The Commissioner Of Income Tax-X vs Satish Kumar Agarwal
2011 Latest Caselaw 5383 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+            INCOME TAX APPEAL NO.349/2011

                            Reserved on : 1st November, 2011.
%                        Date of Decision : 8th November, 2011.

The Commissioner of Income Tax-X                   .... Appellant
              Through: Ms. Rashmi Chopra, Advocate.

                           VERSUS

SATISH KUMAR AGARWAL                          .....Respondent

Through: Ms.Bhakti Pasrija, Advocate

CORAM:

HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE R.V. EASWAR

1. Whether Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not ?                               Yes.
3. Whether the judgment should be reported in the Digest?                Yes.

R.V. EASWAR, J.:

This is an appeal filed by the Revenue under Section 260A of the

Income Tax Act (for short „the Act‟) against the order dated 28th May,

2010 passed by the Income Tax Appellate Tribunal (for short

"Tribunal"), Delhi Bench "G" in IT Appeal No.1429/Del/2008 for the

assessment year 2002-2003.

2. The respondent/assessee is an individual. He is engaged in the

business of export and was accordingly entitled to the deduction under

Section 80HHC of the Act. We are concerned with the assessment

year 2002-2003. The assessee filed a return of income on 31st

October, 2002 claiming deduction under the aforesaid section. An

assessment was framed by the Assessing Officer by order dated 31st

March, 2004 passed under Section 143(3) of the Act. In this order the

Assessing Officer computed and allowed Rs.2,24,38,491/- as

deduction under Section 80HHC.

3. After the completion of the assessment, a notice under Section

154 of the Act was issued by the Assessing Officer proposing to rectify

the assessment order on the ground that the deduction allowed in the

assessment order was incorrect to the extent of Rs.1,36,92,769/-. One

of the grounds on which the Assessing Officer issued the notice under

Section 154 of the Act was that the loss suffered by the assessee from

the export of trading goods, amounting to Rs.68,37,193/- ought to have

been adjusted against 90% of the export incentives under the proviso to

Section 80HHC(3) and the omission to do so in the assessment order

passed on 31st March, 2004 was a mistake apparent from the record

which needed rectification.

4. The assessee objected to the notice under Section 154 of the Act

on the ground that the issue proposed to be rectified was debatable and

was not amenable to the jurisdiction conferred under Section 154 of the

Act. The assessee also drew the attention of the Assessing Officer to

several authorities on the point, which were in his favour. These

contentions were however rejected by the Assessing Officer who

passed the order under Section 154 of the Act on 1st July, 2005

reducing the deduction under Section 80HHC as per the working given

in the said order. In short, the loss suffered in the export of trading

goods was adjusted against the export incentives and deduction under

Section 80HHC was reduced accordingly.

5. The assessee preferred an appeal before the CIT(Appeals)

against the order passed by the Assessing Officer under Section 154 of

the Act. The CIT(Appeals) agreed with the Assessing Officer and held

that the provisions of Section 80HHC authorized the adjustment made

by the Assessing Officer in the order passed by him under Section 154

of the Act and that in any case the issue was settled in favour of the

Revenue by the judgment of the Supreme Court in the case of IPCA

Laboratory Ltd. vs. Deputy Commissioner of Income Tax (2004)

266 ITR 520 (SC). He also referred to the amendment made to the

aforesaid Section by the Taxation Laws Amendment Act, 2005 with

retrospective effect from 1st April, 1998. He, thus, dismissed the

assessee‟s appeal.

6. The assessee filed an appeal before the Tribunal against the

order of the CIT(Appeals) and contended that the issue sought to be

rectified by the Assessing Officer in the order passed under Section 154

of the Act was a debatable issue and hence cannot be rectified as a

mistake apparent from the record. It was also submitted that the

Assessing Officer had framed the assessment after due consideration

of all the relevant aspects of Section 80HHC and, therefore, cannot

resort to rectification proceedings under Section 154 of the Act. These

contentions were accepted by the Tribunal which held by order dated

28th May, 2010 that the rectification order passed by the Assessing

Officer under Section 154 of the Act was not valid, that it amounted to

review by the Assessing Officer of his own assessment order and that

there was no glaring, patent or obvious mistake apparent from the

record. The Tribunal also observed that merely because there was a

possible loss of revenue, the provisions of Section 154 of the Act

cannot be invoked. In this view of the matter, the Tribunal accepted the

assessee‟s appeal and quashed the order passed by the Assessing

Officer under Section 154 of the Act. In the view which the Tribunal

took, it did not consider it necessary to examine the merits of the

assessee‟s contentions.

7. The Revenue has filed the appeal against the aforesaid order

passed by the Tribunal. The following substantial question of law is

framed after hearing counsel for both the sides:-

"Whether on the facts and in the circumstances of the case, and having regard to the nature of the issue sought to be rectified, the Tribunal was right in law in quashing the order passed by the Assessing Officer under Section 154 of the Income Tax Act, 1961?

8. The matter poses little difficulty. In this case the assessee

claimed deduction under Section 80HHC, inter alia, on the footing that

the loss suffered by him in the export of trading goods need not be

adjusted against the export incentives to the extent of 90% thereof. The

question whether the loss has to be so adjusted has been settled in

favour of the revenue by the judgment of the Supreme Court in the case

of IPCA Laboratory Ltd.(supra). This judgment was rendered on 11th

March, 2004. This was the law of the land and the ratio thereof ought to

have been applied by the Assessing Officer while completing the

assessment on 31st March, 2004. He, however, omitted to do so. Non-

consideration of the judgment of the Supreme Court and non-

application of the ratio of the said judgment to the facts of the present

case, with reference to the claim of the assessee under Section

80HHC, is a glaring, patent and obvious mistake of law which can be

rectified by resort to section 154 of the Act. It is also to be noted that

there is no dispute regarding the facts and no further investigation was

required to gather any more facts. On the admitted facts, the

applicability of the judgment of the Supreme Court (supra) was not

capable of generating any elaborate or long-drawn process of

argument. In fact, no such plea appears to have been taken by the

assessee. The omission to apply the judgment of the Supreme Court

was a glaring and obvious mistake of law. In the circumstances, the

case is covered by the ratio of the ruling of the Supreme Court in

M.K.Venkatachalam, Income Tax Officer and Anr. Vs. Bombay

Dyeing and Manufacturing Co. Ltd. (1958) 34 ITR 143 where it was

observed that a glaring and obvious mistake by law can be corrected

under Section 154. In Assistant Commissioner of Income-Tax v.

Saurashtra Kutch Stock Exchange Ltd., (2008) 305 ITR 227 (SC) the

Supreme Court held that where, after the Tribunal rendered its decision

on appeal, a miscellaneous application was filed by the assessee under

Section 254 (2) of the Income Tax Act stating that the order of the

Tribunal required to be rectified on the ground that a judgment of the

jurisdictional High Court was not brought to the notice of the Tribunal,

there was a mistake apparent from the record which required

rectification. In that case the Tribunal decided the appeal on

27.10.2000. A judgment of the Gujarat High Court in Hiralal Bhagwati

v. CIT (2000) 246 ITR 188, which was the judgment of the jurisdictional

High Court, was rendered a few months prior to the order of the

Tribunal. However, the judgment was not brought to the attention of the

Tribunal. An application under Section 254 (2) of the Income Tax Act

was filed before the Tribunal requesting the Tribunal to rectify its order

so as to bring it in conformity with the law laid down by the jurisdictional

High Court. The Tribunal accepted the application which action was

upheld by the Gujarat High Court in the judgment reported as CIT

(Asst.) v. Saurashtra Kutch Stock Exchange Ltd. (2003) 262 ITR

146. On appeal by the Revenue, the judgment of the Gujarat High

Court (supra) was upheld by the Supreme Court holding that no error

was committed by the Tribunal in rectifying the mistake. Though the

facts of the case before the Supreme Court (supra) show that the

rectification was made by the Tribunal on the basis of the judgment of

the jurisdictional High Court, the ratio would apply to the present case

with stronger force because in the present case the rectification has

been done on the basis of a judgment of the Supreme Court which is

binding under Article 141 of the Constitution of India. In our considered

view, the judgment of the Supreme Court in Saurashtra Kutch Stock

Exchange Ltd. (supra) applies a fortiori to the present case.

9. The learned standing counsel for the Income Tax Department

cited the judgment of the Allahabad High Court in Commissioner of

Income-Tax and Another v. Bindal Industries Ltd., (2010) 328 ITR

160 (All) and the judgment of the Punjab and Haryana High Court in

Shahbad Co-operative Sugar Mills Ltd. v. Deputy Commissioner of

Income-Tax, (2011) 336 ITR 222 (P&H). The Allahabad High Court

(supra) held that the law declared by the Supreme Court is binding on

every court and authority and any decision taken earlier which is

contrary to the law declared by the Supreme Court can be rectified

under Section 154 of the Act. The Punjab and Haryana High Court

(supra) also took the same view. These two judgments support the

rectification order passed in the present case by the Assessing Officer.

10. We are, accordingly, unable to agree with the view taken by the

Tribunal that there was no mistake apparent from the record requiring

rectification. We, therefore, reverse the decision of the Tribunal and

answer the substantial question of law in the negative and in favour of

the Revenue and against the assessee.

11. The appeal of the revenue is allowed with no order as to costs.

(SANJIV KHANNA) JUDGE

(R.V. EASWAR) JUDGE

NOVEMBER 08, 2011 Bisht