PUNJAB STATE COOP SUPPLY AND MARKETING vs. JOINT COMMISSIONER OF INCOME TAX

ITA No. 42 of 2004 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 42 of 2004 Date of Decision: 5.9.2011 Punjab State Coop. Supply & Marketing Federation Ltd. ....Appellant. Versus Joint Commissioner of Income-tax ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Garg, Advocate for the appellant. Ms. Urvashi Dhugga, Senior Standing Counsel, for the respondent. AJAY KUMAR MITTAL, J. 1. This order shall dispose of ITA Nos. 42 and 57 of 2004 filed by the assessee for the assessment years 1992-93 and 1993-94 as according to learned counsel for the parties, identical questions of law are involved therein. For brevity, the facts are being extracted from ITA No. 42 of 2004. 2. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 22.7.2003 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) in M.A. No. 5/CHANDI/99 in ITA No. ITA No. 42 of 2004 -2- 1327/CHANDI/1995, for the assessment year 1992-93, claiming the following substantial questions of law:- “i) Whether the learned Tribunal is correct in law in passing the rectification orders impugned in the present appeal when the very basis of the rectification proceedings was debatable before this Hon'ble Court as well as Hon'ble Supreme Court of India? ii) Whether the Tribunal could at all issue the notices for rectification of its earlier orders when the vires of the retrospective amendment of Section 80P(2)(a)(iii) were debatable before this Hon'ble Court in CWP No. 3242 of 1999? iii) Whether in view of the fact that the judicial decisions having become final in case of the appellant in 182 I.T.R. 59, the Revenue not having preferred an appeal against the said decision and allowing exemption claimed by the appellant, the same can be set at naught by way of the present rectification order?” 3. Briefly stated, the facts necessary for adjudication as narrated in the appeal are that the assessee had been making purchase of food grain from its member-societies as an agent of the Government and selling the same to Food Corporation of India (FCI). The income of the assessee arising from the same was exempt from tax under Section 80P(2)(a)(iii) of the Act, as held by this Court in the assessee's own ITA No. 42 of 2004 -3- case in Commissioner of Income Tax v. Punjab State Cooperative Supply and Marketing Federation Ltd. 182 ITR 59 following its own judgment in the case of Commissioner of Income Tax v. HAFED 182 ITR 53. The appeal filed by the revenue bearing Civil Appeal No. 15430 of 1996 against the order of this Court was dismissed by the Hon'ble Supreme Court on 31.5.1998 while deciding the case of Kerala State Coop. Supply & Marketing Federation Ltd. and others v. Commissioner of Income-tax 231 ITR 814 holding that the agricultural produce of its members as defined in Section 80P(2)(a)(iii) of the Act means that it should belong to its members and not that it should be produced by its members. The Tribunal following the judgment of the Hon'ble Supreme Court in Kerala State Coop. Supply & Marketing Federation Ltd's case (supra) allowed deduction to the assessee for the income derived by it from marketing an agricultural produce of its members which belonged to them vide order dated 23.9.1998. The Parliament amended the provisions of Section 80P(2)(a)(iii) of the Act with retrospective effect from 1.4.1968 vide Income-tax (Second Amendment) Act, 1998 which came into force on 8.1.1999. The said amendment was challenged by the assessee before this Court vide CWP No. 3241 of 1999. This Court admitted the petition and stayed further proceedings which were started in pursuance to the amended law. The retrospective amendment was also challenged by the National Agricultural Cooperative Marketing Federation in Delhi High Court who upheld the said amendment against which Special Leave Petition was filed in the Hon'ble Supreme Court. The Hon'ble Supreme Court upheld the retrospective amendment. In pursuance thereof, the Tribunal vide ITA No. 42 of 2004 -4- its order dated 22.7.2003 in the misc. application filed under Section 254 of the Act, reversed its earlier order dated 23.9.1998 and denied the deduction which was earlier granted under Section 80P(2)(a)(iii) of the Act. Hence, the present appeal by the assessee. 4. We have heard learned counsel for the parties. 5. The point for consideration in this appeal is as to whether the order of the Tribunal dated 23.9.1998 could be rectified in view of retrospective amendment made by the Income Tax (Second Amendment) Act, 1998 effective from 1.4.1968. 6. The Tribunal while rejecting the contention of the assessee, following the decision of the Apex Court in the case of J.M. Bhatia AAC and others v. J.M. Shah (1985) 156 ITR 474, held that the order dated 23.9.1998 could be rectified as there was mistake of law which was apparent on the record. The observation of the Tribunal reads thus:- “There is no dispute in this case that in view of the retrospective amendment u/s 80P(2)(a)(iii), the assessee is not entitled for deduction. We feel that when the law is amended with retrospective amendment, the fiction is that all the authorities under the statute must proceed on the basis that the law at the relevant time was the law as amended subsequently with retrospective effect. That being so, the legal fiction is apparently capable of being carried forward to hold that when the earlier order was passed, it was passed in contravention of the amended law which by fiction is deemed to be in ITA No. 42 of 2004 -5- force at that time. This clearly is an error apparent on the face of the record. Section 80P(2)(a)(iii) has been amended with retrospective effect, i.e. w.e.f. 1.4.68. The apex court has upheld the constitutional validity of the retrospective amendment of the section in the case of National Agricultural Coop Marketing Federation of India Ltd. (supra). Once the law is made applicable with retrospective effect, it is deemed to be in existence from the date when it is made applicable and if an order is passed contrary to the amended law, there is a mistake of law crept in the order and such a mistake must be rectified. The apex court has also taken the same view in the aforesaid two decisions and the reasoning given therein is squarely applicable to the facts of the case before us. In view of the above discussions and the case law, we accept the plea of the Revenue and rectify our orders by which both the assessee were allowed deduction u/s 80P(2)(a)(iii) by holding that both the assessees are not entitled for deduction u/s 80P(2)(a)(iii) and to that extent our orders in aforesaid ITAs stand amended.” 7. Further, Full Bench of this Court in Commissioner of Income Tax v. Smt. Aruna Luthra [2001] 252 ITR 76 was considering the scope of power given under Section 154 which is analogous to Section 254 of the Act for rectification of any mistake apparent on the ITA No. 42 of 2004 -6- record. It was held as under:- “The power given to the authority is wide. It can correct “any mistake” provided it is “apparent from the record”. The first question that arises for consideration is – when a mistake can be said to be apparent from the record? The plain language of the provision suggests that the mistake should be apparent. It must be patent. It must appear ex facie from the record. It must not be a mere possible view. The issue should not be debatable. Mr. Sawhney contended that when the view taken by an authority is ex facie contrary to the decision of the jurisdictional High Court or a superior court, the case would fall within the mischief of section 154. However, Mr. Bansal submitted that while deciding a matter, an authority cannot anticipate the view that may be taken by the High Court or the Supreme Court on a subsequent date. If at the time of the passing of the order, the authority takes a particular view, which is not contrary to the existing interpretation of law, the provision of section 154 cannot be invoked. Apparently, the argument of Mr. Bansal appears to be attractive. If the issue of error in the order is to be examined only with reference to the ITA No. 42 of 2004 -7- date on which it was passed, it may be possible to legitimately contend that it was legal on the date on which it was passed. The subsequent decision has only rendered it erroneous or illegal. However, there was no error much less an apparent error on the date of its passing. Thus, the provision of section 154 is not applicable. However, such a view shall be possible only if the provision were to provide that the error has to be seen in the order with reference to the date on which it was passed. Such words are not there in the statute. Resultantly, such a restriction cannot be introduced by the court. Thus, the contention raised by counsel for the assessee cannot be accepted. There is another aspect of the matter. In a given case, on an interpretation of a provision, an authority can take a view in favour of one of the parties. Subsequent to the order, the jurisdictional High Court or their Lordships of the Supreme Court interpret the same provision and take a contrary