SMT SMITA CHATTERJEE,KOLKATA vs. DCIT-CIRCLE-22, KOLKATA, KOLKATA

In his submission the A/R of the assessee requested to grant exemption u/s. 10(10C) which was rejected by the AO in the assessment made u/s. 143(3) of the I. T. Act and pleaded to rectify the order u/s. 154 of the I. T. Act. The jurisdiction of section 154 is confined to the rectification of mistake apparent from the records and it does not envisage the rectification of error of judgment. In this case the assessee in his rectification u/s. 154 claimed to grant exemption u/s. 10(10C) which was denied by the AO in his order u/s. 143(3). The purview of section 154 is restricted to the issues which was not considered and decided in the orders passed by the AO. Thus the rectification petition filed by the assessee on the issues already decided by the AO in his order u/s. 143(3) is outside the scope of section 154 of the I. T. Act. Thus the rectification petition filed u/s. 154 of the Act by the A/R of the assessee is hereby deleted.

3. The assessee preferred appeal against the order passed u/s. 154 of the Act before the Ld. CIT(A). The Ld. CIT(A) disposed of the appeal by observing as under:

“7.I have carefully considered the submissions of the appellant. As regard the first ground of the assessee it is seen that the Assessing Officer had considered the submission of the assessee while rejecting the claim of exemption u/s. 10(10C) of the Income Tax Act, 1961 in the order passed u/s. 143(3). After considering all the facts, provisions of the Act and the provisions of the Rules the Assessing Officer had taken judgment and denied the exemption u/s. 143(3). Once the assessment order has been passed after considering the facts and provisions of Law the Assessing Officer cannot interfere with such an order unless there is a mistake apparent from record. The appellant had chosen to file the petition u/s. 154 instead of an appeal against the said order u/s. 143(3) of the Act. The scope of section 154 is restricted to the issues, which have not been considered and decided in the orders passed u/s. 143(3). Since the issue of granting or otherwise of the exemption u/s. 10(10C) of the Income Tax Act had already been considered and decided by the Assessing Officer after due consideration of facts and law, an amendment as requested by the assessee on the same issue is outside the ambit of section 154 and thus the Assessing Officer has rightly rejected the assessee’s application as there was no mistake apparent from the records. There is no scope for the Assessing Officer to change his opinion u/s. 154 of the I. T. Act, 1961. The jurisdiction u/s. 154 is confined to the rectification of the mistakes apparent from the records and it does not envisage the rectification of error of judgment or rectification of a debatable issue where the provisions of facts and law have been properly considered. Accordingly the first ground of the assessee has no merit and it is dismissed.

8. As regards the second ground the Assessing Officer has given a clear cut finding that the provisions of the rule 2BA of the Income Tax Rules, 1962 read with section 10(10C) of the I. T. Act, 1961 were not satisfied in the assessee’s case. In accordance with the section 10(10C) of the Act an exemption to the extent of Rs.5,00,000/- is admissible from any amount received or receivable by the employee under a scheme of Voluntary Retirement framed by the employer. However, in accordance with the first proviso to section 10(10C) the exemption as mentioned aforesaid is allowable if the scheme is framed in accordance with the requirements as prescribed under Rule 2BA. One of the requirements of the Rule 2BA is as under: “the amount receivable on account of voluntary retirement (or voluntary separation) of the employee does not exceed the amount equivalent to (three months) salary for each

completed year of service or salary at the time of retirement multiplied by the balance months of service left before the date of his retirement on superannuation.” The AO has given clear cut finding in the order passed u/s.143(3) that the above requirement prescribed under the Rule 2BA has not been fulfilled in this case. Either during the proceedings u/s. 154 or the appellate proceedings, this finding of the Assessing Officer could not be controverted by the appellant. The issue raised by the assessee in this ground is debatable and it is outside the scope of section 154 of the Act. Since the ground raised has no merit, it is dismissed.

9. As regards ground no. 3 the issue raised in the ground is not tenable as the reliance placed by the assess4ee on the ratio laid down by the Hon’ble Calcutta High Court in the case of SAIL DSP VR. EMPLOYEES ASSOCIATION 1998 Vs. UNION OF INDIA & OTHERS 262 ITR 638 is misplaced as the facts in that case are different from facts of the present case. The case relied upon by the assessee pertained to employees of SAIL wherein the Hon’ble High Court has given the finding that the scheme for Voluntary Retirement floated by SAIL confirmed to Rule 2BA. The Hon’ble High court also gave the finding that nowhere there was any provision in the scheme which could be said to be in conflict with the requirements of Rule 2BA. However, in the present case, the issue relates to the Voluntary Retirement Scheme floated by the Hongkong & Sanghai Banking corporation Limited, and the Assessing Officer gave the finding in the assessment order that the scheme was not in conformity with Rule 2BA of the Income Tax Rules, 1962. Hence, there is no error apparent from the records in the order passed by the Assessing Officer. Hence this ground is also dismissed.”

4. The assessee preferred rectification petition u/s. 154 of the Act before the Ld. CIT(A) on 10.12.2012 with a prayer seeking to rectify the Ld. CIT(A)’s order on the following basis: i) Forty employees of Hongkong and Sanghai Banking Corporation Ltd. filed appeals to the Hon’ble Income-tax Appellate Tribunal, Kolkata against your order on the identical issue relating to the assessment year 2004-05. The Hon’ble ITAT, “B” Bench, by a consolidated order dated 30th March, 2012 held in favour of those forty employees and vacated orders of the lower authorities. ii) Let us now take note of a Third Member decision of this very Tribunal in the case of DCIT - vs. - Krishna Gopal Saha (121 ITD 368 (TM ) wherein the assessee was a former employee of Standard Chartered Bank and admittedly the Voluntary retirement scheme offered by the SCB was not in conformity with Rule 2BA of the Income Tax Rules (as noted in paragraph 3.1 of the lead order). Yet, the Third Member decision was that to the extent of Rs.5,00,000/- the assessee was eligible for deduction u/s. 10(10C). In coming to this conclusion, the Tribunal, inter alia, took note of Hon'ble jurisdictional High Court's guidance in the matter. What is held by the Tribunal in this Third Member decision is at the minimum a possible view of the matter, and so far as this Division Bench is concerned a binding judicial precedent. iii) We find that as held by Hon'ble Calcutta High Court in the case of SAIL DSP VR Employees' Association (supra), undoubtedly Their Lordships held that there is no conflict between the VRS Scheme of the SAIL employee and Rule 2BA, but Their Lordships also observed as follows :- "An expression used in the statute is not always to be interpreted literally or grammatically. Sometimes, it has to be interpreted having regard to the context in which the expression is used and having regard to the object and purpose for which the same is enacted. Section 10(10C) was inserted in order to make voluntary retirement attractive so as to reduce human complements for securing economic viability of certain companies. This object was elaborated by various Departmental circulars and 6 Smt. Smita Chatterjee & Ors.. AY 2004-05 explanatory statements issued from time to time. Similarly, r. 2BA which was inserted by the IT (Sixteenth Amendment) Rules, 1992, were amended from time to time. All these go to show that this was intended to make a voluntary retirement more attractive and beneficial to the employee opting for voluntary retirement. Therefore, this has to be interpreted in a manner beneficial to the optee for voluntary retirement, if there is any ambituity" iv) It is thus free from any doubt that, as held by Hon'ble jurisdictional High Court, that the provisions of section 10(10C) are to be "interpreted in a manner beneficial to the optee for retirement, if there is any ambiguity". In view of this binding legal position, it is clear that on the point of ambiguity, if any, an interpretation in favour of the assessee is to be adopted. That is how, according to Hon'ble jurisdictional High Court, section 10(10C) is to be interpreted. v) The real question, therefore, is whether or not these decisions of Hon'ble jurisdictional High Court can be subject matter of rectification under section 154. On this question, we find guidance from Hon'ble Supreme Court's judgment in the case of ACIT - vs - Saurashtra Kutch Stock Exchange Ltd. (305 ITR 227) wherein Their Lordships have held that non-consideration of a judgment of Hon’ble jurisdictional High Court is also a mistake apparent on record, which can be rectified under section 154. What follows, inter alia, is that in a situation in which Hon’ble jurisdictional High Court is not followed, such a non-consideration is clearly a mistake apparent on record.

The assessee preferred an appeal before us against this order dated 12.06.2013.