THE COMMISSIONER OF INCOME TAX vs. M/S PB AGRO INDUSTRIES

ITC/77/1999HC Punjab & HaryanaPHHC01038497199914 March 2013Author: MR. JUSTICE HEMANT GUPTA,MS. JUSTICE RITU BAHRI4 pages
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What were the facts?

The Assessing Officer (AO) finalized the assessment for assessment year 1988-89 on December 31, 1990, disallowing various expenditures, including Rs. 40,29,208/-. However, in the final computation, this specific disallowance was omitted. The AO subsequently passed an order under Section 154 of the Income Tax Act, 1961, to rectify this omission and add back Rs. 40,29,208/-. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who accepted the appeal, stating that an opportunity of hearing had not been granted to the assessee. The Income Tax Appellate Tribunal (ITAT) then set aside the CIT(A)'s order, deeming the AO's Section 154 order null and void. The Revenue's application for reference to the High Court under Section 256(1) was declined by the ITAT. The Revenue then filed a petition under Section 256(2) of the Act.

What did the High Court hold?

The High Court held that the ITAT was not right in setting aside the order of the CIT(A). The Court found that the original assessment order clearly showed a disallowance of Rs. 40,29,208/-. The omission of this amount in the final computation was a mistake apparent from the record, which the Assessing Officer was empowered to correct under Section 154 of the Act. While the Court acknowledged a potential procedural irregularity in not granting an opportunity of hearing, it noted that the CIT(A) had directed such an opportunity. The Court stated that it had doubts about whether an opportunity was strictly required for correcting such an inadvertent and clerical mistake, but refrained from opining further on that specific issue. Consequently, the substantial question of law was answered in favour of the Revenue and against the Revenue, implying that the ITAT's decision was overturned.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the ITAT was right in law in setting aside the order of the CIT(A), who restored the matter to the file of the Assessing Officer for passing fresh orders under Section 154 after allowing an opportunity of being heard to the assessee? This question of law turns on the interpretation and application of Section 154 of the Income Tax Act, 1961. Assessee's contentions: The assessee argued that the CIT(A) was correct in restoring the matter to the AO for a fresh order under Section 154 after providing an opportunity of hearing, implying that the AO's Section 154 order was flawed due to procedural irregularity. Revenue's contentions: The Revenue contended that the ITAT was incorrect in setting aside the CIT(A)'s order. They argued that the mistake in the original assessment order was apparent and rectifiable under Section 154, and that the ITAT's decision to deem the Section 154 order null and void was erroneous. The Revenue relied on the fact that the omission of Rs. 40,29,208/- from the final computation was a clear error.

Which sections of the Income-tax Act were involved?

Section 154,Section 256(1),Section 256(2)

AI-generated summary — verify with the full judgment below

ITC No.77 of 1999 (1) IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 14.03.2013 ITC No.77 of 1999 The Commissioner of Income Tax, Chandigarh ..Appellant Versus Punjab Agro Industries Corporation Ltd. ..Respondent CORAM: HON’BLE MR. JUSTICE HEMANT GUPTA HON’BLE MS. JUSTICE RITU BAHRI Present: Ms. Urvashi Dugga, Advocate, for the appellant. M/s Akshay Bhan & Alok Mittal, Advocates, for the respondent.

Hemant Gupta, J. (Oral)

Present petition is under Section 256(2) of the Income Tax Act, 1961 (for short ‘the Act’) for directing the Income Tax Appellate Tribunal (for short ‘the Tribunal’) to refer the following substantial question of law in respect of assessment year 1988-89: “Whether on the facts and in circumstances of the case, the ITAT was right in law in set aside order of CIT(A), who restored the matter to the file of Assessing Officer for passing fresh orders under Section 154 after allowing opportunity of being heard to the assessee?”

The Assessing Officer finalized assessment of the respondent- assessee for the assessment year 1988-89 on 31.12.1990. The Assessing Officer disallowed many expe

The order continues below.

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