COMMISSIONER OF INCOME-TAX vs. CHALTAN VIBHAG UDYOG KHAND SAHAKARI MANDLI LTD

ITR/40/1994HC GujaratGJHC24020118199425 August 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI7 pages
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What were the facts?

The assessee, Chaltan Vibhag Udyog Khand Sahakari Mandli Ltd., filed its return for assessment year 1975-76. The Assessing Officer (AO) passed an assessment order on August 3, 1979, determining total income at Rs. Nil after allowing deductions under Section 80P, Section 80J, development rebate, and setting off carried forward loss from assessment year 1973-74. Subsequently, the AO believed there was a mistake in the order regarding the priority of deductions. He initiated proceedings under Section 154 of the Income Tax Act, 1961, to rectify the assessment. The CIT (Appeals) held that the matter was debatable and not rectifiable under Section 154. The Income Tax Appellate Tribunal (ITAT) confirmed the CIT (Appeals)'s order. The Commissioner of Income-tax (Revenue) referred the matter to the High Court.

What did the High Court hold?

The High Court held that the ITAT was right in its conclusion. The dispute revolved around the priority of deductions such as carried forward business loss, current development rebate, and deduction under Section 80J. The court noted that the position in law regarding the order of priority amongst these items was not settled, although it referenced a Supreme Court decision on unabsorbed depreciation. The court agreed with the assessee and the Tribunal that a mistake apparent on the record must be obvious and patent, not something requiring extensive reasoning or on which two opinions could be held. A debatable point of law does not constitute a mistake apparent from the record. Therefore, the action under Section 154 was not permissible as there was no mistake apparent from the record. The ITAT's order was upheld, and the question of law was answered in favour of the assessee.

What were the issues?

1. Whether, in law and on facts, the ITAT was right in holding that when a Supreme Court judgment existed prior to the assessment order, and the AO made the assessment without following it, a subsequent action under Section 154 to rectify the order constituted a change of opinion and not a correction of a mistake apparent from the record. Assessee's contentions: The assessee relied on the Supreme Court decision in T.S. Balaram, Income Tax Officer v. Volkart Brothers, [1971] 82 ITR 50, arguing that the true scope of a provision cannot be a subject matter of rectification proceedings. Revenue's contentions: The revenue contended that a Supreme Court decision would always constitute a ground for holding that the order suffered from an apparent mistake, and therefore, the ITAT's order was bad in law. The revenue relied on the Supreme Court's decision in Cambay Electric Supply Industrial Co. Ltd. v. Commissioner of Income Tax, Gujarat II, [1978] 113 ITR 84.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 143(3),Section 144B,Section 80P,Section 80J,Section 154

AI-generated summary — verify with the full judgment below

ITR/40/1994 1/7 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 40 of 1994 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MS.JUSTICE H.N.DEVANI ============================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ============================================================== COMMISSIONER OF INCOME-TAX - Applicant(s)

Versus CHALTAN VIBHAG UDYOG KHAND SAHAKARI MANDLI LTD - Respondent(s) ============================================================== Appearance : MR MANISH R BHATT for MR JP SHAH for the Applicant NOTICE SERVED for Respondent No(s).: 1. ================================================================== CORAM :  HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 24-25/08/2005 ORAL JUDGMENT (Per : HONOURA

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