TMI Blog2003 (3) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted and deposited during the relevant previous year. The assessee, therefore, filed a revised return voluntarily on 17-3-1994, withdrawing its claim for deduction in respect of royalty payment without deducting the tax at source came up for consideration during the course of regular assessment proceedings in the month of March 1994. A notice under section 154 was served on the assessee on 24-3-1994, proposing the rectification of the said intimation and proposed action was objected to on the ground that there was no mistake apparent from the records which could be rectified under section 154 of the Act. Under section 143(1)(a), the Assessing Officer is permitted to make adjustment only on the basis of information available in the return filed, accounts or documents accompanying it. It has been held in the case of N. Rajamoni Amma v. Dy. CIT [1990] 86 CTR (Ker.) 12, that the Assessing Officer was not entitled to go beyond the records and look into fresh evidence or material which had not been on the record at the time the order (intimation in this case) sought to be rectified was passed. 2-3. The Assessing Officer did not appreciate the explanation offered by the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denied. The return filed by the assessee on 17-3-1994 and the accompanying statements did form part of the records when the notice under section 154 of the Act was issued and in such a situation, it cannot be said that there was a mistake (which then stood corrected) apparent from the records justifying rectification under section 154 of the Act. It was further contended that the order passed by the Assessing Officer under section 154 deserves to be cancelled. Reliance was placed on the decisions Maharana Mills (P.) Ltd. v. ITO [1959] 36 ITR 350 (SC), Mahendra Mills Ltd. v. P.B. Desai, AAC [1975] 99 ITR 135 (SC), 45 ITR 277 (SC)(sic) and N. Rajamoni Amma's case in support of the above contentions. 6. In appeal proceedings, the Assessing Officer was also present and he submitted that the mistake was sought to be rectified in the intimation dated 31-7-1992. The claim was withdrawn by the assessee by filing revised return of income only after a query was raised by the Assessing Officer on 11-3-1994. It can, therefore, not be claimed that the assessee had filed revised return voluntarily. It was further, pointed out by the Assessing Officer that the royalty payment was clearly an ina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich were existing at the time when the return filed by the appellant under section 143(1) was processed on 31-7-1992. The Assessing Officer has rightly pointed out that the royalty payment is clearly an inadmissible deduction in accordance with the provisions contained in section 40(a)(i). It is also verifiable from the records, particularly Challan No.8, which was filed along with the return of income, that the tax amounting to Rs. 2,03,250 was deducted from the royalty payment and paid to the State Bank on 17-8-1991. In other words, the tax at source on the royalty payment was deducted and paid in the assessment year 1992-93 and as such, the royalty payment was clearly inadmissible deduction in the assessment year 1991-92. Since the Assessing Officer had committed the mistake in not making adjustment in regard to the disallowance of royalty payment while processing the return under section 143(1)(a), a mistake had crept in, in the intimation issued on 31-7-1992, which was capable of rectification under section 154 as per the existing provisions of law relating to the subject. It is true that the mistake was discovered in the course of assessment proceedings, this mistake had a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of royalty payment and allowed in intimation under section 143(1)(a). Nothing has been argued or placed on record to convince us to take a different view than taken by the authorities below. Therefore, while concurring with the findings of the learned CIT(A) we hold that there is no merit in the appeal of the assessee and dismiss the same as such. 11. As a result, the appeal of the assessee gets dismissed. B.L. Chibber, Accountant Member - Regretting my inability to persuade myself to agree to the view taken in the order of my learned Brother, I proceed to write a dissenting order. 2. In this case, the assessee-company had filed its return of income declaring total income at NIL on 31-12-1991. This return was processed under section 143(1)(a) on 31-7-1992, accepting the returned income. 3. In the course of the regular assessment proceedings, it was noticed by the Assessing Officer that the assessee had made royalty payment of Rs. 6,78,169 to a non-resident outside India on which tax was not deducted under Chapter XVIIB during the financial year relevant to the assessment year 1991-92 and, therefore, the said amount was not allowable under section 40(a)(1) of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the mistake was discovered in the course of assessment proceedings, this mistake had a direct nexus to the intimation received on 31-7-1992, i.e., to say the mistake in regard to non-adjustment of Royalty payment was committed by the Assessing Officer at the time of processing the return under section 143(1)(a), though it was discovered in the course of assessment proceedings. According to the CIT(A), there was no bar to the amendment of Intimation already sent by taking recourse to section 154. Accordingly, the CIT(A) held that the order passed under section 154 was proper and dismissed the appeal of the assessee. 6. During the course of proceedings before this Tribunal, Shri K. A. Sathe, the learned counsel for the assessee, contended that the view taken by the lower authorities that the amount was disallowable under section 40(a)(1) was not legally correct. He read out section 40(a)(1) according to which the following amounts are not deductible in computing the income chargeable under the head 'profits and gains of business', namely, any interest, royalty, fees for technical services or other sums chargeable, under this Act, which is payable outside India, on which tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count by a sum of Rs. 6,46,303, while the non-resident's account, viz., account of RIS-Irrigation, Italy, was credited with an amount of Rs. 4,52,412.20 and TDS account was credited with an amount of Rs. 1,93,890.80. Since on the date when the Royalty was credited to the account of non-resident actual payment was not made, the only way of deducting tax was to reduce the amount from the account of the payee and show it separately as TDS payable. This, according to me, amounted to deduction of tax at source as subsequently this amount was paid on 17-8-1991. Thus, it was clear from the original return that there was deduction of tax at source, though the payment was made later on. If, therefore, one of the conditions of tax deduction at source was satisfied, there was no reason for assuming that section 40(a)(1) applied to the facts of the case and this position is clear from the original return itself which was processed under section 143(1)(a). It is true that in subsequent return of income the assessee withdrew its claim, but what is relevant for the purpose of adjustment under section 143(1)(a) is the original return and the document accompanying it and not subsequent return or ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d deposited during the relevant previous year, when such claim was withdrawn by the assessee itself by filing successive return on 17-3-1994, could be denied in view of provisions contained under section 40(a)(i) while invoking the provisions of section 154 to amend intimation under section 143(1)(a) by making adjustment and accordingly additional tax under section 143(1A) could be charged." 2. At the outset, Shri K. A. Sathe, learned counsel for the assessee, made a request to widen the scope of the question. The validity of order passed under section 154 seeking to rectify intimation under section 143(1)(a) was assailed on the ground that notice under section 143(2) was issued on 23-10-1992 whereas the notice under section 154 was issued on 24-31994. According to the learned counsel, subsequent to the issuance of notice under section 143(2), it is not open for the Assessing Officer to issue notice under section 154 to rectify the order passed under section 143(1)(a) of the Act. In support of this proposition, Shri Sathe relied on the following two judgments : (1) CIT v. Punjab National Bank [2001] 249 ITR 763 (Delhi) (2) Lakhanpal National Ltd. v. Dy. CIT [1996] 222 ITR 151 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to resolve a point of dispute. He should decide the issue in such a way, so the appeal could be finally disposed of according to the opinion of the majority. If the Third Member decides an issue, which was never canvassed before the Bench, that aspect will carry the opinion of only one Member. As such, the issue cannot be decided as per the opinion of the majority, which is the sine qua non of section 255(4) of the Act. In order to gain the majority, the Third Member has to concur with one of the Member's opinion. He relied on various precedents to buttress the point. 5. In the case of Jan Mohammed v. CIT [1953] 23 ITR 15 (All.) it was held that the Third Member can only answer the point or points that were referred to him for decision and on which there was a difference of opinion. The reason is obvious. The section requires the opinion of the Third Member to resolve the dispute. The two other Members of the Tribunal had no opportunity of going into that question and, if the point had been raised before them, they might not have taken the same view as the Third Member took. 6. In the case of CIT v. Bhai Shams her Singh Sons [1989] 179 ITR 538 (Punj. Har.) difference of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income on 31-12-1991. Intimation under section 143(1)(a) was served upon the assessee on 16-9-1992. No prima facie adjustment was made while serving the said intimation. Later on it was detected that the assessee did claim deduction in respect of royalty amount payable outside India. Challan evidencing the payment of tax deducted at source was appended along with the return. From the perusal of the said Challan, it appeared that the tax amounting to Rs. 2,03,250 was deducted from the royalty payment and paid to the State Bank of India on 17th August, 1991. Assessing Officer, therefore, found that the tax at source on royalty payment was deducted and paid in the assessment year 1992-93 and as such the royalty payment was clearly inadmissible deduction in the assessment year 1991-92. In the opinion of the Assessing Officer, this mistake was apparent from the face of the record. As such, to rectify the said mistake, Assessing Officer resorted to the provisions of section 154 of the Act. 12. In reply to the notice issued under section 154 of the Act, the assessee vide its reply dated 28-3-1994, stated that it had filed its revised return of income on 17-3-1994, voluntarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectification proceedings cannot be resorted to. But in the present case I find that the issue was not debatable. The mandate of the law is very clear. The tax was not deducted at source. The assessee accepted this fact while making reply to the notice issued under section 154 of the Act. In the revised return also the assessee accepted this fact. The error is apparent from the face of the record. Therefore, in my opinion, it clearly comes within the ken of section 154 of the Act. I am, therefore, inclined to accept the view taken by the learned JM. 18. The matter will now go before the regular Bench for deciding the appeal in accordance with the opinion of the majority. Per U.B.S. Bedi, Judicial Member. - As there was a difference of opinion between the Accountant Member and the Judicial Member, following question was referred to a Third Member: "Whether in view of facts and circumstances of the case, the claim of deduction in respect of royalty amount payable outside India, as no tax was deducted and deposited during the relevant previous year, when such claim was withdrawn by the assessee itself by filing successive return on 17-3-1994, could be denied in view of provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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