2016 (8) TMI 649 - HC - Income Tax

Rectification of mistake - entitlement to the benefit of Section 80HHC - Held that - In the present facts, we find that the issue of Section 80HHC of the Act was a subject matter for consideration by the Assessing Officer while passing an order dated 31st March, 1995 relating to A.Y. 1992-93. Thereafter, in an appeal filed by the petitioner, the CIT(A) in its order dated 5th October, 1995 also dealt with the issue of Section 80HHC of the Act while allowing the appeal for A.Y. 1992-93 of the petitioner. The order of the CIT(A) has been accepted by the Revenue in respect of the A.Y. 1992-93, as no further appeal from the order of CIT(A) was filed. Thus, the issue of grant of deduction under Section 80HHC of the Act stands settled by the Appellate Authority into which the order of the assessment dated 31st March, 1995 has merged. Therefore, even if we assume that impugned notice is not barred by limitation, yet such a notice would be barred by virtue of Section 154(1A) of the Act. It is not open to the Authority under the Act to rectify an order on an issue of Section 80HHC of the Act which has undisputedly merged with the order of the Appellate Authority. Thus, on the aforesaid ground itself, the impugned notice is without jurisdiction. Issue of benefit of Section 80HHC of the Act was debatable one and, therefore, could not be a subject matter of rectification proceedings. Any issue that requires debate and is not self evident as it requires examination and consideration, would be beyond the scope of rectification. Thus, on the above ground also the impugned notice is without jurisdiction.

Summary

Issues Involved:
1. Jurisdiction of the impugned notice under Section 154 of the Income Tax Act, 1961.
2. Limitation period for issuing the impugned notice.
3. Merger of the assessment order with the appellate authority's order.
4. Debatable nature of the issue sought to be rectified.

Detailed Analysis:

1. Jurisdiction of the Impugned Notice:
The petitioner challenged the notice dated 26th September 2001, issued under Section 154 of the Income Tax Act, 1961, arguing it was without jurisdiction. The notice aimed to rectify an order dated 5th October 1998, based on a High Court decision for the Assessment Year (A.Y.) 1996-97, which denied the benefit of Section 80HHC to the petitioner. The petitioner contended that the issue of Section 80HHC was already considered in the assessment order dated 31st March 1995, and the impugned notice was issued beyond the permissible period.

2. Limitation Period:
The petitioner argued that the notice was barred by limitation, as it was issued beyond four years from the assessment order dated 31st March 1995, which initially dealt with Section 80HHC. The respondent countered that the rectification notice was within the limitation period, as the order dated 5th October 1998 modified the original assessment order, thus extending the limitation period to four years from the latter date.

3. Merger of Assessment Order:
The petitioner highlighted that the issue of Section 80HHC was already decided by the Commissioner of Income Tax (Appeals) [CIT(A)] on 5th October 1995, which was accepted by both parties. Therefore, the assessment order dated 31st March 1995 merged with the appellate order, barring any further rectification by the Assessing Officer on this issue under Section 154(1A) of the Act.

4. Debatable Nature of the Issue:
The petitioner contended that the issue of Section 80HHC was debatable, as evidenced by the Supreme Court's decision to issue a notice to the Revenue on the petitioner’s appeal against the High Court's order for A.Y. 1996-97. The Revenue did not contest this point, implying that the issue was not apparent from the record and required further examination, making it unsuitable for rectification under Section 154.

Court's Findings:

Jurisdiction and Merger:
The Court found that the issue of Section 80HHC was indeed considered in the original assessment order and subsequently in the appellate order dated 5th October 1995. As the appellate order was accepted by both parties, the assessment order merged with it. Therefore, any attempt to rectify the merged order under Section 154 was beyond the jurisdiction of the Assessing Officer.

Debatable Issue:
The Court agreed with the petitioner that the issue of Section 80HHC was debatable, as indicated by the Supreme Court's decision to issue a notice to the Revenue. Since rectification under Section 154 is only permissible for mistakes apparent from the record, and not for debatable issues, the impugned notice was without jurisdiction.

Limitation:
Given the findings on jurisdiction and the debatable nature of the issue, the Court did not find it necessary to address the limitation argument.

Conclusion:
The Court concluded that the impugned notice dated 26th September 2001 was without jurisdiction and not sustainable in law. Consequently, the petition was allowed, and the rule was made absolute, with no order as to costs.