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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & SHRI DUVVURU RL REDDY
आदेश / O R D E R
Per A. Mohan Alankamony, AM:-
This appeal by the Revenue is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-1, Chennai dated 23.02.2016 in (New No. ITA238/CIT(A)-1/2014-15) passed U/s.250(6) r.w.s.143 & 154 of the Act.
The Revenue has raised several grounds in its appeal and they are reproduced herein below for reference: 1. The order of the learned CIT(A) is contrary to law, facts and circumstances of the case.
2.1 The learned CIT(A) has erred in not acknowledging that the revenue has not taken any new stand, but has merely reiterated the stand taken by the assessee himself in the preceding assessment year. Therefore, this is indeed a mistake apparent from record which is sought to be rectified.
2.2 The learned CIT(A) erred in allowing the appeal of the assessee without taking into account the revision order passed for the similar reason for A.Y.2006-07 which was not appealed against.
2.3 The learned CIT(A) ought to have appreciated the fact that since the assessee has not gone on appeal on the similar issue in the preceding year, it goes against the stand taken by the assessee already.
3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored.
The assessee has also filed cross objection which is reproduced herein below for reference: 1. The appeal filed by the appellant is defective when it had not enclosed the Grounds of Appeal
relating to the Respondent and hence the same is liable to be dismissed in limini, without Prejudice,
2. The Respondent, submits that the appeal filed by the revenue is not maintainable since the appeal has been filed mechanically without application of mind and judicial discretion has not been exercised judicially and judiciously, further the revenue ought to have followed in this regard the binding decision of the IT AT in the case of Sri Varadaraja Textiles reported in 119 ITD 469 (MAD) which tellingly pointed out as under:-
"Section 253(2) of the Act provides that the Commissioner may, if he objects to any order passed by the Commissioner (Appeals), direct the ITO to file an appeal to the Tribunal against the order. But, this does not mean that every order of the Commissioner (Appeals) which interferes with the assessment made by the ITO can be objected to. The objection must be reasonable and rational and cannot be made without regard to the correctness of the order appealed against. This power itself is a discretionary power and is coupled with the duty to act fairly. The exercise of this power is also a matter of review by the Tribunal because an administrative Tribunal is duty bound to determine whether the power of the Commissioner has been exercised in a manner that complies with certain implied legal requirements. De Smith's Judicial Review of Administrative Action at page 323 states that in some context it may be confined to the question whether the competent authority has kept within the four corners of the Act and whether it has acted in good faith, but usually they will pursue their inquiry further and will consider whether the repository of a discretion although acting in good faith has abused its power by exercising it for an inadmissible purpose or on irrelevant grounds or without regard to relevant considerations or with gross unreasonableness. We find the following statement of law on this point:
"The emphasis that the Courts have recently placed on an implied duty to exercise discretionary powers fairly must normally be understood to mean a duty to adopt a fair procedure (p. 346)
3. The Appellant has mechanically filed the appeal since the appeal is barred by limitation and the order of the CIT (A) both on merits and on limitation is unimpeachable and filing of appeal is bordering on harassment and abuse of process of court by the appellant.
4. The Respondent on the facts and circumstances is entitled to exemplary cost and the same be ordered.
The Respondent craves leave to file additional grounds.
The brief facts of the case are that the assessee is a private limited company carrying on multi-disciplinary research and development in Biotechnology, new chemical entities, novel drug delivery system and other allied areas for invention of new technology, concepts and products, manufacturing and production of acid free cleanings formulation and long lasting surface specialty coating. The assessee filed its return of income for the assessment year 2007-08 on 31.12.2007. The return of income was processed U/s.143(1) of the Act on 06.11.2008.
Subsequently notice U/s.154 of the Act was issued and order U/s.154 of the Act was passed on 28.01.2014, wherein the Ld.AO disallowed depreciation on “self-generated assets” of Rs.1,94,91,446/- and thereby determined the total income of the assessee at Rs.1,76,16,560/-.
5. On appeal, the Ld.CIT(A) held that the order passed by the Ld.AO U/s.154 of the Act is time barred and also decided the issue on merits in favour of the assessee. The relevant portion of the order is extracted herein below for reference: “Para 10 to 15: Issue No.1: The impugned order is barred by limitation.
The provisions as contained in s.154 provide that the AO has power to pass rectification orders being only. mistake apparent from record. It can be made suo moto or on an application by parties concerned after giving an opportunity to the assessee, if in case the rectification or the amendment results in enhancing the assessment or reducing the refund or increasing the liability of the assessee. Such rectification has to be carried out within a time limit of 4 years from the end of the financial year in which the order sough to be amended was passed. The AO has to pass order within six months from the end of the month in which the application for rectification is received by him.
In this case the order sought to be amended is the order u/s 143(1) which was passed on 6.11.2008 (F. Y. 2008-09). The order rectifying the same was therefore required to be passed by 31st March, 2013 being 4 years from the end of financial year in which the order sought to be amended was passed. As against the same, the order was passed by the AO on 28.1.2014, clearly beyond time prescribed u/s 154. However, the AO has not either controverted or confirmed the same in the report dated 27.11.2015.
Issue No.2: There is no mistake apparent from the record.
In order to examine as to whether there was mistake apparent from record it will serve useful purpose to refer to the reasons recorded by the AO for proceedings u/s 154 which are extracted in para 4 above as also the order passed by the AO u/s 154 on 28.1.2014. Therein it has been observed by the AO that in the assessment completed u/s 143(1) on 6.11.2008 it was found
that depreciation on plant and machinery, product patents, trade marks, design and R& 0 charges were claimed which were allowed. An inference is further drawn that R&D charges and self-generated assets will have Nil as WDV. Similarly, there was an opinion with regard to plant & machinery which were transferred from the proprietorship to the company. The provisions of s.43(1) and Explanation 6(b) u/s 43(6) have been referred to. Such discussion itself is a pointer to the fact that a view on interpretation of law had to be taken with regard to various claims made by the appellant and examining the same in the light of existing provisions. In other words, the resultant decision would require calling for details arid processing the same to arrive at a conclusion.
As to whether such an exercise would be covered under the existing provisions of s.154 has been answered by the Hon'ble Supreme Court in the case of T.S. Balaram, ITO Vs. Volkart Brothers & Others (SC) 82 ITR 50. The Hon'ble Supreme Court held that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. In Satyanarayan Laxminarayan Hegde v. Mallikaljun Bhavanappa Tirumale [19601 1 SCR 890, the court while spelling out the scope of the power of a High Court under article 226 of the Constitution ruled that an error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions cannot be said to be an error apparent on the face of the record. A decision on a debatable point of law is not a mistake apparent from the record; reference is invited to the ratio in Sidhramappa Andannappa Manvi v. Commissioner of Income-tax [1952121 ITR 333 (Bom.).
In view of the above, I am of the considered view that the matter under consideration of the AO was beyond the scope of s.154 and as such, the order of the AO for such reasons cannot
be upheld as being permissible within the scope of this provision. This ground of appeal is allowed,
Issue No.3: On merits, the assessee is eligible for depreciation:
This issue in any case for reasons discussed in the foregoing as also submissions made by the appellant and observation made by the AO, cannot be a matter which can be considered u/s 154.”
Before us the Ld.AR submitted that the order passed by the Ld.AO U/s.154 of the Act, is time barred because it is passed beyond the period of 4 years from the end of the financial year in which order U/s.154 was passed. The Ld.DR could not controvert to the submission of the Ld.AR.
We have heard the rival submissions and carefully perused the materials available on record. From the facts of the case, it is apparent that the assessment order was passed U/s.143(1) of the Act on 06.11.2008. Therefore, the order U/s.154 of the Act has to be passed within 4 years from the end of the financial year 2008-09, i.e., before 31.03.2013. Since in the case of the assessee the assessment order U/s.154 of the Act was passed on 28.01.2014 which is well beyond 4 years from the end of the financial year in which the assessment order was passed viz., 2008-09, the order passed by the Ld.A.O is time barred and 8 & CO No. 86/Mds/2016 therefore requires to be quashed. Accordingly, we hereby quash the assessment order passed by the Ld.AO dated 28.01.2014. Since we have quashed the assessment order by holding it to be time barred, it is not necessary for us to adjudicate the merit of the case as it would be only academic. Consequently the CO of the assessee has also become infructuous and therefore dismissed.
In the result the appeal of the Revenue and the Cross Objection of the assessee are dismissed.
Order pronounced in the court on the 01st May, 2017.