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IN THE HIGH COURT AT CALCUTTA
Tarun Chatterjee, J.
M/s. Eastern Scales Private Limited - Petitioner
Versus
Commissioner of Income Tax, West Bengal-V Calcutta & Ors. - Respondents
Decided on : August 30, 1995
INCOME TAX - Section 154 - Rectification of mistake apparent from record - Order passed under Section 154 of the Act - Held to be illegal and invalid - No jurisdiction to rectify mistake on debatable points - Order quashed.
Fact of the Case:
The petitioner, a private limited company, challenged an order passed under Section 154 of the Income Tax Act, 1961, which rectified an earlier assessment order. The petitioner had received a sum of Rs. 1,50,000/- on surrender of its tenancy right in New Delhi. The Assistant Commissioner of Income Tax (ACIT) initially accepted the petitioner's contention that the sum was not taxable as income or capital gains. However, the ACIT later issued a notice under Section 154, alleging that the original assessment order contained a mistake apparent from the record, and revised the assessment to include the sum as capital gains.
Finding of the Court:
The court held that the ACIT had no jurisdiction to rectify the mistake under Section 154 because it was not a mistake apparent from the record. The court noted that the petitioner had consistently maintained that the sum was not taxable, and that the ACIT had accepted this contention in the original assessment order. The court also held that the ACIT had not given the petitioner a real opportunity of being heard before passing the order under Section 154.
Issues: 1. Whether the ACIT had jurisdiction to rectify the mistake under Section 154 of the Income Tax Act, 1961. 2. Whether the ACIT had given the petitioner a real opportunity of being heard before passing the order under Section 154.
Ratio Decidendi: 1. The court held that the ACIT had no jurisdiction to rectify the mistake under Section 154 because it was not a mistake apparent from the record. The court noted that the petitioner had consistently maintained that the sum was not taxable, and that the ACIT had accepted this contention in the original assessment order. The court also held that the ACIT had not given the petitioner a real opportunity of being heard before passing the order under Section 154. 2. The court held that the ACIT had not given the petitioner a real opportunity of being heard before passing the order under Section 154.
Final Decision: The court set aside the order passed under Section 154 of the Income Tax Act, 1961, and quashed all proceedings thereunder.
The judgment of the Court was as follows :––
The writ petitioner No.1 is a private limited company (hereinafter referred to as "the company") and the writ petitioner No.2 is a share holder of the company. In this Writ application the writ petitioners have challenged an order dated 30th November, 1994 passed under Section 264 of the Income Tax Act, 1961 (For short 'the Act') by the Commissioner of Income Tax, West Bengal-V, Calcutta affirming an order passed by the Assistant Commissioner of Income Tax (Company's circle-9(1) Calcutta) under Section 154 of the Act relating to the Assessment year 1990-91. On 31st December, 1990 the petitioners filed a return for the assessment year 1990-91 showing an income of Rs. 33,100/- enclosing therewith the statutory audit as also tax audit under Section 44 AB of the Act. An intimation was received under Section 143(1)(a) of the Act by the company wherefrom it appears that the Assistant Commissioner of Income Tax, Company circle 9(1) accepted the said return without making any adjustment. Subsequently thereafter the company received a notice issued under Section 142(1) of the Act by which the company was directed to furnish information and documents specified in the enclosure to the said orders. According to the company they duly complied with the said notice and produced all information and documents as required by the Assistant Commissioner of Income Tax, from time to time. It was brought to the notice of the Assistant Commissioner of Income Tax, company circle (hereinafter referred to as 'Assistant Commissioner') of the fact that it was a tenant in respect of an office premises of the writ petitioners in New Delhi at 23 A, Ansari Road, Daria Ganj, New Delhi since 1940-41 for which the company did not have to pay anything excepting the monthly rent of the said premises. In the previous year relevant for the assessment year 1990-91 the company surrendered the said tenancy right for which the company received a sum of Rs. 1,50,000/- which they showed in the profit and loss appropriation account under the head "consideration money on surrender of tenancy right." According to the company the said sum of Rs. 1,50,000/- received by it was not taxable either as income or casual gains in view of several decisions referred to before the Assistant Commissioner of Income Tax by the company by filing to letters. The matter was preferred to the deputy commissioner of Income Tax to seek his direction in the matter of addition of Rs. 1,50,000/- under the head 'other source'. It appears from the record that the deputy commissioner of income tax, Range-9 directed the assistant commissioner of Income Tax to treat the said sum of Rs. 1,50,000/- as capital receipt and assessable to capital gains. On 23rd March of 1993 a notice was received from the Assistant Commissioner directing the company to file an explanation regarding taxability of Rs. 1,10,000/- as capital gains and also to produce other correct papers in support of the claim of the company that the said sum of Rs. 1,50,000/- was not taxable. A reply to the show cause notice was filed on 24th of March, 1993 by the company wherein it was pointed out that the Supreme Court in Gasper v. Commissioner of Income Tax held that the tax was not payable by the assessee although the Supreme Court for technical reasons dismissed the appeal of the assessee. Alternatively it was pointed out by the company in the said letter that since the company had invested the entire sum of Rs. 1,50,000/- in acquiring another property by utilising Rs. 1,50,000/- no capital gains would be leviable in view of Section 54 of the Act. However, subsequently an assessment order was received by the company on 26th of March, 1995 passed by the Assistant Commissioner of Income Tax under Section 143(3)/144(9) of the Act wherefrom it appears that the Assistant Commissioner of Income Tax computed the total income of the company at Rs. 3,570/- and computed the profit under Section 150
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