1. The assessee has preferred these appeals against the consolidated order dated 29-12-1981 of Shri M.S.M. Maraikayar, the Commissioner, who dismissed the appeals against the even date orders--23-3-1981--of Shri K.V. Madan Babu, ITO, passed in the assessment years 1967-68 to 1971-72, respectively.
2. We are disposing of these appeals on consolidating these together and thereby passing a consolidated order for the sake of convenience; since the issue involved in these appeals are common, so much so, that the contention and submissions of the parties are also common.
3. The relevant facts, in brief, are that the assessee filed the returns of income for the assessment years under consideration and the assessments were completed. Appeals were made thereafter before the AAC and the ITO gave effect to the orders of the AAC in each assessment year. However, the assessee made rectification applications under Section 154 of the Income-tax Act, 1961 ('the Act'), stating therein that the ITO should make rectification in his orders as mistake apparent from the record is there for the purpose of recomputation of the deduction admissible under Section 80J of the Act, by revising the capital employed without taking into account the liabilities. Reliance was placed on the decision of the Hon'ble Madras High Court in the case of Madras Industrial Linings Ltd. v. ITO [1977] 110 ITR 256.
4. The ITO did not accept the applications of the assessee for rectification under Section 154 for the assessment years under consideration. He rejected the rectification application for the assessment year 1967-68 on the ground that the assessee had not claimed it at the time of original assessment; that, however, on the basis of the Madras High Court decision, the assessee had put in this claim; that even on merits, the rectification application had been considered and the assessee's petition was rejected. Similarly, the ITO rejected the rectification applications for the other assessment years. The relevant details of completion of original assessments, passing of orders in giving effect to the appellate orders and rectification applications are as under:Assessment Date of original Date of the Dates on whichyears assessment orders of the application filed ITO giving under section1967-68 29-3-1968 31-3-1977 10-5-19791968-69 15-11-1971 31-3-1977 10-5-19791969-70 28-1-1972 31-3-1977 10-5-19791970-71 11-3-1973 30-9-1977 10-5-19791971-72 22-3-1973 30-9-1977 10-5-1979 5. In appeals, the Commissioner confirmed the orders of the ITO and thereby dismissed the appeals of the assessee holding therein that the rectification applications are barred by limitation. The Commissioner (Appeals) further held that the rectification applications are to be filed within four years from the date on which the original assessments were made by the ITO and not from the date the ITO made the assessments in giving effect to the orders of the AAC in appeals before him against the original assessments. Reliance was placed on the decisions in the cases of Ahmedabad Sarangpur Mills Co. Ltd, v. A.S. Manohar, ITO [1976] 102 ITR 712 (Guj.) and Bengal Assam Steamship Co. Ltd. v. CIT [1978] 114 ITR 327 (Cal.). The assessee, being further aggrieved, has preferred these appeals before the Tribunal.
6. Shri Philip George, the learned counsel for the assessee, contends that the period of limitation should be counted from the date of giving effect to the order of the AAC and not from the date of original assessments in deciding the issue whether the rectification application is within time or not. He relies on the decision of the Tribunal in the case of Salem Co-operative Spg. Mills Ltd. [IT Appeal Nos. 1580 and 1581 (Mad.) of 1980 dated 22-10-1981 for the assessment years 1972-73 and 1973-74].
7. On the other hand, Shri Martin David, the learned departmental representative, contends that the decision of the Tribunal, relied upon by the assessee supra, is distinguishable and as such of no help to the assessee; hence, the Tribunal should not follow its own decision in the cases of the assessee. He further contends that the issue involved in these appeals are fully covered by the decision of the Hon'ble High Courts of Gujarat and Calcutta in the cases of Ahmedabad Sarangpur Mills Co. Ltd. (supra) and Bengal Assam Steamship Co. Ltd. (supra), where their Lordships held that the period of limitation is to be counted for the purpose of rectification of assessment orders under Section 154 from the date of passing of the original assessments and not from the date of orders of assessments passed by the ITO in giving effect to the orders of the appellate authorities or from the date of subsequent rectification order.
8. We have heard the rival contentions and have gone through the records before us. We are of the opinion that the assessee should also fail over here. The reasons are that in the applications filed by the assessee before the ITO for the years under consideration for rectification of the orders on the dates referred to above were for the purpose of recomputation of the deduction admissible under Section 80J by revising the capital employed without taking into account the liabilities. This claim was never made by the assessee before the ITO or before the AAC in appeals. Therefore, on this sole ground, it can be safely held that there is no mistake apparent from the record.
Moreover, this cannot be there at all in view of the amendment of Section 80J with retrospective effect vide which the relief for the purpose of Section 80J is to be calculated including the liabilities in the computation of capital employed. When this is so, then the decision of the Tribunal, relied upon by the assessee supra, is of no use to the assessee being distinguishable as the facts in the cases of the assessee are different than that of the case decided by the Tribunal referred to above where the rectification made by the ITO was the natural consequence of the effect given to the order in appeal by him, and it is immaterial if this amendment is not applicable to the assessments under consideration in view of the fact that this is the proof for the intention of Parliament on the issue.
9. Apart from it, the case of the Tribunal cannot be followed in view of the fact that the Tribunal is bound to follow the decision of any High Court, if the same is contrary to the decision of the Tribunal.
Therefore, we are bound to follow the decisions on the issue of the Hon'ble Gujarat High Court and the Calcutta High Court. We cannot do otherwise on the ground that the Tribunal has considered the decision of the Gujarat High Court and the same has been distinguished by the Tribunal. Furthermore, the Tribunal has followed the ratio decidendi of the Hon'ble Gujarat High Court though decided the case otherwise on account of distinguishing features or facts of the case. Therefore, we have to follow the ratio of the decision of the Gujarat High Court on the issue.
10. Besides, the Tribunal has not considered the decision of the Calcutta High Court in deciding the case of Salem Co-operative Spg.
Mills Ltd. (supra) and, therefore, we reject the contention of the learned counsel for the assessee that the ratio laid down by the Calcutta High Court on the issue is identical to that of the Gujarat High Court decision in Ahmedabad Sarangpur Mills Co. Ltd.'s case (supra) and, therefore, when the Tribunal has not followed the decision of the Hon'ble Gujarat High Court on the issue, then on the same reasoning the decision of the Calcutta High Court should not be followed, hence the ratio laid down by the Tribunal is favourable to the assessee and as such the decision of the Tribunal is to be followed. Therefore, on these reasons, we reject the contentions of the assessee's counsel to follow the decision of the Tribunal as these are not well founded, while we accept that of the learned departmental representative being relevant.
11. In the case of Bengal Assam Steamship Co. Ltd. (supra), their Lordships of the Calcutta High Court held that the period of limitation to make an application for rectification of certain mistakes in the assessment order of the ITO under Section 154 should be computed from the date of the earlier order of the ITO and not from any subsequent order passed thereon. Similarly, their Lordships of the Gujarat High Court in the case of Ahmedabad Sarangpur Mills Co. Ltd. (supra) held as under: ... the contention for the revenue that there could be two assessments contemplated under the Income-tax Act, one the original assessment under Section 23 of the 1922 Act and the other when the assessment is rectified under Section 35, could not be accepted.
Even if there could be two such assessment orders, the period of limitation for rectifying the respective orders should be four years from the date of the original assessment order. Merely because an assessment order is rectified, it cannot enlarge the period of limitation. Therefore, the period of limitation in this case should be considered to commence from December 26, 1962, when the order of assessment was made in respect of the assessment year 1961-62, and consequently the notices issued on February 3, 1968, for initiation of rectification proceedings were clearly time-barred. Even assuming that the limitation should commence from the first rectification order of May 21, 1965, even then, what was sought to be rectified was the mistake which had been committed in setting off the loss to Rs. 12,39,626 as loss for the assessment year 1954-55, and, therfore, it could not be said that what was sought to be done by the Income-tax Officer was in effect and substance the rectification of the order of May 21, 1965. Therefore, the effort of the Income-tax Officer was to rectify the error which had crept in the original assessment order for the assessment year 1961-62, which had been made on December 26, 1962. Therefore, the impugned rectification notice was clearly time-barred and without jurisdiction. The two notices for initiation of rectification proceedings for the subsequent years 1962-63 and 1963-64 were consequential and, therefore, they were also beyond the jurisdiction of the Income-tax Officer.
12. Since the learned counsel for the assessee has not brought any decision either of the Madras High Court or of the Supreme Court in support of his stand stated above and we have already held that the decision of the Tribunal in Salem. Co-operative Spg. Mills Ltd.'s case (supra) is distinguishable, therefore, we hold that the ratio decidendi laid down by the decisions of the Calcutta and Gujarat High Courts, is to be followed. Hence, we follow it with respect and thereby hold that the period of limitation to make application under Section 154 for rectification of mistakes in the assessment order of the ITO should be computed from the date of passing of the original assessment orders and not from the date of subsequent assessments made by him in giving effect to the orders of the appellate authority. Accordingly, we confirm the impugned orders on the issue of limitation, holding further that acting otherwise will give no finality in the case and the provisions of the Act for appeal and rectification shall be misused.
13. On merits also, the assessee has to fail. The reasons are that the assessee made the claim under Section 80J by computing the capital employed excluding the liabilities. In appeals, the assessee did not claim that Section 80J relief is to be provided to the assessee on including the liabilities in computing the capital employed. When this is so, then, if the ITO has given effect to the orders of the AAC, accordingly, then, there is no mistake apparent from the record to be rectified by computing the capital employed including the liability for the purpose of Section 80J. Furthermore, Section 80J has been amended with retrospective effect vide the Finance (No. 2) Act, 1980, according to which relief under Section 80J is to be provided by computing the capital employed excluding the liabilities.
14. When this is so, then the question of providing such relief on including the liabilities in computing the capital employed does not arise as the meaning or interpretation of the term 'capital employed' on the issue is defined and described by this amendment; hence, the interpretation of the Parliament (vide amendment) was there even prior to amendment of this section as vide this amendment the Parliament has shown its intention in express terms while prior to it, it was not in the Act but in rule 19A of the Income-tax Rules, 1962 ('the Rules'), and being so, it was held void being contrary to the provisions of Section 80J by judicial pronouncement. Therefore, in deciding the appeal or pending appeals prior to the assessment year 1972-73, we have to follow the amendment for the purpose of interpreting the term 'capital employed' as subsequent amendment is always the best source, proof to describe or prove the intention of the Legislature (Parliament); hence for the interpretation of this term (capital employed) in disposing of the appeals or pending appeals, the amendment is to be followed for this purpose. Thus, the Madras High Court decision on the issue, relied upon by the assessee, is of no help or substance as it was made prior to the amendment of Section 80J.Accordingly, on these reasons, we hold that the assessee should fail on merits as it has no case and, therefore, the legal issue which have determined is merely an academic issue, since the appeals of the assessee are liable to be dismissed on merits. In view of our above discussion and reasons thereto, we hold that the authorities below are justified on the totality of the facts and circumstances of the case in rejecting and confirming the orders of the ITO of rejecting the rectification application under Section 154 for the assessment year under consideration. Hence, we confirm the impugned order.
1. I have carefully perused my learned brother, the Judicial Member's order. With great respect, I wish to dispose of the appeal differently.
2. In these appeals by the assessee, its common contention for all the years contained in grounds Nos. 3 to 5 of the grounds of appeal is as under: 3. The learned Commissioner (Appeals) ought to have held that for the purposes of Section 154 of the Income-tax Act, 1961, the period of time has to be calculated only from 31-3-1977/30-9-1977, being the date of the order of the ITO giving effect to the AAC's order and not from the date of the original assessment.
4. The learned Commissioner (Appeals) ought to have held that the application filed under Section 154 of the Act was filed on 10-5-1979 and was, therefore, within the prescribed time limit.
5. The learned Commissioner (Appeals) ought to have held that as the application under Section 154 was within time, the appellate was entitled to have the assessment order rectified in accordance with the ratio of the decision of the Madras High Court in Madras Industrial Linings Ltd, v. ITO [1977] 110 ITR 256.
The dates of the original assessment, the dates on the ITO's orders giving effect to the appellate brders and the dates on which applications were filed by the assessee under Section 154 were as under:Assessment Date of Date of Dates on which applica-years original orders of the tions filed under sec- assessment ITO giving tion 1541967-68 29-3-1968 31-3-1977 10-5-19791968-69 15-11-1971 31-3-1977 10-5-19791969-70 28-1-1972 31-3-1977 10-5-19791970-71 11-3-1973 30-9-1977 10-5-19791971-72 22-3-1973 30-9-1977 10-5-1979 The assessee filed rectification applications under Section 154, dated 10-5-1979, for the above years in which it requested the ITO for revision of the assessment to allow deduction under Section 80J on the capital of the company, taking liabilities also as capital, relying on the ratio of the decision of the Madras High Court in Madras Industrial Linings Ltd.'s case (supra). The ITO, however, rejected the assessee's application under Section 154 by his impugned orders (e.g., for the assessment years 1967-68) in the following terms: After due consideration of the assessee's letter dated 10-5-1979 and the oral submissions made before me at the time of hearing, and with great respect to the Madras High Court, the assessee's claim for recomputing the capital base, including the liabilities for purpose of deduction under Section 80J, is rejected. The assessee has not claimed this at the time of original assessment. However, on the basis of the Madras High Court decision, the assessee has put in this claim. As such since the original assessment was made on 29-3-1968, it is barred by time for rectification under Section 154.
However, even on merits, it has been considered and the assessee's petition is rejected. (Assessment Year 1967-68) 3. Before the Commissioner (Appeals), in appeal the assessee contended against the above orders of the ITO that the period of limitation of four years should be counted from the date of the ITO's order giving effect to the orders of the AAC and if so computed, the assessee's rectification applications dated 10-5-1979 would be found to have been filed in time. It was urged that the ITO's orders giving effect to the AAC's orders were independent orders in the nature of the assessment orders as laid down in Jeewanlal (1929) Ltd. v. CIT [1971] 106 ITR 33 (Cal.), Triplicane Urban Co-operative Society Ltd. v. CIT [1980] 126 ITR 125 (Mad.). The Commissioner (Appeals), however, observed that the above decisions were not authorities for the proposition that when mistakes are in the original assessment orders, the limitation period has to be counted from a subsequent order either rectifying the original assessment order or giving effect to any appellate order. The Commissioner (Appeals) referred to the decision in Ahmedabad Sarangpur Mills Co. Ltd.'s case (supra) and Bengal Assam Steamship Co. Ltd.'s case (supra). He observed that it was clear that even if there had been a subsequent rectification of the original assessment order so long as the rectnication to be made is in respect of a mistake which was committed in the original assessment order, the limitation would commence from the date of the original assessment order and not the subsequent rectificatory order. The Commissioner (Appeals) held that the limitation has to be counted from the date of passing of the original assessment order and on such basis the assessee's rectification petitions were barred by limitation. The Commissioner (Appeals), thus, dismissed the assessee's appeals. The Commissioner (Appeals) did not deal with the assessee's further contention on the merits.
4. We have heard the parties. Before us, the learned counsel for the assessee relied on the order of the 'C Bench of this Tribunal in the case of Salem Co-operative Spg. Mills Ltd. (supra) and contended that the assessee's applications for rectification of the computation of Section 80J dated 10-5-1979 were within time, reckoned from the date of the ITO's orders giving effect to the appellate orders, viz., 31-3-1977/30-9-1977. The counsel submitted that the mistake apparent on the record regarding non-deductions of liabilities, in view of the Madras High Court decision in Madras Industrial Linings Ltd.'s case (supra), should have been rectified by the ITO and the assessee's applications under Section 154 become within time. In reply the learned departmental representative strenuously urged that the timelimit of four years has to be calculated from the date of the original assessment and not from the dates of the ITO's subsequent orders giving effect to the appellate orders. The departmental representative in this context referred to the Gujarat and Calcutta High Courts' decision in Ahmedabad Sarangpur Mills Co. Ltd.'s case (supra), Bengal Assam Steamship Co. Ltd.'s case (supra) and Mettur Chemical & Industrial Corpn. Ltd. v. CIT [1977] 110 ITR 822 (Mad.).
5. I have considered the rival submissions. On a careful consideration of the rival submissions, I find considerable merit in the assessee's contention. The basic point for consideration in these appeals is whether the assessee's rectification applications dated 10-5-1979 are within time. I am of the view that they are within time computed with reference to the ITO's orders, dated 31-3-1977/30-9-1977, giving effect to the appellate orders (the AAC's orders for the first three years and the Tribunal's orders for the last two years), following the Tribunal's decision in the case of Salem Co-operative Spg. Mills Ltd. (supra). In this case, the facts were that the assessment for the assessment year 1972-73 was completed on 17-12-1974 by the ITO, deducting current year's depreciation, current year's development rebate, the business loss carried forward from 1966-67, the unabsorbed development rebate carried forward from 1965-66 and unabsorbed development rebate carried forward from 1966-67, thereby reducing the total income to nil and leaving some unabsorbed development rebate for 1966-67 to be carried forward. On 14-8-1978, the ITO revised the assessment to give effect to an order of the Tribunal by deleting a disallowance of Rs. 1,475 in computing the income from business. While making the revised order of assessment, the total income was again determined in the same manner as before. Later the ITO realised that he had committed a mistake regarding the order in which the deductions were made, since the business loss carried forward should have been deducted first, before deducting the current year's development rebate. He, therefore, made an order on 13-12-1979, rectifying the revised assessment made on 14-8-1978. This resulted in the variation of the amount carried forward for the subsequent year and, accordingly, he rectified the assessment order for the assessment year 1974-75 as a consequence. On appeal by the assessee, the Commissioner (Appeals) held that the rectification made by the ITO in effect corrected a mistake in the original assessment order dated 17-12-1974 and, hence, the order passed by the ITO on 13-12-1979, after more than four years after that date, was barred by limitation. Since the rectification for the subsequent year was consequential, he cancelled the rectification orders for both the years. The revenue appealed to the Tribunal against the AAC's order contending that the rectification was only of the order dated 14-8-1978 and, therefore, it was in time. The Tribunal accepted this contention as under: Needless to say that Section 154 empowers the Income-tax Officer to rectify any order and not necessarily original order of assessment.
Therefore, if there was a mistake in the order dated 14- -1978, the Income-tax Officer can certainly correct it under Section 154. We do not see why his power to correct that mistake should be i.gnored only because the same mistake has been repeated from the earlier assessment order dated 17-12-1974. As we have seen above, the original assessment order dated 17-12-1974 stood superseded and what was in force was only the order dated 14-8-1978. Therefore, it cannot be said that the rectification of the order, dated 14-8-1978, was a rectification of an earlier order dated 17-12-1974. The decision of the Gujarat High Court in Ahmedabad Sarangpur Mills Co.
Ltd. v. A.S. Manohar, ITO [1976] 102 ITR 712, relied on by the assessee, is clearly distinguishable because in that case, the original order of assessment was not superseded and it was only rectified by a rectification order. The Income-tax Officer purported to rectify the rectification order and thereby correct a mistake in the original assessment order which was still in operation. Since it was found that the rectification order which stood by itself did not contain any mistake, the second rectification was held to be invalid. But in the present case, the revised assessment dated 14-8-1978, admittedly, contains a mistake and is in force whereas the original assessment order dated .17-12-1974 is no longer in force. Therefore, we find that the original assessment order dated 17-12-1974 cannot be a subject-matter of rectification as it does not exist and it is only the order dated 14-8-1978 which is the subject of rectification proceedings. It follows that the rectification of the assessment order for the assessment year 1974-75 as a consequence is also valid.
As stated earlier, the department before us relies on Ahmedabad Sarangpur Mills Co. Ltd's, case (supra), Bengal Assam Steamship Co.
Ltd.'s case (supra) and Mettur Chemical & Industrial Corpn. Ltd.'s case (supra). It would be seen from the Tribunal's order above that it has distinguished the Gujarat High Court decision in Ahmedabad Sarangpur Mills Co. Ltd.'s case (supra) on the ground that in that case the original assessment order was not superseded but it was only rectified by a rectification order. The same is the position regarding Bengal Assam Steamship Co. Ltd.'s case (supra); for the assessment year 1954-55 in the case, the ITO passed an order dated 22-2-1961 under Section 49A of the Act giving certain relief to the assessee under Double Tax Avoidance Agreement. On 4-9-1963, the ITO passed an order under Section 154 by which he rectified the order dated 22-2-1961.
There was similar rectification by the ITO for the assessment year 1955-56. On 22-10-1965, the assessee applied for rectification of certain mistakes in the assessment orders which the ITO rejected on the ground that the application was time barred. The ITO, however, rectified certain mistakes, on 4-2-1966. The assessee filed appeals from those orders, but both the appellate authorities dismissed those appeals as the assessee's application for rectification was time barred. The High Court held that the period of limitation will run from the dates of the earlier orders of the ITO in respect of both the assessment years. Bengal Assam Steamship Co. Ltd.'s case (supra), relied on by the department, is thus similar to Ahmedabad Sarangpur Mills Co. Ltd.'s case (supra) in that here also the original order of the ITO was not superseded but merely rectified by a rectification order. Ahmedabad Sarangpur Mills Co. Ltd.'s case (supra) was distinguished by the Tribunal in arriving at its conclusion, and Bengal Assam Steamship Co. Ltd.'s case (supra) is also manifestly distinguishable for the same reasons.
6. The department has also relied on Metlur Chemical & Industrial Corpn. Ltd.'s case (supra), which case also, in my view, is distinguishable on facts. In this case in making the income-tax assessment, the ITO had allowed the wealth-tax paid as a deduction in computing the assessee's total income. In the subsequent orders of reassessments also, this point was not touched by the ITO.Subsequently, the ITO initiated proceedings in respect of both the years under Section 154 apparently on the basis of the Madras High Court decision in Kumbakonam Electric Supply Corpn. Ltd. v. CIT [1963] 50 1TR 809 which held that wealth-tax paid was not deductible from the income from business in arriving at the taxable income. The ITO overruled the assessee's objection and rectified the assessment order by adding back the wealth-tax which was originally deducted. The Madras High Court held regarding the question of limitation that though proceedings for a reassessment had been completed under Section 147 of the Act, it could not be held that the entire order of assessment originally passed by the officer ceased to exist and that the only order that remains in force is the reassessment order; therefore, the limitation for initiation of proceedings under Section 154 will have to be reckoned from the original assessment order. As the order of rectification for the assessment year 1959-60 was passed on 25-2-1965, after the period of four years from the date of the original assessment made on 27-5-1960, the same was barred by limitation. It will be seen that in this case the High Court was considering the original assessment and the reassessment made thereafter, whereas in the case before us in the present appeals, as also the case decided by the Tribunal in Salem Cooperative Spg. Mills Ltd.'s case (supra), the issue is regarding the computation of limitation with reference to the ITO's order giving effect to an appellate order. We are, therefore, of the view that Mettur Chemical & Industrial Corpn. Ltd.'s case (supra) is also clearly distinguishable. In the circumstances, with respect, I find no reason to depart from the Tribunal's view that the question of limitation for rectification has to be considered with reference to the date of the ITO's order giving effect to the appellate order and not the date of the original assessment order which has ceased to exist.
This view of the Tribunal also finds support from the following observation of the Calcutta High Court decision in Chloride India Ltd. v. CIT [1977] 106 ITR 38: ... When an assessment is modified pursuant to the order of the appellate authority or direction, the subsequent order will be regular assessment and must supersede and replace the earlier assessment order ..." This same view was echoed by the Madras High Court in Triplicane Urban Co-operative Society Ltd.'s case (supra), holding that the ITO's order passed to give effect to the decision of the AAC is an order passed under Section 143 of the Act and is, therefore, a regular assessment, vide also Rayon Traders (P.) Ltd. v. ITO [1980] 126 ITR 135 (Mad.).
Thus, adopting the reasoning and conclusion in the aforesaid order of the Tribunal in Salem Co-operative Spg. Mills Ltd.'s case (supra), I would hold that the assessee's rectification applications dated 10-5-1979 are within time computed with reference to the ITO's order dated 31-3-1977 and 30-9-1977, which are the subject of rectification proceedings. Accordingly, I would vacate the AAC's finding on this point for all the years.
7. Regarding the assessee's further submission that the assessments should be rectified under Section 154 by applying the ratio of the Madras High Court decision in Madras Industrial Linings Ltd.'s case (supra), the Commissioner (Appeals) has not gone into the merits of the issue raised by the assessee including the point that there is a mistake apparent on the record within the meaning of Section 154 which should be rectified on the basis of Madras Industrial Linings Ltd.'s case (supra). Hence, I would direct the Commissioner (Appeals) to deal with, and dispose of, this issue on merits in accordance with law after giving the due opportunity to both the parties.
8. In the result, the assessee's appeals are treated as allowed for statistical purposes.
Order under Section 255(4) of the Income-tax Act, 1961 - Whereas we are unable to agree on the point set out below for the assessment years 1967-68 to 1971-72, we refer the following point of difference of opinion to the President for reference to Third Member, under Section 255(4) of the Act: Whether, on the facts and in the circumstances of the case, the period of four years' limitation for the purpose of rectification under Section 154 of the Act should be considered with reference to the dates of the Income-tax Officer's orders giving effect to the appellate orders for the respective years and, consequently, the assessee's rectification applications under Section 154 dated 10-5-1979 are within time ?" 1. My learned brothers, not being able to agree on the following point of difference, have referred the matter to the President, who, in turn, nominated me as the Third Member: Whether, on the facts and in the circumstances of the case, the period of four years' limitation for the purpose of rectification under Section 154 of the Act should be considered with reference to the dates of the Income-tax Officer's orders giving effect to the appellate orders for the respective years and, consequently, the assessee's rectification applications under Section 154 dated 10-5-1979 are within time ?" 2. Simply stated, the question is from which order, the period of four years' limitation should be computed for the purpose of Section 154.
Before I go to the relevant facts, I would like to refresh myself with the provision laying down the limitation for rectifying the orders under Section 155(4) of the Act. That provision is contained in Sub-section (7) of Section 154, which is to the following effect: (7) Save as otherwise provided in Section 155 or Sub-section (4) of Section 186 no amendment under this section shall be made after the expiry of four years from the date of the order sought to be amended." This section simply means that the period of four years is to be reckoned from the date of the order sought to be amended. I have to, therefore, see in the present case, what is the order sought to be amended and what was its date. That should resolve the conflict.
3. In the present case, the assessee, a limited company, filed its returns for the assessment years 1967-68 to 1971-72. The assessments for these years were completed on 29-3-1968, 15-11-1971, 28-1-1972, 11-3-1973 and 22-3-1973, respectively. There were appeals filed against these orders and after the receipt of the appellate orders, the ITO passed orders giving effect to the appellate orders for the first three years on 31-3-1977 and for the latter two years, on 30-9-1977. In the meantime, the Madras High Court in Madras Industrial Linings Ltd.'s case (supra), held that for computing the capital under Section 80J, the liabilities should not be deducted. That is to say, the assessee would be entitled to higher relief under Section 80J than claimed for.
With a view to take advantage of the decision of the Madras High Court, the assessee put in petitions before the ITO under Section 154 for all these years on 10-5-1979, requesting him to rectify the assessments by recomputing the relief allowable under Section 80J without deducting the liabilities. The ITO rejected these applications, inter alia, pointing out that since the original assessments were made on 29-3-1968, 15-11-1971, 28-1-1972, 11-3-1973 and 22-3-1973, respectively, the applications for rectification under Section 154 were barred by time. It is now common ground that if the four years time is reckoned from the dates of original assessments, the applications for rectification are barred by lime for all these years, whereas, if it is counted from the date when the ITO passed the orders giving effect to the appellate orders, they should be within time. Now the controversy is, which is the date from which the period of limitation should be counted. Is it the date of the original assessment order, or is it the date of orders passed giving effect to the appellate orders In other words, what is the order sought to be amended.
4. The assessee contended before the Tribunal, relying on a decision of the Tribunal in the case of Salem Co-operative Spg. Mills Ltd. (supra), that the period of limitation should be counted from the date of the second order passed by the ITO giving effect to the appellate orders and not with reference to the earlier orders, namely, the original assessment orders.
5. The departmental representative, however, pointed out that the Gujarat High Court in the case of Ahmedabad Sarangpur Mills Co. Ltd. (supra) and the Calcutta High Court in the case of Bengal Assam Steamship Co. Ltd. (supra), held that the period of limitation is to be counted from the date of the original assessment and not from the subsequent orders passed even though giving effect to the orders of the appellate authorities.
6. The learned Judicial Member was of the opinion that the earlier order of the Tribunal was not correctly decided, that the decision of the Tribunal was contrary to the judgments of the High Court, and that the decision of the Gujarat High Court should have been followed. He was also of the opinion that there was another judgment of the Calcutta High Court, which was not noticed by the earlier Bench. He also dealt with the merits, but I am not in this reference concerned with the merits.
7. But, the learned Accountant Member preferred to follow the view expressed by the earlier Bench of the Tribunal. He was of the firm opinion that the High Court decisions referred to by the departmental representative the Gujarat High Court decision in Ahmedabad Sarangpur Mills Co. Ltd.'s case (supra), the Calcutta High Court decision in Bengal Assam Steamship Co. Ltd.'s case (supra) and the Madras High Court decision in Mettur Chemical & Industrial Corpn. Ltd.'s case (supra), are clearly distinguishable and the facts were not at all in pari materia. After pointing out the point of distinction, he sought support for the view he took from another decision of the Calcutta High Court in Chloride India Ltd's case (supra), where the Calcutta High Court observed that when an assessment was modified pursuant to an appellate order or direction, the subsequent order will be regular assessment and must supersede and replace the earlier order. This view was supported by the Madras High Court in Triplicane Urban Co-operative Society Ltd.'s case (supra), where the Madras High Court held that when an ITO passes an order giving effect to a decision of the AAC, that would be an order passed under Section 143 and, therefore, a regular assessment. He, thus, held that the period of limitation should be computed from the dates of the orders passed giving effect to the appellate orders and not from the dates of the original assessment orders. Thus, the learned brothers could not agree on their conclusions and hence this reference to me.
8. I have very carefully gone through the orders of the learned Members, the decisions of the High Courts relied upon before them and also before me and considered the arguments addressed to me. I am of the opinion that the view expressed by the learned Accountant Member is the correct view and should prevail. I agree with him that the decisions given by the Gujarat High Court in Ahmedabad Sarangpur Mills Co. Ltd.'s case (supra), by the Calcutta High Court in Bengal Assam Steamship Co. Ltd.'s case (supra) and by the Madras High Court in Meltur Chemical & Industrial Corpn. Ltd.'s case (supra), were clearly distinguishable.
9. In the Gujarat High Court decision in Ahmedabad Sarangpur Mills Co.
Ltd.'s case (supra), the facts were as under: In the assessment order dated February 27, 1958 for the assessment year 1954-55, the Income-tax Officer determined the business loss of the petitioner firm at Rs. 12,39,626. This loss was carried forward and ultimately allowed to be set off against the business income of the petitioner-company in the assessment year 1961-62, with the result that an amount of Rs. 47,887, which was a carried forward loss of the assessment year 1954-55 remained outstanding. This assessment order for the assessment year 1961-62 was made on December 26, 1962. When it was later discovered that the actual loss for the assessment year to be set off had been wrongly computed, the Income-tax Officer, with a view to correct the amount of set off allowed in respect of the carried forward loss, issued three notices on February 3, 1968, under Section 154 of the Income-tax Act, 1961, proposing to rectify the assessment orders for the assessment years 1961-62 to 1963-64, passed on December 12, 1962, March 25, 1966, and July 5, 1966, respectively. For the assessment year 1961-62, the notice was virtually under Section 35 of the 1922 Act. In the meantime, the Income-tax Officer had on May 21, 1965, passed an order of rectification under Section 154 of the 1961 Act in respect of the assessment order for the assessment year 1961-62 on a different matter. In pursuance of the three notices, the Income-tax Officer passed orders of rectification of the assessment orders of the three years 1961-62 to 1963-64 overruling the assessee's objection on the ground of limitation. The petitioner filed a writ petition challenging the notices and orders of rectification, contending that the rectification proceedings were barred by limitation as they were made after four years from the date of the assessment order: (p. 732) The Gujarat High Court, no doubt, held that the period of limitation commenced from the date of the original assessment order passed on 26-12-1962 and not from the later date, and consequently, the notices issued of rectification on 3-2-1968 were clearly time-barred. In coming to this conclusion, the Gujarat High Court pointed out at page 722 of its report that the mistake sought to be rectified existed in the original assessment, order passed on 26-12-1962 and that mistake could not be rectified by commencing the period of limitation from a later order. Thus, the Gujarat High Court lays down two principles, one is if the mistake sought to be rectified is traced to a particular order, the period of limitation would commence from the date of that order. The second principle, is that the subsequent order of rectification cannot be considered to be a separate order from the original assessment order.
10. In the case before the Tribunal, which the learned Accountant Member wished to follow and the learned Judicial Member declined, the Gujarat High Court decision was, no doubt, cited by the department and the Bench did not find it difficult to distinguish it on facts by pointing out that where, as in the case before the Gujarat High Court, the original order passed was not superseded and it was only rectified by a rectification order and thus stood the ground in the case before the Tribunal, the original assessment order was superseded by a subsequent order passed. As a consequence, the original order ceased to be in force, and what was more, the mistake continued to exist in the second assessment order which means the superseding order. So, when the mistake existed in the superseding order and when that mistake was sought to be rectified, the period of limitation must commence only from that order and not from the original assessment order which was superseded. It is, no doubt, true that the Tribunal did not notice the Calcutta High Court decision in Bengal Assam Steamship Co. Ltd.'s case (supra), but the facts there are not dissimilar to the facts obtaining in the case before the Gujarat High Court in Ahmedabad Sarangpur Mills Co. Ltd.'s case (supra). The Calcutta High Court decision does not show any discussion except stating that it would reject the contention put forward on behalf of the assessee that the period of limitation would run not from the earlier order but from the subsequent order. There is also no reference to the decision of the Gujarat High Court. But this short judgment delivered by the Calcutta High Court would disclose that here also, as in the case before the Gujarat High Court, there were only certain rectifications made in the original assessment order and the mistake sought to be rectified was in the original assessment order and perhaps for this reason, the High Court held that the period of limitation should commence from the original assessment order, because it was a mistake in that order that was sought to be rectified. So, before the High Court also, there was no such thing as the earlier assessment order being superseded by the subsequent order. So too, is the case before the Madras High Court in Mettur Chemical & Industrial Corpn. Ltd.'s case (supra), which I think, is not necessary for me to give the facts in detail because they are given in the order passed by my learned brother, the Accountant Member. The question, therefore, ultimately turns upon, as I said in the beginning, where does the mistake lie Does it lie in the original assessment order or does it lie in the subsequent proceedings, call it by whatever name If the mistake lies in the subsequent order, Section 154 postulates the rectification of mistake in that order also and the time limit under Sub-section (7) would commence from that order. Once it is held that the original assessment order ceased to exist, then the question of computing the time limit from the date of the non-existing order does not arise. My learned brothers did not differ on the question whether the original assessment order ceased to exist or did not cease to exist. Both of them seemed to agree, at least so I understand, that both of them proceeded from the premises that consequent upon the passing of orders giving effect to the appellate order, the original assessment orders ceased to exist. Therefore, the mistake said to exist is in the order that finally held the field which was the order passed giving effect to the appellate orders and not the original order. If the mistake is repeated in the subsequent order, the rectification of mistake is then traced to the subsequent order. It, therefore, follows that the orders sought to be amended within the meaning of Sub-section (7) of Section 154 are the orders passed on 31-3-1977 for the first three years and 30-9-1977 in respect of the other two years. These considerations lead me to agree with the view expressed by the learned Accountant Member that the period of limitation would commence from the date of the subsequent orders and not from the dates of the original orders and the decisions of the High Courts, relied upon by the learned Judicial Member, are clearly distinguishable. It may not be out of place for me to add here that when the Tribunal had observed in its order in Salem Co-operative Spg. Mills Ltd.'s case (supra) distinguishing the Gujarat High Court decision, it did not amount to refusing to follow the Gujarat High Court decision. This seems to be the basis for the learned Judicial Member to decline to follow the order of the Bench on identical issue. Here again the observations of the Madras High Court in the case of CIT v. L.G. Ramamurthi [1977] 110 ITR 453 are very opposite and ought to be borne in mind.
11. I am not going into the merits of the case, as it is beyond the purview of the reference to me.
12. The matter will now go before the regular Bench for the disposal of the appeal in accordance with the majority of the opinion.