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Commissioner of Income-tax, Delhi (Central) Vs. Dalmia Cement (Bharat) Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberIncome-tax Reference Nos. 139 to 142 of 1974 and 109 of 1975
Judge
Reported in[1982]137ITR681(Delhi)
ActsIncome Tax Act, 1961 - Sections 35, 154 and 214
AppellantCommissioner of Income-tax, Delhi (Central)
RespondentDalmia Cement (Bharat) Ltd.
Cases ReferredTata Iron & Steel Co. Ltd. v. N. C. Upadhaya
Excerpt:
.....but requires determination after a prolonged consideration, debate or argument. we are unable to find any merit in this objection because though at the stage of the ito this objection was not voiced by the assessed and it had been raised only in a somewhat indirect manner before the aac, it had been very clearly raised before the appellate tribunal. that apart, the numerous decisions that were rendered subsequently clearly indicate that the matter was one of the controversy and was being agitated at various levels. the matter is one of interpretation of the provisions and the existence of judicial opinions deferring from one another clearly show that the question of interpretation is one of some difficulty and complexity......18a(5) of the indian i.t. act, 1922/s. 214 of the i.t. act, 1961, consequent on the fact that the original assessments for these years were modified on appeal by the aac and the appellate tribunal. i.t.r. no. 109 of 1975 also pertains to the assessment year 1961-62 and the question raised therein relates to a further withdrawal of such interest on grounds similar to those in which interest had been with drawn at a certain earlier stage which is being challenged in i.t.r. no. 141 of 1974. it will be convenient to deal with all the references together as the point raised for decision is ultimately the same. 2. the assessed is a public limited company doing business in the manufacture of cement. for the assessment years in question its assessments were completed on certain figures of total.....
Judgment:

Ranganathan, J.

1. I.T.R. Nos. 149 to 142 of 1974 raise certain common questions of law arising out of the assessments of M/s Dalmia Cement (Bharat) Ltd., New Delhi, for the assessments years 1959-60, 1960-61, 1961-62 and 1962-63. The common question involved relate to the withdrawal of interest paid to the assessed under s. 18A(5) of the Indian I.T. Act, 1922/s. 214 of the I.T. Act, 1961, consequent on the fact that the original assessments for these years were modified on appeal by the AAC and the Appellate Tribunal. I.T.R. No. 109 of 1975 also pertains to the assessment year 1961-62 and the question raised therein relates to a further withdrawal of such interest on grounds similar to those in which interest had been with drawn at a certain earlier stage which is being challenged in I.T.R. NO. 141 of 1974. It will be convenient to deal with all the references together as the point raised for decision is ultimately the same.

2. The assessed is a public limited company doing business in the manufacture of cement. For the assessment years in question its assessments were completed on certain figures of total income. The assessed had paid certain amounts thus paid exceeded the amount of tax payable on the basis of the assessments (except for the assessment year 1959-60), the assessed was awarded interest under s. 214 at the time of the completion of assessments in respect of the amounts paid in excess up to the dates of the original assessments. Subsequently, on appeals the total income of the company was substantially reduced and the tax payable on such total income was also substantially reduced. As a consequence, considerable amounts became repayable to the assessed for all these assessment years including the assessment year 1959-60. The ITO concerned, while passing orders giving effect to the appellate orders of the AAC and the Appellate Tribunal, also granted interest to the assessed on the footing that the reduction in tax payable by the assessed determined as a result of the appeal entitled the assessed to interest on the excess amounts of advance tax paid. There is no discussion about these in the orders passed by the ITO but there is no dispute that interest was paid to the assessed by determining the excess advance tax on the basis of the revised assessments, and granting interest to the assessed in respect of such additional amounts, though only up to the dates of the original assessments.

3. Subsequently, the ITO took the view that the interest thus granted at the time of the revision of the assessment was not correct and that on a proper interpretation of the provisions of s. 18A(5) s. 214 the assessed was entitled to interest only on the amount of advance tax paid as calculated at the time of the original assessment and up to the date of such original assessment. They, thereforee, issued notices to the assessed under s. 35 of the 1922 Act/s. 154 of the 1961 Act and proceeded to rectify the earlier orders and to withdraw the extra interest that had been granted at the time of revising the assessments is consequence of the appellate orders. It is the correctness of this withdrawal, both on the merits and on the ground that it could not have been done under the provisions of s. 35/s. 154 that is in issue in these references.

4. Before proceeding further it may be useful to illustrate the position by giving the details of one of the years which are before us. For the assessment year 1959-60, the original assessment was completed on March 25, 1964, and the total income of the assessed was determined at Rs. 32,98,398 and the tax payable thereon at Rs. 17,72,659. The assessed had paid an advance tax of Rs. 16,12,756. thereforee, as per the original assessment the assessed had not paid any advance tax in excess of the tax due on the basis of the assessment and was entitled to any interest under s. 18A(5)/s. 214. The assessed preferred an appeal to the AAC which was disposed of in September, 1966. Consequent on this, the assessment was revised by the ITO on November 16, 1966. As a result of the revision the total income of the assessed got reduced to Rs. 24,64,781. The tax payable in respect of this total income was naturally less than the figure of advance tax paid by the assessed. thereforee, at the time of revising the assessment on November 16, 1966, the assessed was granted under s. 214 on the amount by which the advance tax exceeded the tax determined as payable. It appears that the department had preferred an appeal to the Tribunal from the order of the AAC which went in favor. Consequent on the orders of the Appellate Tribunal the assessment was once more revised on June 4, 1968, which brought the total income of the assessed to Rs. 24,64,081. The tax payable on this total income was Rs. 13,42,986 which was still less than the advance tax paid by the assessed. As a consequence of this action the interest figures under s. 214 were suitably revised and the excess interest paid as a result of the revision on November 16, 1966, was recovered from the assessed. Then comes the rectification order dated October 28, 1970. By this rectification order the ITO pointed out that the assessed should not have been granted any interest under s. 214 over and above what had already been paid at the time of the original assessment. According to him a sum of Rs. 1,02,711 had been paid in excess to the assessed over and above the amount properly due to him and it is this excess amount which he proceeded to recover by the order under s. 35/s. 154 passed on October 28, 1970. The same is the position in respect of the other years also and it is unnecessary to elaborate all the detailed facts about which there is no dispute.

5. The assessed appealed to the AAC but the appeals were unsuccessful. Thereafter appeals were preferred to the Appellate Tribunal. The Appellate Tribunal found that two High Court decisions, i.e., Sarangpur Cotton . v. CIT : [1957]31ITR698(Bom) and Shadilal Sugar and General Mills Ltd. v. Union of India : [1972]85ITR363(All) , had taken the view 'that the tax determined as payable on regular assessment by reference to which the interest was to be calculated was the tax determined to be payable on the basis of the original assessment unscathed by any process of appeal, revision, rectification or reopening'. In view of these decision they upheld the revision and rectification in the present cases on the merits though they also expressed an opinion, in an earlier part of the order, that interest should be paid on the basis of the amount determined in the light of appeals, revisions or other rectifications. Thus, the merits of the action taken by the ITO were upheld by the Tribunal. The Tribunal, however, went on to hold that the ITO was not justified in rectifying his original order under s. 35/s. 154. The Tribunal pointed out that the question in dispute admitted to two possible answers. It was, thereforee, a question the settlement of which required debate, discussion and analysis and was open to genuine controversy. The answer to the question proposed by the department and given effect to by the ITO was not the obvious or the only possible answer. The Tribunal, thereforee, concluded that the ITO could not have entitled his original orders under s. 154 in the manner he had done.

6. The Commissioner was aggrieved by the order of the Tribunal and requested the Tribunal to refer three question for the decision of this court so far as assessment years 1959-60, 1960-61 and 1961-62 were concerned and two question in relation to assessment year 1962-63. In the application relating to the year 1961-62, he sought for the reference of three questions. The Tribunal, however, was of opinion that only two questions of law arose out of the order for the assessment years 1959-60 to 1962-63. These questions are as follows :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the interest payable to the assessed under section 18A(5) of the Indian Income-tax Act, 1922/s. 214 of the Income-tax Act, 1961, for the assessment years 1959-60 to 1962-63 was to be determined on the basis of the tax finally determined after giving effect to the appellate orders

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified to hold the rectification effected by the Income-tax Officer under section 35/154 of the Income-tax Act, 1922/1961, was without jurisdiction and invalid ?'

7. In regard to the further rectification effected for the assessment years 1961-62, the Tribunal was of opinion that only the following question of law arose out of the order of the Tribunal :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Income-tax Officer's assumption of jurisdiction u/s. 154 of the Income-tax Act, 1961, for withdrawing the interest of Rs. 1,469 by his order dated April 24, 1971, was not valid in law ?'

8. These are the questions which have been referred to us for decision.

9. In regard to the first question as to the interpretation of s. 18A(5) of the Indian I.T. Act, 1922/s. 214 of the I.T. Act, 1961 our attention had been drawn to large number of decisions which have all been discussed in a recent decisions of this bench in the case of National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India (C.W.P. No. 878 of 1978, decided on September 17, 1980), reported in : [1981]130ITR928(Delhi) . We are, however, saved the trouble of discussing the matter in detail or expressing any opinion thereon here as Shri Wazir Singh, learned counsel for the department, stated that since the decision of the Tribunal on this point was in favor of the department he would not be pressing for a answer to this question. In view of this statement of the learned counsel, we express no opinion in regard to this question.

10. This leaves for consideration the one question which is common to all the five references and that is, as to whether the revision made by the ITO could be made under the provision of s. 35/s. 214 of the I.T. Act, which is merely intended to enable the officer to rectify mistakes apparent from the record. The scope of s. 35/154 has been considered in large number of decisions. It is now well settled that this section cannot be restored to in order to revise a previous decision taken in a matter earlier at issue, the answer to which is not quite clear or obvious but requires determination after a prolonged consideration, debate or argument. It is sufficient to refer to the statement of law contained in the case of T. S. Balaram, ITO v. Volkart Brothers : [1971]82ITR50(SC) . The headnote of this decision is sufficient for our present purposes. It reads :

'A mistake apparent on the record must be an obvious and patent mistake and not something which can be establish be a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debate point of law is not a mistake apparent from the record.'

11. The Bombay High Court in the case of Tata Iron & Steel Co. Ltd. v. N. C. Upadhaya : [1974]96ITR1(Bom) , observed :

'If after long drawn process of reasoning on a point on which there obviously are two opinions, High Court in India have taken different views, it is obvious that it s a debatable point of law. It could not, thereforee, be said to be a mistake apparent from the record or which is an obvious or a patent mistake.'

12. In the present case the question for consideration is whether the expression 'regular assessment' in s. 214 has reference to the original assessment made in the case of an assessed by the ITO or whether it will also take in any revision of such assessment made by the said ITO consequent upon appeals, references or revisions. As we have pointed out in the decision in the case of National Agricultural Co-operative Marketing Federation of India Ltd. : [1981]130ITR928(Delhi) , referred to earlier the interpretation of this phrase which is seemingly simple, is really one of great intricacy and of considerable difficulty, on which there has been a difference of opinion among the High Courts. Our judgment in that case contains a detailed discussion regarding the various judgments and the differences of opinion and it is unnecessary to elaborate on the same here. Even in the present case, the Tribunal, on its independent consideration of the provision, came to the conclusion that 'regular assessment' should mean only the assessment as modified in the light of the appellate or revisional or rectification orders but since there were two decisions which took the view that regular assessment meant only the original assessment, they followed these decision and upheld the department's action. There can be no doubt, in the light of the various decisions which have been referred to in our earlier judgment, that the question raised is one of interpretation of a particularly difficult provision in the I.T. Act. In our opinion. thereforee, the Tribunal was correct in saying that the ITO had no jurisdiction to revise his earlier orders and to withdraw the interest by resorting to the provisions of s. 35/s. 154.

13. Shri Wazir Singh, learned Counsel for the department, sought to contend to the contrary and he made three points. His first argument was that when the ITO gave notice to the assessed under s. 35/s. 154, the assessed only took up the objection that action under this section was not called for because the original assessment order had been made the subject of appeal and had merged in the appellate orders. The assessed did not raise the objection that s. 35 did not apply to the present case. We are unable to find any merit in this objection because though at the stage of the ITO this objection was not voiced by the assessed and it had been raised only in a somewhat indirect manner before the AAC, it had been very clearly raised before the Appellate Tribunal. The Appellate Tribunal has also considered the objection and dealt with the same. It is also an objection to the exercise of jurisdiction under s. 35 and the Tribunal having permitted the assessed to raise the same, the omission to raise it earlier cannot stand in the way of the assessed urging the contention before us. We are concerned only with the order of the Tribunal and the reference made to us, and thereforee, it is also for the department's representative to contended that this question is not open for consideration.

14. The second point urged by Shri Wazir Singh was that though it is true that there are a number of decisions, some one way and some the other at the present day, the position at the time when the rectification were effected by the ITO was quite clear. According to him, at the time the only decision holding the field was that of the Bombay High Court in Sarangpur Cotton Manufacturing Co.'s case [1957] 31 ITR 698. There was no other decision to the contrary and Shri Wazir Singh contends that there was thereforee no doubt that the only possible interpretation of s. 18A(5) /s. 214 was the one placed upon by the ITO. This argument again is misconceived. We have pointed out that the first and the second revisions of the assessment for 1959-60 were effected in 1966 and 1968. By this time the decisions of the Calcutta High Court in Kooka Sidhwa and Co.'s case [1964] 54 ITR 54 and the Circuit Bench of the Punjab High Court in the case of Gopi Lal p1967] 65 ITR 477 had already bee rendered. That apart, the numerous decisions that were rendered subsequently clearly indicate that the matter was one of the controversy and was being agitated at various levels. There is no doubt that the matters came up to the stage of the High Court only much later, but it is not correct to say that there was no controversy of opinion in the matter when the assessments were revised in 1966 and subsequently. The matter is one of interpretation of the provisions and the existence of judicial opinions deferring from one another clearly show that the question of interpretation is one of some difficulty and complexity. We, thereforee, agree the Tribunal that this was not a matter which could have been set right by resort to 35/s. 154.

15. The third point made by Shri Wazir Singh was that when the orders initially revising the assessments were made by the ITO, he awarded the assessed the interest only up to the date of the original assessment. He submitted that if the view of the ITO was that the expression 'date of regular assessment' meant the date of the original assessment, he could not have consistently believed that the assessed was to be awarded interest on the excess of tax as calculated on the basis of the revised assessment. This shows, according to him, that the orders passed at the time of revising the assessment awarding interest to the assessed on the basis of the revised figures of assessment had been made as a result of oversight or inadvertence. This argument cannot also be accepted. As pointed out by the learned counsel for the respondent an order of refund is not easily granted. Before refund can be granted to an assessed, the ITO has to satisfy himself personally that the refund is do due and, perhaps administrative procedure also exists, under which where the amounts involved are substantial as in the present case, even the concurrence of an IAC may be necessary. The refunds could not have thereforee been granted without deliberation or application of mind. That apart, in this case the revisions have taken place not once but on different occasions and in respect of different assessment years. All these could not have proceeded on the basis of a mistake. It is clear that these revision were effected on the basis of conclusion that 'regular assessment' and the 'tax determined on the basis of the regular assessment' included the effect of any revisions or appeals. The act of the ITO in granting interest only up to the date of original assessment is also not inconsistent with the above opinion. As pointed out by the learned counsel for the respondent a view can possibly be taken that though the expression 'tax on the basis of regular assessment' might mean the tax due after giving effects to appellate or revisional orders, such revisions or rectifications could be easily considered as relating back to the original assessment with the result that though the figure of tax payable might be the reduced tax, the 'date of original assessment. referred to in the section would still be the date of original assessment. The learned counsel referred to the decisions of the Madras High Court in Rayon Traders Private Ltd. v. ITO [1980] 126 ITR 315 and CIT v. Rajalakshmi Mills Ltd. : [1980]125ITR141(Mad) and a decision of the Allahabad High Court in CIT v. Raza Buland Sugar Company Ltd. : [1980]123ITR185(All) , in support of this proposition. It is not necessary to consider these decisions in detail or to give any concluded opinion in regard to this contention. The short point for consideration is whether it can be said that in passing the refund orders while revising the assessments, the ITO committed a mistake in the sense explained earlier. We are of the opinion that it is difficult to say so. The ITO applied, while making the revision and granting the refunds, the law as interpreted by him at that time. The point at issue being one of doubt and debate, he cannot change that view and proceed against the assessed, by invoking the provisions of s. 35/s. 154, to give effect to a new interpretation which in his opinion now is the correct one.

16. Before concluding we may mention that Shri Harihar Lal raised an objection that the first question cannot be considered to arise out of the order of the Tribunal at the instance of the applicant in view of the decision of the Supreme Court in the case of CIT v. V. Damodaran : [1980]121ITR572(SC) , but as already mentioned the applicant has not pressed for an answer to this question and it is not, thereforee, necessary to consider for the maintainability of this objection by the learned counsel for the respondent.

17. In the result in I.T.R. Nos. 139 to 142 of 1974, we decline to answer the first question and answer the second question in favor of the assessed. In I.T.R. NO. 109 of 1975, the question referred is answered in the affirmative and in favor of the assessed. As the assessed has succeeded, it will be entitled to the costs of the reference. Counsel's fee Rs. 350 (one set).


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