COMM. OF INCOME TAX DEHRADUN vs. READING and BATES EXPLORATION CO. AS AGENT OF BEVAN

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ITA/211/2004HC UttarakhandUKHC01000010200510 April 2006Author: HON'BLE MR. JUSTICE M. M. GHILDIYAL3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal is dismissed and the questions are answered in favour of the assessee and against the Revenue. The Court noted that the issue of 'off period salary' was previously decided in favour of the Revenue by a Division Bench of the Uttaranchal High Court in CIT vs. Sedco Forex International Drilling Co. Ltd. (2003) 264 ITR 320. However, the Supreme Court, in the case of Sedco Forex International Drill Inc. and Others vs. Commissioner of Income Tax, Dehradun and Another (JT 2005(9) SC 639), set aside the High Court's judgment. The Supreme Court held that the Explanation to Section 9(1)(ii) of the Income Tax Act, 1961, amended by the Finance Act 1999, was prospective and could not be applied retrospectively. Since the assessment year in the present case (1994-95) was prior to 1999, the assessee could not be taxed based on the law laid down by the Apex Court. Therefore, the ITAT was correct in not recalling its order as the subsequent Supreme Court judgment supported the assessee's position, and the issue was not a mistake apparent from the record in the context of the law as it stood at the time of the ITAT's original order, but rather a clarification of the law by a higher court.

What were the facts?

The Revenue (Commissioner of Income Tax, Dehradun) filed an appeal under Section 260-A of the Income Tax Act, 1961, challenging an order dated July 20, 2004, passed by the Income Tax Appellate Tribunal (ITAT), Delhi Benches. The ITAT had dismissed the Revenue's application for recalling its earlier consolidated order dated July 16, 2003, which was passed in various appeals for the assessment year 1994-95. The Revenue sought recall to amend the order in light of a subsequent judgment of the Uttaranchal High Court. The assessee, Reading & Bates Exploration Co., as agent of Mr. Bevan A., had appealed an assessment order and the Commissioner (Appeals)'s order dismissing its appeal. The ITAT had decided in favour of the assessee.

What were the issues?

1. Whether the ITAT was justified in holding that its order did not suffer from a mistake apparent from the record, based on a subsequent judgment of the Uttaranchal High Court? (Question of law) 2. Whether a subsequent judgment of the Uttaranchal High Court is binding on the ITAT for an issue arising from an assessment order within the jurisdiction of the Uttaranchal High Court? (Question of law) 3. Whether the ITAT was right in holding that Section 254(2) of the Income Tax Act, 1961, was not applicable to the facts and circumstances of the case? (Question of mixed law and fact) Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The Revenue argued that the ITAT's order suffered from a mistake apparent from the record due to the subsequent judgment of the Uttaranchal High Court, and that Section 254(2) should have been applied to recall and amend the order. The Revenue relied on the principle that a subsequent binding precedent should be considered.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 254(2),Section 9(1)(ii)

AI-generated summary — verify with the full judgment below

COURT NO.2 IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No.211 of 2004

Commissioner of Income Tax, Dehradun

......Appellant Versus

Reading & Bates Exploration Co., as agent of Mr. Bevan A.

………….. Respondent

Shri P. Maulekhi, Id. Standing counsel for the Revenue. Ms. Krishi Shukla, Advocate for the respondent.

Dated: April 10, 2006

Coram: Hon. M.M. Ghildiyal, J. Hon. B.C. Kandpal, J.

Both the parties are ready to argue the matter today.

2.

This appeal has been filed by the Revenue under Section 260-A of the Income Tax Act, 1961 (hereinafter will be referred to as the Act) challenging the impugned order dated 20.07.2004 passed by Income Tax Appellate Tribunal, Delhi Benches (C), New Delhi in M.A. No.109/Del/2004 (in ITA Nos.2410 to 2415/Del/98, 2366 to 2367/De1/98, 2370 to 2372/Del/98, 2374 to 2375/Del/98, 2377, 2379, 2381/Del/98, 2361 to 2364/Del/98, 2416, 2418 and 2420/Del/98) for the assessment year 1994-95, by which the Tribunal has dismissed the application of the appellant for recalling the order of the Tribunal decided in aforesaid appeal numbers. The questions framed in the memo of appeal for our consideration are as follows:-

A- Whether the ITAT was justified in holding that order of the Tribunal did not suffer from a mistake apparent from record on the basis of subsequent judgment of Uttaranchal High Court? B- Whether the judgment of Uttaranchal High Court, even if pronounced subsequently, is not binding upon the Tribunal on the issue arising from the order of an AO functioning within the jurisdiction of the Hon’ble Uttaranchal High Court? C- Whether the ITAT was right in holding that under the facts and circumstances of the case there was no scope of application of Section 254(2) of the Act?

3.

Brief facts of the case as narrated by the appellant are that assessee filed an appeal against the assessment order dated 15.01.1997 before the Commissioner (Appeals). The said appeal was dismissed by commissioner of Income Tax (Appeals) dated 08.01.1998. Thereafter, the assessee filed an appeal before Income Tax Appellate Tribunal, Delhi Bench (B) Delhi which was decided in favour of the assessee. The issue under consideration was decided by this Court and the question was decided in favour of the department and against the assessee. The Revenue preferred a recall application with a request to amend its earlier consolidated order dated 16.07.2003 in ITA No.2410/Del/98 taking into account the Civil Appeal Nos.351-355 of 2005. The Hon’ble Apex Court in “Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another, JT 2005(9) SC 639” has held that since the Explanation to Section 9(1)(ii) of the Income Tax Act, 1961 was amended by the Finance Act 1999 and was prospective, therefore, it could not be made applicable in the previous year i.e. to say that no retrospective effect can be given to the Explanation, if the assessment proceedings are pending after the said amendment and accordingly the judgment of Division Bench of this Court was set aside as the assessment year in dispute was prior to 1999. 6. In the present case also, the assessment year is prior to 1999, thus the assessee cannot be taxed in view of the law laid down by the Hon’ble Apex Court “Sedco Forex Rajeev Dang

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