JANATA CO--OPERATIVE BANK LTD vs. THE COMMISSIONER OF INCOME TAX-I AND ORS

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WP/10653/2011HC BombayHCBM01046963201115 December 2011Author: HON'BLE SHRI JUSTICE A.A. SAYED,HON'BLE SHRI JUSTICE DR. D.Y. CHANDRACHUD5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court found merit in the assessee's contention. It held that Section 154(1A) of the Income Tax Act, 1961, is intended to prevent rectification of matters that have already been considered and decided in an appeal or revision. However, in this specific case, the application for rectification was made to the Commissioner who had passed the order under Section 264 (revision), and not to the original assessing officer. The Court reasoned that such an application made to the revisional authority itself for rectification is maintainable and not barred by Section 154(1A). Consequently, the Commissioner erred in declining to entertain the application. The Court set aside the impugned order and restored the rectification proceedings to the Commissioner for adjudication on merits. The Court explicitly stated that it had not examined the merits of the rectification claim itself.

What were the facts?

The assessee, Janata Co-operative Bank Ltd., Nashik, is challenging an order dated June 27, 2011, passed by the Commissioner of Income Tax-1, Nashik. This order declined to exercise jurisdiction under Section 154 of the Income Tax Act, 1961, for rectification. The dispute stems from an assessment order for Assessment Year 2007-08, finalized on December 21, 2009, under Section 143(3) by the Additional Commissioner of Income Tax. In that assessment, a contribution towards a gratuity fund of Rs. 31.25 lakhs was made, of which Rs. 6.80 lakhs was allowed, and the balance was disallowed. The assessee subsequently applied for rectification under Section 154. The Commissioner rejected this application, relying on Section 154(1A). The assessee's appeal is against this rejection.

What were the issues?

1. Whether the Commissioner of Income Tax erred in declining to entertain the assessee's application for rectification under Section 154 of the Income Tax Act, 1961, by invoking the bar of Section 154(1A)? (Question of law) Assessee's Contention: The assessee argued that Section 154(1A) applies when a matter has been considered and decided in an appeal or revision relating to an order referred to in sub-section (1). However, in this case, the rectification application was made before the Commissioner who passed the order under Section 264 (revision), not the original assessing authority. Therefore, Section 154(1A) should not preclude the Commissioner from entertaining the rectification application made to him directly. Revenue's Contention: The judgment does not record any specific contentions made by the revenue.

Which sections of the Income-tax Act were involved?

Section 154,Section 143(3),Section 264

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 10653 OF 2011 Janata Co­operative Bank Ltd., Nashik. ..  Petitioner. versus The Commissioner of Income Tax ­ 1 Nashik & Ors. ..  Respondents. ..... Mr. Subhash Shetty with Mr. Atul K. Jasani for the Petitioner. Mr. Vimal Gupta for the Respondents. ...... CORAM :  DR.D.Y.CHANDRACHUD & A. A. SAYED, JJ.

15 DECEMBER 2011. P.C.  : These proceedings are directed against an order passed by the Commissioner of Income Tax­1, Nashik on 27 June 2011 declining to exercise his jurisdiction under Section

154 of the Income Tax Act, 1961.  An order was passed under Section   264   by   the   Commissioner   of   Income   Tax   on   6 December 2010 in revision against an order of assessment for Assessment Year 2007­08 finalised on 21 December 2009 under Section 143 (3) by the Additional Commissioner of Income Tax, Range­3, Malegaon.  The claim of the assessee to the extent of contribution towards the payment of gratuity fund made during the previous year relevant to Assessment Year 2007­08 was allowed to the extent of Rs.6.80 lakhs while the balance in the amount of Rs. 31.25 lakhs was disallowed.  The assessee applied under   Section   154   for   rectification.     The   Commissioner   of Income Tax has declined to entertain the application placing reliance on Section 154 (1A).  Section 154 (1A) reads as follows : Where   any   matter   has   been   considered   and “

decided in any proceeding by way of appeal or revision relating to an order referred to in sub­ section (1), the authority passing such order may, notwithstanding anything contained in any law for

the time being in force, amend the order under that sub­section in relation to any matter other than the matter which has been so considered and decided.” 2. Learned   Counsel   appearing   on   behalf   of   the Petitioners submits that Section 154 (1A) applies in a situation where   any  matter   has  been   considered  and  decided  in   a proceeding by way of appeal or revision relating to an order referred to in sub­section (1).  Under sub­section (1) of Section 154 a mistake apparent from the record can be rectified by amending, inter alia, any order passed under the provisions of the Act on any intimation or deemed intimation under Section 154(1).  However, Section 154 (1A) provides that the authority passing such an order may amend the order in relation to any matter other than the matter which has been so considered and decided.  The contention which has been raised on behalf of the Petitioner is that Section 154 (1A) will preclude the authority   which   has   passed   the   order   from   exercising   the

jurisdiction to rectify the order where that particular matter has   been   considered   and   decided   in   appeal   or   revision. However, in the present case, Section 154 (1A) will not come in the way since, the jurisdiction was invoked not of the original assessing authority but of the Commissioner who had passed an order under Section 264.

3.

We find merit in the contention which has been urged on behalf of the Petitioner.   In the present case, the revisional authority had passed an order in revision on 6 December 2010.  The application for rectification was not made before the Assessing Officer who passed the assessment order which was the subject matter of revision, but, the application was made before the revisional authority itself for rectification. Such an application was maintainable and was not barred by Section 154 (1A).   In these circumstances, we are of the view that the Commissioner of Income Tax has erred in declining to entertain the application for rectification.

4.

We, therefore, set aside the impugned order dated 27 June 2011 and restore the proceedings arising out of the application   for   rectification   under   Section   154   to   the Commissioner of Income Tax.  We clarify that we have had no occasion to examine whether a case of rectification has been made out on merits.   The Petition is, accordingly, disposed of in these terms.   There shall be no order as to costs.

(Dr. D.Y. Chandrachud, J.)

(A. A. Sayed, J.)

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