GUJARAT CO-OPERATIVE OILSEEDS GROWERS' FEDERATION LTD. vs. DY. C.I.T.

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TAXAP/345/2000HC GujaratGJHC24022865200027 November 2000Author: HONOURABLE THE CHIEF JUSTICE MR. JUSTICE D.M.DHARMADHIKARI,HONOURABLE MR. JUSTICE MOHIT S. SHAH6 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court held that the Tribunal was not right in refusing to permit the assessee to raise the question of arithmetical calculation of disallowable depreciation. Citing the Supreme Court's decision in National Thermal Power Co. Ltd. vs. CIT, the Court stated that the Tribunal's powers are broad enough to consider issues arising from facts already on record, especially when a permissible deduction is denied due to an arithmetical mistake. The Court found that the assessing officer had indeed calculated the disallowable depreciation for the Jamnagar project by including Rs. 6,01,198/- twice, leading to an incorrect aggregate disallowance of Rs. 12,71,203/- instead of the correct Rs. 6,70,005/-. The Court noted that this glaring arithmetical mistake was not disputed by the revenue. Therefore, the High Court allowed the appeal to the extent of remanding the case to the Tribunal to permit the question to be raised and grant the necessary relief. The Court directed the recalculation of disallowable depreciation for the Jamnagar project to Rs. 6,70,005/- and recomputation of tax accordingly. The Court found no substantial question of law concerning the first two issues (validity of reopening and disallowance of depreciation).

What were the facts?

The assessee, Gujarat Co-operative Oilseeds Growers' Federation Ltd., filed an income tax return for assessment year 1985-86, claiming depreciation. The assessing officer initially allowed the claim. However, a reassessment notice under Section 148 was issued, and the Deputy Commissioner disallowed depreciation of Rs. 12,71,203/- for the Jamnagar project and Rs. 3,09,946/- for the Anand project. The CIT dismissed the assessee's appeal. The assessee appealed to the Income Tax Appellate Tribunal (Tribunal), challenging the validity of reopening, the disallowance of depreciation, and seeking a reduction in the disallowed amount. The Tribunal upheld the reopening and the disallowance but declined to consider a further challenge on the grounds that it was not raised before lower authorities. The assessee filed an appeal before the High Court.

What were the issues?

1. Whether the Tribunal was right in law in rejecting the admission of an additional ground which did not require any additional fact or evidence for adjudication and which was a patent mistake committed by the assessing officer by disallowing depreciation of Rs. 6,01,198/- in respect of the same assets twice? (Question of law) Assessee's contentions: - The Tribunal erred in not allowing the additional ground concerning the arithmetical mistake in calculating disallowable depreciation. This was a patent mistake apparent on the face of the reassessment order. - Relied on the Supreme Court decision in National Thermal Power Co. Ltd. vs. CIT, 229 ITR 383, stating that the Tribunal's powers are not confined only to issues arising from the appeal before the Commissioner (Appeals) if relevant facts are on record. Revenue's contentions: - The issue does not involve a substantial question of law. - The assessee's remedy was to file an application under Section 154 of the Act, and the limitation period for that has elapsed. - Relief cannot be sought under Section 260A for a matter that does not involve a substantial question of law.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 148,Section 43(1),Section 260A,Section 154

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

TAX APPEAL No 345 of 2000

For Approval and Signature:

Hon'ble CHIEF JUSTICE MR DM DHARMADHIKARI and Hon'ble MR.JUSTICE M.S.SHAH

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- GUJARAT CO-OPERATIVE OILSEEDS GROWERS' FEDERATION LTD. Versus DY. C.I.T. -------------------------------------------------------------- Appearance: MR JP SHAH for Petitioner MR Mihir Joshi with Mr.MANISH R BHATT for Respondent No. 1

--------------------------------------------------------------

CORAM : CHIEF JUSTICE MR DM DHARMADHIKARI and MR.JUSTICE M.S.SHAH

Date of decision: 27/11/2000

ORAL JUDGEMENT (Per : MR.JUSTICE M.S.SHAH)

The appeal is admitted on the following substantial question of law:

"Whether the Tribunal was right in law in rejecting the admission of the additional ground which did not require any additional fact or evidence for adjudication and which was a patent mistake committed by the assessing officer by disallowing the depreciation of Rs. 6,01,198/-in respect of the same assets twice?"

2.

Mr Mihir Joshi waives service of notice of final hearing on behalf of the revenue.

3.

This is an appeal under section 260A of the Income tax Act, 1961 (hereinafter referred to as `the Act') challenging the judgment and order dated 16.6.2000 of the Income tax Appellate Tribunal (hereinafter referred to as `the Tribunal') in Income Tax Appeal No. 4012/Ahd/1992. 4. The appellant is a cooperative society carrying on business of marketing agricultural produce of its members. Income tax return for the year 1985-86 was filed wherein the assessee claimed depreciation for a sum of Rs. 11,07,230/- in respect of the land, building, machinery for Jamnagar project and also claimed depreciation for the project at Anand. The assessing officer passed the assessment order dated 23.3.1988 under section 143 (3) of the Act allowing the assessee's claim for depreciation. However, the assessing officer thereafter issued notice dated 27.3.1990 under section 148 of the Act for reassessment. After hearing the assessee, the Deputy Commissioner of Income tax, Rajkot passed his order dated 23.3.1992 disallowing the depreciation to the extent of Rs. 12,71,203/- for Jamnagar project and Rs. 3,09, 946/- in respect of the Anand project.

5.

The assessee's appeal was dismissed by CIT, Rajkot , The assessee also filed an appeal before the Tribunal. At the time of hearing of the appeal before the Tribunal, the following main challenges were levelled;

(1) The Commissioner erred in holding that the reopening of section 143 (3) assessment done previously was valid;

(2) The Commissioner erred in confirming disallowance

of depreciation to the extent of Rs. 15,81,189/- and (3) Disallowance made by the assessing officer at Rs. 15,81,189/- as confirmed by the Commissioner was required to be reduced to Rs. 9,79,945/-.

After giving elaborate reasons, the Tribunal negatived the first two challenges on merits. It,however, declined to entertain the final challenge on the ground that it was not taken up either before the assessing officer or before the Commissioner of Income tax (appeals).

6.

After issuing notice to the respondent, we have heard the learned counsel for the appellant-assessee and the revenue at length. We agree with the Tribunal that notice of reopening of assessment under section 148 of the Act was issued within four years on the grounds permissible under law. The Tribunal found that in the original order of assessment, the assessing officer had allowed depreciation on the full cost of plant and machinery without reducing the amount of grant which was paid by National Dairy Development Board (`NDDB') to the appellant for purchasing such plant and machinery. The Tribunal found that in the original assessment proceedings, the assessing officer had called for material from the assessee regarding cost of machinery and grant received from NDDB; but the assessing officer depreciation to the extent of Rs.12,71,203/-; whereas, the amount of depreciation disallowable even as per the finding of the assessing officer in the reassessment proceedings was only Rs.6,70,005/-. He pointed out the mistake from para 6 of the reassessment order:

"WDV as on 1.11.93 -Amount of grant

Amt. Amt. Rate of depre. Dep Rs. Rs. Rs.

Land 4,19,417 1,23,937 - -

Building 44,35,578 13,10,707 5% 65,535

Factory Rd. 2,21,437 65,454 5% 3,272

Plant & 1,35,63,449 40,07,962 15% 6,01,198 -------------- ---------- ----------- 12,71,203

(instead of 6,70.005)

The contention of the learned counsel for the assessee is that the amount of Rs. 6,01,198/- is considered twice over while aggregating disallowable depreciation for the Jamnagar Project (Rs. 6,70,005 + Rs. 6,01,198 = Rs. 12,71,703).

9.

The above factual mistake is not seriously contested by the learned counsel for the revenue. The revenue, however, opposes the grant of any relief on the amount of depreciation on the ground that that, this issue does not involve any substantial question of law . If at all, the assessee had any remedy, it was by way of filing an application under section 154 of the Act. The four year period of limitation prescribed by sub-section (7) of section 154 having elapsed, it is not open to the assessee to seek relief through the provisions of section 260A which permit grant of relief only in a matter which involves a substantial question of law.

10.

In rejoinder, Mr. Shah for the assessee has heavily relied on the decision of the Apex court in National Thermal Power Co.Ltd.vs. CIT, 229 ITR 383. 11. Having heard the learned counsel for the parties, we are of the view that the Tribunal was not right in not permitting the appellant-assessee to raise the question about arithmetical calculation of disallowable depreciation. In the aforesaid decision of National Thermal Power Co. (supra), the Apex court has observed that the view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (appeals) is too narrow a view to take of the powers of the Tribunal. If it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item.

12.

It is true that in the above case, the Apex court was dealing with the power of the Tribunal to entertain a question of law arising from the facts already on record. The Tribunal's power cannot conceivably be lesser in case of an arithmetical mistake apparent on the face of the reassessment order. In the facts of the present case, it is apparent that aggregate of the amounts of disallowable depreciation works out to only Rs. 6,70,005/-. By calculating the amount of Rs. 6,01,198/twice over, the assessing officer raised the amount of disallowable depreciation to Rs. 12,71,203/for Jamnagar project which resulted into consequential mistake of total disallowable depreciation calculated at Rs. 15,81,139/- in the final operative portion of the assessment order.

13.

We would also like to note that the appellant had raised this question before the Tribunal but it was not allowed to be raised only on the ground that it was a new ground and it was not taken up before the assessing officer or before the Commissioner (appeals). The appeal before the Tribunal was filed within four years from the date of reassessment order which was passed on 23.3.1992 and hence, the grievance made by the appellant-assessee regarding the glaring arithmetical mistake in the calculation of disallowable depreciation regarding Jamnagar project ought to have been entertained by the Tribunal.

14.

Since this glaring arithmetical mistake is brought to our notice in the course of hearing of the appeal arising from the reassessment order, and on facts, it is not disputed, we see no reason not to allow the appeal only to the limited extent of remanding the case to the Tribunal for permitting the question to be raised and then granting the necessary relief to the assessee.

15.

In view of the above discussion, we direct the respondents to recalculate the amount of disallowable depreciation for Jamnagar project by arriving at correct aggregated amounts of the following three items of disallowable depreciation .

"WDV as on 1.11.93 -Amount of grant Amt. Amt. Rate of depre. Dep Rs. Rs. Rs.

Land 4,19,417 1,23,937 - -

Building 44,35,578 13,10,707 5% 65,535

Factory Rd. 2,21,437 65,454 5% 3,272

Plant & 1,35,63,449 40,07,962 15% 6,01,198 Machinery -------------- ---------- ----------- 6,70,005

Since the aggregate works out to Rs. 6,70,005/instead of Rs. 12,71,203/-, the respondents shall recalculate and recompute the tax payable by the assessee accordingly, within two months from the date of receipt of a certified copy of this judgment.

16.

The appeal is accordingly partly allowed to the aforesaid extent. We do not find any substantial question insofar as questions (1) and (2) are concerned . We allow the appeal only insofar as question (3) is concerned in the aforesaid terms. There shall be no order as to costs.

(D. M. Dharmadhikari, C.J.)

(M. S. Shah, J.)

parekh

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