{"id":19,"date":"2008-05-08T11:35:28","date_gmt":"2008-05-08T11:35:28","guid":{"rendered":"http:\/\/www.itatonline.org\/articles_new\/?p=19"},"modified":"2008-05-08T11:35:28","modified_gmt":"2008-05-08T11:35:28","slug":"analysis-of-recent-supreme-court-judgements","status":"publish","type":"post","link":"https:\/\/itatonline.org\/articles_new\/analysis-of-recent-supreme-court-judgements\/","title":{"rendered":"Analysis of recent Supreme Court judgements"},"content":{"rendered":"
\n
\"Shri.<\/div>\n

Analysis of recent Supreme Court judgements<\/p>\n

CA Kapil Goel <\/p>\n

\t\t\t The author has made a critical analysis of four recent and important decisions of the Supreme Court in R & B Falcon vs. CIT<\/strong>, Goetze India vs. CIT<\/strong> 284 ITR 323, Honda Siel vs. CIT <\/strong>295 ITR 466 and CIT vs. Alagendran <\/strong>293 ITR 1 and highlighted the nuances thereof.\n<\/div>\n

\n 1. R&B Falcon vs. CIT<\/a><\/strong> <\/p>\n

Introduction<\/strong>\n<\/p>\n

The importance of above ruling is highlighted by the fact that same is first Indian judicial and that too from SC, in context of Fringe Benefit Tax (FBT) provisions introduced in the Income Tax Act (Act) by Finance Act, 2005 with effect from AY 2006-2007.\n<\/p>\n

Background in brief<\/strong>\n<\/p>\n

Assessee (R& B Falcon) incorporated in Australia, is engaged in business of supplying Mobile Offshore Drilling Rig (MODR) along with off-shore supporting staff, to units operating in oil and gas industry like ONGC etc. Word \u201coff-shore\u201d here signifies operating in off-shore area. In relation to the subject MODR\u2019s, assessee provided staff\/crew to operate the same and since the conditions in MODR are not congenial to working, employees (here residents of foreign country), worked on the MODR on \u201ccommuter basis\u201d that is, they come to India and stay in the Rig (MODR) for 28 days and go back to their country of residence and so on and so forth. The transportation costs for commutation in terms of provision of air tickets was borne by employer. In this connection, assessee in relation to its subject contract with ONGC applied to Authority for Advance Ruling (AAR) seeking its views on:\n<\/p>\n

\u201cWhether transportation cost incurred by R and B Falcon (A) Pty Limited (hereinafter referred to as the “Applicant”) in providing transportation facility for movement of offshore employees from their residence in home country to the place of work and back is liable to Fringe Benefit Tax (‘FBT”)?<\/p><\/blockquote>\n<\/div>\n

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AAR\u2019S VIEWS<\/strong>\n<\/p>\n

In relation to its contention that FBT is not leviable on aforesaid transportation costs, Assessee\/applicant interalia placed reliance on CBDT Circular no. 8 of 2005 which stated that:\n <\/p>\n

“104. Whether expenditure incurred by the employer for the purposes of providing free or subsidized transport for journeys to employees from their residence to the place of work or such place of work to the place of residence would attract FBT?\n<\/p>\n

Ans. The free or subsidized transport provided to employees for journeys from their residence to the place of work or such place of work to the place of residence is in lieu of conveyance\/transportation allowance, which is not liable to FBT. Accordingly, the expenditure incurred by the employer for the purposes of providing free or subsidized transport for journeys to employees from their residence to the place of work or such place of work to the place of residence will not be liable to FBT”.<\/p><\/blockquote>\n

AAR while rejecting assessee\u2019s contention and concluding that FBT is leviable on subject transportation costs, interalia held that:\n<\/p>\n

\u201cFrom a cursory reading of the above question and the answer, it appears that the free or subsidized transport provided to employees for journeys from their residence to the place of the work or such place of work to the place of residence if in lieu of conveyance\/transportation allowance, is not liable to FBT and therefore the expenditure incurred by the employer thereof will not be liable to FBT. The gist of the aforementioned question and answer is to be found in the amended sub-section (3) of Section 115WB. <\/p>\n

However, a careful reading and the context of question no. 104 and the answer and our finding on the second limb of subsection (3) of section 115WB, would disclose that the journeys of the employees spoken of therein relate to journeys from the residence of the employees within India to the place of work in India. The transportation of employees in the instant case, according to the applicant as well as for purposes of the question, is from their residences in the home countries (outside India) to the place of work in India (the rig).\u201d<\/p><\/blockquote>\n

Assessee\u2019s SLP before Supreme Court<\/strong>\n<\/p>\n

In relation to aforesaid AAR, assessee filed Special Leave Petition before SC and inter-alia contended that:\n<\/p>\n

\u201c(4) \tResidence of an employee being not restricted to the Territory of India, the AAR committed a serious error of law in passing the impugned judgment.\n<\/p>\n

(5)\tCBDT itself, in its circular, having clarified that sub-section (2) is merely an expansion of sub-section (1), it was impermissible for the AAR to take the said factor into account.\n<\/p>\n

(6)\tFrom the questions and answers contained in the said circular, it is evident that fringe benefit tax would be applicable on the value of fringe benefit provided or deemed to have been provided to employees based in India and no fringe benefit tax would be payable in respect of an expenditure incurred by the employer for an employee who is not based in India and in any event if the employee is based in a foreign country would also come within the purview thereof.\n <\/p>\n

(7)\tThe AAR is clearly wrong in holding that the word ‘residence’ would mean only residence in India.\u201d <\/p><\/blockquote>\n

SC\u2019s Observation and Conclusions <\/strong>\n<\/p>\n

In aforesaid connection, SC inter-alia concluded as under:\n<\/p>\n

a)\tSection 115WB which is divided in three sub-sections, sub-section (1) provides for direct benefits provided by employer and sub-section (2) provides for \u201cother benefits\u201d i.e in words of SC :\u201cWhereas sub-section (1) envisages any amount paid to the employee by way of consideration for employment, what would be the limits thereof are only enumerated in sub-Section (2).\u201d After so holding, SC held that sub section (1) and sub \u2013section (2) of section 115WB operates in different fields.\n<\/p>\n

b)\tSubject transportations costs incurred by employer assessee, falls within purview of \u201cconsideration for employment\u201d as envisaged in sub-section (1) of section 115WB, being provided to employee by employer and is covered under expression \u201cby reimbursement or otherwise\u201d as stipulated in section 115WB(1).\n<\/p>\n

c)\tMatters covered by sub-section (2) which provides for \u201cdeeming benefits\u201d are not eligible for\/covered by sub-section (3) thereof (which provides exemption from FBT to perquisites etc taxable as \u201csalary\u201d, free \/subsidized transport provided by employer etc) as the same is restricted for sub-section (1) thereof.\n<\/p>\n

d)\tAs regards reading of words \u201cin India\u201d by AAR in the expression \u201cany benefit or amenity in the nature of free or subsidized transport or any such allowance provided by the employer to his employees for journeys by the employees from their residence to the place of work or such place of work to the place of residence”, after the word \u201cresidence\u201d and hence, restricting its applicability to commutation within India, SC while rejecting the same inter-alia held as under: <\/p>\n

\u201c21.\tAAR with respect was not correct in its view in reading the words ‘in India’ after the word residence in sub-section (3).\u201d<\/p><\/blockquote>\n

e)\tAs regards revenue\u2019s contention that words \u201cemployees journey\u201d as used in subject section 115WB(3) giving exemption to transport costs etc, postulates only regular journey and not periodic journey (like here journey is taking place at gap of 28 days), SC without giving any finding thereon, held that it for assessing authority to examine on case-to-case on the basis of material placed on record.\n<\/p>\n

Impact Analysis on Ongoing Matter <\/strong>\n<\/p>\n

As regards interpretation on using of words \u201cin India\u201d in provisions of the Act, Mum ITAT in STAR <\/strong>case 99 ITD 91 has earlier turned down assessee\u2019s contention that words \u201cin India\u201d needs to be read into section 195 of the Act and that section 195(1) should be restricted to payments in India. This ruling of SC which has accepted assessee\u2019s plea that words \u201cin India\u201d are not to be read into section 115WB(3), needs to be examined in depth, how far (if any) impact is casted on section 195 of the Act dealing with TDS on Non Resident Payments. In the understanding of the author, same may distinguished as regards section 195 is concerned as the same is machinery provision and section 115WB(3) is beneficent provision.\n<\/p>\n

In aforesaid connection, reference may be made to DHC ruling in the case of American Hotel <\/strong>289 ITR 46 wherein after relying on section 1(2) defining scope of the Act, words \u201cin India\u201d were read into section 10(23C) of the Act which were otherwise not there, reasoning that section 1(2) of the Act which states that this Act shall extend to India makes this law non extra-territorial in nature. SC on assessee\u2019s appeal in this case, has since concluded the hearings and reserved its judgment, which may be expected to be pronounced shortly.\n<\/p>\n<\/div>\n

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\n 2. Goetze India vs. CIT<\/strong>\n<\/p>\n

In the article, an attempt has been made by the authors to analyse law relating to admissibility of fresh claims during income tax assessment proceedings without recourse to revised return, in light of latest SC ruling in the case of Goetze India <\/strong>157 Taxman 1. <\/p>\n

1.\tIntroduction<\/strong>\n<\/p>\n

In view of complex and technical provisions contained in Indian Income Tax Act (Act), it may not be unreasonable to expect the taxpayers to miss on some of their rightful claims\/concessions when they file their tax returns in first instance. In this connection, albeit one may revise the original return within one year from end of relevant assessment year to claim what is left earlier, but it may happen that said omission may come to assessee\u2019s notice during assessment proceedings by which, time limit for filing revised return may have elapsed. The position in this regard, prior to SC ruling in the case of Goetze<\/strong> (supra), seems to have been settled that fresh claims may be made during the course of assessment proceedings without need for resort to revised return. However, SC in Goetze<\/strong> (supra) has held that to admit fresh claims, assessee must come through the gate-pass of revised return. It is this proposition of law, which has been debated under this article.\n<\/p>\n

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2.\tSC ruling in Goetze (Supra) \u2013 A Snapshot <\/strong>\n<\/p>\n

Assessee filed its return for AY 1995-1996 on 30 Nov 1995. On 12 Jan 1998, assessee sought to claim a deduction by way of a letter, at assessment stage. Now it is not from the express words used in the SC ruling, whether assessment proceedings were going on under section 143(2) of the Act or under section 144 (Best Judgment Assessment). In this regard, SC came to a sweeping conclusion that no new claim may be made by an assessee without taking recourse to revised return under section 139(5) of the Act, in contradistinction to ITAT powers to admit new grounds which is far wide in scope. <\/p>\n

3.\tSection 143(3) \u2013 Express Language \u2013 A Historical Perspective <\/strong>\n<\/p>\n

Once an Assessing Officer issues a notice under section 143(2) (scrutiny assessment) to an assessee, the same normally culminates by an assessment order under section 143(3) of the Act. But, the same may end in best judgment assessment (Section 144) also, in case there is specified failure on assessee\u2019s part (like non compliance to notices for hearing etc). As regards section 143(3) is concerned, same as it stands today from 1 October 1998, enables the AO to compute both sum payable and losses in pursuance of its order which position is different in section 144 as it has only outlet for \u2018sum payable\u2019.\n<\/p>\n

4.\tCBDT Views \u2013 An Apparent Contradiction <\/strong>\n<\/p>\n

It seems that CBDT in its circular accompanying Direct Tax Laws Amendment Act 1987 which has changed the entire scheme of assessment by introducing summary assessment and scrutiny assessment in place of assessment is all cases, has stated that:\n<\/p>\n

\u201c5.12 Since under the provisions of sub-section (1) of the new section 143, as assessment is not to be made now, the provisions of sub-sections (2) and (3) have also been recast and are entirely different from the old provisions. A notice under sub-section (2), which will be issued only in cases picked up for scrutiny, is now issued only to ensure that the assessee has not understated his income or has not computed excessive loss or has not underpaid the tax in any manner while furnishing his return of income. This means that under the new provisions, in an assessment order passed under section 143(3) in a scrutiny case, neither the income can be assessed at a figure lower than the returned income, nor loss can be assessed at a figure higher than the returned loss, nor a further refund can be given except what was due on the basis of the returned income, and which would have already been allowed under the provisions of section 143(1)(a)(ii).\u201d <\/p><\/blockquote>\n

A Risk<\/strong>: It seems that aforesaid philosophy contained in aforesaid CBDT Circular may be applied in present situation also and hence assessee may be debarred from making fresh claims during assessment proceedings. <\/p>\n

But there is an old CBDT Circular No 14 of 11 April 1955, which comes to rescue of taxpayers and states that:\n<\/p>\n

\u201c3. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should :-\n<\/p>\n

(a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;\n<\/p>\n

(b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs;\n<\/p>\n

(c) Public Relation Officers have been appointed at important centres, but by the very nature of their duties, their field of activity is bound to be limited.”<\/p><\/blockquote>\n

5.\tConstitutional Spirit and Indian Contract Law <\/strong>\n<\/p>\n

In relation to aforesaid CBDT Circular (No. 14) which may be at one place be argued to be valid in old assessment scheme existing prior to 1987 Amendment Act, may not hold good in view of following (that is 1955 Circular is good in present scenario also):\n<\/p>\n

\u2022\tArticle 265 of Indian Constitution which states that no tax can be collected except by express authority of the law supports the spirit behind aforesaid CBDT Circular. In this context, one may further refer to SC ruling in the case of Goodyear case <\/strong>AIR 1990 SC 781 wherein it has been stated that Constitution is not a mere law but machinery by which all laws are enacted;\n<\/p>\n

\u2022\tFurther, section 72 of Indian Contract Law, which states that money given under mistake, needs to be refunded to payer of the same also supports the spirit behind aforesaid CBDT Circular. <\/p>\n

6.\tCertain Precedents on the subject\u2013 SC, HC and ITAT \u2013 Pre Goetze<\/strong>\n<\/p>\n

SC in Anchor Pressing <\/strong>Case 161 ITR 159: In this case, SC (through Hon\u2019ble Justice R.S.Pathak) has observed that: \u201cIt is urged that the income-tax authorities and the High Court erred in holding that no mistake was apparent from the record merely because no claim to relief under section 84 had been made by the appellant before the Income-tax Officer during the assessment proceedings. It is contended that an obligation was imposed on the Income-tax Officer by the statute to grant such relief and it could not be refused merely because the appellant had omitted to claim the relief. While we believe the appellant is right in his contention<\/em>\u2026\u201d\n<\/p>\n

SC in Mahalkshmi Sugar M<\/strong>ills 160 ITR 920: In this case, it (Justice R.S.Pathak) has been held that: \u201c\u2026In the second place, there is a duty cast on the Income-tax Officer to apply the relevant provisions of the Indian Income-tax Act for the purpose of determining the true figure of the assessee’s taxable income and the consequential tax liability. Merely because the assessee fails to claim the benefit of a set-off, it cannot relieve the Income-tax Officer of his duty to apply section 24 (set off of loss etc) in an appropriate case<\/em>..\u201d\n<\/p>\n

Delhi High Court in Bharat General ReInsurance <\/strong>81 ITR 303: In this case, DHC has held that \u201cIt is true that the assessee itself had included that dividend income in its return for the year in question but there is no estoppel in the Income-tax Act and the assessee having itself challenged the validity of taxing the dividend during the year of assessment in question, it must be taken that it had resiled from the position which it had wrongly taken while filing the return. Quit apart from it, it is incumbent on the income-tax department to find out whether a particular income was assessable in the particular year or not. Merely because the assessee wrongly included the income in its return for a particular year, it cannot confer jurisdiction on the department to tax that income in that year even though legally such income did not pertain to that year<\/em>\u2026.\u201d\n<\/p>\n

J&K High Court in Snehlata<\/strong> (2004) 192 CTR 50: In this case, it has been held that: <\/p>\n

\u201cWhen the substantive law confers a benefit on the assessee under a statute, it cannot be taken away by the adjudicatory authority on mere technicalities. It is settled proposition of law that no tax can be levied or recovered without authority of law. Article 265 of the Constitution of India and section 114 of the State (J&K) Constitution imposes an embargo on imposition and collection of tax if the same is without authority of law<\/em>\u2026\u201d\n<\/p>\n

Bombay High Court in Central Provinces Manganese Ore <\/strong>112 ITR 734: In this case, it has been held that: \u201cThe mere fact that such a deduction was not claimed before the Income-tax Officer is, in our opinion, not of much importance. If the liability arises then a claim can be made bona fide at any stage before the higher authority, who is competent to grant relief<\/em>\u2026.\u201d\n<\/p>\n

Rajasthan High Court in Hiranand <\/strong>148 Taxman 281: In this case, it has been observed that:\n<\/p>\n

\u201c\u2026. It is difficult to appreciate what to say to accept this approach off the Revenue Officers only to concern with the augmenting of the revenue by all means and seldom to bother the rightful claims made of the deduction from the gross income as a result of the business loss. The ITOs are first also the citizens of the country. They are equally concerned to see and look into that whatever \\ legally permissible deductions available are to be given to the assessee. This one-side approach of the Revenue officers of the IT Department only concerns with the Revenue and not to bother for the assessee’s legal rights, rightful deductions and other claims, is not befitting to their position. They are the officers of the welfare State and have duty and obligation to see that assessees are being given their legal rightful and legitimate claims of deductions and other benefits. Whatever may be reason or ground it is not unknown that the assessees have fear and are afraid of entering in the IT Department.\u201d<\/p><\/blockquote>\n

Further, Delhi ITAT in Vam Organics <\/strong>6 SOT 775: In this case, after analyzing conspectus of case laws surrounding the issue, it has been held that:\n<\/p>\n

\u201cFurther, the Hon’ble Bombay High Court in the case of CIT vs. Smt. Archana R. Dhanwatey<\/strong> (1981) 24 CTR (Bom) 142 : (1982) 136 ITR 355 (Bom) held “that there was a duty on the part of the ITO to consider whether the assessee was entitled to a deduction from income from other sources, though no such specific claim was made by the assessee. The jurisdiction of the ITO is to compute the total income which could be brought to tax in accordance with law. It is obvious that the Tribunal’s observations that the ITO had been too technical are clearly justified because, if in fact and in law, the assessee was entitled to a deduction in which would have ultimately affected his or her total taxable income the assessee could not be assessed on a larger income.” Still further, the Hon’ble Delhi High Court in the case of CIT vs. Bharat General Reinsurance Co. Ltd<\/strong>. (1971) 81 ITR 303 (Del) observed that “it is true that the assessee itself had included that dividend income in its return for the year in question but there is no estopple in the IT Act and the assessee having itself challenged the validity of taxing the dividend during the year of assessment in question, it must be taken that it had resiled from the position which it had wrongly taken while filing the return. Quit apart from it, it is incumbent on the IT Department to find out whether a particular income was assessable in the particular year or not. Merely because the assessee wrongly included the income in its return for a particular year, it cannot confer jurisdiction on the Department to tax that income in that year even though legally such income did not pertain to that year.” Still further, the Hon’ble Supreme Court in the case of CIT vs. Mahalakshmi Textile MM Ltd<\/strong>. (1967) 66 ITR 710 (SC) held that “all questions, whether of law or facts, which relate to the assessment of the assessee may be raised before the Tribunal. If for reasons recorded by the Departmental authorities in respect of a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the Departmental authorities and the Tribunal, and indeed they would be under a duty to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him. For the reasons given above we are of the opinion that both the lower authorities were wrong in not considering the claim of the loss made by the assessee. Since the claim of loss of the assessee was not examined by the AO, we, by setting aside the orders of the CIT(A) and AO, restore the matter back to the file of AO with the direction to examine the claim of loss considering the order of the BIFR passed under s. 72 A of the Act and if all the other relevant conditions have been fulfilled by the assessee and is eligible for claim of deductions, to allow the same to the assessee. The AO shall allow reasonable opportunity of hearing to the assessee. The assessee is also directed to file all the relevant details and papers on which it wishes to rely in support of his claim before the AO. The ground of appeal of the assessee is allowed.\u201d<\/p><\/blockquote>\n

7.\tCertain Precedents on the subject\u2013 HC and ITAT \u2013 Post Goetze<\/strong>\n<\/p>\n

DHC in the case of Bharat Aluminium <\/strong>(decided on 24 May 2007) 163 Taxman 430, has inter-alia ruled that assessee can file revised computation in the course of ongoing assessment proceedings under the Act, without making recourse to revised return, despite the fact that time limit for revising return under section 139(5) had expired. DHC while inferring above has placed reliance on All.HC ruling in the case of Dhampur Sugar Mills <\/strong>90 ITR 236. Interestingly, SC ruling in the case of Goetze do not find mention in DHC ruling.\n<\/p>\n

Mumbai ITAT in the case of Chicago Pneumatic India Limited <\/strong>15 SOT 252 in context of allowability of new claims during the assessment proceedings without having recourse to revised return, placing reliance on principle embedded in Article 265 of Indian constitution (No tax can be collected except by the authority of law) and old CBDT Circular No. 14 dated 11 April 1955 and distinguishing Goetze<\/strong> ruling of SC reported in 284 ITR 323 has categorically held that assessee has the right to make new claims during assessment proceedings without recourse to revised return (Refer Para 45 to Para 49 of the ruling).\n<\/p>\n

Delhi ITAT in Moser Baer<\/strong> Further 295 ITR 148 (AT) has distinguished Goetze (supra) in context of fresh claim (viz. opting out) under section 10B of the Act. In this connection, while distinguishing Goetze (supra) ITAT has held that Goetze (supra) operates in different context and has no applicability to section 10B, which is a code in itself.\n<\/p>\n

Kolkata ruling in the case of Van Oord Altanata B.V<\/strong> 112 TTJ 229 has interalia held that \u201cthere is no estoppel against that statute\u201d and AO is duty bound to bring correct legal position to assessee\u2019s notice and give effect to the same while passing assessment order, irrespective of assessee\u2019s mistake.\n<\/p>\n

8.\tConclusion<\/strong>\n<\/p>\n

In view of above discussion, it may be inferred that income tax authorities in present legal position are bound to give effect to claims made, first, in course of assessment proceedings as otherwise they may land up crossing constitutional embargo contained in Article 265. Further, same may also be supported by CIT-Appeals co-terminus power to AO, which has been judicially held to include power to admit of fresh claims at appeal stage (SC in famous case Jute Corporation<\/strong> 187 ITR 688). <\/p>\n<\/div>\n

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\n 3. Honda Siel vs. CIT 295 ITR 466 <\/strong>\n<\/p>\n

In this article an attempt has been made by author to deliberate upon ITAT powers of rectification as codified in section 254(2) of the Income Tax Act (\u2018Act\u2019).\n<\/p>\n

Introduction<\/strong>\n<\/p>\n

Power to rectify \u2018mistake apparent from record\u2019 has been conferred on Income Tax Authorities and Income Tax Appellate Tribunal (\u2018ITAT\u2019) respectively under sections 154 and section 254(2) of the Act. As regards ITAT power to rectify its mistake is concerned, it has been seen that there has been lot of litigation in the past revolving around recalling of an order in order to redress a mistake committed like non-consideration of cited case law etc. In this connection, Delhi High Court in its series of rulings has rejected the aforesaid practice of recalling an order by ITAT and held that ITAT is not empowered to do \u2018review\u2019 its order in guise of \u2018rectification\u2019. Very recently, SC while reversing the aforesaid orders of DHC, in the case of Honda Siel <\/strong>has held that power under section 254(2) is meant for atonement of wrong committed to a party at dispute by an action\/inaction of ITAT.\n<\/p>\n

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Delhi High Court rulings on Section 254(2) \u2013 A snapshot<\/strong>\n<\/p>\n

In first of its rulings, DHC in the case of Shakuntla Rajeshwar <\/strong>160 ITR 840, which ruling has not been considered in subsequent DHC rulings, has while dismissing revenue\u2019s appeal held that ITAT is justified to reconsider an issue afresh under powers conferred by section 254(2) of the Act, in case some assumption taken is found erroneous from records. But later on, DHC starting from the case of Deeksha Suri <\/strong>232 ITR 395, not considering Shakuntla<\/strong> ruling (supra), where an interim application for admission of additional evidence stood unconsidered in original ITAT order, it was held by DHC that ITAT was justified in rejecting the assessee\u2019s rectification application that no mistake emerged from records and only proper course on assessee\u2019s part was to approach higher authority (i.e High Court) for redressal of prejudice.\n<\/p>\n

This ruling of DHC has been followed in number of cases which are reported at 212 CTR 171, 204 CTR 349, 269 ITR 371, 257 ITR 16 etc to conclude that ITAT cannot recall (refresh) its order in order to redress the prejudice (if any) and only course available is to approach higher forum. Unfortunately, in all these rulings of DHC relying on Deeksha Suri<\/strong>, it never came to notice of the court that same has been since reversed by Supreme Court in 128 Taxman 33, holding that interim application remaining unconsidered by ITAT needs to be adjudicated first and assessee\u2019s appeal were allowed..\n<\/p>\n

Latestly, came the ruling of DHC in Honda Siel <\/strong>293 ITR 132, where while allowing revenue\u2019s appeal and placing reliance on Deeksha Suri <\/strong>(DHC), it was held that ITAT was not justified in recalling its order to consider a precedent cited which remained unconsidered by ITAT due to oversight. Further, SC on assessee\u2019s appeal while allowing the same, has held that power to rectify given to ITAT is based on the legal maxim \u201cno one should suffer due to mistake of court\u201d and it is duty of ITAT to see that no one is prejudiced due to mistake attributable on its part. In this regard, it has been further emphasized that \u2018rule of precedent\u2019 is an important aspect of legal certainty, which is not obliterated by section 254(2).\n<\/p>\n

Other High Court views \u2013 An overview<\/strong>\n <\/p>\n

Madhya Pradesh High Court in Mithalal<\/strong> case 158 ITR 755 has held that ITAT can recall its order when it is brought to its notice that it has not considered certain material which is already on record and which has the effect of deciding the appeal on merits\n<\/p>\n

Allahabad High Court in Laskhsmi Elect<\/strong>. 188 ITR 398 has held that the Tribunal fails or omits to deal with an important contention affecting the maintainability\/merits of an appeal, it must be deemed to be a mistake apparent from the record which can be rectified by the Tribunal by its subsequent order.\n<\/p>\n

Gujarat High Court in Suarashtra Stock Exchange <\/strong>262 ITR 146 relying on the principle that \u201cAn act of the Tribunal should not prejudice a party so as to force the party into unwarranted litigation\u201d has held that ITAT can reopen its concluded order in order to set right the mistake committed by it, in not considering important assessee\u2019s contentions.\n<\/p>\n

Rajasthan High Court in Ramesh Chand Modi <\/strong>case163 CTR 424 has held that ITAT is well powered to recall its order correcting procedural mistakes apart from arithmetic (sunstantive) mistakes. It has been illustrated by HC that if record transpires that one of the parties has not been heard in passing an order, going to the root of the matter, it is well powered to recall its order and pass fresh order after giving hearing opportunity.\n<\/p>\n

SC observations in Krishnaswamy case 151 Taxman 286 <\/strong>\n<\/p>\n

In captioned ruling, SC has latestly recognized that \u201cThe maxim of equity, namely, actus curiae neminem gravabit – an act of court shall prejudice no man, is founded upon justice and good sense which serves a safe and certain guide for the administration of law<\/em>.\u201d\n<\/p>\n

Conclusion<\/strong>\n<\/p>\n

In view of above discussion, it may be concluded that power of rectification conferred on ITAT needs to be exercised for redressal of prejudice and for atonement of wrong committed to a party, resulting from mistake attributable to ITAT. Further, since new Direct Tax Code is in pipeline, FM may do well to clarify the above in order to save surmounting litigation costs on the issue. <\/p>\n<\/div>\n

<\/p>\n

\n 4. CIT vs. Alagendran 293 ITR 1<\/strong>\n<\/p>\n

The Hon\u2019ble Supreme court of India, in its recent judgment in the case of CIT vs Alagendran<\/strong>, has dealt with the issue of time limit available to Commissioner of Income Tax (or \u2018CIT\u2019) for passing order under section 263 of the Act, when a reassessment order had already been passed by the Assessing Officer (\u2018AO\u2019). There was controversy prevailing on the issue and the same has been now settled by the Hon\u2019ble Supreme Court of India. <\/p>\n

1.\tIntroduction<\/strong>\n<\/p>\n

In the instant case, assessment of assessee company for assessment years 1994-1995 to 1996-1997 was completed by the AO on 27 February 1997, 12 May 1997 and 30 March 1998 respectively. Thereafter, on limited three issues, assessments were reopened and reassessment order thereupon was passed on 28 March 2002. Further, CIT exercising the jurisdiction under section 263, passed an order on an issue (i.e. lease equalization fund), which was only dealt in original assessment orders, on 29 March 2004, for all the subject assessment years. Income Tax Appellate Tribunal (\u2018ITAT\u2019) allowed the appeal of the assessee company and held that subject orders passed by CIT are barred by limitation. On appeal by revenue, High Court upheld the order of ITAT. In this way matter landed up in Supreme Court on departmental appeal. <\/p>\n

\n
<\/div>\n<\/div>\n

2.\tIssue posited for consideration of Hon\u2019ble Supreme C<\/strong>ourt\n<\/p>\n

Whether for the purpose of computing the period of limitation envisaged under section 263 of the Act, the date of original assessment or that of the reassessment, is to be taken into consideration? <\/p><\/blockquote>\n

3.\tUnderlying Legal Position <\/strong>\n<\/p>\n

Section 263 of the Act gives powers to CIT for revising the orders of subordinate authorities which are erroneous and are prejudicial to the interest of revenue. The power to revise the order under section 263 of the Act is further circumscribed with the limitation period of two years, from the end of the year in which order sought to be revised is passed.\n<\/p>\n

4.\tContention of Department before Hon\u2019ble Supreme Court <\/strong><\/p>\n

Department contended that limitation for passing order under section 263 in the facts of instant case, must begin from the date of reassessment order and not the original order. Department also contended that once reassessment order is passed, original assessment stands merged in reassessment order albeit the issues taken under reassessment are different from the issues sought to be plugged under section 263 of the Act<\/p>\n

5.\tContention of Assessee before Hon\u2019ble Supreme Court <\/strong>\n<\/p>\n

The issue sought to be revised under section 263 of the Act relating to \u2018lease equalization fund\u2019 remained foreign to reassessment order, hence the limitation for passing order under section 263 needs to be reckoned from the date of original assessment, where the issue of \u2018lease equalization fund\u2019 was only dealt with. There can be no application of doctrine of merger as intended by the department, in the facts of instant case.\n<\/p>\n

6.\tRuling of Hon\u2019ble Supreme Court <\/strong>\n<\/p>\n

The Hon\u2019ble Supreme Court held that where the issue sought to be revised under section 263 of the Act was not the subject of the reassessment proceedings, the period of limitation under section 263 will begin from the date of original assessment and not from the date of reassessment order.\n<\/p>\n

In so holding, the Hon\u2019ble Supreme Court placed reliance on the previous ruling of Hon\u2019ble Supreme Court in the case of CIT vs Sun Engineering <\/strong>198 ITR 297: This was pressed into service, in the instant case to deduce that on initiation of reassessment proceedings although the previous under assessment is set aside and whole proceedings start afresh but the same does not mean that even when the subject matter of original assessment and reassessment is different, entire proceedings would be deemed to have been reopened.\n<\/p>\n

Further, the Hon\u2019ble Supreme Court approved the Madras High Court ruling in the case of CWT vs A.K.Thanga Pillai<\/strong> 252 ITR 260 wherein also the Madras High Court took the view that in case the revenue fails or neglects to revise the original order of assessment within the period of limitation allowed by law, it cannot in the guise of revising the order of reassessment made several years after the original assessment, proceed to revise the items which had been accepted in the original order of assessment. Ruling of Calcutta High Court in the case of CIT vs Kanubhai Engineers (P) Limited <\/strong>241 ITR 665 wherein it was held that on reassessment, original assessment do not become non est and keeps the legal sanctity, had also got the blessings of Supreme Court in the instant case.\n<\/p>\n

Further, the Hon\u2019ble Supreme Court held that as the issue relating to \u2018lease equalization fund\u2019 was not the subject matter of reassessment proceedings, doctrine of merger in such a situation cannot be said to have any application. It was further clarified by the Hon\u2019ble Supreme Court that present case is not the one where subject matter of reassessment and subject matter of original assessment are overlapping.\n<\/p>\n

It may be interesting to note that, few months back, Hon\u2019ble Justice S.B.Sinha who has pronounced the instant ruling in the case of Alagendran<\/strong>, has in the case of CIT vs Ralson Industries <\/strong>158 Taxman 160 also observed (in context of section 263 of the Act) that there is no application of doctrine of merger between original order and rectification order qua section 263 of the Act.\n<\/p>\n

Further, it may be construed from the instant ruling of Hon\u2019ble Supreme Court that in case the issues on which the revision power is sought to be exercised by CIT under section 263 of the Act were the subject matter of reassessment proceedings, the limitation to revise the order under section 263 shall commence from the date of reassessment order, which view is very recently endorsed by Punjab and Haryana High Court also in the case of CWT vs Rakesh Kumar Jairath<\/strong> 162 Taxman 285.\n<\/p>\n

7.\tConclusion<\/strong>\n<\/p>\n

Keeping in mind the principle that limitation period is meant to protect the assessee and ensure that stale issues do not get reactivated beyond a particular stage and that lapse of time induce repose in and set at rest judicial and quasi-judicial controversies (Refer Supreme Court in Parshuram Pottery vs ITO <\/strong>106 ITR 1), the subject ruling of Supreme Court may be seen as blowing the wind of certainty and bringing the issue to a fair conclusion, by holding that the period of limitation under section 263 of the Act will begin from the date of original assessment order and not from the date of reassessment order, if the issue was only dealt under original assessment proceedings and not under reassessment proceedings. Further, Punjab and Haryana High Court in the case of CWT vs Rakesh Kumar Jairath <\/strong>(supra) independently speaking has also echoed the same line of thought as is aired by Supreme Court in the subject ruling.\n<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Analysis of recent Supreme Court judgements CA Kapil Goel The author has made a critical analysis of four recent and important decisions of the Supreme Court in R & B Falcon vs. CIT, Goetze India vs. CIT 284 ITR 323, …<\/p>\n

Analysis of recent Supreme Court judgements<\/span> Read More »<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[],"class_list":["post-19","post","type-post","status-publish","format-standard","hentry","category-articles"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/posts\/19","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/comments?post=19"}],"version-history":[{"count":0,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/posts\/19\/revisions"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/media?parent=19"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/categories?post=19"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/tags?post=19"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}