2012 (4) TMI 212 - HC - Income Tax

Assessee disclosed the claim made for excise duty refund credited to the profit and loss account as miscellaneous receipts by original as well as the revised returns - such amount was neither received nor accrued to the appellant company and the same cannot be included in the total income - the assessing officer rectified the order and reduced the claim under Section 32AB as against the original claim - tribunal passed the order that the assessing officer had in the guise of rectifying an arithmetical mistake sought to rectify a debatable question of law and re-calculation of the eligible profit under Section 32AB by deleting the expected return of customs duty, which was not included in the computation of income is an error rectifiable under Section 154 of the Income Tax Act -Revenue filed the appeal that Appellate Tribunal being a final fact finding authority, is expected to give reasons supporting its finding - Held that - the Appellate Tribunal should have considered the materials placed on either side and have independently applying its mind should have come to its own conclusion as to whether any mistake had crept in the the order of the assessing authority or it is a debatable question - the order of the Tribunal is set aside - matter is remitted back to the ITAT to decide the issue within a period of six months - Appeal of revenue allowed.

Issues Involved:
1. Whether the Tribunal was right in holding that the assessing officer had in the guise of rectifying an arithmetical mistake sought to rectify a debatable question of law.
2. Whether the re-calculation of the eligible profit under Section 32AB by deleting the expected return of customs duty, which was not included in the computation of income, is an error rectifiable under Section 154 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Rectification of Arithmetical Mistake vs. Debatable Question of Law:
The Tribunal held that the assessing officer, under the guise of rectifying an arithmetical mistake, was attempting to rectify a debatable question of law. The Tribunal referenced the decision of the Apex Court in T.S. Balaram, ITO Vs. Volkart Brothers, 82 ITR 50, which states that Section 154 of the Income Tax Act cannot be used to rectify a debatable question of law. The Tribunal concluded that the issue at hand was not an arithmetical mistake but a debatable question of law and allowed the assessee's appeal by setting aside the orders of the Revenue authorities.

2. Re-calculation of Eligible Profit under Section 32AB:
The assessee, engaged in the manufacture of electrical items, filed an original return declaring an income of Rs. 65,55,668/- and later a revised return disclosing a total income of Rs. 1,11,78,051/-. The assessment was completed on a total income of Rs. 2,60,25,256/- under Section 143(3) of the Act, including a claim for excise duty refund amounting to Rs. 1,51,00,000/-. The assessee contended that the refund amount was neither received nor accrued in the relevant accounting year and thus should not be included in the total income for the assessment year 1987-88. The assessing officer rectified the order dated 20.10.1992 and reduced the claim under Section 32AB of the Act to Rs. 99,24,043/- from the original claim, which included the excise duty amount. The Commissioner of Income-Tax (Appeals) confirmed the rectification order, but the Tribunal allowed the assessee's appeal, holding that the issue was not an arithmetical mistake but a debatable question of law.

Tribunal's Order and Judicial Review:
The Tribunal's order was challenged by the Revenue, leading to the present appeal. The High Court emphasized that the Appellate Tribunal, being a final fact-finding authority, must provide reasons supporting its findings. The Tribunal's order was found lacking in detailed reasoning and application of mind, as it merely referred to the objections raised by the Departmental representatives and the assessee's contention without independent analysis.

Legal Principles and Requirement of Reasoned Orders:
The High Court cited several judgments underscoring the importance of reasoned orders in judicial and quasi-judicial proceedings. It referenced the Apex Court's decisions in Jawahar Lal Singh v. Naresh Singh, Shri Swamiji of Shri Admar Mutt v. Commissioner, Hindu Religious and Charitable Endowments Department, and Siemens Engineering and Manufacturing Co. of India Ltd. v. Union of India and Another, which highlight that providing reasons is fundamental to good administration and justice. The principles of natural justice require authorities to give notice, grant an opportunity of hearing, and provide reasons for their decisions.

Conclusion and Remand:
The High Court concluded that the Tribunal's order suffered from non-application of mind and lacked detailed reasoning. Therefore, it set aside the Tribunal's order and remitted the matter back to the Income Tax Appellate Tribunal for a fresh decision, directing it to consider the issue expeditiously within six months. The Tax Case Appeal was allowed without costs.

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