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

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ITA/218/2004HC UttarakhandUKHC01003075200523 March 2006Author: HON'BLE MR. JUSTICE P. C. VERMA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the issue of 'off period salary' was decided by a Division Bench of the Uttaranchal High Court in favour of the Revenue in the case of Commissioner of Income Tax and another 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 to assessment proceedings prior to the amendment. 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 Supreme Court. Therefore, the appeal filed by the Revenue was dismissed, and the questions were answered in favour of the assessee and against the Revenue. No order as to costs was made.

What were the facts?

The Revenue, Commissioner of Income Tax, Dehradun, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated 20.07.2004 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 16.07.2003, which was passed in various appeals (ITA Nos. 2410 to 2415/Del/98, etc.) for the assessment year 1994-95. The Revenue sought to amend the order based on a subsequent judgment of the Uttaranchal High Court. The ITAT observed that a subsequent judgment does not constitute a mistake apparent from the record and that the admission of SLPs by the Supreme Court indicated a contentious issue. The assessee, Reading & Bates Exploration Co., as agent of Mr. Macfarlane G., had previously succeeded before the ITAT.

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 the judgment of the Uttaranchal High Court, even if pronounced subsequently, is binding upon the ITAT on an issue arising from an order of an Assessing Officer functioning within the jurisdiction of the Uttaranchal High Court? (Question of law) 3. Whether the ITAT was right in holding that there was no scope for the application of Section 254(2) of the Act under the facts and circumstances? (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 a subsequent judgment of the Uttaranchal High Court. They contended that this judgment should have been considered and that Section 254(2) of the Act should have been applied to recall and amend the earlier order. The Revenue relied on the principle that a High Court's judgment is binding on authorities within its jurisdiction. They also implicitly argued that the subsequent judgment of the Supreme Court in the Sedco Forex case, which set aside the High Court's earlier decision, should have been considered by the ITAT.

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.218 of 2004

Commissioner of Income Tax, Dehradun

........... Appellant Versus

Reading & Bates Exploration Co., As agent of Mr. Macfarlane G.

.............. Respondent

Ld. Standing counsel for the Revenue. Ms. Krishi Shukla, Advocate for the respondent.

Dated: March 23, 2006

Coram: Hon. P.C. Verma, 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/Del/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 form a mistake apparent form 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 years 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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