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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Hon’ble Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
आदेश /O R D E R
Per Waseem Ahmed, AM This appeal by the assessee is against the order of Commissioner of Income Tax (Appeals)- 12, Kolkata dated 19.01.2015. Assessment was framed by A.C.I.T., Circle-56, Kolkata u/s 143(3)/147 of the Income tax Act, 1961 (hereinafter referred to as ‘the Act ‘) vide his order dated 29.09.2003 for assessment year 1999-00. Shri S.M. Surana, Ld. Authorized Representative appeared on behalf of assessee and Shri H.R.Singh, Ld. Departmental Representative represented on behalf of Revenue.
The solitary issue raised by the assessee in this appeal is that the ld. CIT(A) erred in confirming the order of AO by treating the corporation tax of Rs.10,38,400/- and Rs.83220/- received from the tenants as income under the head “other sources” by passing a rectification order u/s 154 of the Act.
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The facts in brief are that the assessee is a partnership firm engaged in the business of petrol pump. The assessee, for the year under consideration, has filed his return of income declaring total income of Rs.11,73,380/- comprising income from business, house property and other sources. The return was processed u/s 143(1) of the Act and the refund of Rs. 232599/- u/s 244A of the Act was granted to the assessee. Subsequently the notice was issued u/s 148 of the Act on account of various reasons and accordingly assessment was framed u/s 147 of the Act at a total income of Rs.20,29,710/- after making certain additions/disallowances to the total income of the assessee which are discussed herein after. The assessee, inter alia was deriving rental income from properties which was offered to tax under the head “house property” besides the rental income, the assessee received property tax for Rs.10,38,400/- and Rs.83,220/- respectively from the tenants which was deposited with the Municipal Authorities of West Bengal. The assessee, in his returned of income has neither shown any income of such amount nor claimed any deduction in his income tax computation. However, the AO treated the same as income from other sources and added to the total income of the assessee.
Aggrieved, the assessee preferred a revisionary application u/s 264 of the Act to the Commissioner of Income Tax. The ld. CIT u/s 264 of the Act has deleted the addition made by the AO vide order dated 23.03.2005 by observing as under :- “Keeping in view the order of the jurisdictional High court in the case of CIT - vs- Gillanders Arbuthnot & Co. Ltd. 142ITR 598(Cal) and the provision of the Calcutta Municipal Corporation Act 1980 and the West Bengal Premises Tenancy Act 1997 the amount received by the assessee as tenant share of corporation taxes to be paid by the assessee to the corporation cannot be assessed under the head 'other sources' merely because the same cannot be assessed under the head 'income from house property'. Keeping in view the provision of Calcutta Municipal Act 1980 and West Bengal Premises Tenancy Act 1997 the assessee merely is an agent of Municipal Corporation for the collection of tenant share of Municipal taxes and therefore, the receipt cannot be assessed under head of 'income from other sources' . The AO is therefore, not justifying in assessing the corporation tax realization Rs. 10,38,400/- and Rs.83,220/- by the applicant from its tenants in respect of property Act No.3,Decres Lane and 2/6 Sarat Bose Road, Kolkata as income under the head 'income from other sources'. The same is therefore deleted.”
Subsequently, the AO passed the effect giving order vide dated 30.05.2006 by deleting the addition as directed by the ld. CIT u/s 264 of the Act. However, subsequently the AO observed that while giving effect to the order of ld. CIT u/s 264 of the Act, a mistake apparent from record
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has occurred i.e. not adding the municipal taxes in the annual value of both the properties. Accordingly, the AO issued notice u/s 154 of the Act dated 07.07.2008 for rectifying the order of the ld. CIT u/s 264 of the Act dated 15.02.2008. Finally, the AO added the municipal taxes in the annual value of both the properties which were let out during the year and added to the total income of the assessee.
Aggrieved the assessee preferred an appeal to the ld. CIT(A). The assessee before the ld. CIT(A) submitted that the provision of Section 154 of the Act are applied to a mistake apparent from record but in the instant case no such mistake is arising from the order of ld.CIT u/s 264 of the Act. The ld. CIT u/s 264 of the Act has just deleted the addition as prayed by the assessee and there was no such direction for adding the municipal taxes in the annual value of the properties. There was absolutely no mistake in the order passed for giving effect to the order of the ld. CIT u/s 264 of the Act. However the ld. CIT(A) after considering the submissions of the assessee has confirmed the addition of the AO by observing as under :- “The Assessing Officer was proposing to rectify the order dated 30.05.2006 and not some order dated 15.02.2008 is also borne out by the second ground of appeal in which it has been stated that the proceedings u/s.154 of the Act were initiated for rectification of the order dated 30.05.2006. It is clear from these facts and the tone and tenor of the order dated 17.10.2008 that the same was passed only with the view to amend the order dated 30.05.2006 giving effect to the order u/s 264 of the Act. Thus, it appears that it was only by mistake that the order u/s.154 dated 15.02.2008 was stated as the order sought to be rectified in the order dated 17.10.2008. Section 2928 of the Act lays down that no return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of the Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of .income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and, effect in conformity with or according to the intent and purpose of the Act. As is clear from the facts narrated above, in substance and effect the order dated 1,7.10.2008 u/s.154 is in conformity with the provisions of section 154 of the Act and was passed with a view to rectifying the mistakes apparent from record in the order dated 30.05.2006 giving effect to the Id CII''s order u/ s.264 of the Act. It would not be out of place to state that the appellant's first ground No.1 does not become invalid merely for the reason that he has wrongly mentioned the date of the impugned order das 17.10.2006 instead of 17.10.2008. similarly, the order dated 17.10.2009 does not become invalid merely by reason of mistake in mentioning the order dated 15.02.2008 u/s 154 as the order sought to be rectified by virtue of the provisions of section 292 B of the Act. Hence the first ground of appeal is rejected.”
Being aggrieved by the order of ld. CIT(A) the assessee is in second appeal before us on the following grounds of appeal :-
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“1. That the learned Commissioner of Income Tax (Appeals) erred on facts and in law in sustaining validity of the rectification proceedings initiated by the Deputy Commissioner of Income Tax, Circle-56, Kolkata ('the Assessing Officer') by notice dated 07/07/2008 and the Order dated 17-10- 2008 made by Assessing Officer under section 154 of the Act consequent to the said Notice dated 07/07/2008 for the assessment year 1999-2000. 2. That the learned Commissioner of Income Tax (Appeals) erred in fact and in law in ignoring: (a) 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 or examining arguments on points where there may conceivably be two points; (b) that an authority cannot proceed to rectify the mistake in the order of any higher authority; and (c) that under the guise of rectification, the assessing officer cannot undo the directions of the appellate authority. 3. That the learned Commissioner of Income Tax (Appeals) both on facts and in law was not justified in confirming the Order of the Assessing Officer bringing the Corporation Tax of Rs.10,38,400/- and Rs.83,220/- realized from the tenants/ occupiers of the house property situated at 3, Dacres Lane and 2/6 Sarat Bose Road respectively for assessment under the head 'Income from House Property' in the rectification proceedings though such amount was neither assessed under the head 'Income from House Property' in assessment originally made under sections 147/143(3) nor so directed by the learned Commissioner in his order under section 264 of the Act. 4. That the appellant craves leave to adduce additional grounds and/or to modify, substitute or amend any of the foregoing grounds at/or before of hearing of the appeal.”
The ld. AR before us submitted that the issue was raised before the ld. CIT u/s 264 of the Act. The AO erred in treating the amounts of municipal taxes received from the tenants as income from other sources. In fact the AO deleted the municipal taxes as income from other sources passed u/s 147 of the Act vide order dated 29.09.2003. In the order passed u/s 147 of the Act there was no whisper whether such receipt was house property income or other sources. The limited issue was that before CIT u/s 264 of the Act that the AO erred in treating the municipal taxes received as income of the assessee which was deleted by the ld. CIT u/s 264 of the Act. As such, there was no mistake apparent from record in the order of ld. CIT u/s 264 of the Act. Therefore order cannot be rectified u/s 154 of the Act.
Similarly the findings of the ld. CIT(A) that the AO is proposing to rectify the order dated 30.05.2006 which is based on his wrong premises. It is because there is no apparent mistake as the order was passed to comply with the directions given by the ld. CIT u/s 264 of the Act. On the other hand the ld. DR relied on the orders of the authorities below. The ld. AR in his rejoinder further submitted that order of the AO passed u/s 147 of the Act got merged with the order u/s 264 of the Act passed by the ld. CIT and therefore the same cannot be rectified u/s 264 of the Act.
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The ld. AR without prejudice to the above also submitted that if the original order is to be rectified then the period of four years which should be counted from the date of the original order i.e. 29.09.2003. Thus, the period for rectifying the order ends dated 31.03.2008 and the notice in the instant case for rectification u/s 154 of the Act was issued on 07.07.2008 which is barred by time. Subsequently the rectification order u/s 154 of the Act was passed dated 17.10.2008 which is against the provision of law. On the other hand, Ld. DR vehemently relied on the order of Authorities Below.
We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the instant case relates to the municipal taxes received by the assessee from its tenants. The AO in its order passed u/s 147 of the Act treated the same as income from other sources. Against the order of AO the assessee filed a revisionary petition to the ld. CIT u/s 264 of the Act wherein the addition was deleted. Accordingly the AO treated the addition in its effect order passed on 30.5.2006. However, subsequently, the AO stated that the income that the municipal taxes should have been formed part of the annual value of the let out properties and accordingly he rectified the order of ld. CIT passed u/s 264 of the Act by treating the municipal taxes as part of the annual value. At the outset, we find that there was no direction in the order of the ld. CIT u/s 264 of the Act for adding the municipal taxes in the annual value of the properties. When there was no such direction then the view of the AO assuming the apparent mistake in the order of the ld. CIT u/s 264 of the Act is not sustainable in the eyes of law. The provisions of section 154 of the Act are very clear and the same can be resorted by the AO only in a case where the mistake is apparent from the records. While doing so, we find support and guidance from the judgment of the Hon’ble Supreme Court in the case of ITO Vs. Vokart Bros reported in 82 ITR 50 wherein it was held as under :- “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. A decision on a debatable point of law is not a mistake apparent from the record. The power of the officers mentioned in s. 154 of the IT Act, 1961 to correct "any mistake apparent from the record" is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an "error apparent on the face of the record."
In view of the above, we hold that there was no mistake apparent from the record in the order of the ld. CIT passed u/s 264 of the Act.
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6.1 We also find that the assessee cannot rectify its original order passed on 29.09.2003 u/s 147 of the Act as the same has been merged with the order of the ld. CIT u/s 264 of the Act. In this connection, we rely in the case of ITC Limited vs Inspecting ACIT and Others reported in 249 ITR 104 wherein it has been held as under :-
“The subject of rebate was an issue decided ultimately by the Tribunal. The rate has also been fixed by the appellate authority and affirmed by the Tribunal. Hence, by way of rectification such rebate cannot be decreased or increased by way of rectification. Since the question of payment of rebate and the rate of rebate had once been decided and reached its finality before the Tribunal it is not open for the AO to revise his order which he has passed in compliance with the direction of the appellate authority affirmed by the Tribunal. Even if such issue can be reopened such can only be reopened by the Tribunal and none else. The Revenue accepted the order of the Tribunal, did not proceed with the reference application and allowed the same to be dismissed for non- prosecution. Having done so, the order of assessment passed by the AO in compliance with the direction of the appellate authority has been accepted by the Revenue and the same cannot be reopened at this stage in the manner it has been attempted.—T.S. Balaram, ITO vs. Volkart Brothers (1971) 82 ITR 50 (SC) : TC 53R.165 and Oil India Ltd. vs. CIT (1982) 27 CTR (Cal) 259 : (1982) 138 ITR 836 (Cal) : TC 57R.665 relied on; CIT vs. Method Trading & Investment Ltd. (2001) 165 CTR (Cal) 541 : (2000) 246 ITR 588 (Cal) applied; Zdzizlaw Skakuz vs. CIT (1986) 50 CTR (AP) 39 : (1986) 158 ITR 420 (AP) : TC 32R.599, Sirsa Industries vs. CIT (1983) 36 CTR (P&H) 130 : (1984) 147 ITR 238 (P&H) : TC 13R.372 and Sait Nagjee Purushotam & Co. Ltd. vs. Third Addl. ITO (1964) 51 ITR 33 (Ker) distinguished.” We further find that in case the AO wishes to rectify its original order u/s 147 of the Act then also the same needs to be rectified within four years as contemplated under the provision of section 154 of the Act. In the instant case the AO has rectified the order after the expiry of four years which is also not valid in the eyes of law. In this regard, we find guidance from the order of this Co-ordinate Bench in the case of Shri Hanuman Sugar vs ACIT in ITA NO.341/Kol/2010 vide order dated 08.06.2016, wherein it has was held as under :- “We find that from the end of the financial year i.e. 1997-98 the AO is bound to make the rectification order within four years and in this case the AO is beyond four years from the original assessment order dated 30.03.2001. Therefore, we are of the opinion that the impugned order dt.30.03.2009 passed by the AO is held to be invalid by treating the same as barred by limitation.”
Accordingly respectfully following the precedent as above we hold that the order passed u/s 154 of the Act is not maintainable in the eyes of law. Therefore, we direct the lower authorities to delete the addition as discussed above. Since the rectification order passed u/s 154 of the Act is not sustainable and the assessee gets relief on technical grounds, therefore we are inclined to
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adjudicate the matter on merit. Hence, we reverse the order passed by the lower authorities and this ground of appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 10/03/2017 Sd/- Sd/- [S.S.Viswanethra Ravi] [Shri Wassem Ahmed] Judicial Member Accountant Member
Dated : 10/03/2017
{RG SPS}/Dkp* Copy of the order forwarded to: 1. Appellant/Assessee – Sri Ganeshdas Ramgopal, 1 Chitaranjan Avenue, Kolkata-72 2. Respondent –DCIT, Circle-40m 3, Government Place West, Kolkata-001 3. CIT(A)- Kolkata. 4. CIT – , Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.
By Order /True Copy/ Asstt.Registrar, ITAT, Kolkata Benches