I.T.A. No. 637 of 2007 [1] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 637 of 2007 Date of decision: 11.8.2008 Abhishek Industries Ltd., Ludhiana ... Appellant v. The Commissioner of Income-Tax, Central Circle, Ludhiana and another ... Respondents. CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE RAJESH BINDAL Present: Ms. Radhika Suri, Advocate for the appellant. Mr. Rajesh Sethi, Advocate for the respondents. .. Rajesh Bindal J. This is an appeal filed by the assessee raising following substantial questions of law, arising out of order dated 28.6.2007 passed by the Income Tax Appellate Tribunal, Chandigarh Bench `B', Chandigarh (for short,`the Tribunal') in I.T.A. No. 392/Chandi/2006 for the assessment year 1998-99: “i) Whether in the facts and circumstances of the case, Income Tax Appellate Tribunal was justified in upholding the order passed by the Assessing Officer under Section 154 of the Income Tax Act levying interest under Section 234(B) and (C)even though the income was computed under Section 115JA of the Income Tax Act ? ii) Whether in the facts and circumstances of the case, the Assessing Officer could levy interest under Section 234B and C even though no interest had been levied while framing assessment under Section 143(3) of the Income Tax Act ?” After hearing learned counsel for the parties, we find that first I.T.A. No. 637 of 2007 [2] substantial question of law, as referred to above, does arise for consideration by this Court in the present appeal. With the consent of learned counsel for the parties, arguments were heard at the motion stage for final disposal of the appeal on the first substantial question of law. Briefly, the facts are that assessment of the appellant-assessee was completed under Section 143(3) of the Income-tax Act, 1961 (for short, `the Act') on 22.12.2000 assessing the income at `nil'. However, the income under Section 115JA of the Act was determined at Rs. 89,15,417/- and tax was charged thereon. However, no interest under Section 234B of the Act was charged. Notice under Section 154 of the Act was issued for charging interest under Section 234B and 234C of the Act for short payment/ non- payment of advance tax on the income assessed under Section 115JA of the Act for 27.8.2002. The contention raised by the assessee is that interest under these sections can be levied only in case where the assessee is required to pay any advance tax and as the tax under Section 115JA of the Act is levied on the book profits which are calculated on the basis of audited profit and loss account, which are available only after the close of the year when the accounts are prepared and finally approved, was rejected keeping in view the judgment of Gauhati High Court in Assam Bengal Carriers Limited v. Commissioner of Income-Tax, (1999) 239 ITR 862 holding that interest under Section 234B and 234C of the Act was leviable for short payment/ non-payment of advance tax. The judgment of Gauhati High Court is dated 23.7.1999. The order levying interest under Section 234B and 234C of the Act was passed on account of short payment of advance tax on 12.9.2002. In appeal before the Commissioner of Income-tax (Appeals)-I, Ludhiana, the assessee succeeded and the rectification order was set aside. However, in further appeal by the Revenue before the Tribunal, the stand of the Revenue was accepted and the order passed by the Assessing Officer under Section 154 of the Act was restored. Learned counsel for the assessee submitted that as on the date when the notice for rectification was issued to the appellant, the legal issue on the basis of which the rectification was sought to be made was debatable, as there was no judgment of jurisdictional High Court. The only judgment relied upon was of Gauhati High Court in Assam Bengal Carriers Limited's I.T.A. No. 637 of 2007 [3] case (supra), whereas contrary thereto, there was already a decision of Karnataka High Court in Kwality Biscuits Ltd. v. Commissioner of Income- Tax, (2000) 243 ITR 519 taking a view in favour of the assessee. It was for the first time on 25.9.2004 that this Court in Commissioner of Income-Tax v. Upper India Steel Mfg. and Engg. Co. Ltd., (2005) 279 ITR 123 opined that in the case of non payment/ short payment of advance tax even in case of application of the provisions of Section 115JA of the Act, interest under Section 234B and 234C of the Act was leviable. However, the rectification order in the case of the assessee was passed much prior to that, i.e., 12.9.2002, when two different High Courts had given different opinions. Gauhati High Court was taking view in favour of the Revenue, whereas Karnataka High Court had decided the issue in favour of the assessee. Relying upon the judgment of this Court in Commissioner of Income-Tax v. P.K. Bhardwaj, (2005) 279 ITR 326 and Andhra Pradesh High Court in Commissioner of Income-Tax v. T.N. Viswanatha Reddy, (1991) 190 ITR 266, the submission is that when the issue on the date when rectification was sought to be made was debatable, the power of rectification under Section 154 of the Act could not possibly be exercised. On the other hand, learned counsel for the Revenue submitted that as finally the issue has been determined in favour of the Revenue, the same would mean that the position of law even as on date was the same and now at this stage the order passed by the Assessing Officer under Section 154 of the Act rectifying the mistake committed in the original order of assessment cannot be faulted with as the same is strictly in conformity with law. After hearing learned counsel for the parties and perusing the record, we find merit in the submission made by learned counsel for the appellant. This Court in P.K. Bhardwaj's case (supra), while dealing with a similar situation, opined as under: “In T. S. Balaram, ITO v. Volkart Bros. [1971) 82 ITR 50, the Supreme Court, while considering the scope of section 154 of the Act, categorically laid down that 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 be conceivably two I.T.A. No. 637 of 2007 [4] opinions. Their Lordships further held that a decision on a debatable point of law is not a mistake apparent from the record. Following the dictum laid down in T. S. Balaram, ITO case [1971] 82 ITR 50 (SC) the Calcutta High Court in Vijay Mallya v. Asst. CIT [2003] 263 ITR 41 held as under (page 48): “Section 154 can be invoked for rectification of a mistake apparent from the record. The mistake contemplated under Section 154 must be a mistake apparent on the face of the records. It must be obvious, clear and patent. It must not be a mistake, to establish which a long and elaborate reasoning and arguments is required on points on which there may conceivably be two opinions. It must not be a debatable point of law. It must be a patent and apparent mistake in the assessment. It must not be a question with regard to which two different views may be possible or with regard to which two different opinions can be formed. It must be a glaring, obvious or self-evident mistake of fact or a mistake of law, in respect of which there cannot be any two opinions and it should not be one in order to establish which a long-drawn process of argument or reasoning is to be advanced.” In the present case, the intimation under Section 143(1) (a) of the Act was dated May 31,1993, and order under section 154 was passed on November 17, 1993. The Tribunal dismissed the appeal of the Revenue on September 24, 1997. The decision by this Court in B. M. Parmar's case [1999] 235 ITR 679 was rendered on October 27, 1998, sub-section (7) of section 154 prescribes limitation of four years for initiation of action for rectification of a mistake. Therefore, the action for rectification could have been taken by the Assessing Officer up to March 31, 1998, on the basis of the judgment of the jurisdictional court. However, the fact of the matter is that action initiated under section 154 had been finalised much before the judgment of I.T.A. No. 637 of 2007 [5] this court in B.M. Parmar's case [1999] 235 ITR 679. Therefore, the Revenue cannot rely on the judgment to justify the order passed by the Assessing Officer.” No judgment of Hon'ble the Supreme Court or this Court taking a view contrary to what has been opined in P. K. Bhardwaj's case (supra) has been cited by learned counsel for the Revenue. Keeping in view the law laid down by this Court in the aforesaid case, we are of the considered view that rectification order passed in the case of the assessee on 12.9.2002 when the legal issue on account of which the rectification was sought to be made was highly debatable one as there was no judgment of the jurisdictional High Court. The two other judgments available on the issue were taking a view contrary to each other – the Gauhati High Court was in favour of the Revenue whereas the Karnataka High Court was in favour of the assessee. For the reasons mentioned above, we answer question (i), as referred to above, in favour of the assessee and against the Revenue by holding that the power of rectification could not be exercised by the respondents in the facts and circumstances of the present case. The appeal is disposed of accordingly. (Rajesh Bindal) Judge (Hemant Gupta) Judge 11.8.2008 mk