2019 (12) TMI 1677 - AT - Income Tax

Rectification u/s 154 - period of limitation - time limit for rectification of mistake under section 154(7) - dividend distribution tax paid u/s 115O for computing book profit u/s 115JB is not correct - HELD THAT - The first rectification order was passed by the AO on 13.03.2012 at the instance of assessee. Admittedly no issue of book profit under section 115JB was the subject matter of the rectification order passed on 13.03.2012. AO issued show cause notice for rectifying the order on the issue of book profit only for the second proposed rectification. From the above discussions, it is clear that the legal position is that the time limit for rectification of mistake under section 154(7) is to be considered from the date of the original order or in subsequent rectification order only if the said rectification order dealing with the same which is sought to be rectified. Thus having noted that the first rectification order dealt with entirely different, it is clear that the time limit for passing the impugned order indeed expired on expiry of four years from the end of the financial year, in which, the original order sought to be rectified was passed i.e. on 31.3.2009. As relying on Ashu Engineers Plastic Pvt Ltd 2011 (4) TMI 1519 - ITAT MUMBAI we are of the view that the rectification order passed u/s 154 is clearly beyond the prescribed limitation of period provided u/s 154(7). Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Violation of principles of natural justice by not providing adequate opportunity of being heard.
2. Original order not suffering from any mistake apparent on record.
3. Inclusion of surcharge and cess in the determination of tax liability on book profits under section 115JB.
4. Validity of the rectification order being time-barred.

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The appellant argued that the rectification order under section 154 was passed without providing an adequate opportunity of being heard, thereby violating the principles of natural justice. This contention was raised as the first ground of appeal against the order of the CIT(A).

2. Original Order Not Suffering from Any Mistake Apparent on Record:
The appellant contended that the original order passed by the Assessing Officer did not suffer from any mistake apparent on record. This was the second ground of appeal, emphasizing that the rectification was unnecessary and uncalled for.

3. Inclusion of Surcharge and Cess in Book Profit Calculation:
The appellant challenged the confirmation of tax liability on book profits under section 115JB by including surcharge and cess. This was argued as an error in law and facts, forming the third ground of appeal. The appellant claimed that this inclusion was incorrect while comparing it with tax on normal income.

4. Validity of Rectification Order Being Time-Barred:
The appellant raised an additional ground of appeal, asserting that the rectification order was time-barred. The appellant argued that the rectification order dated 08-07-2014 was passed beyond the four-year limitation period prescribed under section 154(7) of the Income Tax Act. The original order under section 143(1) was passed on 26-11-2009, and the rectification order should have been passed within four years from the end of the financial year in which the original order was passed.

Detailed Judgment:

Admission of Additional Ground:
The Tribunal admitted the additional ground of appeal, recognizing it as purely legal in nature and not requiring new facts for adjudication. The Tribunal referenced the decisions of the Hon’ble Supreme Court in National Thermal Power Corporation Vs CIT and Jute Corporation of India vs CIT to support this admission.

Time-Barred Rectification Order:
The Tribunal analyzed the appellant's argument regarding the rectification order being time-barred. The Tribunal noted that the rectification order dated 08-07-2014 was indeed passed after four years from the end of the financial year in which the original order under section 143(1) was passed. The Tribunal emphasized that the subject matter of the first rectification order dated 13-03-2012 was different from the second rectification order, which dealt with the computation of book profit under section 115JB.

Legal Precedents:
The Tribunal referred to multiple legal precedents, including:
- Ashu Engineers & Plastics Pvt Ltd ITA No.3453/Mum/2010
- ITO vs BFIL Finance Ltd ITA No.3828/Mum/2015
- DCIT vs Godrej Industries ITA No.4339/Mum/2015
- CIT vs Sekseria Cotton Mills Ltd 124 ITR 570 (Bom)
- CIT vs Shriram Engineering Construction Co Ltd 330 ITR 568 (Mad)

These cases reinforced the Tribunal's view that the time limit for rectification should be reckoned from the date of the original order if the subject matter of the rectification is different.

Conclusion:
The Tribunal concluded that the rectification order dated 08-07-2014 was beyond the prescribed limitation period under section 154(7) and, therefore, invalid. Consequently, the Tribunal allowed the additional ground of appeal raised by the appellant and declared the rectification order invalid. Given this conclusion, the Tribunal deemed the adjudication of other grounds of appeal on merit as academic and unnecessary.

Final Order:
The appeal of the assessee was allowed, and the rectification order was quashed as time-barred. The order was pronounced in the open court on 13-12-2019.