2004 (1) TMI 66 - HC - Income Tax

Mistake apparent on record - Rectification proceedings - Neither from the subsequent order passed by the AO or the Commissioner of Income-tax or the Tribunal was any other record shown to be available before the Assessing Officer for exercising his power u/s 154 which shows any other material available before such officer which disclosed further materials enabling him to form the opinion that the said contributions were paid after the due dates - In such circumstances on the said allegation the notice u/s 154 could not have been issued and the proceeding following such notice is apparently bad

Issues Involved:
1. Issuance of notice under section 154 of the Income-tax Act, 1961.
2. Determination of due dates for provident fund and employees' State insurance contributions.
3. Applicability of section 43B of the Income-tax Act.
4. Retrospective application of the amendment to section 43B by the Finance Act, 2003.
5. Maintainability of the appeal under section 260A of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Issuance of Notice under Section 154 of the Income-tax Act:
The appellant contended that the notice issued under section 154 for rectifying the assessment order was invalid as there was no apparent mistake on the face of the records. The records available, including the audit report and statement of particulars, did not indicate any payments made after the due dates. The court agreed, stating that the materials did not show any apparent mistake justifying the issuance of the notice under section 154. The court referenced judgments supporting this view, such as T.S. Balaram, ITO v. Valkart Bros. and CIT v. Hero Cycles Pvt. Ltd., which emphasize that a mistake must be obvious and patent to warrant rectification under section 154.

2. Determination of Due Dates for Provident Fund and Employees' State Insurance Contributions:
The appellant argued that the due dates should be considered as per section 139 of the Act, which prescribes the last date for filing the income-tax return. The court noted that the due dates must be ascertained to determine whether the contributions were paid on time. The documents available did not disclose the due dates, making it impossible to form an opinion that the contributions were paid late. The court concluded that without clear evidence of the due dates, the notice under section 154 was unjustified.

3. Applicability of Section 43B of the Income-tax Act:
The appellant contended that section 43B should not apply if the statutory liability was not payable within the accounting year. The court referenced judgments like Srikakollu Subba Rao and Co. v. Union of India and CIT v. Edcons (India) Pvt. Ltd., which support the view that section 43B applies only if the liability is statutorily payable within the accounting year. The court agreed with the appellant's contention that the payments made in May and June 1996 could not be treated as late for the assessment year 1996-97.

4. Retrospective Application of the Amendment to Section 43B by the Finance Act, 2003:
The appellant argued that the amendment to section 43B should have retrospective effect to avoid inconsistency. The court considered judgments like Allied Motors (P.) Ltd. v. CIT, where the Supreme Court held that the first proviso under section 43B should be effective from an earlier date to avoid serious consequences. The court agreed that the amendment should be applied retrospectively to ensure that deductions are allowed for statutory dues paid after the close of the assessment year but within the due time.

5. Maintainability of the Appeal under Section 260A of the Income-tax Act:
The Revenue raised the issue of maintainability, arguing that the appellant had already preferred an application under section 254(2) for rectification. The court did not find this contention sufficient to dismiss the appeal, focusing instead on the substantive issues related to the issuance of the notice under section 154 and the subsequent proceedings.

Conclusion:
The court concluded that the notice under section 154 and the subsequent rectification proceedings were invalid as there was no apparent mistake on the face of the records. The due dates for the contributions were not clearly established from the available documents, and the view taken by the Assessing Officer in the original proceeding was also possible. The court quashed the impugned order and the proceeding under section 154, allowing the appeal.

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