appeals) [in short,
"CIT(A)"] dismissed the respondent-assessee's appeal, the Tribunal
deleted the addition of ` 39.28 lacs made by the AO under Section 154
of the Act on the ground that AO's action was on a debatable issue and
jurisdiction under Section 154 of the Act could have been invoked only
to rectify a mistake apparent from the record--which was not the
present case. The relevant observations of the Tribunal are reproduced
hereinbelow:
"6. After hearing both the sides and going through the
records, we hold that the provisions of S. 154 of the I.T.
Act, 1961 can be invoked when there is a mistake and the
mistake is apparent from records. When the mistake was
not apparent from the records and there can be conflict of
views and there are possibility of more than one view, the
AO cannot justify the rectification as a mistake apparent
from the record. In the present case the AO has made an
order u/s 143(3) of the I.T. Act on 19.7.2007. Assessee
complied with the queries made during the assessment
proceedings. Nothing has been said in respect of this bad
debt/provision for the bad debt in this assessment order u/s
143(3). A decision on a debatable point of law or failure
to apply the law to a set of facts which remains to be
investigated cannot be corrected by way of rectification u/s
154 of the I.T. Act, 1961. This section does not empower
the AO to investigate a particular point which he had
apparently missed at the time of finalization of the order
u/s 143(3) of the Act. The AO claimed that the assessee
was provided with an opportunity before rectification
appears to be irrelevant to the facts of the case when there
was no mistake apparent from the record which can justify
the action of the AO. The AO's jurisdiction u/s 154 of the
I.T. Act is only limited to rectify the mistake apparent from
the records. The mistake must be apparent on the face of
the records. We are of the considered view that the AO's
action u/s 154 of the I.T. Act on debatable issue and
CIT(A)'s confirmation of the AO's action does not appear
to be good in the eye of law. In view of these facts, we set
aside the order of AO as well as of the CIT(A) and direct
to allow the claim of the assessee. Since we have granted
relief to the assessee on ground nos. 1, 2 and 3 there is no
need to adjudicate on remaining ground taken by assessee.
In the result, the appeal of assesses is allowed."
6. Ms. Prem Lata Bansal, learned counsel for revenue submitted
that the Tribunal had erred in law in deleting the addition of ` 39.28
lacs made by the AO on account of provision for doubtful debts under
Section 154 of the Act. She submitted that the AO had rightly invoked
the jurisdiction under Section 154 of the Act as there was a mistake
apparent from the record and the AO's action was not a debatable issue.
7. Though neither the notices dated 05th February, 2007 and 13th
July, 2007 under Section 154 of the Act nor the AO's order dated
19thJuly, 2007 have been placed on record, yet from the CIT(A)'s and
Tribunal's order it is apparent that the AO had added an amount of
`38,59,820/- on the ground that doubtful debts and advances were not
allowable under Section 36(1)(vii) of the Act. However, the Supreme
Court recently in the case of T.R.F. Ltd. Vs. Commissioner of Income
Tax (2010) 323 ITR 397 (SC) has held that after 01st April, 1989, it is
not necessary for the assessee to establish under Section 36(1)(vii) that
the debt had become irrecoverable. To claim deduction under Section
36(1)(vii), it was enough if the bad debt is written off by the assessee as
irrecoverable in its accounts. Consequently, in view of the aforesaid
judgment and assessee's stand, deduction under Section 36(1)(vii) was
certainly a debatable issue.
8. We are also in agreement with the view of the Tribunal that
neither a debatable point of law nor failure to apply the correct law to a
set of facts can be corrected by way of a rectification under Section 154
of the Act. In fact, the Supreme Court in the case of MEPCO
Industries Ltd. Vs. Commissioner of Income Tax and Another (2009)
319 ITR 208 (SC) has held that the right to rectify mistakes under
Section 154 of the Act cannot be invoked in case of change of opinion.
A rectifiable mistake is a mistake which is obvious and not something
which has to be established by a long drawn process of reasoning or
where two opinions are possible.
9. Consequently, the Tribunal in the present case has rightly held
that a decision on a debatable point of law cannot be treated as a
mistake apparent from the record.
10. Accordingly, the present appeal being devoid of merit, is
dismissed.
MANMOHAN, J
CHIEF JUSTICE
OCTOBER 06, 2010
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