Madhya Pradesh High Court
Cit vs Mahavir Drilling Co. on 4 October, 2004
Equivalent citations: (2005)193CTR(MP)43
Author: Am. Sapre
Bench: Am. Sapre
ORDER
AM. Sapre, J:
This is a reference made under section 256(1) of the Income Tax Act at the instance of revenue (CIT) to answer following questions of law which arise out of ITA No. 1107/1108/Ind/1993 :
"1. Whether, on the facts and in the circumstances of the case, the Hon'ble Tribunal was justified in law in confirming the order of the learned Dy. CIT (A) cancelling the assessing officer's order under section 154 withdrawing investment allowance in respect of drilling machines even though the assessing officer's action in rejecting such claim of investment allowance was in conformity with the ratio of the decision of the Hon'ble Supreme Court in the case of CIT v. N. C. Budharaja & Co. & Anr. (1993) 204 ITR 412 (SC) ?
2. Whether, on the facts and in the circumstances of the case, the Hontle Tribunal was justified in upholding cancellation of the rectification order passed by the assessing officer on 19-10-1992, despite the decision of the Hon'ble Supreme Court in the case of N.C. Budharaja & Co. (supra) on the ground that the aforesaid order of the Supreme Court was passed on 7-9-1993 and hence, it would not be applicable to the order dated 19-10-1992 of the assessing officer under section 154 in the case ?"
2. Facts as mentioned in statement of case drawn by the Tribunal need to be taken note of infra.
3. The respondent, an assessee, is a firm engaged in the business of drilling tube-well. In the assessment year 1987-88, the assessee claimed investment allowance of Rs. 2,99,175 on drilling rig machine which the assessing officer allowed it to be set off against the income of assessment years 1988-89 and 1989-90 by his order passed on 31-3-1989.
4. The assessing officer later realised that the investment allowance could not have been claimed by assessee on the drilling machine or in other words, it was noticed that the same was wrongly granted. A notice for rectification under section 154 of the Act was issued to assessee to show cause as to why the relief of investment allowance be not withdrawn. The assessee contested the issue. However by order dated 19-10-1992 (Annex.-A) the assessing officer withdrew the benefit of investment allowance by taking recourse to provisions of rectification namely, section 154 ibid. In the opinion of assessing officer, it being a mistake apparent on its face, a case for rectification is made out. The assessee felt aggrieved, filed an appeal to Dy. CIT (A). The Dy. CIT (A) by order dated 3-9-1993 (Annex.-B) allowed the appeal and set aside the order passed by assessing officer. The revenue then filed appeal to Tribunal. By order dated 6-11-1997 (Annex.-C), the Tribunal dismissed the appeal filed by revenue. However, on a reference prayed by the revenue, the Tribunal acceded to the prayer made by revenue and made the reference to this court for answering the two questions framed supra. This is how the matter has come to this court to answer the aforementioned two questions of law.
5. Heard Shri R.L. Jain, learned counsel for the applicant, and Shri S.K. Jain, learned counsel for non-applicant.
6. Learned counsel for the revenue has contended that in the light of law laid down by Supreme Court in the case of CIT v. N.C. Budharala & Co. & Anr. (supra) the issue in relation to claiming of investment allowance in the activity of drilling stands decided in favour of revenue. It is on this basis, learned counsel contended that once the issue is decided by the Supreme Court against an assessee, the action on the part of assessing officer in invoking section 154 of the Act rectifying the mistake in wrongly granting the benefit to assessee in the original assessment order could always be withdrawn. In reply, learned counsel for assessee placing reliance on the decisions in Geo Miller & Co. Ltd. v. Dy. CIT (2004) 134 Taxman 552 (Cal), CIT v. K. Venkateswara: (1988) 169 ITR 330 (AP), CIT v. Jabalpur Transport Development Co. (1983) 143 ITR 964 (MP), CIT v. Agya Wanti: (2001) 248 ITR 641 (J&K) contended that in this case assessing officer had no jurisdiction to invoke powers under section 154 of the Act. According to learned counsel, the law laid down by Supreme Court in the case of Budharaja (supra) being much subsequent to the order passed by assessing officer in assessment and hence, the same cannot be made basis to seek rectification under section 154 ibid. In other words, the submission was that the law laid down in Budharala (supra) being prospective in nature, the same will not apply to this case because on the date when assessing officer granted relief to assessee, the issue in relation to claiming of investment allowance on drilling activity was a debatable one. In substance, therefore, the submission of learned counsel for the assessee was that both Dy. CIT (A) and Tribunal were justified in holding that section 154 of the Act could not have been resorted to in this case.
7. Having heard learned counsel for the parties and having perused record of the case, we are inclined to answer the reference against the revenue and in favour of assessee.
8. As taken note of supra, the assessing officer passed an assessment order on 31-3-1989, granting benefit of investment allowance to an assessee. This benefit was withdrawn by taking recourse to the provisions of section 154 on 19-10-1992.
9. Admittedly, either on the date of granting benefit, i.e., on 31-3-1989, or on the date when the same was withdrawn by taking recourse to section 154 i.e., 19-10-1992, the decision of Supreme Court in the case of N.C. Budharaja (supra) had not been delivered. It was delivered on 7-10-1993. Obviously, therefore, the assessing officer had not relied upon nor he could have relied upon the decision of Budharaja (supra) for invoking the powers under section 154 of the Act seeking rectification. In other words, on the date when the rectification was done (19-10-1992) by assessing officer, decision of Budharaja (supra) was not made basis nor it could have been made. It is for the simple reason that it had not been rendered till that date.
10. It is not in dispute that on the date when the assessee claimed the benefit of investment allowance i.e., on 31-3-1989 the issue in regard to its claim was a debatable one. In other words, on that date, there was cleavage of judicial opinion between the several High Courts. Some had taken a view in favour of assessee and some in favour of revenue. It is in this state of judicial environment, the assessing officer decided to grant benefit to assessee rather than to revenue. In a case where the issue is debatable, one cannot claim rectification on the ground of an error being apparent on the face of the record. In this view of the matter, the assessing officer had no jurisdiction to invoke section 154 ibid and rectify the order of assessment thereby withdrawing the benefit granted to assessee. In other words, there did not arise any cause of action as on 19-10-1992, to seek rectification of the order and the issue being debatable on the date of claiming benefit, the assessee could claim and assessing officer could either grant or decline.
11. In our view, the decision relied on by learned counsel for the assessee does support the stand taken by an assessee. Indeed, in some cases, i.e., (2004) 134 Taxman 552 (Cal) (supra), the assessing officer made Budharaja (supra) decision as basis to seek rectification in assessment order, yet the Calcutta High Court held that law laid down by Supreme Court being prospective in nature, the same cannot be made basis for seeking rectification of an assessment order. The learned Judge placing reliance on an Explanation appended to order 47, r. 1 of CPC held, and in our opinion rightly, that the legislative intent contained in enacting Explanation added to order 47, r. 1 can always be taken into consideration while construing section 154 of the Act. It was held that when decision on a question of law on which the impugned judgment of the court is based has been reversed or modified by the subsequent decision of a superior court in other case cannot be made a ground for review under Order 47, r. 1 of CPC then it necessarily follows that the same cannot be made basis for claiming rectification under section 154 of Income Tax Act. In the case in hand, the decision of Budharaja (supra) was not even delivered on the date when the order for rectification was passed. It was rendered much thereafter. We, therefore, respectfully concur with the view taken by Calcutta High Court in the case of Geo Miller Co. Ltd. v. Dy. CIT (supra) as in our opinion, the decision lays down correct principle of law insofar as the interpretation of section 154 ibid is concerned.
12. Accordingly, and in view of aforesaid discussion, we answer both the questions, i.e., question Nos. 1 and 2, against the revenue and in favour of assessee. In other words, we answer the questions by holding that Tribunal was right in holding that assessing officer had no jurisdiction to invoke the powers under section 154 of the Act and hence, the order dated 19-10-1992 passed by assessing officer under section 154 of the Act is without jurisdiction and was thus rightly set aside by the Tribunal by upholding the order of Dy. CIT (A). No costs.
OPEN