Income Tax Appellate Tribunal - Delhi
Asstt. C.I.T., Spl. Range vs Hughes Services (Fe) Pte. Ltd. As Agent ... on 30 November, 2004
Equivalent citations: [2005]93ITD77(DELHI), (2005)94TTJ(DELHI)815
ORDER
Vimal Gandhi, President
1. This matter has been referred to me Under Section 255(4) of I.T.Act on account of difference between the learned Members of the Bench who heard the misc. applications. The following question has been referred to me to cover the difference:
"Whether in law, the order of the Tribunal Under Section 255(1) of the Income-tax Act, 1961 can be said to be suffering from mistake apparent from record on the basis of subsequent judgment of the jurisdictional High Court for the purpose of rectification Under Section 254(2) of Income-tax Act, 1961 ?"
2. The facts of the case are that assesses were expatriate technicians who worked for foreign companies for drilling of oil. After every 28 days of working on oil rig, they were entitled to 28 days of "off period" to be spent outside India. The Income-tax Appellate Tribunal, vide orders dated 23.3.2001 & 20.3.2001, accepted that salary of "off period" was not liable to be taxed in India. The matter was ultimately carried to the Uttaranchal High Court and the High Court vide its decision dated 9.10.2003 in the case of CIT Dehradun v. Sedco Forex Intl. Drilling Ltd. Hughes Services Pte. Ltd. held that salary of "off period" was also to be taxed in India.
3. In the light of above decision, the Assessing Officer moved the misc. applications before the Tribunal requesting for rectification of orders in the light of decision of Uttaranchal High Court, which is the jurisdictional High Court in these cases. It was contended that in the light of decision of the High Court, the Bench committed a mistake apparent from record in holding that salary of "off period" was not liable to tax.
4. After hearing both the parties, the learned Judicial Member was of the view that there was no mistake apparent from record in the order of the Tribunal which could be rectified Under Section 254(2) of I.T. Act on the basis of a subsequent decision of jurisdictional High Court taking a view contrary to the one taken earlier by the Tribunal. The learned Judicial Member conceded that following three decisions supported the request made by the applicant (revenue) for rectification of the mistake:
1. Nav Nirman P. Ltd. 174 ITR 577 (M.P.)
2. Smt. Aruna Luthra, 252 ITR 76 (P & H) (FB).
3. Kil Kotagiri Tea & Coffee Estate Co. Ltd. 174 ITR 579 (Ker.) He, however, found that the Hon'ble Calcutta High Court in the case of Jiyajee Rao Cotton Mills Ltd. 130 ITR 710 held as under:
"The principle of retrospective legislation is not applicable to the decisions of the Supreme Court declaring the law or interpreting a provision in a statute. The law is laid down or a provision in a statute is interpreted by the Supreme Court only when there is a debate or doubt on the interpretation of any provision of a statute requiring interpretation by the Supreme Court or when there is a conflict of judicial opinion on the provision of a statute among the different High Courts of India which is required to be resolved and settled by the Supreme Court. The law laid down by the Supreme Court cannot be said to have retrospective operation in the sense that although a debate, doubt or conflict of judicial opinion is resolved and settled by the Supreme Court it does not obliterate the existence of such debate, doubt or conflict prior to such decision."
5. The learned Judicial Member found that SLP against the above decision was dismissed. A similar view was taken by Hon'ble Andhra Pradesh High Court in the case of Venkateshwar Rao 169 ITR 330 to hold that order of Tribunal cannot be rectified on the basis of a subsequent judgment. The learned Judicial Member then considered the scope of expression "mistake apparent from the record" on the basis of decision of Hon'ble Supreme Court in the case of Volkart Bros., 82 ITR 50. In his view the proposition that order of a Tribunal can be said to contain a mistake apparent from record on the basis of subsequent judgment of jurisdictional High Court is not free from doubt in view of conflicting views expressed by various High Courts. In his view, decision of Hon'ble Supreme Court in the case of G.M. Mittal Stainless Steel P. Ltd. 263 ITR 255 fortified above view. The learned Member noted facts of that case and quoted relevant extracts from the said decision at page 5 of the impugned order.
The learned Judicial Member noted another fact in support of his view that there was no mistake apparent from record. The said fact is that SLP against decision of Hon'ble Uttranchal High Court stood admitted by the Hon'ble Supreme Court under Article 136 of the Constitution of India. He further observed that discretion to entertain appeal under the above Article is exercised by Hon'ble Supreme Court only in cases where special circumstances are shown to exist. In order to support his conclusion, the learned Judicial Member relied upon decisions of Hon'ble Apex Court in the case of Pritam Singh v. State, AIR 1950 SC 169 and in the case of Dhakeshwari Cotton Mills Ltd. 26 ITR 775. Therefore, on the facts of the case, learned Judicial Member concluded that there was no mistake in the impugned order of the Tribunal. He proposed that application of the revenue be dismissed.
6. The learned Accountant Member did not agree with above view. In his view the decision of jurisdictional High Court even if subsequently given would constitute a mistake in the order of the Tribunal liable to be rectified Under Section 254(2) of I.T. Act. He observed that power to review Under Section 254(2) was wider than the power possessed by Courts under Order 47, Rule 1 of CPC. He further observed that binding decision rendered by a Court is always retrospective. The learned Accountant Member further quoted the decision of Supreme Court in the case of East India Commercial Co. Ltd. v. Collector of Customs AIR 1962 SC 1893 where their Lordships declared as under:
"We, therefore, hold that the law declared by the Highest Court in the State is binding on authorities or Tribunal under its superintendence and they cannot ignore it."
The learned Accountant Member further relied upon large number of decisions to support his view that decision of a jurisdictional High Court, even if subsequently given would constitute a mistake apparent from record. I deem it appropriate to quote the ld. Accountant Member's observations:
"There is no dispute that the decision of High Court of Uttaranchal in the case of Hughes Services Pte. Ltd. was rendered after the orders were passed by the Tribunal. The proposition arising before us - whether a subsequent decision of the jurisdictional High Court can be the basis for rectifying an earlier order in exercise of the powers Under Section 254(2) of the Income-tax Act, is in my opinion, squarely covered by the authoritative pronouncement of the Supreme Court in the case of S.A.L. Narayana Rao, CIT v. Model Mills Nagpur Ltd. 64 ITR 67. In that case, the assessing authority subjected excess dividends to income-tax. Subsequently, the Bombay High Court in Khatau Makanji Spinning and Weaving Co. Ltd. v. CIT (1956) 30 ITR 841, held that levy of tax on excess dividends was illegal. On the basis of that decision, a claim for refund was made by the assessee requesting the assessing authority to rectify the earlier order mistakenly made. That plea was rejected by the assessing authority and also by the Commissioner of Income-tax when a revision application was filed before him. The High Court of Bombay allowed the writ petition filed by the assessee and directed the Income-tax Officer to revise the order of assessment and grant refund to the extent of the tax levied on the excess dividends. By the time the matter was carried to the Supreme Court, the decision of the Bombay High Court in Khatau Mahajan Spinning and Weaving Co. Ltd.'s case (1956) 30 ITR 841 was affirmed in CIT v. Khatau Makanji Spinning and Weaving Co. Ltd. (1960) 40 ITR 189. The Supreme Court affirmed the view taken by the Bombay High Court that the assessee was entitled to refund of the amount. This ruling is a clear authority for the proposition that a subsequent decision can validly form the basis for rectifying an order of assessment under Section 154 of the Income-tax Act, 1961.
6. String of judicial pronouncement of different High Courts like Rajasthan, Bombay, Kerala, Madras, Calcutta, Gujarat, Punjab and Haryana and Andhra Pradesh etc. can be cited in support of the proposition that a subsequent decision of the jurisdictional High Court can validly form the basis for rectifying an order Under Section 154 or 254(2) of the Income-tax Act, 1961. Since Allahabad High Court held the territorial jurisdiction prior to the creation of High Court of Uttranchal, it would be useful to refer to the consistent view taken by the Allahabad High Court in various judgments on the issue. The Allahabad High Court held in Devendra Prakash v. ITO (1969) 72 ITR 151 "It is clear, therefore, that the Income-tax Officer does not have to shut his eyes completely to all extraneous matters when judging whether a particular assessment record reveals a "mistake apparent from the record". He can take into account statutory provisions and pronouncements of the Supreme Court. We see no reason why this principle should no also apply to a case where a High Court has given a decision that shows an existing assessment order to be erroneous; and if the argument is taken to its logical extreme, the Income-tax Officer should be able to take note of any judicial pronouncement by any court or tribunal, when considering whether there is a "mistake apparent from the record of a prior assessment".
7. This judgment has been followed by Allahabad High Court in the case of Omega Sports & Radio Works v. CIT 134 ITR 28 wherein the High Court went to the extent of holding that if there is a decision on a particular point by the High Court of a State, it is binding on the authorities in that State and merely because there is some judicial diversion of opinion on that time between some High Courts it cannot be said that there is still scope for a debate on the points and, therefore, Section 154 of the I.T.Act, 1961 is not attracted to the case. In support of its view Allahabad High Court placed reliance on the decision of Gujarat High Court in the case of CIT v. Ramjibhai Hirjibhai & Sons 110 ITR 411 and decision of Punjab and Haryana High Court in the case of CIT v. Mohan Lal Kansal 114 ITR 583. While considering the present miscellaneous application filed by the Revenue before us, the Bench is bound to follow the binding decision of Allahabad High Court which has consistently expressed the view that a subsequent decision of the jurisdictional High Court can validly form the basis for rectification Under Section 154 as well as 254(4) of the Act. It appears to me that the rejection of the miscellaneous application filed by the revenue as suggested by the learned Judicial Member in his proposed order would run contrary to the settled proposition of law as laid down by Allahabad High Court as well as Supreme Court regarding the binding nature of the decision of jurisdictional High Court. Apart from the binding decisions of Hon'ble Supreme Court as well as Allahabad High Court, which are directly on the point in issue before us, similar view has been reiterated by other High Courts in the following judgments:
Nav Niarman P. Ltd. v. CIT 174 ITR 574 (MP).
Kil Kotagiri Tea and Coffee Estates Co. Ltd. v. CIT 174 ITR 579 (Ker) CIT v. Sunil Kumar 212 ITR 238 (Raj) Mettur Chemical and Industrial Corporation Ltd. v. CIT 110 ITR 822 (Mad), CIT v. Moghul Builders and Planners 252 ITR 488 (AP), CIT v. Mohan Lal Kansal (3 partners) 114 ITR 583 (P&H), CIT v. Purtabpore Co. Ltd. 159 ITR 362 (Cal), B.V. Sehavataram v. CIT 210 ITR 633 (AP) CIT v. K. Venkateswar Rao 169 ITR 330 (AP), CIT v. Premier Polymers (P) Ltd.
A bare perusal of the aforesaid judicial pronouncements of various High Courts would indicate a consensus of judicial opinion on the issue. The proposition is well settled that a subsequent decision of the jurisdictional High Court can form the valid basis of rectification of an order of the Tribunal Under Section 254(2) of the I.T.Act. The learned Judicial Member while taking a contrary view has observed that some High Courts have taken the contrary view that subsequent decision of a High Court would not confer jurisdiction for rectification under Income-tax Act. In support of this view reference has been made by the learned Judicial Member to the decision of Calcutta High Court in the case of Jiyajeerao Cotton Mills Ltd. 130 ITR 710 and decision of Andhra Pradesh High Court in the case of Venkateshwar Rao 169 ITR 310. I have carefully gone through both these decisions and I find that the proposition laid down in these judgments does not in any manner runs contrary to the view taken by other High Courts like Allahabad, Madhya Pradesh, Rajasthan, Kerala, Gujarat etc. Both these decisions are in fact distinguishable on facts and issue involved."
7. With reference to decision of Calcutta High Court in the case of Jiyajeerao Cotton Mills (supra), the learned Accountant Member held that above decision does not counter to the view taken by other High Courts like Allahabad, Madhya Pradesh, Rajasthan, Kerala, Gujarat. He held that decision of Andhra Pradesh and Calcutta High Courts were distinguishable on facts. To distinguish above cases, the learned Accountant Member has observed as under:
8. In Jiyajeerao Cotton Mills's case (supra), notice of rectification Under Section 154 was issued by the A.O. prior to the decision of Supreme Court and, therefore, on the date of such notice there was no mistake apparent from record. The facts were that the A.O. completed the assessment on 27th February, 1970 wherein development rebate allowed in the computation of total income was not deducted while computing the profits and gains attributable to the business of production and manufacture of soda and ash for allowing the special rebate of 35%. The A.O. subsequently issued on May, 1972 a notice of rectification Under Section 154 for amendment of the said assessment made on 27th February, 1970 on the ground that development rebate has not been deducted while computing the special rebate of 35%. The assessee filed a writ petition before the Calcutta High Court. The Revenue resisted the said petition on the basis of the Supreme Court decision in the case of Cambey Electric Supplies (1978) 113 ITR 84. It was in the light of these facts the High Court held that notice of rectification has been issued prior to the Supreme Court decision and it cannot be said that mistake became apparent from record even before the decision was handed down by the Supreme Court. The validity of the rectification is to be seen on the basis of the date of assumption of rectification jurisdiction by the A.O. According to the High Court, apparency of the mistake has to be considered on the date of the issue of the rectification notice. Since the Supreme Court decision has been rendered in 1978, it could not justify assumption of rectification jurisdiction by the A.O. in 1972. It was on these grounds that the rectification notice issued by the A.O. was quashed by the High Court.
9. I may point out that the aforesaid distinction has been highlighted by the Kerala High Court in Kil Kotagiri Tea & Coffee Estates Co. Ltd. v. ITAT and Ors. 174 ITR 579 while holding that the subsequent decision of a jurisdictional High Court justifies rectification Under Section 154, the Kerala High Court explained the ratio of the Calcutta decision in Jiyajeerao Cotton Mils Ltd. which was cited by the Tribunal to take a contrary view. The Kerala High Court observed on page 585 of the report as under:
"We are afraid that the Appellate Tribunal misunderstood the ratio of the two decisions referred to by it in Jiyajeerao Cotton Mills Ltd. v. ITO (1981) 130 ITR 710 (Cal) and CIT v. Assam Oil Co. Ltd. (1982) 133 ITR 204, 214 (Cal). The said decisions are distinguishable. The question that arose for consideration in Jiyajeerao Cotton Mils case (1981) 130 ITR 710 was, whether the decision of the Supreme Court resolving conflict of judicial opinion on a particular point obliterates the existence of a debatable point prior to such decision. It was held that the law laid down by the Supreme Court cannot be said to have retrospective operation in the sense that although a debate or doubt or a conflict of judicial opinion is resolved and settled by the Supreme Court, yet still that does not obliterate the existence of such debate or doubt or conflict that existed prior to the decision of the Supreme Court setting at rest such debate or doubt or conflict."
The Kerala High Court decision relied upon by the learned Judicial Member, therefore, is clearly distinguishable on facts, a crucial difference, as pointed above being the fact that in the present case before us rectification jurisdiction is being invoked on the basis of subsequent decision of the jurisdictional High Court whereas in the aforesaid case before the Calcutta High Court jurisdiction for rectification had been invoked prior to the decision of the Supreme Court. The fact that the view of the Calcutta High Court on the question arising before us is in concurrence with the view taken by the other High Courts like Kerala, Allahabad etc is further fortified by the following two decisions of Calcutta High Court:
1) CIT v. Purtabpore Co. Ltd. 159 ITR 362, wherein the Calcutta High Court held that the validity of the action of the Income-tax Officer must be judged on the facts as they were at the time when the action was taken. When the said rectification was made in March, 1969, no decision of any other High-Court taking a contrary view was referred to the Income-tax Officer or for that matter to the Appellate Asstt. Commissioner or the Tribunal. All the High Courts had since held uniformly that extra shift allowance for a seasonable factories had to be allowed in proportion to the actual number of days for which the plant and machinery had worked extra shift. The language of the provision was also unambiguous. After the decision of the High Court there was a mistake apparent from the record of the assessment. The order of rectification was, therefore, valid.
2) CIT v. Premier Polymers (P) Ltd. In this case the High Court held that a subsequent decision of the jurisdictional High Court could validly form the basis of rectification Under Section 154.
Thus both the decisions of Calcutta High Court take the same view as taken by other High Courts and the learned Judicial Member has wrongly proceeded on the assumption that Calcutta High Court has taken a divergent view.
10. The learned Judicial Member has next cited the decision of Andhra Pradesh High Court in the case of Venkateswar Rao 169 ITR 330. The facts of the case before the Hon'ble Andhra Pradesh High Court are entirely distinguishable. In this case also, like the Calcutta decision cited by the learned Judicial Member rectification proceedings were initiated not on the basis of any binding decision of the jurisdictional High Court. In this case their lordships held that the decision of High Court was rendered on March 6, 1979, whereas the jurisdiction to rectify the alleged mistake under Section 154 was invoked as early as August 30, 1977. The proceedings initiated by the Income-tax Officer for rectification were not with reference to the judgment of the High Court which was rendered much later. On the date when the Income-tax Officer exercised his jurisdiction under Section 154, the matter was not free from argument or debate. Therefore, it could not be said that a patent and self-evident mistake occurred when the Income-tax Officer allowed interest under Section 214 treating the payment as an advance tax. The rectification proceedings were, therefore, not valid.
In fact, the view taken by the Andhra Pradesh High Court on the point in issue before us concurs with the view taken by the other High Courts as above. Reference in this connection may be made to B.V. Sehavataram v. CIT 210 ITR 633. In this decision the Andhra Pradesh High Court has clearly laid down the proposition that a subsequent decision can validly form the basis for rectifying an order of assessment Under Section 154 of the I.T. Act, 1961. In support of this view the High Court has placed reliance on the direct decision of Hon'ble Supreme Court in S.A.L. Narayan Rao, CIT v. Model Mills Nagpur Ltd. 64 ITR 67 which has already been referred by me above"
8. The learned Accountant Member has further observed that decisions of Jiyajeerao Cotton Mils Ltd. (Cal.) and Venkateshwar Rao (A.P) were given on entirely distinguishable set of facts as well as the legal question involved. All the same view taken by these High Courts was consistent with the view of other High Courts as well as ratio of Supreme Court decision in S.A.L. Narayan Rao, CIT v. Model Mills Nagpur Ltd. 64 ITR 67 and in State of Kerala and Anr. v. P.K. Syed Akbar Sahib 173 ITR 1.
In the light of above discussion, he disagreed with the view of learned Judicial Member and held that order of the Tribunal suffered from a mistake apparent from record on the basis of subsequent judgment of the Uttaranchal High Court. The earlier order of the Tribunal was liable to be rectified to the extent that "off period" salary of expatriate assessee employees was liable to be Heated as income under the Income-tax Act, 1961. The learned Accountant Member accordingly allowed the misc. application.
9. The difference has been brought before me and I have heard both the parties on the difference. The learned counsel for the assessee Shri R. Ganesan, vehemently contended that provision of Section 9(1)(ii) of I.T. Act were not applicable in this case as income did not accrue or arise in India. Therefore, there was no question of carrying any rectification. At any rate highly debatable question was involved on which more than one view was possible and therefore, there was no mistake apparent from record. The learned counsel for the assessee in support of his arguments placed strong reliance on the decision of Calcutta High Court in the case of Jiyanjeerao Cotton Mills Ltd. 130 ITR 710 and also on the decision of Hon'ble Supreme Court in the case of G.M. Mittal Stainless Steel P. Ltd. 263 ITR 255. The learned counsel accordingly supported order of the Judicial Member.
The learned Departmental Representative on the other hand supported and relied upon order of the Accountant Member.
10. I have given careful thought to the rival submissions of the parties and examined case law cited on their behalf. I do not find any force in the contention of the ld. Counsel for the assessee that the provisions of Section 9(1)(ii) of the Income-tax Act were applicable in this case. The Hon'ble jurisdictional High Court has already decided the matter and the said decision is valid and binding on subordinate Courts and Tribunal despite the fact that it has been challenged before the Hon'ble Supreme Court. Both the Id. Members have proceeded on the premises that the jurisdictional High Court has held that the salary of the "off period" is liable to be taxed in India. The issue on merit is not open before me. I have to confine myself to the question whether provisions of Section 254(2) are applicable in these cases in the light of the decision of the Court. I, therefore, reject above submission of the ld. Counsel for the assessee.
In my humble opinion, the matter in issue is fully covered as per decision of Hon'ble Allahabad High Court which is the jurisdictional High Court as the decision was given when High Court of Uttaranchal had not come into being and Uttaranchal fell within the territorial jurisdiction of Allahabad High Court. In the case of Omega Sports & Radio Works v. CIT 134 ITR 28 (All), their Lordships observed as under:
"A mistake apparent from the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there can be two opinions. If there is a decision on a particular point by the High Court of a State, it is binding on the I.T. authorities in that State and merely because there is some judicial divergence of opinion on that point between some High Courts, it cannot be said that there is still scope for a debate on the points and that, therefore, Section 154 of the I.T. Act, 1961, is not attracted to the case."
11. The above decision is binding and is duly noted by the learned Accountant Member. He has also distinguished on facts other decisions relied upon by the learned Judicial Member to demonstratively show that subsequent binding decision would constitute a mistake apparent from record in the order of the Tribunal holding a contrary view. In the light of elaborate discussion available in the order of learned Accountant Member, I do not see any useful purpose in further repeating all the case law cited by the learned Accountant Member. I agree with the view expressed in the proposed order of Accountant Member and hold that there is a mistake apparent from the record in the impugned order of the Tribunal which is liable to be rectified Under Section 254(2) of the I.T. Act. With above observations, I agree with the view expressed by the learned Accountant Member.
12. The matter maw now be placed before regular Bench for passing an order in accordance with law.