M/S KAKKAR COMPLEX STEEL P.LTD vs. CIT JALANDHAR

PDF · subscribers
ITR/171/1998HC Punjab & HaryanaPHHC01037965199815 January 2020Author: MR. JUSTICE AJAY TEWARI,MR. JUSTICE AVNEESH JHINGAN4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the first issue was not well-founded. It reasoned that the CIT(A) had directed the AO to re-compute the deduction at 20% of the profits for units 'A' and 'B' without considering the actual allowable amount. While re-computing, the AO erroneously included profits from non-industrial activities and failed to deduct unabsorbed brought forward losses. The invocation of Section 154 was to correct this mistake apparent on the record. The Court found no perversity in the ITAT's order, stating that the issue dealt with by the CIT(A) was not the subject matter of the Section 154 proceedings, which focused on the correct calculation of deduction based on industrial profits. For the second issue, the Tribunal, relying on the Supreme Court decision in Distributors (Baroda) Pvt. Ltd. v. Union of India and others, upheld the AO's action of reducing unabsorbed brought forward losses from current year profits for Section 80-HH computation. The assessee failed to demonstrate the inapplicability of the Supreme Court's decision. Therefore, both questions were answered against the assessee.

What were the facts?

The assessee, M/s Kakkar Complex Steels (P) Ltd., is in appeal against the order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 1983-84. The Assessing Officer (AO) initially allowed a deduction under Section 80-HH of Rs. 1,18,346/-. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the assessee's appeal, remanding the matter to the AO to re-compute the deduction at 20% of the profits for units 'A' and 'B'. The AO re-computed the deduction. Subsequently, the AO issued a notice under Section 154 of the Act, on October 8, 1987, to rectify a mistake where 20% deduction was allowed on profits from non-industrial activities. The AO's order dated February 29, 1988, re-calculated the deduction. Appeals against this order were dismissed by the first appellate authority and the ITAT partly allowed the assessee's further appeal.

What were the issues?

1. Whether the ITAT order holding that Section 154 was correctly invoked because the AO miscalculated the Section 80-HH deduction, is perverse in law, when the assessee contended that the AO was not justified in rectifying points that were already decided by the CIT(A)? (Section 154 of the Income Tax Act, 1961). The assessee argued that the AO could not invoke Section 154 to rectify mistakes on points already adjudicated by the CIT(A). The revenue contended that Section 154 was invoked to correct a mistake apparent on the record regarding the calculation of deduction under Section 80-HH, specifically allowing deduction on profits from non-industrial activities and not reducing unabsorbed brought forward losses. 2. Whether the ITAT was right in law in holding that unabsorbed brought forward losses are to be reduced from the profits of the current year for the purpose of computing deduction under Section 80-HH? (Section 80-HH of the Income Tax Act, 1961). The assessee argued that the AO's rectification under Section 154 was impermissible as it went beyond correcting a mere mistake and re-adjudicated issues decided by the CIT(A). The revenue argued that the AO correctly invoked Section 154 to rectify an apparent mistake in the calculation of the Section 80-HH deduction.

Which sections of the Income-tax Act were involved?

Section 154,Section 80-HH

AI-generated summary — verify with the full judgment below

ITR No. 171 of 1998 [1]

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITR No. 171 of 1998 Date of decision: 15.1.2020 M/s Kakkar Complex Steels (P) Ltd., Jalandhar .. Applicant v. The Commissioner of Income-Tax Jalandhar .. Respondent CORAM: HON'BLE MR. JUSTICE AJAY TEWARI HON'BLE MR. JUSTICE AVNEESH JHINGAN Present: Mr. Divya Suri, Advocate for the applicant. Mr. Vivek Sethi, Senior Standing Counsel and Mr. Varun Issar, Junior Standing Counsel for the respondent. ... AVNEESH JHINGAN, J. In reference under Section 256(1) of the Income Tax Act, 1961 (for short, 'the Act'), following questions of law have been referred for opinion of this Court:

“1. Whether on the facts and in the circumstances of the case the order of the Appellate Tribunal, holding that Section 154 was correctly envoked since calculation of Section 80-HH on various item was not properly worked out by the A.O. whereas the appellant had challenged the applicability of Section 154 on the ground that the A.O. was not justified in passing oder u/s 154 rectifying the mistakes on points which were the subject matter of appeal decided by CIT (A) is not perverse in law. MANOJ KUMAR 2020.01.21 13:52 I attest to the accuracy and authenticity of this document High Court,Chandigarh

ITR No. 171 of 1998 [2]

2.

Whether on the facts and in the circumstances of the case the Appellate Tribunal was right in law in holding that unabsorbed brought forward loss are to be reduced from the profits of the current year for the purposes of computation of deduction u/s 80-HH.” The facts of the case are that the assessment year involved is 1983-84. The assessment was finalised on 25.3.1986 and deduction under Section 80-HH of the Act of `1,18,346/- was allowed. Aggrieved of the assessment order, appeal was filed. Commissioner of Income Tax (Appeal), Jalandhar [for short, 'CIT (A)'] vide order dated 22.1.1987 allowed the appeal with regard to the issue of deduction under Section 80-HH of the Act. The matter was sent to the Assessing Officer to re-compute the deduction under Section 80-HH of the Act in respect of unit 'A' and unit 'B' of the assessee @ 20% of profits ultimately determined for the year. In pursuance to the remand, the Assessing Officer vide order dated 23.2.1987, allowed deduction under Section 80-HH of the Act. On realising that there was a mistake apparent on the record as deduction of 20% was allowed even on the profits earned from non- industrial activities, a notice under Section 154 of the Act was issued on 8.10.1987. The applicant filed reply dated 27.10.1987. The Assessing Officer vide order dated 29.2.1988 re-calculated the deduction. The appeal filed before the 1st Appellate Authority against the said order was dismissed on 1.11.1991. Further appeal filed before the Tribunal was partly allowed. Learned counsel for the assessee argued that the issue with regard to deduction under Section 80-HH of the Act was specifically decided by CIT (A) vide order dated 22.1.1987, hence the Assessing Officer MANOJ KUMAR 2020.01.21 13:52 I attest to the accuracy and authenticity of this document High Court,Chandigarh

ITR No. 171 of 1998 [3] could not have passed order under Section 154 of the Act for rectifying the mistake on the point which was subject matter in appeal. The contention raised is not well-founded. CIT (A) allowed the appeal holding that deduction under Section 80-HH of the Act should have been allowed @ 20% of the profit for the year without considering the actual amount allowable. To re-compute the deduction in respect of unit 'A' and unit 'B'@ 20% of the profit ultimately determined for the year, the matter was remitted back to the Assessing Officer. While re-computing the deduction, the Assessing Officer considered the profit earned from non- industrial activities and also did not deducted unabsorbed brought forward losses. It was to correct this mistake apparent on the record that Section 154 of the Act was invoked. Suffice to say that the issue dealt with by the 1st Appellate Authority was not subject-matter of proceedings under Section 154 of the Act, rather 20% of the profit earned from industrial activities was considered and deduction was allowed. There is no perversity in the order passed. Question No. 1 is answered against the assessee. So far as question No. 2 is concerned, the Tribunal relying upon the decision of the Supreme Court in Distributors (Baroda) Pvt. Ltd. v. Union of India and others, 1985(155) ITR 120 upheld the order of the Assessing Officer reducing the unabsorbed brought forward loss from the profit of the current year for the purpose of computing deduction under Section 80-HH of the Act. Learned counsel for the assessee has not been able to show that the decision of the Supreme Court is not applicable in the facts of the present case, hence the question is answered against the assessee. MANOJ KUMAR 2020.01.21 13:52 I attest to the accuracy and authenticity of this document High Court,Chandigarh

ITR No. 171 of 1998 [4] The reference is disposed of accordingly. (AVNEESH JHINGAN) (AJAY TEWARI)

JUDGE JUDGE 15.1.2020 mk Whether speaking/reasoned: Yes/No Whether reportable: Yes/No MANOJ KUMAR 2020.01.21 13:52 I attest to the accuracy and authenticity of this document High Court,Chandigarh

More judgments on Section 154

All 8,676 judgments and leading authorities on Section 154 →

Recent GST High Court judgments

Search GST case law →