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

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ITA/49/2002HC KeralaKLHC01020872200211 December 2018Bench: 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 noted that the original assessment for assessment year 1985-86, which allowed the carry forward of loss, had been completed under Section 143(3) and remained unrectified. The Court found that the rectification proceedings initiated in the subsequent assessment years were time-barred, as the notices were issued on December 4, 1995, which was beyond the four-year period from the end of the respective assessment years (March 31, 1992, March 31, 1994, and March 31, 1995). Given the time-bar, the Court refused to answer the question regarding change of opinion and dismissed the appeals. The ratio decidendi is that rectification proceedings under Section 154 must be initiated within the prescribed limitation period, and even if a mistake exists, it cannot be rectified if the period has expired.

What were the facts?

The appeals concern assessment years 1987-88, 1989-90, and 1990-91. The assessee, Cochin Refineries Ltd., had filed its return for assessment year 1985-86 beyond the due date. Despite this, the assessment for 1985-86 was completed under Section 143(3), allowing the carry forward of its loss. The Revenue initiated rectification proceedings under Section 154 in the subsequent assessment years (1987-88, 1989-90, 1990-91) to disallow the set-off of this carried-forward loss. The Income Tax Appellate Tribunal (ITAT) set aside these rectifications, primarily on the ground of change of opinion. The Revenue is in appeal before the High Court against the ITAT's order.

What were the issues?

1. Whether the Tribunal was justified in setting aside the rectification under Section 154 of the Income Tax Act, 1961, solely on the ground of change of opinion, when the original assessment order for assessment year 1985-86 had erroneously allowed carry forward of loss despite the return being filed beyond the due date? Assessee's Contention (Implicit from the judgment's reasoning): The rectification proceedings were time-barred as they were initiated beyond the four-year period prescribed under Section 154 from the end of the respective assessment years. Furthermore, the original assessment order for 1985-86, which allowed the carry forward of loss, had attained finality and could not be rectified after the limitation period expired. Therefore, the subsequent disallowance of set-off in the assessment years in question was invalid. Revenue's Contention (Implicit from the judgment's reasoning): The Tribunal erred in setting aside the rectification merely on the ground of change of opinion. The Revenue likely argued that the rectification was necessary to correct a 'mistake apparent from the record' by disallowing the carry forward of loss which was impermissible under Section 80 of the Act due to the delayed filing of the return for assessment year 1985-86.

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

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

ITAs16, 41 & 49/2002 -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

ITAs16, 41 & 49/2002 -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. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENON JUDGE

ITAs16, 41 & 49/2002 -7- 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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