Commissioner of Income-tax,Chennai v. M/s.Faizan Shoes Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 22.06.2007Coram :THE HONOURABLE MR.JUSTICE P.D.DINAKARANANDTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJATax Case (Appeal) No.869 of 2007 Commissioner of Income-tax, Chennai. ..Appellant Vs.M/s.Faizan Shoes Pvt. Ltd.,53, Vepery High Road, Periamet, Chennai-600 003. ..RespondentAppeal under Section 260A of the Income-tax Act, 1961against the order of the Income Tax Appellate Tribunal, Chennai'A', Chennai in I.T.A. No.1479/Mds/2002 dated 28.02.2006 forthe assessment year 1998-99 against the order of the Commissioner of Income Tax (A) XI, Chennai in ITA No.61-2001-02dated 28.6.2002 for the assessment year 1998-99 against DeputyCommissioner of Income Tax Company Circle IV (2) Chennai-6dated 10.4.2001 GI No: 110F.For Appellant :Mrs. Pushya Sitaraman, Sr.Standing Counsel for Income-tax Department JUDGMENT(Judgment of the Court was delivered byP.P.S.Janarthana Raja, J.)This appeal is filed under Section 260A of the Income TaxAct, 1961 by the Revenue, against the order of the Income TaxAppellate Tribunal, Chennai 'A', Chennai in I.T.A.No.1479/Mds/2002 dated 28.02.2006, raising the followingsubstantial questions of law:- https://hcservices.ecourts.gov.in/hcservices/ "

Whether on the facts and circumstancesof the case, the Tribunal was right inholding that rectification of the deductiongranted by taking the correct figure fromthe audit certificate produced by theassessee is a debatable issue, notpermissible u/s 154?2. Whether on the facts and circumstancesof the case, the Tribunal was right inholding that the issue is decided in the Revenue's favour on merits, but allowingthe appeal on the ground that therectification was beyond the scope ofsec.154?"

The facts leading to the above substantial questionsof law are as under:-The assessee is a Private Limited Company incorporatedunder the Companies Act. The relevant assessment year is 1998-99 and the corresponding accounting year ended on 31.03.1998.The assessee-company filed its Return of income on 30.11.1998declaring 'nil' income under normal computation. The assesseealso computed the income under Section 115JA of the Act ("Act"in short) and for the purpose of MAT liability, deduction under Section 80HHC of the Act was claimed by the assessee based onworking as per the Company's Act and also relied on a decisionof the Income-tax Appellate Tribunal, Madras Bench, in the caseof M/s.Sapri Garments, to support its contention. TheAssessing Officer found that the decision relied on by theassessee in the case of M/s.Sapri Garments was with referenceto the provisions of Section 115J of the Act, and since theseprovisions have been replaced by Section 115JA from theassessment year 1998-99, the claim of the assessee based on thesaid Tribunal's decision interpreting the old provisions, wasnot correct. Hence the Assessing Officer worked out theminimum alternate tax by deducting the amount of Rs.14,13,157/-while working out the income under Section 115JA of the Act. According to the Assessing Officer, there was a mistake creptin the assessment order and hence, he issued notice under Section 154 of the Act and rectified the assessment order. Aggrieved by the order, the assessee filed an appeal to the Commissioner of Income-tax (Appeals). The C.I.T.(A) dismissedthe appeal and held that the Assessing Officer has rightlyrectified the Assessment Order based on the definition of bookprofit under Section 115JA of the Act. Aggrieved, the assesseefiled an appeal to the Income-tax Appellate Tribunal("Tribunal" in short). The Tribunal allowed the appeal and setaside the order of the C.I.T.(A). Hence the present tax caseby the Revenue. https://hcservices.ecourts.gov.in/hcservices/

Learned Sr.Standing Counsel appearing for the Revenuesubmitted that there is a mistake on the face of the record. Itis also submitted that the Assessing Officer had found out awrong claim made by the assessee and hence the AssessingOfficer is right in rectifying the assessment order under Section 154 of the Act. It is also further submitted that theapplication of the provisions of Section 115JA and mandatoryprovisions are to be applied, and in following the mandatoryprovisions, there is a mistake apparent on the face of therecord.

Heard the counsel. The Tribunal had given a findingthat the issue is debatable and there is a conflict of opinionamong the decisions of the Tribunal on this point. TheTribunal, in its order, held as follows:-"4. After hearing both the sides and goingthrough the case records, it is seen thatthere are diverse opinion on this issuetaken by the various High Courts and Tribunal. ITAT, Chennai Bench in I.T.A.No.797/Mds/2002 dated 31/5/2003 in the caseof Narmatha Textiles Ltd., Vs. JCIT hastaken a view in favour of the Revenue. However, the Assessing Officer has actedu/s.154 of the Act which is a clear casewhere the issue is debatable and the Assessing Officer has acceded in hisjurisdiction while acting u/s. 154 of the Act. This is not a mistake apparent fromrecord. Here two views are possible. Wehave gone through the case laws cited byboth the sides and finally hold that theissue is debatable. Hence the AssessingOfficer has acceded his jurisdiction whileacting u/s. 154 of the Act. Accordinglythis appeal of the assessee is allowed. "From a reading of the above, it is seen that the issue isdebatable and also there are diverse opinions on the issuetaken by various Income-tax Appellate Tribunals. Once theissue is a debatable one, the same cannot be rectified under Section 154 of the Act. The Supreme Court, in the case ofT.S.Balaram, Income-tax Officer, Company Circle IV, Bombay Vs.Volkart Brothers and Others, 82 ITR 50 (SC), held that amistake apparent on the record must be an obvious and patentmistake and not something which can be established by a longdrawn process of reasoning or examining arguments on pointswhere there may conceivably be two opinions. It has also beenheld that a mistake apparent from the record must be a glaring, https://hcservices.ecourts.gov.in/hcservices/ obvious or self-evident mistake and no rectificationproceedings can be initiated in the case of a debatable issue.A debatable issue could be considered only under regularassessment and the same cannot be rectified under Section 154of the Act. The Tribunal correctly followed the principlesenunciated in the Supreme Court judgment cited supra and cameto the correct conclusion. Hence we do not find any error orlegal infirmity in the order of the Tribunal so as to warrantinterference.

In view of the foregoing reasons, no substantialquestions of law arise for consideration of this Court andaccordingly, the tax case is dismissed. No costs. Sd/Asst. Registrar/true copy/Sub Asst. Registrar kmTo1. The Assistant Registrar, Income-tax Appellate Tribunal, Chennai "A" Bench, Sastri Bhavan, Rajaji Salai, Chennai.2. The Secretary, Central Board of Direct Taxes, New Delhi. 3. The Addl. Commissioner of Income Tax, Com. Range II, Chennai-34.4. The Commissioner of Income-tax (Appeals) XI, 121 Mahatma Gandhi Salai, Chennai-34.5. The Deputy Commissioner of Income-tax, Company Circle IV(2), Chennai-6.+1cc to M/s.Pushya Sitaraman, SSC Income Tax Dept., Sr 37296GG (CO)km/9.7. T.C.(A) No.869 of 2007