ITR/218/1999 of THE Vs

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY, THE 10TH DAY OF JULY 2018 / 19TH ASHADHA, 1940 ITR.No. 218 of 1999 (REFERENCE BY THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN : RA NO.165 (COCH)/97 IN MP NO.53 (COCH)/1997 ARISING OUT OF STA NO.4(COCH)/94 - 1982-83) APPLICANT/PETITIONER(S)/ASSESSEE THE MALAYALA MANORAMA CO. LTD., KOTTAYAM. BY ADVS.SRI.M.PATHROSE MATTHAI (SR.) SRI.JOHN RAMESH K.I.JOHN RESPONDENT(S)/RESPONDENT/REVENUE: THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM. BY ADV. SRI.P.K.R.MENON(SR.), SR.COUNSEL FOR GOI (TAXES) SRI.JOSE JOSEPH, SC, INCOME TAX DEPARTMENT. THIS INCOME TAX REFERENCE HAVING BEEN FINALLY HEARD ON 10-07-2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

ITR 218/99 APPENDIX APPLICANTS' EXHIBITS ANNEXURE-A : COPY OF ASSESSMENT ORDER DATED 25.2.1987 FOR THE ASSESSMENT YEAR 1982-83. ANNEXURE-B : COPY OF APPELLATE ORDER AND GROUNDS OF DECISION DATED 21.10.1994 (STA NO.1/DC-K/CIT-II/91-92 FOR THE ASSESSMENT YEAR - 1982-83. ANNEXURE-C : COPY OF ORDER IN STA NO.4/COCH/94 DATED 27.9.1996 FOR THE ASSESSMENT YEAR 1982-83 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. ANNEXURE-D : COPY OF ORDER IN MP NO.53 (COCH)/1997 IN STA NO.4(COCH)/94 DATED 27.5.1997 FOR THE ASSESSMENT YEAR 82-83. ANNEXURE-E : COPY OF NOTICE DATED 14.2.1989 BY THE DEPUTY COMMISSIONER OF INCOME TAX. ANNEXURE-F : COPY OF ORDER DATED 2.7.1991 BY THE DEPUTY COMMISSIONER INCOME TAX. //TRUE COPY// PS TO JUDGE. jg-16/7

K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- ITR No.218 of 1999 ------------------------------------------- Dated this the 10th day of July, 2018 O R D E R Vinod Chandran, J. The question of law raised is more academic, but is also no longer res integra. We are compelled to consider this reference only since it is at the instance of the assessee. The brief facts to be stated are that for the assessment year 1982-83, Annexure-A assessment order was passed on 25.2.1987. No interest was levied under the Companies (Profits) Surtax Act, 1964 ('Surtax Act', for short). The assessee took the matter in appeal and an appellate order was passed on 7.6.1987 making certain modifications. A consequential order giving effect to the appellate order was passed on 6.7.1987. Later, by Annexure-E notice dated 14.2.1989, the original order dated 25.2.1987 was sought to be rectified. Rectification was carried out levying interest under Section 7C of the Surtax Act, which was omitted to be done in the original order and also the order in which the appellate order was given effect to.

ITR 218/99 -2- 2. Before the Tribunal, the assessee took two contentions; one as to rectification not being possible for levy of interest under the Surtax Act and the other on the question of limitation. On the question of rectification, the Tribunal held in favour of the assessee and the Revenue was before this Court in an application compelling reference under Section 256(2) of the Income Tax Act, 1961 as it existed then. The reference was answered in favour of the Revenue and against the assessee. The power to rectify is hence no longer res integra. 3. Simultaneously, the Revenue had moved a miscellaneous application before the Tribunal for review, on the question of limitation. On the limitation aspect, the Tribunal by Annexure-D order held in favour of the Revenue and against the assessee finding that there is no limitation. We see from the Tribunal's order that the limitation issue was answered following the judgment of the Honourable Supreme Court in (1995) 212 ITR 639 [Hind Wire Industries Ltd. v. Commissioner of Income Tax]. In the cited decision, the assessee had filed an application for rectification

ITR 218/99 -3- within the period of four years on the ground that the ITO had not taken into consideration the shift allowance available to the assessee. An order rectifying the original order was passed. Later the assessee approached the ITO with yet another application for rectification on the question of rate of depreciation applicable to factory building. The same was rejected by the ITO finding the application to be beyond four years prescribed for rectification from the original proceedings. The Tribunal held in favour of the assessee and the High Court reversed it finding that the subject matter of the second rectification application was not at all a question considered in the first rectification application. The limitation hence has to be taken from the date of the first order which alone can be deemed to have been sought for rectification was the finding. The Honorable Supreme Court held otherwise. Reversing the judgment of the High Court, it was held that the word 'order' in the expression “from the date of the order sought to be amended” was not qualified in any manner and it did not necessarily mean the original order. The subsequent

ITR 218/99 -4- order could also be rectified was the declaration of the Hon'ble Supreme Court. 4. Going by the judgment of the Hon'ble Supreme Court, we reiterate that the issue is no longer res integra. In the present case, an order was passed on 6.7.1987 giving effect to the appellate order. Neither in the first order dated 25.2.1987 nor in the second order on 6.7.1987, interest under Section 7C of the Surtax Act was levied. True the notice produced as Annexure-E dated 14.2.1989 spoke of rectification of the original order dated 25.2.1987. This is, at best, a mistake, insofar as the order dated 6.7.1987 had already been passed when Annexure-E notice was issued. A rectification could only and also have been carried out of that subsequent order. Annexure-F order dated 2.7.1991 has been passed within the limitation period of four years from the order dated 6.7.1987. It is also pertinent that neither in the original order or in the order giving effect to the appellate order; was there any interest levied. Hence the rectification made could only be of the order giving effect to the appellate order.

ITR 218/99 -5- The learned counsel for the assessee then submits that the specific question as to whether the notice dated 14.2.1989 referred to in the earlier order or the order giving effect to the appellate order was never considered by the Tribunal and does not arise herein. True, the documents at Annexures E & F were produced by the assessee before us. It was argued pointing to Section 13 of the Surtax Act that when it conferred power to amend any order, within four years of the date on which such order was passed, only the order, the date of which is referred to in the notice could be amended. In the facts and circumstances, we do not think there is any scope for a different opinion to be rendered. We take into account the additional argument addressed by the learned counsel for the assessee and answer the question referred in favour of the Revenue and against the assessee, especially noticing the fact that this reference case is of the year 1999 and relates to the assessment year 1982-83. There is no warrant for now remanding the matter to the Tribunal for considering this additional question. Our finding on that aspect will regulate the Tribunal, if any

ITR 218/99 -6- consideration is sought for on that aspect by the assessee. The reference is answered with our opinion on the additional question raised by the assessee in the reference made by the Tribunal. The Tribunal would dispose of the appeal expeditiously within a period of one month from the date of receipt of the certified copy of the order.

Sd/- K.VINOD CHANDRAN JUDGE

Sd/- ASHOK MENON JUDGE jg