The Lakshmi Mills Co. Ltd vs The Assistant Commissioner Of ...
2022 Latest Caselaw 805 Mad

                                                                                T.C.A. No.746 of 2009

                                  IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                DATED : 19.01.2022

                                                      CORAM

                              THE HONOURABLE MR.JUSTICE R.MAHADEVAN
                                                and
                            THE HONOURABLE MR.JUSTICE MOHAMMED SHAFFIQ

                                                T.C.A. No.746 of 2009

                     The Lakshmi Mills Co. Ltd.,
                     #1100, Avanashi Road,
                     Pappanaickenpalayam,
                     Coimbatore-641 037.                                    ... Appellant

                                                        Vs.

                     The Assistant Commissioner of Income Tax,
                     Company Circle-IV(1),
                     Coimbatore.                                            ... Respondent
                     PRAYER: Appeal under Section 260A of the Income Tax Act, 1961
                     against the order dated 13.02.2009 made in ITA.No.2036(Mds)/2007 on the
                     file of the Income Tax Appellate Tribunal, Chennai 'A' Bench for the
                     assessment year 2001-02.
                                    For Appellant         : M/s.Philip George

                                    For Respondent        : Mr.M.Swaminathan
                                                            Senior Standing Counsel
                                                            Mrs.K.G.Usharani
                                                            Junior Standing Counsel



                     1/9

https://www.mhc.tn.gov.in/judis
                                                                                      T.C.A. No.746 of 2009

                                                          JUDGMENT

MOHAMMED SHAFFIQ, J.

This is an assessee's appeal. The challenge made herein is to the

order dated 13.02.2009 passed by the Income Tax Appellate Tribunal,

Chennai 'A' Bench, in ITA No.2036(Mds)/2007, pertaining to the

assessment year 2001-02.

2.On 14.09.2009, the aforesaid appeal was admitted on the following

substantial questions of law:

A. Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was right in law in upholding the jurisdiction of the assessing officer u/s 154 to adjust the unabsorbed depreciation loss of earlier assessment years against the current year's business income, while computing deduction u/s 80HHC?.

B. Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was right in not holding that the issue of setting off brought forward unabsorbed depreciation of earlier years against the current year's business income was a debatable issue and therefore

https://www.mhc.tn.gov.in/judis T.C.A. No.746 of 2009

there was no apparent mistake for the assessing officer to exercise the jurisdiction u/s 154 of Income Tax Act, 1961?

3.The appellant is engaged in the business of manufacture and sale of

cotton yarn, cotton fabrics and staple fibre yarn. For the assessment year

2001-02, they had filed its return admitting a total income of

Rs.3,98,17,147/-, which was processed u/s 143(1) of the Income Tax Act,

1961 on 29.10.2001. Subsequently, the appellant filed a revised return

admitting net adjusted income of Rs,3,82,35,240/- on 24.06.2002, which

was processed under section 143(1) on 29.10.2002. After scrutiny of the

same, the assessment under section 143(3) was completed on 30.03.2004,

determining the total income at Rs.4,69,55,518/-. The said assessment was

reopened according to the Appellate Authority's order, at the instance of the

assessee and the reassessment order was passed on 28.03.2006 under

section 143(3) r/w section 147 of the Income Tax Act, 1961, determining

the business income at Rs.4,42,39,895/-, after adjusting unabsorbed

depreciation of the Assessment Years 1999-2000 and 2000-01 totalling to

Rs.1,57,77,978/-.

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4.While so, pointing out that while calculating 80 HHC deduction,

the adjusted business profits was taken at Rs.6,00,17,873/- instead of

Rs.4,42,39,895/- by mistake and 80HHC deduction was allowed

excessively, notice under section 154 was issued, as the mistake being

apparent on the face of record. The appellant filed its objection on

11.12.2006. Rejecting the said objection, the assessing officer held that the

order dated 28.03.2006 suffers from error apparent on the face of record

inasmuch as it was contrary to the decision of the Hon'ble Supreme Court in

IPCA Laboratories Ltd. v. Deputy Commissioner of Income Tax, 266

ITR 521, in which, it was held that “section 80AB would override all other

provisions in Chapter VI A” and accordingly, revised the assessment.

5.Aggrieved by the rectification of assessment on 15.12.2006, the

appellant preferred an appeal before the Commissioner of Income Tax

(Appeals)-1, Coimbatore, who referring to the decision of the Hon'ble

Supreme Court in IPCA Laboratories Ltd (supra), found that the

overriding effect of section 80AB in the computation of total income over

all other sections in Chapter VIA, was a settled issue and thus, held that the

revision order under section 154 was legal and justified.

https://www.mhc.tn.gov.in/judis T.C.A. No.746 of 2009

6.Being dissatisfied with the order passed by the Appellate Authority,

the appellant carried the matter by way of an appeal before the Income Tax

Appellate Tribunal. After analysing the entire materials and legal position,

the Tribunal affirmed the order of the First Appellate Authority, after having

held that the exercise of jurisdiction under section 154 was valid and

justifiable. The findings of the Tribunal may be relevant and are extracted

hereunder:

“It is clear that the decision of the Hon'ble Supreme court in the case of IPCA Laboratory cited supra, was rendered on 11.03.2004, which was available before the completion of the assessment under section 143(3), which was completed on 28.03.2006, wherein the business income was determined at Rs.4,42,39,895/-. Further it seems to be a simple case of arithmetic mistake because in the assessment the business profit was determined at Rs.4,42,39,895/- and therefore deduction had to be given accordingly in view of the decision of the Hon'ble Supreme Court in the case of IPCA Laboratory Ltd., wherein it was clearly held that section 80AB will override the provisions of section 80HHC. In view of this we find nothing wrong in the order of the Commissioner(Appeals) upholding the rectification order passed by the Assessing Officer.”

https://www.mhc.tn.gov.in/judis T.C.A. No.746 of 2009

Therefore, the assessee is before this court with the present appeal,

suggesting the substantial questions of law, as stated supra.

7.Though the learned counsel for the appellant would agree that the

issue, as to whether it is permissible to adjust unabsorbed depreciation loss

of the earlier assessment year, while computing deduction under section

80HHC, stands decided against the appellant/assessee, he attempted to

suggest that the said issue was debatable, when the assessing officer sought

to invoke his power under section 154 of the Income Tax Act, 1961, on the

premise that the said issue was finally resolved in favour of the Revenue by

the Hon'ble Supreme Court only on 17.05.2007, in the case of

Commissioner of Income Tax v. Shirke Construction Equipment Ltd,

[2007] 291 ITR 380 (SC), in which, the decision rendered on 24.07.2000 by

the Bombay High Court, in the case of Commissioner of Income Tax v.

Shirke Construction Equipment Ltd, [2000] 246 ITR 429 (Bombay), was

reversed.

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8.We find that the Hon'ble Supreme Court in the decision in IPCA

Laboratories Ltd (supra) had already overruled the decision of the Bombay

High Court in the case of Commissioner of Income Tax v. Shirke

Constructions Equipments Ltd (supra). Importantly, it is to be noted that

the said decision in IPCA Laboratories Ltd. (supra) was delivered on

11.03.2004 much prior to the order of assessment dated 28.03.2006. Thus,

we are of the view that the submission of the learned counsel for the

appellant that the issue was debatable, when the assessing officer invoked

section 154, lacks merit.

9.It is trite law that an order contrary to law declared by the Hon'ble

Supreme Court, would constitute an error apparent on the face of record.

Therefore, the order passed by the assessing officer exercising his

jurisdiction conferred under section 154 of the Income Tax Act, 1961, as

affirmed by the Appellate Authority as well as the Appellate Tribunal,

warrants no interference at the hands of this court.

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10. Accordingly, the appeal filed by the assessee stands dismissed,

answering the substantial questions of law, in favour of the Revenue. No

costs.

[R.M.D., J.] [M.S.Q., J.]

19.01.2022

Speaking (or) Non Speaking Order Index : Yes/ No Internet: Yes/No

To

1.The Income Tax Appellate Tribunal, 'A' Bench, Chennai.

2.Commissioner of Income Tax (Appeals)-I, Coimbatore.

3.The Assistant Commissioner of Income Tax, Company Circle-IV(1), Coimbatore.

https://www.mhc.tn.gov.in/judis T.C.A. No.746 of 2009

R.MAHADEVAN, J.

and MOHAMMED SHAFFIQ, J.

smn/rk

T.C.A. No.746 of 2009

19.01.2022

https://www.mhc.tn.gov.in/judis