2016 (6) TMI 387 - HC - Income Tax

Addition to commission receipts assessable in the hands of the appellant on a substantive basis - rectification of mistake to delete protective assessment - application filed by father-assessee M/s. Siemens Ltd. before the Settlement Commission admitting the unsubstantiated commission payments as its own income and the Settlement Commission had accepted such disclosure - Held that - In a Circular issued by the Central Board of Direct Taxes, bearing No.71, dated 20.12.1971, the Board has indicated that once the same income is assessed as a protective measure in the hands of more than one assessee, the protective assessment needs to be cancelled after the relevant assessments have become final and conclusive. The Circular also indicates that the only method of doing this is by invoking Section 154, irrespective of the time prescription contained in Sub-Section (7) of Section 154. We do not think that the above Circular can be made use of by persons whose transactions prima facie do not appear to be genuine. The cases on hand will not be covered by the Circular for one more reason namely that the assessee do not stop with the mere receipt of money. He withdrew it and claimed to have paid to different third parties, but those payments were disallowed. Therefore, if his submission that he had paid money to third parties is true, the money received by him could be only his income. Therefore, the appellant cannot contend that the order of the Settlement Commission clinches the entire issue. - Decided against the appellant/father-assessee. Maintainability of the application under Section 154 - Held that - The Assessing Officer rejected the application under Section 154 by a one line order. It was set aside by the Commissioner of Income Tax (Appeals). The Tribunal held that the issue raised by the assessee will fall under the category of a debatable issue and not error apparent . We think that is a correct view taken by the Tribunal. While the treatment of the payment made by M/s. Siemens Limited at the hands of the appellant herein, after it was treated differently at the hands of M/s. Siemens Limited can, given some allowance, be treated as an error apparent, the moment it is shown to have been rejected in the order of Assessment, it would become at the most a mistake correctable on an appeal but not an error apparent. Hence, the second substantial question of law is also to be answered against the appellant/assessee.

Summary

Issues Involved:
1. Assessability of commission receipts from M/s. Siemens Ltd. and other entities.
2. Rejection of rectification petition under Section 154.
3. Issuance of notice under Section 143(2) after the expiry period.

Issue-wise Detailed Analysis:

1. Assessability of Commission Receipts:
The key issue was whether the commission receipts from M/s. Siemens Ltd. and other entities were assessable in the hands of the appellants. The Tribunal held that the commission receipts were assessable in the hands of the appellants on a substantive basis. The father-assessee received substantial payments from M/s. Siemens Ltd., which were not substantiated by any technical expertise or agreement. The Tribunal noted that the Settlement Commission's order in favor of M/s. Siemens Ltd. did not protect the father-assessee, as the payments were either returned to Siemens or paid to third parties, which were disallowed. The Tribunal's categorization was upheld, and the Settlement Commission's order did not grant immunity to the father-assessee. Consequently, the first substantial question of law was answered against the appellant/assessee.

2. Rejection of Rectification Petition under Section 154:
The second issue was the rejection of the rectification petition under Section 154. The Tribunal held that the issue raised was debatable and not an apparent error. The Assessing Officer's one-line rejection was set aside by the Commissioner of Income Tax (Appeals), but the Tribunal upheld the rejection, stating that the matter was debatable and not a clear error. Thus, the second substantial question of law was also answered against the appellant/assessee.

3. Issuance of Notice under Section 143(2):
An additional substantial question of law was requested regarding the issuance of notice under Section 143(2) after the prescribed period. The Court acknowledged its power to frame additional substantial questions of law under Section 260-A(4) but noted that the question of limitation was a mixed question of fact and law. Since this issue was not raised before the lower authorities and no finding of fact was reached in favor of the appellant, the Court declined to frame this additional question. Therefore, the third question of law was not considered.

Conclusion:
The substantial questions of law raised were answered against the appellant/assessee, and the appeals were dismissed. Consequently, the related miscellaneous petitions were also closed.