2008 (1) TMI 51 - HC - Income Tax

Order passed by comm.(A) for not to pay interest on non-payment of advanced tax u/s 234B such order could not be a mistake capable of rectification A.O. can not review his own order by raising section 154 of correcting the mistake as those order have already been challenged in appeal.

Summary

Issues:
Challenge to order under section 154 of the Income-tax Act, 1961 for assessment year 1991-92; Alleged rectification of depreciation and levy of interest under section 234B; Revision under section 264 of the Act challenging the order under section 154 and the revisional order.

Analysis:

Issue 1: Challenge to order under section 154
The petitioner sought to challenge an order passed under section 154 of the Income-tax Act, 1961, by the Assistant Commissioner of Income-tax for the assessment year 1991-92. The order sought to revise the depreciation earlier allowed to the assessee and levy interest under section 234B. The petitioner filed a revision under section 264 challenging the order under section 154 and the revisional order.

Issue 2: Rectification of depreciation and levy of interest under section 234B
The Assessing Officer issued a notice under section 154 seeking to rectify the depreciation allowed and levy interest under section 234B. The petitioner argued that the order under section 143(3) had been quashed by the Commissioner of Income-tax (Appeals), rendering the rectification under section 154 invalid. The Assessing Officer rejected the objections and passed the impugned order under section 154, which was affirmed in revision.

Analysis of Judgments:
The court analyzed the provisions of section 154(1A) which allow corrections in orders even after appeal or revision. The court referred to judgments from the Madras and Karnataka High Courts to determine the scope of rectification under section 154. It was established that the doctrine of merger applies to items considered and decided by the appellate authority. The court examined whether the issues sought to be rectified were considered and decided by the appellate authority.

Rectification of Interest under section 234B:
The court found that the levy of interest under section 234B was not applicable as the additional income tax payable was a consequence of the regular assessment. Since the additions were deleted by the Commissioner of Income-tax (Appeals), no interest under section 234B was due.

Rectification of Depreciation:
Regarding excess deduction allowed on account of depreciation, the court noted that the issue of depreciation was dealt with in the appellate order and merged with the original order. Allowing the Assessing Officer to exercise power under section 154 in such matters would lead to judicial anarchy and override higher authorities' orders. The court held that the scope of section 154(1A) is limited to rectifying mistakes apparent from records, not revising earlier orders.

Conclusion:
The court allowed the writ application, finding the exercise of power under section 154 regarding depreciation without jurisdiction. The judgment emphasized the limited scope of section 154(1A) and the importance of respecting higher authorities' decisions in appeal or revision.