Commissioner of Income TaxChennai v. M/s. Y.K. Shoji Stone Indo (P) Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 25.7.2007Coram :THE HONOURABLE MR. JUSTICE K. RAVIRAJA PANDIANAND THE HONOURABLE MR. JUSTICE P.P.S.JANARTHANA RAJATax Case (Appeal) No.1106 of 2007Commissioner of Income TaxChennai.... AppellantVs.M/s. Y.K. Shoji Stone Indo (P) Ltd.,111, Medavakkam Tank RoadKilpauk, Chennai – 10.... RespondentTAX CASE (APPEAL) under Section 260A of the Income Tax Act,1961 against the order of the Income Tax Appellate Tribunal Madras'C' Bench dated 22.2.2007 made in I.T.A.No.1881/Mds/06 for theassessment year 1999-2000 and against the order dated 25.5.2006 ofthe order of the Commissioner of Income Tax (Appeals) III Chennaiin ITA.No.509/2004-05/A III and against order in CO.Cir III33011-Y/1999 - 2000 dated 1.2.2005 of the Deputy Commissioner of IncomeTax Company Circle III (3) Chennai.For Appellant : Mr. Naresh KumarJ U D G M E N T (Judgment of the Court was delivered by K.Raviraja Pandian, J.)The Revenue has filed this appeal by formulating thefollowing Substantial Questions of Law."i. Whether, in the facts and in the circumstancesof the case, the rectification of assessment bydeducting the amount eligible for deduction underSection 80HHC from the profits, and not from 30% of thebook profit was not erroneous as not being on adebatable issue ?ii) Whether the adjustment to any deductionclaimed by the assessee in total contravention to theprovisions of statute would not amount to rectificationof a mistake apparent on record for the purpose ofsection 154 ? https://hcservices.ecourts.gov.in/hcservices/

2. The facts of the case culled out from the statement offacts filed by the Revenue goes as follows.The assessee is a Private Limited Company whose return forthe assessment year 1999-2000 was processed under Section 143(1)of the Income Tax Act (hereinafter referred to as the "Act").Thereafter, the Assessing Officer found a mistake apparent on therecord that inasmuch as deduction under section 80HHC of the Actwas deducted from 30% of the book profit. According to theAssessing Officer, this mistake was glaring mistake apparent onthe face of the record. The Assessing Officer issued notice underSection 154 of the Act for rectification and an order was passedby him under Section 154 of the Act after hearing the assesseewho contended that there is no jurisdiction to revise theassessment under section 154 of the Act as there was no mistakeapparent on the face of the record. Aggrieved by the order ofthe Assessing Officer, the assessee filed an appeal before theCommissioner of Income Tax (Appeals) who by his order dated25.5.2006, confirmed the assessment. The assessee carried on thematter on further appeal in the Income Tax Appellate Tribunal byfiling appeal in ITA.No.1881 of 2006. The Tribunal allowed theappeal on the ground that the debatable issue cannot be a subjectmatter for rectification under section 154 of the Income Tax Act.The tribunal has also relied the decision of the Supreme Court inT.S. BALARAM, INCOME TAX OFFICER, VS. VOLKART BROTHERS AND OTHERSreported in 82 ITR 50, wherein it has been held that a mistakeapparent on the record must be an obvious and patent mistake andnot something which can be established by a long drawn process ofreasoning on points on which there may be conceivably twoopinions. A decision on a debatable point of law is not a mistakeapparent from the record, which is not amenable for rectificationunder Section 154 of the Income Tax Act. A similar view is alsotaken by the Supreme Court in the case of CIT VS. HERO CYCLESPVT. LTD., reported in 228 ITR 463.3. Mr. Nareshkumar, learned counsel appearing for therevenue submitted that the mistake is glaring on the face of theorder and it can be regarded as apparent on the face of therecord.4. We heard the argument of the learned counsel on eitherside and perused the materials on record.5. The error pointed out by the appellant herein is that theassessing officer has committed a mistake inasmuch as deductionunder Section 80HHC was deducted from 30 percent of the bookprofit instead of deducting the same from the whole profit. Hence,it is a glaring mistake, which could be rectified under Section154. But it is the contention of the assessee that the procedurefollowed by the assessing officer in granting the deduction underSection 80HHC from out of the book profit is the correct procedureand the procedure now sought to be projected by the revenue is notcorrect and it is sought to be done in order to have an advantage https://hcservices.ecourts.gov.in/hcservices/ in favour of the revenue. In any event it was contended that theissue was one of debatable issue. We are also of the view that theissue in controversy is a debatable issue.6. It is well recognised law that any erroneous assessmentcannot be the subject matter for rectification under Section 154of the Income-tax Act. The erroneous order of assessment can berectified only under procedure known to law by carrying the matterbefore the appropriate authority to rectify the erroneous order orrevise it as per law. A debatable point cannot be a reason forrectification under Section 154. Further, in order to invokeSection 154 for rectification of the mistake, the mistake soughtto be rectified should be a mistake apparent on the record andmust be an obvious and patent mistake and not something whichcould be established by long drawn process of reasoning on thepoint in issue on which there may be conceivably two opinions. Adecision on a debatable point of law cannot be regarded as amistake apparent on the face of the record amenable forrectification under Section 154 of the Income-tax Act. Usefulreference can be had to the judgments of BALARAM, INCOME TAXOFFICER VS. VOLKART BROTHERS AND OTHERS reported in 82 ITR 50 andCOMMISSIONER OF INCOME-TAX VS. HERO CYCLES PRIVATE LIMITEDreported in 228 ITR 463. Hence, we do not find any question oflaw, much less, substantial question of law, for entertaining thisappeal as the issue has already been covered by the decisions ofthe Supreme Court. Therefore, the Tax Case (appeal)is dismissed. kb/uskSd/Asst.Registrar/true copy/Sub Asst.RegistrarTo: 1.The Assistant RegistrarIncome Tax Appellate TribunalIII Floor, Rajaji Bhavan,Besant Nagar, Chennai.2.The Commissioner of Income-tax(Appeals) III, Chennai3.The Deputy Commissioner of Income-taxCompany Circle III (3) Chennai. https://hcservices.ecourts.gov.in/hcservices/

4. The Commissioner of Income Tax, Chennai.+ 1 cc to M/s. Pushya sitaraman, Sr Standing Counsel for ITDepartment SR No. 46342SSV(CO)SR/10.8.2007T.C.(A) No.1106 of 2007