Zen Tobacco Pvt.Ltd., Ahmedabad vs Assessee

ी अ नल चतुव द , लेखा सद य एवं ी कुल भारत, या यक सद य के सम । BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER And SHRI KUL BHARAT, JUDICIAL MEMBER

आयकर अपील सं./I.T.A. No.2100/Ahd/2011 ( नधा रण वष / Assessment Year : 2007-08) Zen Tobacco Pvt.Ltd. बनाम/ The Asst.Commissioner of th 8 Floor Vs. Income Tax The Chamber Circle-8 Opp.New Gurudwar Ahmedabad S.G.Highway Ahmedabad-380 054 थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AABCT 9591 K (अपीलाथ% /Appellant) .. (&'यथ% / Respondent) अपीलाथ% ओर से /Appellant by : Ms.Urvashi Shodhan, AR &'यथ% क) ओर से/Respondent by : Shri Roop Chand, Sr.DR

ु वाई क) तार ख / सन Date of Hearing 24/06/2015 घोषणा क) तार ख /Date of Pronounce ment 17/07/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

This appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-XIV, Ahmedabad ('CIT(A)' in short) dated 24/06/2011 pertaining to Assessment Year (AY) 2007-08. The Assessee has raised the following grounds of appeal:-

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(1) The learned Commissioner of Income Tax (Appeals) XIV, Ahmedabad has erred both in law and on facts of the case in framing appellate order u/s.250 of the I.T.Act for A.Y. 2007-2008 on 24th June, 2011.

(2) The Learned CIT(A)-XIV, Ahmedabad has erred in upholding action of the Assessing Officer that of rejecting rectification application u/s.154 of the I.T.Act.

(3) Your appellant craves leave to add, alter, amend, omit all or any of the grounds of appeal before the appeal is finally heard and decided.

2. Briefly stated facts are that the assessee had filed its return of income declaring total returned income of Rs.71,91,960/- and the same was processed u/s.143(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") on 01/09/2008. Subsequently, the assessee filed an application u/s.154 of the Act seeking for rectification of mistake along with the revised statement of income by revising the income from Rs.71,91,960/- to Rs.66,91,960/- and claimed a refund of Rs.1,88,580/-. The AO rejected the application observing that the assessee should have filed a revised return rather than taking recourse to section 154, which is not permissible under the Act. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions dismissed the appeal. Now, the assessee is further in appeal before us.

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3. The only effective ground in this appeal is against upholding the action of the AO and that of rejecting the application u/s.154 of the Act.

4. The ld.counsel for the assessee submitted that the authorities below have failed to appreciate the fact that the appellant is a private company carrying business of manufacturing of tobacco. For the A.Y. 2007-08 return of income was filed declaring total income of Rs.71,91,960/-. Subsequently, on verification of assessee's record, it was noticed that the provision of Deferred Tax Assets of Rs.2,50,000/- which ought to have been deducted from total income was not deducted but added back to amount of profit. Thus, taxable income was overstated by Rs.5,00,000/-. The ld.counsel for the assessee submitted that the authorities below have dismissed the appeal simply on the basis that the assessee ought to have filed a revised return. The ld.counsel for the assessee submitted that even if there is a mistake on the part of the assessee in the return of income, that mistake can be rectified by invoking the provisions of section 154 of the Act. The ld.counsel for the assessee placed reliance on the judgement of the Hon'ble High Court of Delhi rendered in the case of Pawan Kumar Aggarwal vs. CIT in ITA No.199/2014 dated 06/05/2014 and the decision of the Coordinate Bench (ITAT Kolkata Bench 'B') rendered in the case of DCIT vs. Justice Dilip Kumar Seth reported at (2006) 98 ITD 241 (Kol.) ITA No.2100/Ahd/2011 Zen Tobacco Pvt.Ltd. vs. ACIT Asst.Year - 2007-08 -4-

4.1. On the contrary, ld.Sr.DR submitted that there is no illegality in the orders of the authorities below. He submitted that the assessee has not pointed out any mistake apparent from the order of the AO. He placed reliance on the judgement of Hon'ble High Court of Kerala rendered in the case of M.Far Hotels Ltd. vs. CIT reported at (2015) 55 taxmann.com 103(Kerala).

5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has affirmed the order of the AO by observing as under:-

"3.3 Decision:

I have carefully perused the assessment order and the written submission filed by the Id.AR of the appellant. The submission of the appellant that it had added the provision of deferred tax of Rs.2,50,000/- to the net profit in deriving at the amount of profit after tax in the P & L Account as per the Companies Act instead of subtracting the same from P & L Account, is factually correct. The appellant in the statement of income filed with the return of income has himself made this error and did not file the return of income u/s. 139(5) of the I. T. Act, 1961. The Assessing Officer has rejected the application u/s. 154 on the ground that there was no mistake apparent from records and the only way to correct the mistake now was to file a revised return. In my opinion, the Assessing Officer was justified in rejecting the application u/s. 154 of the I. T. Act filed by the assessee as there was no mistake on the record. The appellant himself has added the provision for taxation and to correct that mistake, he has to file a revised return along with supporting evidence.

The appellant has also mentioned certain judicial decisions in support of his claim. I have carefully perused the decisions, but the facts of ITA No.2100/Ahd/2011 Zen Tobacco Pvt.Ltd. vs. ACIT Asst.Year - 2007-08 -5-

those decisions are distinguishable. In one case (225 .ITR 348), the issue involved was claim of investment allowance whereas in other case, it was regarding the claim of 80IA and 80HHD. The other decision mentioned by him [280 ITR (AT) 248] is also not applicable as this mistake that has been committed by the appellant is not in the statement of income. It has been committed by him in the audited accounts which has been certified and approved by the Directors. Had the mistake been there in the statement of income, it could have been corrected by the Assessing Officer as he had all the powers to correct the same, but he cannot go back to the audited accounts and correct the mistake committed at that level. The appeal is accordingly dismissed."

5.1. We have given our thoughtful consideration to the rival contentions raised at Bar by the respective representatives of the parties. The issue to be decided is that whether the mistake on the part of the AO in the return so filed can be rectified by invoking the provisions of section 154 of the Act. At this stage, it would be appropriate to examine the relevant provisions relating to filing of the return and process of the same.

5.2. As per Section 139(1) of the Act, return is required to be filed by every person, (a) being a company (or a firm) or; (b) being a person other than a company (or a firm), if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax. Shall, on or before the due date, furnish a return of his income or the income of such other person during the ITA No.2100/Ahd/2011 Zen Tobacco Pvt.Ltd. vs. ACIT Asst.Year - 2007-08 -6-

previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.

5.3. As per Section 139(5) of Act, If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. The return so filed is required to be processed as per section 143(1) which reads as under:-

"Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:--

(a) the total income or loss shall be computed after making the following adjustments, namely:--

(i) any arithmetical error in the return; or

(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return."

5.4. As per section 143(1)(b), the tax and interest, if any, shall be computed on the basis of the total income computed under clause (a) and the income under clause (a) is required to be computed after making the adjustment, namely:- (i) any arithmetical error in the return; or (ii)an incorrect claim, if such incorrect claim is apparent from any information in the return.

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5.5. From the provisions, it is evident that it is not the case that Revenue Authorities have to accept whatever stated in the return and compute the taxable income mechanically. As per provisions of section 143(1) of the Act, the concerned Revenue Authority has to examine whether any claim as made by the assessee is correct or not. In our considered view, this includes under statement and overstatement of the income. If the Revenue Authority failed to take note of any incorrect claim with regard to total income of the assessee, such failure would necessarily mean mistake apparent from the record. The Revenue has relied upon the judgement of the Hon'ble High Court of Kerala rendered in the case of M.Far Hotels Ltd. vs. CIT (supra), the facts of the present case are different from the facts of the case before the Hon'ble High Court of Kerala. The ld.counsel for the assessee has relied upon the judgement of Hon'ble High Court of Delhi rendered in the case of Pawan Kumar Aggarwal vs. CIT(supra), wherein the Hon'ble High Court has held as under:-

"6 Section 154 to the extent it is relevant is extracted below: -

"Rectification of mistake,

154. [(I) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may, -

(a) amend any order passed by it under the provisions of this Act;

[(b) amend any intimation or deemed intimation under subsection (I) of section 143.]] [(IA) Where any matter has been considered and decided in any proceeding by -way of appeal or revision relating to an order referred to ITA No.2100/Ahd/2011 Zen Tobacco Pvt.Ltd. vs. ACIT Asst.Year - 2007-08 -8-

in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.]

(2) Subject to the other provisions of this section, the authority concerned--

(a) may make an amendment under sub-section (1) of its own motion, and

(b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee, and where the authority concerned is the [***] [Commissioner (Appeals)], by the [Assessing] Officer also. "

It is apparent from the bare reading of the above provision that the power of rectification extends to amendment of an intimation or deemed intimation under Section 143. This power enures even after 'the matter' has been considered and decided in any proceeding by way of appeal or revision. Necessarily, this power extends even at the stage of the appeal and the further appeal to the ITAT. Even after such decision, it is open to the AO to amend the intimation under Section 143 (1) if the circumstances so warrant. We are wholly in agreement with the decision in Sam Global 's matter (supra) that the technicalities in the given circumstances of the case ought not to obscure the justice. The justice demands, in the peculiar facts of the case, that there is no impediment to relief. That appears to have been overlooked in entirety by the lower authorities and the Tribunal had failed to notice that the controlling expression in Section 154 is not "an error" which is somewhat coloured by the exercise of power by the authorities. Instead, the controlling expression is "any mistake" which has wider connotation and includes mistakes committed by the parties also."

5.6. The ld.counsel for the assessee has also placed reliance on the decision of the Coordinate Bench (ITAT Kolkat Bench 'B') rendered in the case of Dy.CIT vs. Justic Dilip Kumar Seth reported at (2006) 98 ITD ITA No.2100/Ahd/2011 Zen Tobacco Pvt.Ltd. vs. ACIT Asst.Year - 2007-08 -9-

241 (Kol.), wherein the Hon'ble Coordinate Bench following the judgement of the Hon'ble Calcutta High Court in the case of CIT vs. Premier Polymers (P.) Ltd. reported at (1992) 107 CTR 310 and also the judgement of Hon'ble Supreme Court in the case of CIT vs. D.P.Sandhu Bros., Chembur (P.Ltd. reported at (2005) 273 ITR 1::142 Taxman 713 (SC), has decided this issue by observing as under:-

"19. In view of the above facts and circumstances and considering the decision by the Hon'ble Supreme Court and Calcutta High Court, it is apparently clear that the above amount received by the assessee prior to his elevation could not be taxed and, therefore, the assessee has rightly moved a petition under section 154 to rectify the intimation sent by Assessing Officer, and the Assessing Officer was well-competent to rectify such intimation in view of the provision as laid down in sections 143(1)(ii) and 154(2)(b) of the Act and in view of the decision by the Hon'ble Calcutta High Court in case of Bhaskar Mitter (supra) and in ease of Premier Polymers (P.) Ltd. (supra). We, therefore, in the light of above discussion, are of the considered opinion that the Id. CIT(A) while deciding the above two issues has passed a well reasoned and speaking order which does not call for any interference from our side. We, therefore, uphold the same and reject the grounds raised by the revenue."

20. In the result, the appeal filed by the revenue is dismissed."

5.7. Therefore, respectfully following the judgement of the Hon'ble Delhi High Court and the decision of the Coordinate Bench, we hereby set aside the order of the ld.CIT(A) and direct the AO to allow the application of the assessee made u/s.154 of the Act and grant refund amount of Rs.1,88,580/-. Thus, this ground of assessee's appeal is allowed.

ITA No.2100/Ahd/2011 Zen Tobacco Pvt.Ltd. vs. ACIT Asst.Year - 2007-08

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6. In the result, the appeal of the Assessee is allowed.

Order pronounced in the Court on Friday, the 17th day of July, 2015 at Ahmedabad.

Sd/- Sd/- (अ नल चतव ु द ) (कुल भारत) लेखा सद य या यक सद य ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 17/ 07 /2015 ट .सी.नायर, व. न.स./T.C. NAIR, Sr. PS

आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :

1. अपीलाथ% / The Appellant

2. &'यथ% / The Respondent.

3. संबं4धत आयकर आयु6त / Concerned CIT

4. आयकर आय6 ु त(अपील) / The CIT(A)-XIV, Ahmedabad

5. 7वभागीय & त न4ध, आयकर अपील य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड; फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स'या7पत & त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 8.7.15 (dictation-pad 15 pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ...9.7.15

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......17.7.15

7. Date on which the file goes to the Bench Clerk.....................17.7.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................