2012 (8) TMI 556 - AT - Income Tax

Rectification petition filed u/s 154 seeking rectification of intimation u/s 143(1) and re-computation of income taking into consideration the method of accounting settled in the case of the assessee in earlier year by High Court affirmed by Supreme Court - Revenue contesting the same - Held that - It is not clear from the decision of the CIT(A) that how the alleged mistake was apparent from record. It is a well settled position of law that when for application of a subsequent decision of the Jurisdictional High Court or Supreme Court further investigation into the facts is required then it cannot be held to be an apparent mistake. Also, both the parties before us have not filed the copy of rectification petition filed by the assessee before the AO. Moreover, AO has held that the mistakes sought to be rectified by the assessee are not apparent mistakes but he has given no reasons for arriving at this conclusion. Such an unreasoned and non-speaking order cannot be appreciated. Thus, orders of both the lower authorities are not in order. In these circumstances, we restore the issue back to the file of the AO for adjudication afresh by passing a speaking order.

Issues Involved:
1. Validity of the CIT(A)'s order allowing the assessee's petition under sections 154 and 155(4).
2. Whether the Assessing Officer (AO) has the power to recompute income under section 143(1).
3. Applicability of judicial decisions retrospectively.
4. Rectification of intimation under section 143(1) based on the method of accounting approved by the High Court and Supreme Court.

Issue 1: Validity of the CIT(A)'s order allowing the assessee's petition under sections 154 and 155(4)

The Revenue challenged the CIT(A)'s decision to allow the assessee's petition under sections 154 and 155(4). The CIT(A) held that the assessee's income for the assessment year 2001-02 should be recomputed based on the method of accounting approved by the High Court and affirmed by the Supreme Court. The CIT(A) found a mistake apparent from the record in the intimation dated 08.07.02, which needed rectification. The CIT(A) also noted that the AO had chosen to revise the assessments of earlier years (1998-99, 1999-2000, and 2000-2001) under section 147, altering the loss available to be carried forward. Therefore, the provisions of section 155(4) were attracted, necessitating the rectification of the intimation under section 143(1).

Issue 2: Whether the Assessing Officer (AO) has the power to recompute income under section 143(1)

The Revenue argued that the AO did not have the power to recompute the income under section 143(1) except for arithmetical errors or incorrect claims apparent from the return. The AO's powers under section 143(1) were limited and restricted only to the return of income filed by the assessee. The AO could not disturb the income disclosed in the return or make any adjustments beyond the return. The Tribunal noted that the CIT(A) did not consider the decision of the Ahmedabad Bench in the case of Choice Aquaculture (P) Ltd, which held that making any adjustment to the returned income under section 154 would amount to doing an act that cannot be done directly under section 143(1).

Issue 3: Applicability of judicial decisions retrospectively

The CIT(A) relied on the Supreme Court's decision in the case of Saurashtra Kutch Stock Exchange Ltd, which held that a judicial decision acts retrospectively. The Supreme Court stated that judges do not make law but discover or find the correct law, which has always been the same. Therefore, even if an earlier decision operated for some time, a later decision would have retrospective effect, clarifying the legal position. The CIT(A) concluded that non-consideration of the jurisdictional High Court's decision, as confirmed by the Supreme Court, constituted a mistake apparent from the record that needed rectification.

Issue 4: Rectification of intimation under section 143(1) based on the method of accounting approved by the High Court and Supreme Court

The CIT(A) directed the AO to recompute the income of the assessee by following the method prescribed by the High Court and affirmed by the Supreme Court. The CIT(A) also directed the AO to determine the loss of earlier years to be carried forward. The Tribunal noted that the CIT(A) did not record any finding on whether further investigation of facts was required to apply the law as pronounced by the High Court and Supreme Court. The Tribunal observed that when further investigation into facts is required for applying a subsequent judicial decision, it cannot be held to be an apparent mistake. The Tribunal found that the orders of both the lower authorities were not in order and the full facts were not brought on record. Therefore, the Tribunal set aside the orders of the lower authorities and restored the issue to the AO for fresh adjudication by passing a speaking order after allowing reasonable opportunity of hearing to the assessee.

Conclusion:

The Tribunal allowed the Revenue's appeal for statistical purposes, setting aside the orders of the lower authorities and remanding the issue back to the AO for fresh adjudication. The Tribunal emphasized the need for a speaking order and reasonable opportunity of hearing for the assessee. The Tribunal dismissed other grounds of appeal for want of prosecution. The appeal was partly allowed for statistical purposes.

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