THE COMMISSIONER OF INCOME TAX, vs. M/S.COCHIN REFINERIES LTD., COCHIN

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ITA/41/2002HC KeralaKLHC01020864200211 December 2018Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON9 pages
AI SummaryDismissed

What did the High Court hold?

The High Court upheld the order of the Income Tax Appellate Tribunal setting aside the rectification under Section 154 for the assessment years 1987-88, 1989-90, and 1990-91. The Court found that the rectification proceedings were initiated beyond the four-year limitation period. Specifically, the notice for rectification was issued on December 4, 1995, while the limitation period for the assessment years 1987-88, 1989-90, and 1990-91 expired on March 31, 1992, March 31, 1994, and March 31, 1995, respectively. As all proceedings were initiated after the expiry of the limitation period, the Court refused to answer the question regarding change of opinion and dismissed the appeals. The operative direction was to reject the Income Tax Appeals.

What were the facts?

The appeals by the Revenue (Commissioner of Income Tax, Cochin) challenge orders of the Income Tax Appellate Tribunal (ITAT) that set aside rectifications made under Section 154 of the Income Tax Act, 1961. The assessment years involved are 1987-88, 1989-90, and 1990-91. The core issue stems from the assessment year 1985-86, where the assessee, M/s. Cochin Refineries Ltd., filed its return beyond the due date. Despite this, the assessment under Section 143(3) allowed the carry forward of losses. The Revenue later sought to deny the set-off of these losses in the subsequent assessment years through rectification. However, the ITAT found these rectifications to be unsustainable. The High Court noted that the rectification proceedings were initiated beyond the statutory limitation period.

What were the issues?

1. Whether the Tribunal erred in setting aside the rectification under Section 154 of the Income Tax Act, 1961, solely on the ground of change of opinion? (Question of law) 2. Whether the rectification proceedings initiated by the Revenue for the assessment years 1987-88, 1989-90, and 1990-91 were barred by limitation under Section 154 of the Income Tax Act, 1961? (Question of mixed law and fact) Assessee's Contentions: The assessee argued that the rectification under Section 154 was invalid. The primary grounds were that the proceedings were initiated beyond the four-year limitation period prescribed for rectification, and that the Revenue's attempt to deny set-off of losses was based on a change of opinion, which is impermissible in rectification proceedings. Revenue's Contentions: The Revenue contended that the rectification was necessary to correct a mistake apparent from the record, specifically the erroneous allowance of carry forward of losses from assessment year 1985-86, which should not have been permitted due to the late filing of the return. The Revenue sought to rectify the subsequent assessment years to disallow the set-off of such ineligible losses.

Which sections of the Income-tax Act were involved?

Section 154,Section 139(1),Section 80,Section 143(3)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY ,THE 11TH DAY OF DECEMBER 2018 / 20TH AGRAHAYANA, 1940 ITA.No. 41 of 2002 AGAINST THE ORDER/JUDGMENT IN ITA 638(COCH)/1996 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 17-07-2001 APPELLANT/S:/APPELLANT/REVENUE: THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC FOR IT DEPT. RESPONDENT/S:/RESPONDENT/ASSESSEE: M/S.COCHIN REFINERIES LTD., AMBALAMUGAL. BY ADVS. SRI.P.BENNY THOMAS SRI.ANIL D. NAIR SRI.JOSON MANAVALAN SRI.K.JOHN MATHAI SRI.KURYAN THOMAS SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.GOPINATH SRI.RAJA KANNAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11.12.2018, ALONG WITH ITA.16/2002 AND ITA.49/2002, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITAs16, 41 & 49/2002 -2- IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY ,THE 11TH DAY OF DECEMBER 2018 / 20TH AGRAHAYANA, 1940 ITA.No. 16 of 2002 AGAINST THE ORDER/JUDGMENT IN ITA 637(COCH)/1996 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 17.7.2001 APPELLANT/S:/APPELLANT/REVENUE: THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADVS. SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC FOR INCOME TAX DEPARTMENT RESPONDENT/S:/RESPONDENT/ASSESSEE: M/S.COCHIN REFINERIES LTD, AMBALAMUGAL. BY ADVS. SRI.P.BENNY THOMAS SRI.JOSON MANAVALAN SRI.K.JOHN MATHAI SRI.KURYAN THOMAS SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.GOPINATH SRI.RAJA KANNAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11.12.2018, ALONG WITH ITA.49/2002 AND ITA.41/2002, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITAs16, 41 & 49/2002 -3- IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY ,THE 11TH DAY OF DECEMBER 2018 / 20TH AGRAHAYANA, 1940 ITA.No. 49 of 2002 AGAINST THE ORDER/JUDGMENT IN ITA 639(COCH)/1996 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 17-07-2001 APPELLANT/S:/APPELLANT/ASSESSEE: THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADVS. SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC FOR INCOME TAX DEPARTMENT. RESPONDENT/S: M/S.COCHIN REFINERIES LTD., AMBALAMUGAL. BY ADVS. SRI.P.BENNY THOMAS SRI.ANIL D. NAIR SRI.JOSON MANAVALAN SRI.K.JOHN MATHAI SRI.KURYAN THOMAS SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.GOPINATH SRI.RAJA KANNAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11.12.2018, ALONG WITH ITA.41/2002 AND ITA.16/2002, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITAs16, 41 & 49/2002 -4- K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- ITA Nos.16, 41 and 49 of 2002 ------------------------------------------- Dated this the 11th day of December, 2018

J U D G M E N T Vinod Chandran, J. The Department is in appeal from an order of the Income Tax Appellate Tribunal raising certain questions of law regarding the sustainability of the Tribunal's order setting aside the rectification under Section 154 of the Income Tax Act, 1961 ('Act', for short) merely on the ground of change of opinion. The assessment years are 1987-88, 1989-90 and 1990-91. The Tribunal, in fact, also took note of the earlier proceedings for the assessment year 1985-86, the loss in which year was the subject matter of rectification.

2.

On facts, it is to be noticed that the assessee had filed a return under Section 139(1) for the assessment year 1985-86 beyond the due date in September. The assessment was completed under Section 143(3), a scrutiny assessment, and the assessee was allowed carry forward of the loss of the said year. In fact, such carry -5- forward could not have been allowed, since the assessee had filed the return beyond the due date under Section 139(1). Section 80 under Chapter-VI prohibited such carry forward and set off of loss of years in which the assessee had failed to file the return within the time provided under Section 139(1).

3.

The subject assessment years in which the rectification was carried out, purportedly to refuse set off of the loss carried forward, of the year 1985-86, are the years 1987-88, 1989-90 and 1990-91. The carry forward of loss as permitted in the assessment year 1985-86 by an assessment completed under Section 143(3) remains as such. Without rectifying the order of the said year, there can be no refusal to permit set off for the subsequent years. Admittedly, the assessment of 1985-86 as completed under Section 143(3) remains as such and carry forward is hence permitted. There can be no rectification made for the said assessment year for the limitation having expired. Further, even in the subject assessment years, the limitation under Section 154 has expired. The notice as seen from the appeals and the rectification order was first issued on 04.12.1995. The four year period from the end of -6- the assessment years of 1987-88, 1989-90 and 1990-91 stands expired respectively on 31.03.1992, 31.03.1994 and 31.03.1995. All the proceedings were initiated beyond the four year period. In such circumstances, we refuse to answer the question regarding the change of opinion. We also uphold the order of the Tribunal setting aside the rectification under Section 154 for the subject assessment years. The I.T.Appeals are rejected. No costs. K.VINOD CHANDRAN JUDGE ASHOK MENON JUDGE -7-

Appendix — schedule of exhibits
APPENDIX OF ITA 41/2002 APPELLANT'S EXHIBITS: ANNEXURE-A COPY OF THE ORDER OF THE ASSESSING OFFICER DATED 27/02/89. ANNEXURE-B COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 06/09/1996. ANNEXURE-C COPY OF THE ORDER OF THE TRIBUNAL DATED 17/07/2001. [True Copy] jg ITAs16, 41 & 49/2002 -8- APPENDIX OF ITA 16/2002 PETITIONER'S/S EXHIBITS: ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER DATED 27/02/1996. ANNEXURE-B COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 06/09/96. ANNEXURE-C TRUE COPY OF THE ORDER OF THE TRIBUNAL DATED 17/07/2001. ANNEXURE-D COPY OF THE ASSESSMENT ORDER FOR THE ASSISTANT YEAR 1985-86 DATED 19/02/1988. [True Copy] jg ITAs16, 41 & 49/2002 -9- APPENDIX OF ITA 49/2002 PETITIONER'S/S EXHIBITS: ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER DATED 27/02/1996. ANNEXURE-B COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 06/09/96. ANNEXURE-C TRUE COPY OF THE ORDER OF THE TRIBUNAL DATED 17/07/2001. [True Copy] jg

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