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High Court Of Calcutta
SABYASACHI MUKHERJI
JEEWANLAL (1929) LTD. - Appellant
Versus
INCOME-TAX OFFICER, J-WARD - Respondent
Matter 543 Of 1973
Decided On : 02/18/1976
INCOME TAX - Rectification of mistake - Scope and effect of Section 154 of the Income Tax Act, 1961 - Mistake apparent from the record - Mistake which requires interpretation of statute and investigation of fact and law - Not a mistake apparent from the record - Rectification not permissible - Income Tax Act, 1961, Section 154.
Fact of the Case:
The petitioner, a public limited company engaged in the business of manufacturing and selling aluminium utensils, exported aluminium goods and articles and earned import entitlement, which it sold. The petitioner claimed deductions under Section 2(5)(a)(i) of the Finance Act, 1965, and rebate under para. F(I)(b)(ii)(a) of Part I of the First Schedule to the said Act. The ITO disallowed both contentions. The AAC directed the ITO to examine the point and allow such reliefs as would be admissible in law to the petitioner. The ITO gave effect to the AAC's order and allowed the reliefs to the petitioner. Subsequently, the ITO issued a notice under Section 154/155 of the I. T. Act, 1961, proposing to rectify the mistake of allowing export profit rebate and wrongly calculating tax at the rate applicable to priority income.
Finding of the Court:
The court held that the nature of rectifications proposed by the impugned notice did not come within the purview of Section 154 of the I. T. Act, 1961. The court observed that the mistake sought to be rectified must be patent or apparent or obvious and on which there could not conceivably be two points of view. A mistake which had to be established by way of a process of reasoning or of investigation either on facts or by examination of the question of law on which there might conceivably be two views was not a mistake which came within the provisions of Section 154 of the Act.
Issues: Whether the nature of rectifications proposed by the impugned notice came within the purview of Section 154 of the I. T. Act, 1961.
Ratio Decidendi: The court held that the mistake sought to be rectified must be patent or apparent or obvious and on which there could not conceivably be two points of view. A mistake which had to be established by way of a process of reasoning or of investigation either on facts or by examination of the question of law on which there might conceivably be two views was not a mistake which came within the provisions of Section 154 of the Act.
Final Decision: The court quashed and set aside the impugned notice and restrained the respondents from giving effect to the same. The court also quashed and set aside any order passed in pursuance of the aforesaid notice and restrained the respondents from giving effect to the same.
( 1 ) THE subject-matter of challenge in this application under Article 226 of the Constitution is the notice dated 9th July, 1973, issued under Section 154/155 of the I. T. Act, 1961, In order to appreciate the question involved in this application it would be necessary to refer to certain facts. The petitioner is a public limited company. The petitioner is engaged in the business of manufacture and sale of aluminium utensils and articles. One of the main businesses of the petitioner, according to the petitioner, consisted of export of aluminium utensils and articles and goods outside India. The petitioner is an exporter of aluminium goods and articles to countries outside India. By export of the said aluminium articles and goods the petitioner earned what is known as import entitlement. The petitioner sold the said import entitlement. I am concerned in this application under Article 226 of the Constitution with the question relating to the assessment year 1965-66. On the 18th March, 1970, the ITO made an assessment for the said year. In the assessment the petitioner had contended that the amounts realised by the petitioner from the sale of import entitlement were not income but capital receipts. The ITO negatived this contention. In this application, it is not necessary to refer to this aspect any further. It was contended alternatively that the petitioner was entitled to certain deductions as provided under Section 2 (5) (a) (i) of the Finance Act, 1965, as the said receipts were income or profits derived from export of goods or merchandise out of India. The petitioner also contended that the petitioner was entitled to rebate under para. F (I) (b) (ii) (a) of Part I of the First Schedule to the said Finance Act, 1965. I will refer to the relevant provisions of the said clause. The petitioner contended that the income arising from the manufacture and sale of aluminium utensils are attributable to manufacture and production of aluminium so as to come within the relief granted by the said provision. The ITO, however, disallowed both these contentions. The assessee preferred an appeal before the AAC on 21st April, 1970, contending, inter alia, that the aforesaid two reliefs were wrongly not allowed by the ITO. On the 3rd February, 1972, the AAC of Income-tax disposed of the appeal. The AAC observed, inter alia, as follows : "1965-66.--The Income-tax Officer will check up this point and will allow such relief and rebate as may be admissible in law to the appellant on export sales and export profits. "
( 2 ) THE AAC, therefore, directed the ITO to examine the point and allow such reliefs as would be admissible in law to the petitioner. On 13th November, 1972, the ITO gave effect to the order of the AAC under Section 251 of the I. T. Act, 1961, and allowed the aforesaid reliefs to the petitioner. In passing the impugned order, the ITO, after making the tax calculation, observed, inter alia, as follows :
Less : Rebate on 2% of export sale, i. e. , 2% of Rs. 26,16,093 @ 46. 63% (i. e. , @ 46. 63% on
Rs. 52,322
24,398
17,19,305
Average rate of tax for rebate on export profit = 17,43,703 X 100
37,83,090
Less: Rebate on export profit @ 1/10th of 16. 0% on Rs. 25,25,489 (as per AAC's order ).
1,16,173
16,03,132.
( 3 ) ON the 9th July, 1973, the impugned notice was issued. In the said notice, the ITO indicated that the nature of the mistake proposed to be rectified were as follows: "1. Tax wrongly calculated at the rate applicable to priority income. 2. Export profit rebate wrongly allowed. " 3. On the 20th July, 1973, the petitioner made the demand for justice by withdrawal of the said notice and on 23rd July, 1973, the petitioner moved this court under Article 226 of the Constitution and obtained the rule nisi and also an order of injunction. Thereafter, on the 4th November, 1974, the CIT issued another notice under Section 263 of the I. T. Act, 1961, in respect of the said order m
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