2015 (8) TMI 513 - HC - Income Tax

Rectification of mistake - Whether claim for deduction under Section 35D allowed in respect of expenses incurred in connection with private placement of equity shares is amenable to rectification by the Assessing Officer under Section 154? - Whether Section 154(1A) of the Act is no bar to rectification by the Assessing Officer under Section 154 of the Act? - Held that - This very issue was agitated by the revenue at the hearing of the appeal. In fact, the revenue s submission that the assessee is not entitled to the benefit of Section 35D(2)(c)(iv) of the Act on the ground that the same is available only where expenditure is incurred in connection with public issue and this is a private placement is recorded in paragraph No.3 of the order dated 15 June 2012. The above submission was considered in paragraph No.7 of the above order holding that it was a matter of opinion depending upon the exact nature of the issue. Moreover the issue was also debatable. Therefore outside the scope of rectification. A review is an exception to the general rule that once a Court passes an order it becomes functus officio. The review is generally permissible when new and important evidence not available when the matter was first heard or in case there is some glaring error/mistake apparent on the face of the record. In this case, it is neither. In fact almost one hour was taken in an attempt to show us that it was an error apparent on record. In fact, the contentions taken before us in support of the review as pointed out above are in direct conflict/opposed to the statement of facts mentioned by the Commissioner of Income Tax in the appeal memo filed against the order dated 21 May 2010 of the Tribunal which led to the order dated 15 June 2012 of this Court. We find that the review application seems to have been filed in a most casual manner without having examined the case of the revenue in its memo of appeal which incidentally is the case they came to the Court in respect of the second issue. The approach of the revenue in these review petitions is not understood. First, the appeal was originally argued by some other advocate and for the review petition the revenue decided to engage Mr.Chhotaray. Thereafter when the review petition was being argued for undue time, we pointed out that this is a review and rearguing the appeal is not permissible. The counsel insisted on making submissions for further 45 minutes in support of the review, oblivious of the large number of appeals filed by revenue themselves, involving far more important questions, awaiting disposal. - Decided against revenue.

Summary

Issues:
1. Whether the issue of deduction under Section 35D of the Income Tax Act, 1961, in connection with private placement of equity shares is amenable to rectification by the Assessing Officer under Section 154.
2. Whether the review application filed by the revenue is justified based on the grounds presented.

Analysis:

Issue 1:
The primary issue before the Bombay High Court was whether the Commissioner of Income Tax (Appeals) and the Tribunal were correct in holding that the claim for deduction under Section 35D of the Act, related to expenses incurred in connection with private placement of equity shares, could be rectified by the Assessing Officer under Section 154. The Court noted that the nature of the issue was debatable and a matter of opinion, depending on the specific circumstances. The Court found that the issue was extensively discussed during the appeal, with the revenue contending that the deduction was not applicable for private placements. Ultimately, the Court held that the issue was outside the scope of rectification under Section 154, as it was a matter of opinion and debatable.

Issue 2:
Regarding the second issue, the review application filed by the revenue was found to be contradictory to the appeal memo submitted earlier. The Court highlighted that the grounds raised in the review petition were in direct conflict with the facts presented in the appeal memo. The Court emphasized that a review should only be considered in exceptional circumstances, such as the discovery of new evidence or a glaring error on record, which was not the case here. The Court dismissed the review application, stating that if the revenue disagreed with the judgment, the appropriate course of action would be to file an appeal rather than a review. The Court also expressed dissatisfaction with the revenue's approach in the review petitions and imposed a cost of Rs. 5,000 on the Commissioner of Income Tax for filing the review petitions in a casual manner without proper examination of the case.

In conclusion, the Bombay High Court dismissed both review petitions, emphasizing the importance of filing review petitions only in exceptional circumstances and imposing a cost on the Commissioner of Income Tax to ensure a more diligent approach in future filings.