TMI Blog2015 (7) TMI 1082X X X X Extracts X X X X X X X X Extracts X X X X ..... against the assessee, which was subsequently affirmed by the Supreme Court. Further, an application under section 154 was also pursued simultaneously, which we find is akin to riding two horses at the same time. Unfortunately, the assessee having abandoned the plea before the High Court, the plea, which was raised in the section 154 application would clearly show that it is a new plea, which they want to pursue in terms of the provisions of section 154. Yet another factor, which goes against the assessee in the original order itself relates to the plea of income from lease equipment, which was treated as income from financial transaction. Even at the initial point of time, it was well within the appellant-assessee's knowledge that the said income, though not treated as an income from lease, was treated as income from finance transaction in respect of the same party. Therefore, the new plea taken by the appellant that consequent to disallowance of depreciation, the income should also be deleted, has no legs to stand. That fact was not the issue in the first round of appeal. At best it may be treated as a finding of the Assessing Officer, accepted by the assessee and abandoned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions having been proved to be bogus, the assessee is not entitled to seek rectification under section 154 for the exclusion of the lease rentals which have been included in the total income in the block return ? TCA No. 590 of 2008 Whether the Tribunal is right in holding that notwithstanding the lease transactions having been proved to be bogus, the appellant is not entitled to seek rectification under section 254(2) of the Income- tax Act for the exclusion of lease rentals which have been included in the total income in the returns ? 2. Section 154(2) of the Income-tax Act provides for rectification of mistake. In these appeals, we are now concerned with an application filed by the assessee under section 154(1A). Section 154(1A), clothes the authority, who passed the order, with power to deal with the order, for the purpose of amending the order under sub-section (1) in relation to any matter other than the matter which has been so considered and decided. For better appreciation, section 154(1A), on which much stress is laid by the learned counsel for the assessee-appellant to canvass his argument for rectification, is extracted hereunder : 154.(1A) Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. In the course of search proceedings, the transaction of the assessee in respect of the agreement with Duckfin International Pvt. Ltd. relating to leasing of continuous pusher type furnaces on sale and lease back was found to be fictitious. The acts in relation to the said transaction is recorded in paragraphs 3 and 4 of the order passed under section 158BC. The statement of the managing director, K. V. Balakrishnan, was also recorded and his response is found in paragraph 6.1 of the order. For better appreciation of the case on hand, the said portion of the order is extracted hereinbelow : 6.1 When these facts were put to the managing director, Shri K. V. Balakrishnan, at the time of giving sworn statement under section 132(4) of the Income-tax Act agreed for surrender of ₹ 1.31 crores on claim of depreciation in the return and to admit it as income. Since he himself agreed for this surrender there is no valid reason for him to take a different stand at this state. The entire transaction is routed as money transaction for non-existing assets and it is a money lending business. The asset has already suffered depreciation. Therefore, the assessee's acceptance before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the suppliers M/s. Paras Inds. are paper concerns only. What do you have to say particularly in view of the fact that the assets leased by you have not been identified by you and you have not taken any machinery number such particulars as mentioned in answer to question No. 8. Moreover, you have also claimed depreciation of 1.3 crores in your books on the so-called and lease to M/s. Duckfin Intl. ? Answer : Based on the documents provided and the facts given to us by M/s. Duckfin Intl., we entered into the lease agreement and claimed depreciation. In view of the additional fact and statement made by Shree Deepak Bhargava, I surrender on behalf of the company the depreciation claimed of ₹ 1.3 crores on the assets leased to M/s. Duckfin International in the financial year 1994-95. We shall file the return for the block period and pay the taxes accordingly. 8. The Tribunal, after considering the plea of the assessee that it is a genuine transaction and the challenge to the assessment order under section 158BC on the merits, and taking into consideration the statement recorded from the managing director, on oath, coupled with the documents, which proved that there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be considered as a hindrance for the allowability of the claim of depreciation inasmuch as the managing director of the appellant in the said statement had categorically explained and affirmed the entire transaction except in the answer to the last question on difference consideration. (d) The disallowance of a claim would not come within the pur view of the definition of 'undisclosed income' as defined in section 158B of the Act so as to make a block assessment. (e) Bona fide nature of the said claim was not considered while framing the assessment inasmuch as the assets were inspected by the officials of M/s. Bank of Madura, Authorities of the insurance company and financial institution of State of Madhya Pradesh. (f) Booking of lease income receivable for the respective years in the regular returns filed before the date of search. (g) Violation of the provisions of section 158BG of the Act should be considered. (h) In the alternative the loss incurred by the appellant in the said transaction should be considered as business loss in terms of section 28 of the Act. As regards the disallowance of estimated lease expenses the fol lowin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w were raised in the appeal, TCA No. 238 of 2001. Though so many questions of law were raised, at the time of hearing of the appeal, the very same counsel represented and argued the matter before the Bench and canvassed the following three issues, which were considered by the Bench in its order, which, for clarity, is quoted hereinbelow : 3. Before this court, the learned counsel for the appellant put forth three fold submissions, viz., (a) that the order was issued without obtaining the prior approval of the Commissioner of Income-tax as stipulated under section 158BC of Income-tax Act ; (b) that the appellant was not given an opportunity of hearing and necessary copies of documents were not furnished ; and (c) that the depreciation on two continuous push type furnaces that were leased to M/s. Duckfin International Ltd. was not allowed. 12. The Bench, after hearing either side, disposed of the matter on April 19, 2004, rejecting the plea of the assessee on all the three issues. On the first issue, the court held that the Tribunal, on verification of the original records, came to hold that approval was granted by the Commissioner of Income-tax as provided under section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed. 15. Even while the appeal in TCA No. 238 of 2001 was pending before this court, it appears that the assessee filed a petition on March 1, 2002, under section 154 of the Act for rectification before the Assistant Commissioner of Income-tax, Company Circle VI(4), praying to delete the lease rental of ₹ 86.94 lakhs offered as income. On March 14, 2002, supplementary petition under section 154 was filed before the Assessing Officer praying for deletion of ₹ 18,08,240 being ad hoc disallowance at the rate of 5 per cent. of the lease expenses. However, on March 18, 2002, the Assessing Officer, viz., the Assistant Commissioner of Income-tax, declined to rectify the order on the ground that the subject matter of proceedings is already pending before the Tribunal in M. P. No. 70 of 2001, which the appellant- assessee had filed on May 21, 2001, wherein the scope of the petition is as under : It is submitted that certain issues raised at the time of hearing are not considered by the hon'ble Bench while disposing of the said appeal in their order dated April 12, 2001. It is further submitted that in the light of the said factual position, the entire order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 12, 2001, may be recalled and a direction may be issued to the Registry to refix the said appeal for fresh hearing in the interest of justice. It is further submitted that the issues which were raised on the legal position at the time of original hearing ought to have been considered and inasmuch as the same will go to the root of the said block assessment with far reaching legal consequences. There is every necessity for giving due attention and weightage to this issue raised before coming to any decision on admissibility of depreciation claim arising out of the said transaction. 16. In the petition filed under section 154, the appellant has highlighted the erroneous computation made with regard to the undisclosed income. For better appreciation, the relevant portion of the petition is extracted hereinbelow : 11. In the light of the conclusion by the assessing authority that there was no genuine lease transaction on the ground that there was no existing asset in respect of which the aforesaid lease was entered into and consistent with the said finding the lease rental income included in the return as well as in the income computed in respect of the aforesaid furnaces f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 60 per cent. he has added surcharge amounting to ₹ 13,36,162. The petitioner states and submits that surcharge is not leviable in respect of an assessment under Chapter XIV-B. Surcharge is levied under the Finance Act relating to each year. In so far as the block assessment is made for a block period and not for any specific year of assessment, surcharge cannot be levied in respect of such an assessment. 18. This new plea of deletion of income from lease, consequent to disallowance of the claim of depreciation, was raised in the application filed under section 154. It will be pertinent to point out that though this plea was raised in the appeal before this court, even at the first instance, however, the same was abandoned, as is evident from the order passed by the Bench in TCA No. 238 of 2001 on April 19, 2004, wherein only three issues were canvassed by the assessee. In the order that came to be passed by the Assistant Commissioner of Income-tax under section 154 of the Act, the following four issues were considered : (i) Exclusion of lease rentals of ₹ 86.94 lakhs from the undisclosed income computed in the assessment order dated October 29, 1997. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of this nature can be made in a block assessment order appears to be a legal issue and is not amenable to jurisdiction under section 154. The assessee has also taken up this issue in the miscellaneous petition filed by it before the Income-tax Appellate Tribunal. 21. The arithmetical error pointed out by the assessee was verified and found to be baseless and was accordingly rejected. On the imposition of surcharge, it was held that the matter having already been taken up before the Tribunal in the miscellaneous petition, the said issue was not gone into. The relevant portion of the order is extracted hereinbelow : 6. It is submitted by the assessee's representative that there is an arithmetical error in the computation of undisclosed income made in the assessment order. I find that the assessee has added the income computed in the regular assessment for the assessment years covered by the block period to the undisclosed income assessed in the block assessment and has arrived at the figure of ₹ 1,47,30,048. It is the assessee's contention that, therefore, the figure of ₹ 1,48,46,240, viz., the undisclosed income determined in the block assessment is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d decided in the appeal by the hon'ble High Court. The Tribunal further went on to interpret section 154(1A) and held that the scope of section 154(1A) provides that matters which were considered and decided by the appellate authority cannot be rectified and further went on to hold that matter means all facts of the matter, which comes within the scope of the appeal. The Tribunal further held that if the appeal is filed relating to the matter and the same was considered and decided or be treated to have been considered and decided by the appellate authority, it is no longer open to the Assessing Officer to reopen or reagitate or rectify the said issue or matter. For more clarity, the relevant portion of the order is set out hereunder : . . . The powers of the Assessing Officer under section 154 of the Act flow from the provisions of that section only. The language of section 154(1A) of the Act makes it abundantly clear that the matter which is considered and decided by the appellate authority cannot be rectified. The matter means all facts of the matter which come within the scope of the appeal. If the appeal is filed relating to the matter and the same was considered and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 154, any matter other than the matter, which has been considered and decided, can be raised in an application under section 154(1A). Since the income from lease was not an issue raised and decided in the appeal or revision and the entire grounds raised in the appeal being in relation to false claim of depreciation, the application under section 154 of the Act to delete the lease income is in order. The application under section 154 actually flows as a consequence of the proceedings culminating before the Supreme Court. The sole object of the order is disallowance of depreciation holding the transaction as bogus or paper transaction. If the income is booked on such a transaction, it has to be naturally deleted from the income. So also the claim of surcharge, which flows out of the order of the Supreme Court. Learned counsel relies upon the circular of the Board in No. 68, dated November 17, 1971, wherein it has been clarified that any subsequent interpretation of law, which has been laid down by the Supreme Court would constitute a mistake apparent from the records and, therefore, any rectification application filed by the assessee under section 35/154 of the Act would be in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation of the case, at the risk of repetition, section 154 of the Act is extracted hereinbelow : 154. Rectification of mistake.-(1) With a view to rectifying any mistake apparent from the record an Income-tax authority referred to in section 116 may,- (a) amend any order passed by it under the provisions of this Act ; (b) amend any intimation or deemed intimation under sub-section (1) of section 143 . . (1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided. (2) Subject to the other provisions of this section, the authority concerned- (a) may make an amendment under sub-section (1) of its own motion, and (b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee, and where the authority concerned is the Commissioner (Appeals), by the Assessing Officer also. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the Tribunal. In the absence of any challenge permitting the Assessing Officer to vary or review or revise his own order under a plea of correcting the mistake as contemplated under section 154 is to in effect allow him to override or overreach the order passed by the higher authorities in appeal or revision. This is clearly not the intention of legislation of section 154(1A) of the Income-tax Act. We are of the view that the scope of section 154(1A) remains limited to the 'mistakes apparent from records'. Such mistakes cannot and do not include powers to revise or review/reappraise one's earlier order. We are of the view that in the present case, exercise of power under section 154 in so far as 'depreciation' is concerned, is also without jurisdiction. 35. Further, the decision in Lakshmi Vilas Bank's case (supra) relied on by the learned counsel for the appellant-assessee does not further the case of the appellant as we find that the following observations of the court would only throw light in support of our findings in the present case, as made above (page 598 of 329 ITR) : In the judgment reported in CIT v. Hero Cycles Pvt. Ltd. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the erroneous order or revise it as per law. A debatable point cannot be a reason for rectification under section 154. Further, in order to invoke section 154 for rectification of mistake, the mistake sought to be rectified should be a mistake apparent on the record and must be an obvious and patent mistake and not something which could be established by long drawn process of reasoning on the point in issue on which there may be conceivably two opinions. A decision on a debatable point of law cannot be regarded as a mistake apparent on the face of the record amenable for rectification under section 154 of the Income-tax Act. Useful reference can be had to the judgments of T. S. Balaram, ITO v. Volkart Brothers reported in [1971] 82 ITR 50 (SC) and CIT v. Hero Cycles Pvt. Ltd. reported in [1997] 228 ITR 463 (SC). Hence, we do not find any question of law, much less, substantial question of law, for entertaining this appeal as the issue has already been covered by the decisions of the Supreme Court. Therefore, the tax case (appeal) is dismissed. (emphasis supplied) 36. Reliance was placed by the assessee on Circular No. 68, dated November 17, 1971 (see [1972] 83 ITR (St.) 6 ), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doned the plea before the High Court, the plea, which was raised in the section 154 application would clearly show that it is a new plea, which they want to pursue in terms of the provisions of section 154. 39. Yet another factor, which goes against the assessee in the original order itself relates to the plea of income from lease equipment, which was treated as income from financial transaction. Even at the initial point of time, it was well within the appellant-assessee's knowledge that the said income, though not treated as an income from lease, was treated as income from finance transaction in respect of the same party. Therefore, the new plea taken by the appellant that consequent to disallowance of depreciation, the income should also be deleted, has no legs to stand. That fact was not the issue in the first round of appeal. At best it may be treated as a finding of the Assessing Officer, accepted by the assessee and abandoned in the course of appeal proceedings but it cannot be said that it is a mistake apparent on record warranting invocation of rectification proceedings under section 154 of the Act. For the reasons abovesaid, this court holds that the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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