2024 (5) TMI 165 - HC - Income Tax

Rectification of mistake u/s 154 - tax relating to retention money - tax paid on more than one occasion and claims its refund under Section 154 - HELD THAT - As the authority has perused the record and on the basis of record he gave a finding that assessee has offered tax on excess retention money. Thus no elaborate arguments are needed to establish the error as respondent No.2 himself found the same from the record about the payment of tax in excess on the retention money . As decided in Nirmala L. Mehta vs. A. Balasubramaniam CIT 2004 (4) TMI 43 - BOMBAY HIGH COURT Bombay High Court emphasized that no estoppel can arise against the statute. Article 265 of the Constitution of India expressly lays down that taxes can only be levied or collected through the authority of law. Hence acquiescence cannot deprive a party of rightful relief when taxes are levied or collected without legal authority. Also in Smt. Sneh Lata Jain 2004 (4) TMI 579 - JAMMU KASHMIR HIGH COURT once it is found that the petitioner has no tax liability the respondents cannot be permitted to levy the tax and collect the same in contravention to Article 265 of the Constitution of India which provides a constitutional safeguard on levy and collection of tax. It is true that this Court is not to act as Court of appeal while exercising the writ jurisdiction but at the same time where the admitted facts disclosed non- exercise of jurisdiction by an adjudicatory authority and a citizen is subjected to tax not payable by him interference by this Court is warranted. As in our judgment respondent No.2 has erred in holding that the error shown above does not fall within the ambit of error apparent on the face of record and consequently cannot be corrected under Section 154 of the Act. The view taken by the learned respondent No.2 is hyper technical in nature and runs contrary to the scheme flowing from Article 265 of the Constitution of India. So far the judgment of Division Bench of this Court in the case of MS Educational and Welfare Trust 2022 (3) TMI 901 - TELANGANA HIGH COURT is concerned it is noteworthy that this Court opined that the power of rectification of an order of assessment under Section 154 of the Act lies within a very narrow compass. As clearly held that the order to be rectified must be an order which reflects error apparent on the face of record . Since we have held that the error in the instant case is indeed of that character the said judgment will not improve the case of the respondents. Consequently the Writ Petition stands allowed and the impugned order is set aside. Respondent No.2 is directed to undertake exercise of return of excess tax on retention money and pass appropriate order and return the requisite tax money to the petitioner within a period of 60 days from the date of production of copy of this order.

Summary

1. ISSUES PRESENTED and CONSIDERED

The judgment primarily addresses the following legal issues:

• Whether an application under Section 154 of the Income Tax Act, 1961, for rectification of a mistake regarding double taxation can be rejected on the grounds that it does not constitute an "error apparent on the face of the record".
• Whether the petitioner should be relegated to an alternative remedy of appeal when the issue involves the interpretation of Section 154 and the scope of "error apparent on the face of record".

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Applicability of Section 154 for Rectification of Double Taxation

• Relevant legal framework and precedents: Section 154 of the Income Tax Act, 1961, allows for rectification of any mistake apparent from the record. The court referenced Article 265 of the Constitution, which mandates that no tax shall be levied or collected except by the authority of law. The court also considered precedents from the Bombay High Court and the Delhi High Court, which emphasize that errors of law and fact can constitute errors apparent on the face of the record.
• Court's interpretation and reasoning: The court interpreted Section 154 as encompassing errors that are glaring, obvious, or self-evident, without requiring elaborate arguments. It emphasized that the double payment of tax on 'retention money' was an apparent error, as acknowledged by the respondent in the impugned order.
• Key evidence and findings: The court found that the respondent's own admission in the impugned order acknowledged the excess payment of tax on retention money, which constituted an error apparent from the record.
• Application of law to facts: The court applied the principles from Article 265 and relevant case law to conclude that the excess tax payment was beyond the authority of law and should be rectified under Section 154.
• Treatment of competing arguments: The court dismissed the respondent's argument that the error did not fall within the scope of Section 154, stating that the error was apparent and did not require a long-drawn process of reasoning.
• Conclusions: The court concluded that the error was indeed apparent on the face of the record and should be rectified under Section 154, setting aside the impugned order.

Issue 2: Relegation to Alternative Remedy of Appeal

• Relevant legal framework and precedents: The court considered the principle that where the issue is purely legal and does not involve disputed facts, a writ petition may be entertained despite the availability of an alternative remedy.
• Court's interpretation and reasoning: The court reasoned that since the issue involved a straightforward legal interpretation of Section 154, it was appropriate to address it directly rather than relegating the petitioner to an appeal.
• Conclusions: The court decided not to relegate the petitioner to an alternative remedy, as the issue was purely legal and the facts were undisputed.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "A mistake becomes a mistake apparent from the record when it is a glaring, obvious or self-evident mistake. However, it is not possible to define precisely or exhaustively what is an error apparent from the record. But it can be said with certainty that a mistake which has to be discovered by a long drawn process of reasoning or examining arguments on points where there may conceivably be two opinions, it cannot be said to be a mistake or error which is apparent from the record."
• Core principles established: The judgment reinforces the principle that errors of law and fact can be rectified under Section 154 if they are apparent on the face of the record. It also upholds the constitutional mandate that taxes cannot be levied or collected beyond the authority of law.
• Final determinations on each issue: The court set aside the impugned order, directed the respondent to rectify the error and refund the excess tax paid on retention money within 60 days, and decided not to relegate the petitioner to an alternative remedy of appeal.