COMMISSIONER OF INCOME TAX vs. RAIPUR MFG. CO. LTD.

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ITR/156/1984HC GujaratGJHC24011830198405 April 1999Bench: HONOURABLE MR. JUSTICE R.BALIA,HONOURABLE MR. JUSTICE ANIL R. DAVE2 pages
AI SummaryAllowed

What did the High Court hold?

The High Court of Gujarat, per R. Balia, J., answered the referred question in the affirmative, in favour of the assessee and against the revenue. The reasoning was based on the fact that the Supreme Court, in Modi Industries Ltd. & Ors. v. CIT and Anr., 216 ITR 759, had approved the decisions of the Bombay High Court in Sarangpur Cotton Mfg. Co. Ltd. v. CIT and the Allahabad High Court in Sir Shadilal Sugar and General Mills Ltd. v. Union of India. These decisions supported the view that an ITO cannot reduce interest allowed under Section 214 of the Income Tax Act, 1961, in the exercise of powers under Section 154 of the Act. The ratio decidendi is that the power of rectification under Section 154 is limited to making good of an obvious and patent mistake and does not extend to re-opening a matter which was considered and decided, even if erroneously. The operative direction was to answer the question in favour of the assessee. No order as to costs was made.

What were the facts?

The Commissioner of Income Tax (CIT), Ahmedabad, referred a question of law to the High Court of Gujarat at Ahmedabad concerning Assessment Year 1973-74. The Income Tax Appellate Tribunal (ITAT) had ruled that the Income Tax Officer (ITO) could not reduce the interest allowed under Section 214 of the Income Tax Act, 1961, while exercising powers under Section 154 of the Act. The assessee is Raipur Mfg. Co. Ltd., and the revenue is represented by the CIT. The dispute centers on the ITO's power to rectify an allowance of interest.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the ITO cannot, in exercise of the powers under section 154 of the I.T. Act 1961 reduce the interest allowed under section 214 of the Act? Assessee's contention: The assessee, through its counsel, stated that two decisions relied upon by the Tribunal, namely Sarangpur Cotton Mfg. Co. Ltd. v. CIT, 31 ITR 698 (Bombay) and Sir Shadilal Sugar and General Mills Ltd. v. Union of India, 85 ITR 363 (Allahabad), have since been approved by the Supreme Court in Modi Industries Ltd. & Ors. v. CIT and Anr., 216 ITR 759. Based on this, the assessee argued that the question should be answered in its favour. Revenue's contention: The revenue, represented by the CIT, did not present any separate arguments. However, by referring the question to the High Court, the revenue implicitly challenged the ITAT's order.

Which sections of the Income-tax Act were involved?

Section 154,Section 214

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 156 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE R.BALIA. and MR.JUSTICE A.R.DAVE ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question 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? 1 to 5: No -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus RAIPUR MFG. CO. LTD. -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioner MR M.J. SHAH for MR JP SHAH for Respondent No. 1

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

CORAM : MR.JUSTICE R.BALIA. and MR.JUSTICE A.R.DAVE Date of decision: 05/04/99

ORAL JUDGEMENT (per R. Balia, J.)

At the instance of the C.I.T., Ahmedabad, the following question of law has been referred by the Income Tax Appellate Tribunal for the opinion of this Court in A.Y. 1973-74.

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the ITO cannot, in exercise of the powers under section 154 of the I.T. Act 1961 reduce the interest allowed under section 214 of the Act?"

2.

Both the learned counsel state that, in view of the fact that two decisions relied upon by the Tribunal in Sarangpur Cotton Mfg. Co. Ltd. v. CIT, 31 ITR 698 (Bombay) and Sir Shadilal Sugar and General Mills Ltd. v. Union of India, 85 ITR 363 (Allahabad), have since been approved by the Supreme Court in Modi Industries Ltd. & Ors. v. CIT and Anr., 216 ITR 759, the question may be answered in favour of the assessee and against the revenue.

3.

Accordingly, in view of the aforesaid, the question referred to us is answered in affirmative,that is to say, in favour of the assessee and against the revenue. There shall be no order as to costs.

_____ (hn)

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