2015 (7) TMI 780 - HC - Income Tax

AO jurisdiction to exercise the power of rectification u/s 154 - Assessing Officer while passing order under section 143(3) allowed interest upon interest. He, however, sought to recall the order granting interest upon interest by resorting to proceeding under section 154 - Held that - In any event, the fact that the decision on a question of law on which the judgement is based has been reversed or modified by any subsequent decision of a superior court cannot be a ground for exercise of power under section 154 of the Income Tax Act. Under Order 47 Rule 1 of the Code of Civil Procedure there is a provision for review. But the power of Court to review contains the following restriction as to the fact that the decision on a question of law on which the judgment of the Court is based has been reversed or modified by the subsequent decision of a superior Court in any other case, shall not be a ground for the review of such judgment. Thus Tribunal was justified in reversing the order passed in exercise of section 154 by the Assessing Officer. - Decided in favour of assessee.

Summary

Issues:
1. Jurisdiction of Assessing Officer under section 154 of the Income Tax Act, 1961.
2. Interpretation of Section 244A of the Income Tax Act, 1961 regarding interest on refunds.

Jurisdiction of Assessing Officer under section 154:
The case involved a situation where the Assessing Officer allowed interest upon interest while passing an order under section 143(3) of the Income Tax Act. Subsequently, the officer sought to recall this order by exercising power under section 154. The CIT(A) upheld the order, but the learned Tribunal set it aside. The key argument was whether the Assessing Officer had the jurisdiction to rectify the order based on a change in law, specifically referencing the Supreme Court judgment in the case of CIT v. Gujrat Fluoro Chemicals. The appellant contended that the change in law entitled the officer to rectify the order, while the respondent argued that a previous Supreme Court judgment in the case of CIT v. HEG LTD supported the view that interest becomes part of the amount due under section 244A.

Interpretation of Section 244A regarding interest on refunds:
The discussion revolved around the interpretation of the words "refund of any amount becomes due to the assessee" in section 244A of the Income Tax Act. The appellant cited the Gujrat Fluoro Chemicals case, emphasizing that only interest provided for under the statute could be claimed by the assessee. However, the respondent relied on the HEG LTD case, where it was held that interest becomes part of the amount due. The Tribunal ultimately justified its decision to reverse the order passed under section 154 by the Assessing Officer, citing legal principles from previous judgments and the restriction on reviewing judgments based on subsequent decisions of superior courts.

In conclusion, the High Court of Calcutta upheld the Tribunal's decision, affirming that the Assessing Officer did not have the jurisdiction to rectify the order under section 154. The judgment provided a detailed analysis of the conflicting views in different Supreme Court cases and emphasized that a change in law due to a subsequent decision of a superior court cannot be a ground for exercising power under section 154. The case highlighted the importance of legal interpretation and the limitations on rectification powers based on evolving legal principles.