THE STATE BANK OF HYD. vs. THE JT.COMMI.SPL.RANGE IV HYD.

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD WEDNESDAY ,THE SEVENTH DAY OF SEPTEIVIBER IWO THOUSAND AND TWENTY TWO PRESENT THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HON'BLE SRI JUSTICE C,V. BHASKAR REDDY INCOME TAx TRIBUNAL APPEAL NO: 103 OF 2001 Appeal Under Section 21 of the lnterest Tax Act, 1974 read with Section read with Section 260-A of the lncome Tax Act, 1961 against the order dated 23-03-2001 passed by the lncome Tax Appellate Tribunal, Hyderabad Bench B Hyderabad in M.P. No. 2 / Hyderabad / 2001 in lnterest Tax Appeal No. 9 / Hyderabad / 1992 for the Assessment Year 1985-86 in M.P.No. 2 I Hydl 2001 preferred against the order of the Commissioner of lncome Tax ( Appeals ) lll , A.P. Hyderabad in l.T.A. No. 50 to 59 / DC (A) lll/ CIT (A) lll/ 89-90 Between: The State Bank of lndia having its registered office at Gunfoundry, Hyderabad - 500 001 , rep. by its Chief Manager ( Finance & Taxation ) , Mr. C. Ramaswamy ...... APPELLANT APPELLANT Deputy Commissioner of lncome - Tax, Circle 3 (2) Signature Towers , Kondapur, Hyderabad - 500084 Respondent ( Dismissal for defanlt order dated 21-03-2014 is Set aside vide Court Order dated 28-11-2016 in ITTA MP No. 638 of 2015 ) (Causal tittle of respondent is Amended vide Court Order dated 28-11-2016 in ITTA MP No. 248 of 2016 ) (Amended ride C.O. dt . 7 -9-2022 in lA No. 1120171 And

Counsel for the Appe lant: Sri KARTHIK RAMANA PU'ITAM REDDY FOR STi.S.DWARAKI ANATH Counsel for the Res; )ndent: MS. K. MAMATA CHOWDARY St) fc,r l.T. Dept The Court delivered rhe following: Judgment

2 THE HON'BLE THE CHIEF JUSTICE UJJAL BIIIIYAN AND THE HON'BLE SRI JUSTICE C.V.BTTASKAR REDDY I.T.T.A. No.1O3 of 2OO1 JUDGMENT: Per tle Honble the CheJ Justice U)joL Bhugatr,) Heard Mr. Karthik Ramala Puttam Reddy, learned counsel for the appellant and Ms. K.Mamata Chowdary, learned Standing Counsel for Income Tax Department appearing for the respondent. 2. This appeal has been preferred by the assessee as the appellant under Section 260A of the lncome Ta-x Act, 196 1 (briefly, the Act' hereinaiter) against the order dated 23.O2.2OO1 passed by the Income Tax Appellate Tribunal, Hyderabad Bench 'B', Hyderabad (Tribunal) ln M.P.No.2/Hydl2OOl in Interest Tax Appeal No.9/Hyd/ 1992 for the assessment year 1985 86. 3. The appeal was admitted on 20.09.2001 on the following substantial questions ol law: " 1) Whether on the facts and in the circurnsternces of the case and having regard to the provisions of Section \

25aQ) of hc Income Tax Act, the Tribunal was c('rrect in holdin; rhat on the basis of subsequent Suprr:me Court Jur grnent the Tribunal cannot rectifv its earlier appellate rrder as a mistal<c apparent from record'1 2) Wt:ther the amendment of earlier order passed by the Tr.bunal to bring it in conformity r,rith the law propounc:d by the Supreme Court subseqrrenfl5, amounts to review zrnd not rectification apparenl. tiorri the recor I under the pro'i.isions of Section 254(2) of thr: Income T rx Act and Section 27 of the Interest Ta-:: Ar:t?' 4. Before rclverting to the substantial questions of law so framed, i would be apposite to briefly dj .ate on the material fac s. [n the assessment proceedrng lbr the a-foresaid as;('ssment year, appellant (a:ssess3e) clid not declare any interest on the balance in the "p:otested bill account". lherefore, assessing olficer adderl a sum of Rs.2,65,51,. 417 .OO as chargeable interest for the said aSSeSSment \'ea-r 5. Again: t the aforesaid order of assessm€ nt, €lssessee preferred ar irppeal before the Commissioner of Income Tax (Appeals). Taking the vien' that Section 43I) of the Act, V!'aS though in roduced \^,ith elfect from O 1.0,+. 199 1, l

1 retroactive in nature, appellate authority held that on that basis no interest could have been levied. Therefore, addition made by the assessing officer was deleted. This order of the Commissioner of Income Tax (Appeals) came to be challenged by the revenue before the Tribunal in further appeal. 6. Tribunal, follou,ing two decisions of the Supreme '/' Court in State Bank of Travancore v. CITr and Kerala Financial Corporation v. CIT2, reversed the decision of the Commissioner of Income Ta-x (Appeals) and restored the matter to the file of the assessing officer for quantification of the interest to be chargeable vide the order dated 22.rO.1,997. 7. After the aforesaid decision was rendered by the Tribunal on 22.10.1997, assessee filed a miscellarteous petition before the Tribunal stating that the abol,e two decisions of the Supreme Court in State Bank of Travancore (supra) ar-rd Kerala Financial Corporation ' (i986) 158 ITR r02 ' 1t9o+y z to trR t z..r \ \

l I (supra) have s nr:e been overruled by the Suprerrte Co;rt in the case of U )O Bank v. CIT3. Thereforr,, Tri.tunal was requested to rectify the order dated 22.10.1!t97 under Section 251(2 oi the Act. 8. Bl the rrder dated 23.O2.2OO1, Tribunal helrl that clecisior-r rcnr ered by the Supreme Court in tfCO Bank (supra) rvas s -rbsequent to the order of the Tribunal dat,:d 22.)0.1997. l'he said decision was not avail;rble at the time of decisi rn rendered by the Tribunal. Therefore, thr:re is no rnistak, irpparent from the record in the,;rder of the Tribur-ral. scr pt: of rectification being very iinrjti:d. If the praver for r, ctification was allowed, it u,oukl a)rn()unt to revieu' of .he decision of the Tribunal which is impr:rmissib e. Therefore the miscellanr:otrs petition for rectilication vas dismissed. Hence this appeai. 9. At the threshold, we asked learnecl counsel for the appell.rnt a, '-o whether any appeal has be,:r: preferred assailrng th ' order of the Tribunal dated 2'2 1A.1997. He subrnitted l rat no such appeal has been prr:fr.,rre.cl. The / '(199q) 237 rfl 889 I l

6 present appeal is confined only to the legality and validity of the order dated 23.02.2001 rejecting rectification application of the assessee under Section 254(2) of the Act. 10. At this stage, we notice that an order was passed by this Court on 29.11.2017 that the question as to whether an order can be rectified under Section 25aQl of the Act based on a subsequent judgment is being considered by the Sr:preme Court in Lakshmi Sugar Mills Co. Ltd. v. Commissioner of Income Tax (Special Leave to Appenl (C) No.30062 of 20121. Therefore, the present appeai ri,as adjourned sine die with liberty to the parties to move the Court on disposal of the aforementioned case bv the Supreme Court. 11. We have been informed at the bar that Lakshmi Sugar Mills Co. Ltd. (supra) is still pending before the Supreme Court. 12. However, considering the fact that the present appeal ,.is of the _r'ear 2001 and more than 21 years have gone by since institution of the appeal, we are of the vieu' that the \ \ i I

7 same is requir )ci to be decided by this Court ottt a ir-y or the oth er. I 3. Learned counsel for the appellant in sLrl>1;r:rt of his submissions I Las filed a compilation of judgmr:nts. I-[e has placed relian :e on a decision of the Supremr: Co rrt in Assistant C ommissioner, Income Tax, llajkot v Saurashtra l.utch Stock Exchange Ltd.a :rn,1 contenls that overruli rg of a previous decision b-\. il :;Lr bs,lquent decision is r :trospective. The subsequellt (:(: c-ision lays dovrn the cc rrect interpretation of lar.r' rthici: sl-rould be construed to be the law from dav one. This <lc': isrior of the Supreme Cc rrt was subsequently follou,ed lr'., thc Delhi High Court in Lakshmi Sugar Mills Co. Ltd. v Commissior er of Income Taxs, u'herein irr' : -; rc:iple t tat a judicial , ,ecision acts retrospectively u'a s rei--erated. Subsequent decision would be a goori llround for rectification He has further relied upon a d,,:i:;ion of the then comp rsite High Court of Andhrr,L Pr-adesh in '(2oos) 3os rrr 227 (sc) ' MANUi DE/2t 51 l2ot2 I

8 B.V.K.Seshavataram v, Commissioner of Income Tax6 to contend that a subsequent decision ca-n validly form the basis for rectifying an order of assessment under Section 154 of the Act. Elaborating on this aspect, he submits that while Section 154 of the Act applies to rectification by an assessing officer, similar principle IS applicable to the Tribunal under Sectioo 25aQl of the Act, provisions being pai materia. 14. Ms. K.Mamata Chowdary, learned counsel for the respondent has raised an objection that the appeal is not maintainable. She has referred to Section 26O,4 of the Act, more particularly to sub-section (l ) thereof, and submits that an appeal under Section 260A of the Act shall lie to the High Court from every order passed in "appeal". An order rejecting the application seeking rectilication under Section 254(21 of the Act is not an order passed in appeal. Therefore, an appeal under Section 260A of the Act to the gh Court against an order rejecting pra-\'er for rectification would not be maintainable. In support of such \ o (1994) 210 rrR 633 (AP)

() contention, sL 3 has placed reliance on a decisron of the High Court f Bombay in Chem Amit v. Assistant Commissione: of Income Tax7. Therea-ftr:r, shc submits that the deci ;ion of the Supreme Court in S aurashtra Kutch Stock Exchange Ltd. (supra) u,as brrsed rri the fact that at the t me of decision of the Triburna-l. ther,: was already an or ler of the jurisdictional High Cor-rrt rvhich the Tribunal fail d to notice and consider. It rvas irt that context that 'ir:w was taken that non-consider;.tion of the decision of he jurisdictional High Courl rva l an error apparent on he face of the recorcl. Insofar', the Deltri High Court decisic rr rn Lakshmi Sugar Mills Co. Ltrt. (supra) is concerned, s rc submits that as a matter ol fiecl. the appeal was dismiss :ci by the Delhi High Court b', l- olding that Tribunal ha I not committed anv error of law or of jurisdiction lrl declining to exercise porver urrder sub- section (2) c Section 254 of the Act as the jr-rCgmr:nt rvas rendered su rsequentl],. She, therefore, subr i1.s that the appeal may x' dismissed. ' 1zoos1 zzz ITI 3()7 (Bomba\') (

l0 15. Submissions made by learned counsel for the parties have received the due consideration of the Court. 16. At the outset, we may consider the first objection raised by learned counsel for the respondent that an appeal under Section 260A of the Act is not maintainable against an order passed by the Tribunal rejecting the application seeking rectification under Section 254(2) of the Act. 17. In Chem Amit's case (supra), Bombay High Court held that where as the consequence oi an order passed on the rectification application under Section 254(2) of the appeal which is amenable to appeal, therefore the order passed in the rectification application, would be amenable to appeal under Section 260A of the Act. Noting that assessee had onlv challenged the order of the Tribunal rejecting the application for rectilication, the appeal filed by the assessee was dismissed. \ Act, there is an amendment in the order passed in the I I

il 18. With ut; lost respect, we are unable to irccept the vieu, rendere< by the Bombay High Court. The word "appeal" appe iring in Section 26O,{ of the Act is -equired to be given a u r<ier interpretation; right of appeal bt:ing a substantive r ght. If a rectification application is a-ltowed, in consequen:r, the original order of the lribur-r,rl r;tands rectified. Il t ris; order allowing rectification is ermenrrble to the appellate jrrrisdiction under Section 26OA o: the Act. it u,ould be pa'adoxical to deny similar rernedv to €, party u,hose rectifi:ation application is rejected by 1l-.e Tribunal. Thercforc, ar order passed under Section 254(.!) of the ,\ct either allou,-rg rectilication or not allowing recti:lcatron woulcl be co-rstrued to be an order within the rrnbit oi the expression ' every order passed 1n appeal" appearing in sub-section I I of Section 26OA of the Act. 19. There is one more reason why u'e ar3 ur.able to acccl)t the ;trbmission made by learnecl counsel for the respondent. ,As we have already noticed abovr:, thr: appeal i rias admittr d r.r,ay back on 20.09.2001. Tvver:.[, or-ie years have gonc t r' sr'nce then. After admission of thc apceal and I I I I

t2 after such long lapse of time, it would not at all be justified to dismiss the appeal on the point of maintainability. 20. At this stage, we may also refer to sub-section (4) of Section 26OA of the Act which says that the appeal shal1 be heard only on the question so formulated and the respondent shall at the hearing of the appeal, be allowed to argue that the case does not involve such question. As per the proviso, nothing in sub-section (4) of Section 260A of the Act shall be deemed to take away or abridge the power of the Court to hear for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. Therefore, it is open to the respondent to argue before the High Court that the substantial questions of larn, so formulated are not substaltial questions of law. This cannot be stretched to say that respondent would be at liberty to argue that the appeal is not maintainable. There is a subtle, ,yet significant, distinction between the two which we have borne in mind. l

ll ) I 21 . The situ rtion which is before us is that ir.r t hr: original order dated 2'. .10.1997, Tribunal had allowed ti-'.: appeal of the respond€:lt by following the two dr:cisions of the Supreme Cou:t in State Bank of Travancorc Ijr.-prir) and Kerala Fina ncial Corporation (supra). -'l-r esr: t\\,o decisions har : since been overmled by the Supreme Court vide the subr equent decision in UCO Bank (r;rt rra), rvhich is porr,, the k w, of the land. On the face of tht' aforcsaLid binding jud cial pronouncement, the ver-r, ft,rtnda,ion ol the decision endered on 22.1O.1997 no longe r . u rvi',es 22. It is ir the above backdrop that the -rrcier ol the Tribunal dat.d 23.02.2001 refusing to rectif',, r.hc p:evic,us order dated : 2 10.1997 is required to be consi,::red 23. Let us now advert to Section 254 of tht: Acl rvhich deals rvith o ders of Appellate Tribunal. Siub :.e,::tion (2) of Section 254 tf the Act says that the Appellatr: l-ricunal may at any time within four years from the dat.e ol' the order u'ith a view o rectify any mistake apparent frrln-r thr: record amend any order passed by it under sub-sr, titn (l) and shall make such amendment if the mistakr: , ; brr,ught to

14 its notice by the assessee or the assessing officer within four years. We may mention that the aforesaid period of four years has since been substituted by six months from the end of the month in which the order is passed by the Tribuna-l vide the Finalce Act, 2016, with effect from 01.06.2016. 24. The expression "mistake apparent from the record" or its equivalent expression 'error apparent from the record" has received considerable judicial attention. It is not necessary to burden this judgment u,ith the large number of judicial pronouncements on this issue. Suffice it to say that a mistake apparent from the record or an error discovery of which does not require any process of long drawn arguments/hearing. It must be discernible on the face of the record itself. 25. The issue which is staring at us is rvhether the subsequent decision of the Supreme Court wl'rich had overruled its earlier tu,o decisions rvhich formed the apparent from the record is a mistake or arl error, I I I I

l5 of rectilicatiot rtnder sub-section (2) of Sec:ticn 254 of the Act. 26. In Sau ashtra Kutch Stock Exchange ..td.'r; case (supra) the fa:ts; belore the Supreme Court wr:re thal while deciding the appeai by the Tribuna,l, the decir;ion of the jurisdictional High Court i.e., High Court of Ciutarat was not brought to the notice of the Tribr-rnal Assessee contended tl at there u,as thus a mistakr: apl: arent from the record v hich required rectification. Supreme Court considered a r to whether non -consideration of lhe decision of the jurisd ctional Court or of the Suprr:me t)trur: could be said to be a mistake apparent from :he record. Supreme Co rrt answered the above issue in thr: :rffirrnative holding that such a mistake can be said to b: a rnistake apparent frr m the record rvhich can be rec -ified under Section 252 (21 of the Act. Supreme Court thereafter analysed th r situation from a jurisprudr:ntial 1,rerr;pective and thereaft:r held that il a subsequent decisiol alters an earlier one, t does not make aly ncr. Iau; it orrlv d:.scovers the correct principles of lan, which h:rs to be applied I

i6 retrospectively. Overruling is retrospective except on matters where principies of res judicata apply. Thereafter, Supreme Court further held that rectification of an order stems from the fundamental principle that justice is above all. It is exercised to remove the error and to disturb the finality. In the facts of that case, Supreme Court noted that though the decision of the jurisdictiona-l High Court was pronounced a few months prior to the decision of the Tribuna-I, the same \4,as not brought to the notice of the Tribunal by the assessee. Therefore, no fault could be found with the Tribunal in passing the order. 27. Delhi High Court in Lakshmi Sugar Mills Co. Ltd. (supra) reiterated the proposition that overruling 1S retrospective. Once the lara, is settled by the Supreme Court which operates retrospectively, it has to be construed to be the lar," as it existed when the order was passed by the Tribunal. Therefore, there is clear mistake apparent from the record. The mistake cannot be allowed\ \ . The only limitation for rectification is limitation. I l

t7 28. A Di. ision Bench of this C ourt in / B.V.K.Seshav ltaram's case was confronterl rvitlr a similar situation. Ir that case, this Court was exatninirLg the provision of lection 154 of the Act. As strlrrnitted lty learned coun iel for the appellant, Section 154 of tl-re Act provides for rr:ctification of mistake by an inr:ome tax authority. A; per sub-section (1) thereof. u,ith a r,iew to recfify any n istake apparent from the record, an lncorne tax authoritr r-eferred to in Section 116 of the A<:t mav amend the r r<ler passed by it; amend any intirna:ion or deemeci ir-rtin alion under Section 143(1) of the Act; amend anf ir.rtimati< n under sub-section (l) of Section 200A of t-he Act; :rnd arr errd an-v intimation under sub-se cl-iorr (1) of Section 2O6t:L, ol the Act. In the facts of l.hr;.t case, this Court held I liit subsequent decision can valiclh. fc,rm the basis fbr rc( tifving an order of assessment urLder Section i 54 of the A :t It was held as follows: "8. Trrre is no dispute that the decision of the Suprcrr: Court in Seth Baaarsi Dass Gupta's case N,IANU/ i(r/0552/ 1987 : |9871 166 ITR 783 (SiC) was rcndere I ;rfter the original assessments were finalised eiving hi benefit of depreciation allowancc to the

l8 assessees. Based upon the said Supreme Court decision, rectification orders were passed by the successor assessing authority. Whether a subsequent decision can be the basis for "rectifying" a.:n ea.rlier order in exercise of the powers under section 154 of the lncome-ta-x Act? Although the opening words of section 154(l) - "with a view to rectifying arry mistake apparent from the record, the income-tax autiority. . . . may grve the impression that a judgment which c€une subsequently, not being part of the record at the time u,'hen the assessment was finalised, could not be the basis for rectification of any mistake under section 154, the legal position is no longer in doubt in view of the authoritative pronouncement of the Supreme Court in S. A. L. Narayana Row, CIT v. Model Mills Nagpur Ltd. MANU/SC/016811966 : 119671 6z+ rTR 67 (SC). rn that case, the assessing authority subjected excess dividcnds to income-tax. Subsequently, the Bombay High Court in Khatau MakanJi Spianing and Weaving Co. Ltd. v. CIT MANU/MH/0348/1956 : [1956] 30 ITR 84 1 (Bom), held that lery of tax on excess dividends was illegal. On the basis of that decision, a claim for refund was made by the assessee requesting the assessing authority to rectify the earlier order mistakenly made. That plea was rejected by the assessing authority and also by the Commissioner of Income-tax when a revision application was hled before him. The High Court of Bombay allowed the w t petition filed by the assessee and dirccted the Income-tax OIIicer to revise the order of assessment and grant refund to t-lle extent of the tax levied on the e\cess dividends. By the time the matter was carried to the Supreme Court, the decision of the \ \ I \

l9 Bornbay t igh Court in Khatau Makanji Spinning, and Weaving Co. Ltd.'s case MANU/MH/0348/ 195{r : [19561 30 ITR 841 (Bom) was aflirmed in CIT v. Khatau Makanji Spinning and Weaving Co. Ltd. MANU/S( lo188l1960 : [1960] 40 ITR 189 (S(ll. 'the Supreme lourt alhrmed the view taken by the Bon-bay High Cou 't that the assessee was entitled to relir rrrl ol thc amol nt. This ruling is a clear auttroritl, ic r the propositir n that a subsequent decision can va.Ldh l,;rn: the bas: ; for reclifying an order of asscs:nrent under se, tion 154 of the Income-tax Act, 1961." 29. We resl ectfully agree with the reasonings e,irree b,r' a coordinate E:nch of this Court in B.V.K.Seshavataram (supra); ratf 3r we are bound by it. If th:s p,rsi ,ion is applicable to Section 154 of the Act, we arc oi r lrc vicrv that it is equally r pplicable to Section 254(2\ of the Irc:. 30. Summ; tion of our above discussron is th at the Tribunal wz s not justified 1n rejecting the recti ication :rpplication < f the appellant. 31 . Conser uently, we answer question No I so framed above in tl e negative and in favour of tl- e asisessee. -.1 Resultantly, \-e set aside the order dated it3.O1 )COL I I I I

HIGH COURT DATED:07109t'i022 NOTE LR COPY TOII E MAIIKITD )'5 6t.I! i; .- i;E r i"r, Ii ,'l \q. \:, \ T Eii, IJJ 6' c--,1 s5) JUDGMENT lTTA.No.103 of 2001 ALLOWING IIIE ITTA v 6' o" @ ar\