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2023 (10) TMI 41 - HC - Income TaxRectification of mistake u/s 154 - Period of limitation - Revenue issued notice u/s 154 to deny deduction u/s 10A - Rectification proposed on the ground that, benefit of 10A deduction should be given on the basis of individual eligible unit and not after clubbing the business profits and losses of all the units . - whether issue of deduction u/s 10A was not a subject matter of appeal before the CIT(A) for the said year and therefore there was no question of making any mistake while passing the OGE? - HELD THAT - Considering the issue and disposing of the matter before it, only on the ground of limitation, the Division Bench of this Court in Poonjabhai Vanmalidas 1978 (2) TMI 73 - GUJARAT HIGH COURT held that even after an appeal from an order of assessment is decided, a mistake in that part of the order of assessment which was not the subject matter of review by the Appellate Authority and was left untouched can be rectified, however, that part of the order which is sought to be rectified is the untouched part of the original order. Applying it to the facts of the case, what is evident is that the assessment order was dated 02.02.2012. In an appeal to the CIT(A) there was no dispute regarding Section 10A. The relief was granted in appeal on 27.08.2014. There too there was no dispute regarding Section 10A provision. The order giving effect was date 31.03.2015. Here also since benefit of 10A was as per assessment order , as held in the case of Poonjabhai Vanmalidas 1978 (2) TMI 73 - GUJARAT HIGH COURT in relation to issues not appealable, the order of the appellate authority does not subsume the original order and the time for correcting the mistake in the original order has to relate back to passing of the original order and not the appellate order. In the case of Mettur Chemical Industrial Corpn. Ltd. 1976 (4) TMI 25 - MADRAS HIGH COURT has held that where proceedings are initiated under Section 147, period of limitation for rectification of mistake has to commence and computed from the date of original assessment and not from the date of reassessment order. In facts of the present case, the issue was with regard to the interpretation of the decision in the case of Yokogawa India Ltd. 2016 (12) TMI 881 - SUPREME COURT as settled the controversy on whether the provisions of Sections 10A/10B/10AA are deduction provisions or exemption provisions. A question of interpretation therefore would not make it an issue of a mistake apparent from record. Having held that the notice under Section 154 of the Act is barred by limitation, that it was a debatable issue not therefore within the parameters of Section 154 of the Act, the notices u/s 154 of the Act are bad. Even on the parameters of interpretation, notice u/s 263 in one of the petitions must also fail. Petition allowed.
Issues Involved:
1. Validity of notices under Section 154 and Section 263 of the Income Tax Act, 1961. 2. Jurisdiction and power of the Assessing Officer under Section 154. 3. Limitation period for rectification under Section 154. 4. Interpretation of the Supreme Court decision in CIT v. Yokogawa India Ltd. 5. Maintainability of the petition under Article 226 of the Constitution of India. Summary: Issue 1: Validity of Notices under Section 154 and Section 263 of the Income Tax Act, 1961 The petitions challenged the notices issued under Section 154 of the Income Tax Act, 1961, except for Special Civil Application No.3981 of 2019, which challenged a notice under Section 263 of the Act. The primary contention was that the notices sought to rectify orders giving effect (OGE) based on an alleged mistake in law and facts, particularly concerning the set-off of losses against income from House Property and other incomes. Issue 2: Jurisdiction and Power of the Assessing Officer under Section 154 The petitioner argued that the grounds for rectifying the OGE under Section 154 were misconceived and baseless. The jurisdiction of the Assessing Officer while giving effect to the Appellate Authority's order is confined only to the issue involved in the appellate order. The Assessing Officer cannot travel beyond the jurisdiction and limits of the directions of the Appellate Authority. Issue 3: Limitation Period for Rectification under Section 154 The court observed that the rectification of mistakes under Section 154 must be done within four years from the end of the financial year in which the order sought to be amended was passed. The original assessment order was dated 02.02.2012, and the time to rectify the error expired on 31.03.2016. The rectification notices issued in 2018 were therefore barred by limitation. Issue 4: Interpretation of the Supreme Court Decision in CIT v. Yokogawa India Ltd. The court held that the issue of deduction under Section 10A was not a subject matter of appeal before the CIT(A) for the said year. The interpretation of the decision in the case of CIT v. Yokogawa India Ltd. by the Assessing Officer was incorrect. The Supreme Court had clarified that Section 10A embodies a clear enunciation of the legislative decision to alter its nature from providing for exemption to providing for deductions. The deductions under Section 10A should be made independently and immediately after the determination of profits and gains of the eligible undertaking. Issue 5: Maintainability of the Petition under Article 226 of the Constitution of India The court held that the petition is maintainable under Article 226 of the Constitution of India. The alternative remedy is not a bar when the notice is ex-facie without jurisdiction. The court referred to various decisions, including JMC Projects (India) Ltd and Engineering Professional Co. (P.) Ltd, to support the maintainability of the petition. Conclusion: The court quashed and set aside the impugned notices under Section 154 and Section 263 of the Income Tax Act, 1961, as they were barred by limitation, involved debatable issues not within the parameters of Section 154, and were based on an incorrect interpretation of the Supreme Court decision in CIT v. Yokogawa India Ltd. The petitions were allowed, and the rule was made absolute with no order as to costs.
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