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2015 (9) TMI 332 - ALLAHABAD HIGH COURT

2015 (9) TMI 332 - ALLAHABAD HIGH COURT - TMI - Revision u/s 263 - Rectification of mistake - Entitlement for interest exemption under Section 10(15)(iv)(e) allowed but claim of such amount under Section 80HHC denied - AO disallowing the interest exemption contending that on the basis of the direction of CIT(A) the issue being a legal matter, the error was being rectified under Section 154 of the Act as a mistake apparent from the record.whether Tribunal was not justified in setting aside the or .....

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nder Section 10(15)(iv)(e) of the Act are satisfied and that the assessee was entitled for exemption on interest received. In our view, such finding of the assessing officer, assuming it to be erroneous cannot be rectified in proceedings under Section 154 of the Act on the ground that a mistake apparent on the face of the record had occurred in the assessment order inasmuch as the assessment order was passed by a process of reasoning and after applying its mind. Once an order has been given by a .....

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authority under Section 154 of the Act cannot be sustained.

In so far as the appeal filed by the Department is concerned, we are of the opinion, that the Commissioner of Income Tax had no jurisdiction to pass an order under Section 263 of the Act. The Commissioner of Income Tax assumes jurisdiction under Section 263 of the Act when it issues a notice to the assessee under Section 263 of the Act to show cause as to why the order of the assessing authority should not be set aside on the .....

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der Section 154 of the Act, the notice under Section 263 of the Act questioning the veracity and legality of the original assessment order dated 29.12.2008 was patently erroneous and invalid and, consequently, all the proceedings initiated pursuant to the said notice including the order dated 30.3.2011, passed under Section 263 of the Act, was also invalid and was rightly set aside by the Tribunal though for different reasons. - Civil Misc. Writ petition (Tax) No. 197 of 2010, Civil Misc. Writ P .....

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d in Writ Petition No.197 of 2010, M/s Sheikh Abdullah & Sons vs. Union of India, through Secretary Ministry of Finance, New Delhi and others for the assessment year 1997-98 and Income Tax Appeal No.215 of 2015, Principal Commissioner of Income Tax, Varanasi vs. M/s Sheikh Abdullah and Sons for the assessment year 1997-98, is being taken into consideration. 2. The assessee is engaged in the business of manufacture and sale of carpet. In his return, the assesseee claimed that interest earned .....

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nded the matter again to the assessing authority for reconsideration on the question of interest earned on EEFCTDR under Section 10(15)(iv)(e) of the Act. Pursuant to the direction of the Tribunal, the assessing officer passed a fresh assessment order under Section 143(3) of the Act dated 11.2.2007 and granted exemption on interest earned by the assessee under Section 10(15)(iv)(e) of the Act. Thereafter, the Commissioner of Income Tax passed an order dated 3.3.2008 under Section 263 of the Act .....

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e assessee, being aggrieved, filed an appeal before the Tribunal which was rejected by an order dated 24.7.2008. The Tribunal not only confirmed the order of the Commissioner of Income Tax, but also held that the order of the assessing officer was not in conformity with the direction of the Tribunal and was also pre-judicial to the interest of revenue. 3. Based on the order dated 3.3.2008, passed by the Commissioner of Income Tax, under Section 363 of the Act, as affirmed by the order of the Tri .....

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but, could not claim such amount under Section 80HHC. 4. It transpires that the Commissioner of Income Tax, Varanasi issued a letter dated 12.10.2009 regarding his interpretation of Section 10(15)(iv)(e) of the Act and accordingly directed the assessing officer to take remedial action and disallow the interest exemption. Based on the said direction the assessing officer issued a notice dated 27.11.2009 under Section 154 of the Act, and thereafter, passed an order dated 9.2.2010 under Section 15 .....

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quashing of the order under Section 154 of the Act was added. 5. Much after the passing of the order under Section 154 of the Act, the Commissioner of Income Tax issued a notice dated 18.3.2011, under Section 263 of the Act directing the petitioner to show cause as to why the assessment order dated 29.12.2008 should not be cancelled as it was pre-judicial to the interest of the revenue. The assessee filed his objection, and thereafter, the Commissioner of Income Tax passed an order dated 30.3.20 .....

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uestion of law arises for consideration, namely, that the Tribunal was not justified in setting aside the order of the Commissioner under Section 263 of the Act, inasmuch as, the assessment order was inconsistent with the direction of the Tribunal passed in the earlier round of litigation. 6. In this backdrop we have heard Sri S.D.Singh, the learned senior counsel along with Sri Krishna Dev Vyas, the learned counsel for the assessee and Sri Ashok Kumar along with Sri Shubham Agarwal, the learned .....

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of the Income-tax Act, 1961. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions". 9. Similar view was again given by the Supreme Court in Commissioner of Central Excise, Belapur, Mumbai vs. RDC Concrete (India) Private Limited, 2011 (12)SCC 166, wherein the Supreme Court held that power to rectify a mistake should be exercised only when .....

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t in Mepco Industries Ltd. vs. Commissioner of Income-Tax and another, 2009 319 ITR 208, wherein the Supreme Court held that a rectifiable mistake is a mistake which is obvious and not something which has to be established by a long drawn process of reasoning or where two opinions are possible. Further, a decision on a debatable point of law cannot be treated as a mistake apparent from the record. 11. In the light of the aforesaid decisions, we find that the assessing officer while passing a fre .....

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oceedings under Section 154 of the Act on the ground that a mistake apparent on the face of the record had occurred in the assessment order inasmuch as the assessment order was passed by a process of reasoning and after applying its mind. Once an order has been given by a process of reasoning and assuming that two views are possible it still cannot be treated as a mistake apparent from the record. 12. We also find that the order under Section 154 of the Act has been passed by the assessing offic .....

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263 of the Act. The Commissioner of Income Tax assumes jurisdiction under Section 263 of the Act when it issues a notice to the assessee under Section 263 of the Act to show cause as to why the order of the assessing authority should not be set aside on the ground that the assessment order was pre-judicial to the interest of the revenue. On this aspect, the assumption of jurisdiction takes place when a notice is issued under Section 263 of the Act. This notice under Section 263 of the Act was i .....

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