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Maya Ram Jia Lal Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference Nos. 8 and 9 of 1977
Judge
Reported in(1984)43CTR(P& H)138; [1985]152ITR608(P& H)
ActsIncome Tax Act, 1961 - Sections 154 and 271(1)
AppellantMaya Ram Jia Lal
RespondentCommissioner of Income-tax
Appellant Advocate G.C. Sharma, Senior Adv.,; Vimal Gandhi and; S.S. Mahaja
Respondent Advocate Ashok Bhan, Senior Adv. and; A.K. Mittal, Adv.
Excerpt:
.....questions of law, quoted hereafter to be referred to this court for opinion :1. whether for the purposes of calculation of penalty under section 271(1)(c) read with section 271(2), the tax payable by the applicant, a registered firm, on the basis as if it were an unregistered firm, was to be calculated after deducting the annuity deposit payable under chapter xxii-a of the income-tax act, 196], payable by the applicant-firm as if it were an unregistered firm ? 2. whether, on the facts and in the.....held that while working out penalty imposable under section 271(1)(c) on a registered firm, annuity deposit payable by it fictionally as an unregistered firm had to be deducted from its total income and the quantum of penalty determined, accordingly as per the mandate of section 271(2) of the i.t. act, 1961. so, in the present case, if question no. 1 as asked for had been referred to us, we would have said 'yes'. and, since in the case of the assessee, the calculation in the statutory manner had not been done, there was obviously a mistake of law committed.5. now, the second question asked for, proceeded on the premises that was such a mistake rectifiable under section 154 of the i.t. act the question finally referred to us by the tribunal also proceeds on that assumption.....
Judgment:

Punchhi, J.

1. The assessee is a registered firm. Penalties under Section 271(1)(c) were imposed on the assessee for the assessment years 1964-65 and 1965-66. The penalties calculated were in purported accordance with the provisions of Section 271(2) by treating the firm as unregistered. Before the IAC, the assessee filed two applications under Section 154 for the two assessment years in question, wherein it was contended that while calculating the tax as unregistered firm as per provisions of Section 271(2), deduction should have been allowed in 'respect of annuity deposit payable by the firm as if it were an unregistered firm. It was pointed out that since the penalty had been wrongly calculated, there was a mistake apparent on the face of the record deserving rectification under Section 154. The prayer was declined by the IAC on 5th August, 1975, vide order annexure 'A'. The assessee appealed unsuccessfully before the Income-tax Appellate Tribunal, Amrit-sar Bench, as per order dated June 7, 1976, annexure 'B'.

2. The assessee then preferred two reference applications under Section 256(1) requiring two questions of law, quoted hereafter to be referred to this court for opinion :

'1. Whether for the purposes of calculation of penalty under Section 271(1)(c) read with Section 271(2), the tax payable by the applicant, a registered firm, on the basis as if it were an unregistered firm, was to be calculated after deducting the annuity deposit payable under Chapter XXII-A of the Income-tax Act, 196], payable by the applicant-firm as if it were an unregistered firm ?

2. Whether, on the facts and in the circumstances of the case, a mistake rectifiable under Section 154 of the Income-tax Act had occurred inasmuch while working out the penalty under Section 271(1)(c) of the Income-tax Act, the annuity deposit payable by the applicant-firm as if it were an unregistered firm was not deducted for computing the tax payable by the applicant, a registered firm, on the basis as if it were an unregistered firm ?'

3. The Tribunal instead referred only one question framing it as under :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified, in holding that the mistake in not deducting the annuity deposit on notional basis from the total income of the firm treating it as unregistered for the purpose of calculating penalty under Section 271(1)(c) for the assessment years 1964-65 and 1965-66, is not rectifiable under Section 154 of the Income-tax Act, 1961 ?'

4. As is plain from the two questions asked to be referred by the assessee, question No. 1, if referred for opinion, had to get an answer in accord with the answer we have given recently on February 3, 1984, in I.T.R.No. 18 of 1977 (CIT v. Jawahar Woollen Textile Mills--since reported in ). Amusingly, we find from the record of that case that the same Tribunal (consisting of the same members in disposing of the appeal) had on June 8, 1976 (a day after the decision in the present case) allowed the claim of the then assessee holding that while assessing the total income under Section 280-0, the amount of annuity deposit had to be deducted and that such deduction should be allowed in computing the amount of penalty payable by the firm if unregistered. The view was taken on the basis of CIT v. Gujarat Automobiles : [1976]105ITR588(Guj) . At the instance of the Revenue, the question which was referred by the Tribunal before us was, ' Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in directing that while working out the penalty imposable under Section 271(1)(c) for the assessment year 1965-66, the annuity deposit payable by the assessee-firm should be deducted and the quantum of penalty should be determined accordingly as per the provisions of Section 271(2) of the I.T. Act, 1961 ?' We answered the question in the affirmative, that is, in favour of the assessee and against the Revenue. We fell in line with the near unanimous view of law not only of the Gujarat High Court in the case afore-referred to but also of other High Courts. Thus, it was reiteratingly held that while working out penalty imposable under Section 271(1)(c) on a registered firm, annuity deposit payable by it fictionally as an unregistered firm had to be deducted from its total income and the quantum of penalty determined, accordingly as per the mandate of Section 271(2) of the I.T. Act, 1961. So, in the present case, if question No. 1 as asked for had been referred to us, we would have said 'Yes'. And, since in the case of the assessee, the calculation in the statutory manner had not been done, there was obviously a mistake of law committed.

5. Now, the second question asked for, proceeded on the premises that was such a mistake rectifiable under Section 154 of the I.T. Act The question finally referred to us by the Tribunal also proceeds on that assumption that there was such a mistake and our opinion is sought whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that it was not rectifiable under Section 154 of the Act.

6. The learned counsel for the assessee maintained that the mistake in not deducting the annuity deposit on notional basis from the total income of the firm treating it as unregistered for the purpose of calculating penalty under Section 271(1)(c) was a mistake apparent on the face of the record, inasmuch as it was an obvious and a patent one deserving rectification under Section 154 without much ado. It is further maintained that no elaborate reasoning was needed on any point on which there could conceivably be two opinions and the point of law was not even debatable, as practicallyevery High Court in the country had taken the view which was adopted in Jawahar Woollen Textile Mills' case . On that strength, it was urged that we must answer the question in the negative, that is, in favour of the assessee.

7. Learned counsel for the Revenue has, on the other hand, pointed out the following two passages, respectively, from the orders of the IAC and the Tribunal :

'There is no warrant for extending this legal fiction by taking the view that the material income of the firm should also be redetermined as if it was an unregistered firm and since annuity deposit is deductible from the total income and not from the tax, the question of deducting annuity deposit for determining the tax on the total income of the registered firm by treating it as an unregistered does not arise for the purpose of determining the penalty imposable in the case of a registered firm within the meaning Section 271(2). In any case, there is no doubt that the provisions of Section 154 would not be applicable......' (I.A.C.)

' Whether a registered firm (as in the present case, the assessee is) which is deemed as an unregistered firm as per the provisions of Section 271(2) of the Income-tax Act, 1961, is covered by Chapter XXIIA read with Section 280A of the Income-tax Act, 1961, is a debatable question and the matter is open to more than one interpretation. In these circumstances, it cannot be said that there is a mistake apparent from the records in not deducting annuity deposit on notional basis from the total income of the firm treating it as unregistered for the purpose of calculating penalty under Section 271(1)(c) ......

We, therefore, hold that the provisions of Section 154 of the Income-tax Act are not applicable in this case......' (Tribunal)

8. According to the learned counsel, the Tribunal had treated the matter of deduction of annuity deposit on notional basis from the total income of a registered firm as debatable and open to more than one interpretation. It is further argued that till this court came to settle the matter in Jawahar Woollen Textile Mills' case on February 3, 1984, the matter remained debatable and capable of more than one interpretation. And on that score it was maintained that on the day when the Tribunal passed the order in appeal, wherefrom the question has been referred, it had remained debatable and it was open to more than one interpretation. On this stance, the decision of this court in CIT v. Mohan Lal Kansal [1978] 114 ITR 583, relied upon by the learned counsel for the assessee was sought to be distinguished inasmuch as, in that case, the ITO had ignored a decision rendered by this court while passing an order. In that context, it was held that the income-tax authorities situated withinthe jurisdiction of a particular High Court were bound to follow the law laid down by that court.

9. The argument indeed is attractive but we are not impressed by the same. As has been noticed earlier, the view of the Tribunal in this case and that in Jawahar Woollen Textile Mills' case were diametrically opposite in just a day's span. Before these cases were decided, Gujarat Automobiles' case : [1976]105ITR588(Guj) had appeared in the field. No High Court had taken a contrary view. The question had not become debatable or open to more than one interpretation in the higher echelons of the judiciary. The view in Gujarat Automobiles' case : [1976]105ITR588(Guj) being sound, had consistently been followed by various High Courts, including now by this court. Even the Tribunal after granting relief to the assessee in Jawahar Woollen Textile Mills' case , while referring this case on October 29, 1976, shied away from referring the sought for question No. 1 to this court by confining the question referred, to the limited extent for determining, whether the mistake occurred was rectifiable under Section 154. In this view of the matter and especially on the afore-extracted passages from the two respective orders of the IAC and the Tribunal, we are of the view that no positive finding was recorded by the income-tax authorities on the question of deduction of annuity deposit on notional basis from the total income of a registered firm. The matter which was left swinging initially was stilled only in the reference order as innately it was taken that there was a mistake apparent on the face of the record in not deducting annuity deposit on notional basis. In Jawahar Woollen Textile Mills' case , this court gave accord to the Tribunal's view. It did not lay down a new precedent on the strength of which the mistake is said now to be rectified by the assessee. It is different that that case cannot now be overlooked as the matter had been kept agitated by the assessee, and, as such, it has come to strengthen his claim for rectification. The decision of the Calcutta High Court cited by the learned counsel for the Revenue in Jiyajeerao Cotton Mills Ltd. v. ITO : [1981]130ITR710(Cal) is wholly inapplicable to the facts and circumstances of the present case, as there is no retrospective applicability of the precedent of Jawahar Woollen Textile Mills' case , as alleged.

10. Now, the road is clear. The mistake is apparent on the record : it being glaring, obvious and patent. It falls within the ambit of Balaram, ITO v. Volkart Bros. : [1971]82ITR50(SC) . No reasoning is involved and there are no two opinions for a debate to be indulged into. It is a matter of pure calculation on the principles settled. It is merely a process of making out the penalty under Section 271(1)(c) in the light of the provisions ofSection 271(2) as spelt out earlier. We are in respectful agreement with the view taken by Sabyasachi Mukharji J. (who now adonis the Supreme Court) in CIT v. Mcleod & Co. Ltd : [1982]134ITR674(Cal) to the effect that where by misreading a section a wrong view is taken and a wrong calculation is made, it would certainly come within the purview of Section 154 as a mistake apparent on the face of the record. In that case, there was a mistake in the allowance of relief under Section 80M because of a misreading of Section 80A. In that context, it was held that it was a mistake apparent on the record which can be rectified under Section 154. Somewhat analogous is the situation here. We are thus of the considered view that the mistake was rectifiable. The Tribunal was in error on that score.

11. Accordingly, for the view taken above, the question referred is answered in the negative, that is, in favour of the assessee and against the Revenue. The assessee shall get its costs.

Rajendra Nath Mittal, J.

12. I agree.


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