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Addl. Commissioner of Income-tax Vs. Chemical Limes - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Reference No. 36 of 1974
Judge
Reported in[1984]149ITR325(Raj); 1984()WLN388
ActsIncome Tax Act, 1961 - Sections 139(8), 147, 148, 154 and 263
AppellantAddl. Commissioner of Income-tax
RespondentChemical Limes
Appellant Advocate J.P. Joshi, Adv.
Respondent Advocate S.K. Kakkar and; C.R. Mehta, Advs.
Excerpt:
.....and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. in these circumstances, the learned aac as well as thelearned appellate tribunal were perfectly justified in setting aside the order of the ito (adm......income-tax appellate tribunal against the order of the aac but that appeal was dismissed by the learned tribunal by its order dated october 10, 1973. the department then moved an application under section 256(1) of the act for referring the aforesaid question to this court and the learned members of thetribunal being of the opinion that a question of law did arise out of their order dated october 10, 1973, referred the aforesaid question to this court. 5. we have heard the learned counsel for the parties and have gone through the material on record. 6. the learned counsel for the assessee has also placed on record the copies of the application under section 154 of the act dated. march 18, 1970, the order of the ito, k-ward, jodhpur, dated october 3, 1970, the application for.....
Judgment:

Lodha, J.

1. The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has referred the following question for answer to this court:

' Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in upholding the order of the learned AAC, cancelling the learned ITO's order dated May 3, 1972, tinder Section 154 of the Income-tax Act, 1961 '

2. The facts giving rise to this reference briefly stated are that while making the assessment of the assessee, M/s. Chemical Limes, Jodhpur, for the assessment year 1964-65, the ITO charged interest under Section 139 of the I.T. Act, 1961 (hereinaftercalled 'the Act'). The assessee thereupon filed an application under Section 154 of the Act for rectifying that order by waiving the interest under Section 139(8) of the Act. That application was, however, rejected on October 3, 1970. The assessee again moved an application under Section 154 of the Act alleging that the earlier application under Section 154 of the Act had wrongly been rejected without considering the grounds mentioned in it and without hearing the applicant and praying that the original order of assessment still suffered from an error apparent on the record and, therefore, it deserves to be rectified. This application was accepted by the ITO by his order dated December 10, 1970, and the interest charged under Section 139 was cancelled.

3. The ITO (Adm.), Jodhpur, then issued a show-cause notice under Section 154 of the Act showing his intention to cancel the order passed by the ITO, K-Ward, Jodhpur, on December 10, 1970. The assessee filed a reply supporting the order dated December 10, 1970, but the ITO (Adm.), Jodhpur, was not satisfied with the reply and held that the order passed on December 10, 1970, was erroneous and without jurisdiction. He, accordingly, restored the original order charging interest under Section 139 of the Act by his order dated May 3, 1972.

4. Aggrieved by this order, the assessee filed an appeal before the learned AAC, which was accepted on September 20, 1972. The learned AAC was of the opinion that the order passed by the ITO on December 10, 1970, could not be said to be without jurisdiction and, therefore, the ITO (Adm.), could not have exercised powers under Section 154 of the Act in setting aside that order. He, accordingly, set aside the order of the ITO (Adm.), dated May 3, 1972. This time the ITO (Adm.) went up in appeal before the Income-tax Appellate Tribunal against the order of the AAC but that appeal was dismissed by the learned Tribunal by its order dated October 10, 1973. The Department then moved an application under Section 256(1) of the Act for referring the aforesaid question to this court and the learned members of theTribunal being of the opinion that a question of law did arise out of their order dated October 10, 1973, referred the aforesaid question to this court.

5. We have heard the learned counsel for the parties and have gone through the material on record.

6. The learned counsel for the assessee has also placed on record the copies of the application under Section 154 of the Act dated. March 18, 1970, the order of the ITO, K-Ward, Jodhpur, dated October 3, 1970, the application for rectification dated December 3, 1970, the letter of the ITO dated February 16, 1972, the reply of the assessee dated March 15, 1972, and the letter of the ITO dated March 28, 1972, as the same had not been filed along with the reference.

7. The learned counsel for the Department urged that under Section 139(8) of the Act, the ITO had a discretion to waive or not to waive the interest chargeable under that section and when the ITO had charged interest while making the assessment, the same could not have been waived by him by exercising powers under Section 154 and, in any case, when the earlier application under Section 154 of the Act had already been rejected on October 3, 1970, there was no question of a further application under Section 154 of the Act being entertained for rectifying the assessment order. In these circumstances, the order passed by the ITO on December 10, 1970, was clearly without jurisdiction and, therefore, the ITO (Adm.) could rectify that order and cancel the same under Section 154 of the Act. In these circumstances, the learned AAC and the learned Tribunal were wrong in holding that the ITO (Adm.) could not have exercised jurisdiction under Section 154 of the Act. He, therefore, prayed that the question referred to this court should be answered in the negative. On the other hand, the learned counsel for the assessee supported the orders of the learned AAC and the Appellate Tribunal.

8. We have, given our careful consideration to the rival contentions and we are clearly of the opinion that the question should be answered in the affirmative. Section 139(8) of the Act empowers the ITO to waive interest chargeable under that section. While making the assessment and charging the interest, if the ITO had not considered the question of waiver of the interest under Section 139(8) of the Act, an application for rectifying that order by considering the question of waiver cannot be said to be incompetent. That application, however, appears to have been summarily rejected by the ITO by his order dated October 3, 1970, without considering the grounds raised in the application under Section 154 of the Act and without giving any opportunity of hearing to the assessee as is clear from the order passed bythe ITO, K-Ward, Jodhpur, on October 3, 1970. That being so, the assessee could again file an application tinder Section 154 of the Act for rectifying the order passed on October 3, 1970, and also praying for the rectification of the original assessment order. The ITO, K-Ward, Jodhpur, in these circumstances, considered the application and was inclined to accept the contention of the assessee that the earlier application had wrongly been rejected on October 3, 1970. He was further of the opinion that the interest charged under Section 139 deserves to be waived. He has observed 'The return was due to be filed on March 31, 1964, but return has been filed on November 12, 1965. The assessee was allowed time for filing the return up to October 31, 1965, i.e., the delay being less than a month, interest under Section 139 was unwarranted and, therefore, the same is cancelled under Section 154. '

9. When the ITO thus exercised his jurisdiction under Section 154 of the Act and rectified the order of assessment, his successor ITO could not have sat in appeal over that order and cancelled the same by exercising powers again under Section 154 of the Act. Section 154 of the Act provides for rectification of a mistake apparent on the record. Where the ITO, K-Ward, Jodhpur, had found that interest was liable to be waived but the question of waiver had not been considered in the assessment order, and, therefore, rectified the earlier order of assessment, his order could not be said to be suffering from any error apparent on the record and, therefore, the ITO (Adm.) could not have rectified that order by saying that the earlier order passed by the ITO, K-Ward, was erroneous or without jurisdiction. It is well settled 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 on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. Reference in this connection may be made to a decision of the Hon'ble Supreme Court in T. S. Balaram, ITO v. Volkart Brothers : [1971]82ITR50(SC) . The ITO has certainly a discretion to waive the interest under Section 139(8) of the Act and when he finds that interest had wrongly been charged under Section 139, he could waive that interest by exercising his powers under Section 154 of the Act and rectifying the earlier order. In any case, the question whether he could have exercised his powers under Section 154 of the Act in these circumstances or not was a debatable question and if the ITO took the view that he could exercise powers under Section 154, it was not open to the ITO (Adm.) to say later that the ITO, K-Ward, was wrong in taking that view because he was not exercising any appellate or revisional powers against the order of his predecessor-in-office. Such a power could have been exercised only by the Commissioner under Section 147, 148 or Section 263 of the Act. In these circumstances, the learned AAC as well as thelearned Appellate Tribunal were perfectly justified in setting aside the order of the ITO (Adm.), Jodhpur, dated May 3, 1972.

10. Our answer to the question referred to us, therefore, is that on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in upholding the order of the learned AAC cancelling the learned ITO's order dated May 3, 1972, under Section 154 of the I.T. Act, 1961. Let this answer be returned to the Tribunal.


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