2005-VIL-363-ITAT-

Equivalent Citation: ITD 098, 241, TTJ 101, 090,

Income Tax Appellate Tribunal CALCUTTA

Date: 02.09.2005

DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-I, HOOGHLY.

Vs

JUSTICE DILIP KUMAR SETH.

BENCH

Member(s)  : D. K. TYAGI., JUGAL KISHORE.

JUDGMENT

Per Shri Jugal Kishore, Accountant Member. - This is an appeal filed by the revenue against the order of the ld. CIT(A)-XXXVII, Kolkata dated 31-3-2005 for the assessment year 1999-2000 on the following grounds of appeal:-

(i) That ld. CIT(A) erred in law as well as in facts of the case by accepting reference to Court judgment as part of records for the purpose of section 154 of the Income-tax Act, 1961.

(ii) That ld. CIT(A) erred in law as well as in facts of the case by directing the Assessing Officer to consider the rectification petition afresh in contradiction to provisions of section 143(1) of the Income-tax Act, 1961.

2. Briefly stated the facts of the case are that during the previous year relevant to the assessment year 1999-2000 the assessee received, on receipt basis, a sum of Rs. 3,36,575 representing outstanding fees for professional services rendered by him during the period prior to his elevation to the Hon'ble Calcutta High Court Bench with effect from 19-12-1994. The assessee included the above receipt in his return for the assessment year 1999-2000 under the head "Income from other sources" which was processed and an intimation under section 143(1)(a) was issued by the Assessing Officer accepting the returned income. The assessee thereafter by letter dated 12-2-2003 requested the Assessing Officer to rectify the said intimation under section 154 of the Act in the light of judgment of the Hon'ble Calcutta High Court in case of CIT v. Justice R.M. Datta [1989] 180 ITR 86, wherein it was held that the income received by the assessee prior to his elevation could not be taxed.

3. The Assessing Officer vide his order under section 154 dated 1-8-2003 rejected the application of the assessee with the observation that the outstanding fee for professional services was not taxable under section 28 but was taxable under section 56 of the Income-tax Act. The Assessing Officer further observed that even otherwise rectification under section 154 was not possible as the Assessing Officer has no power under section 143(1) to alter the total income declared by the assessee in the light of decision of the Hon'ble Supreme Court in case of CIT v. Keshri Metal (P.) Ltd. [1999] 237 ITR 165.

4. Being aggrieved, the assessee carried the matter before the ld. CIT(A), wherein it was submitted that on identical facts the Hon'ble Calcutta High Court in case of Justice R.M. Datta has held that sum received by an assessee by way of receipts of professional fees for professional services rendered before he was appointed as a Judge, were not taxable under section 28 or under section 56 or under section 176(4) of the Income-tax Act, 1961. The assessee further contended that the Hon'ble Calcutta High Court followed the judgment of the Hon'ble Supreme Court in case of Nalinikant Ambalal Modi v. S.A.L. Narayan Row, CIT [1966] 61 ITR 428. The assessee also relied on a recent judgment of the Hon'ble Supreme Court in case of CIT v. D.P. Sandhu Bros. Chembur (P.) Ltd. [2005] 273 ITR 1, wherein it was held that if a particular income could not be taxed under section 45, it cannot otherwise be taxed under section 56 or it could not be taxed at all.

5. The assessee further submitted before the ld. CIT (A) that the Assessing Officer was competent under section 154 of the Act to rectify the mistake and pointed out that the Assessing Officer cannot assess an amount which is not taxable in law even if the same is shown by the assessee as taxable and relied on the judgment of the Hon'ble Calcutta High Court in case of CIT v. Bhaskar Mitter [1994] 73 Taxman 437. The assessee further submitted that even otherwise section 143(1)(ii) provides that if any refund is due on the basis of return made it shall be granted to the assessee and an intimation to that effect shall be made to the assessee. The assessee also submitted that the Assessing Officer was well within his jurisdiction to have taken action under section 154(1)(b) of the Act to rectify the order under section 143(1).

6. The ld. CIT(A) after considering the above submission of the assessee observed that outstanding professional fees received by the assessee was not taxable either under the head "Profits and gains of business or profession" or under the head "Income from other sources". The CIT(A) further held that the Assessing Officer was competent to rectify the intimation under section 143(1) for the purpose of withdrawing the inclusion of the outstanding fee and directed the Assessing Officer to consider the rectification petition afresh in light of above observation.

7. The revenue is aggrieved with such order of ld. CIT(A) and has now come in appeal before us.

8. In appeal before us, the ld. Departmental Representative for the revenue, while defending the order of Assessing Officer and assailing the order of ld. CIT(A), has submitted that since the assessee has himself included the outstanding fee received by him in the return of income under the head "Income from other sources", which was processed by the Assessing Officer under section 143(1)(a) of the Act. Hence the application by the assessee to rectify the earlier intimation under section 154 in view of the decision of the Hon'ble Calcutta High Court in case of Justice R.M. Datta was rightly rejected by the Assessing Officer as such return could not be rectified by him as the assessee had not filed revised return and the Department did not commit any mistake while processing the return under section 143(1). The ld. D.R. submitted that the provision of section 154 has no application in this case as this section is enacted for rectification of mistake and in case of mistake committed by assessee, the only remedial measure available with the assessee for rectification of mistake was to file a revised return which the assessee has failed to do, and since the Department also did not do any mistake in processing the return under section 143(1), the Assessing Officer did not have any power to alter the total income as declared by the assessee. The ld. D.R. has further stated that scope of section 154 is limited and could not be invoked in case of debatable issue and relied on the judgment of the Hon'ble Supreme Court in case of T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50. It has, therefore, been pleaded by the ld. D.R. that CIT(A) was not justified in directing the Assessing Officer to rectify the intimation and, therefore, such order of CIT(A) was liable to set aside and the order of Assessing Officer ought to be restored.

9. In his rival submission, the ld. counsel for the assessee has relied heavily on the order of ld. CIT(A) and has reiterated his submission made before him. The ld. counsel has further relied on the judgment as cited before the ld. CIT(A). The ld. counsel has submitted that in view of the above facts it is apparently clear that the above receipt was neither taxable under section 28 nor under section 56 of the Act and, therefore, so far as taxability of the above case is concerned, the same could not be taxed in the hands of the assessee as held by the Hon'ble Calcutta High Court in case of Justice R.M. Dutta.

10. Arguing on the technical aspect of the case, the ld. counsel for the assessee has submitted that the Assessing Officer cannot assess an amount which is not taxable in law, even if the same is shown by an assessee as taxable as held by the Hon'ble Calcutta High Court in case of Bhaskar Mitter. The ld. counsel has further pointed out that the Hon'ble Calcutta High Court in case of CIT v. Premier Polymers (P.) Ltd. [1992] 107 CTR 310 has held that in a case where the point of law in a dispute was settled by a judgment of Hon'ble Court, the Department had to follow the law laid down by the Court, and if that was not done then an obvious and glaring mistake of law have been committed and such mistake can be rectified under section 154 of the Income-tax Act. The ld. counsel has further relied on sections 143(1)(ii) and 154(2) in support of his contention that the Assessing Officer has jurisdiction available with it to rectify such glaring mistake apparent from record. The ld. counsel has, therefore, submitted that the ld. CIT(A) was justified in taking care to the relevant provision of the Act and the decision of various High Courts and Hon'ble Supreme Court while deciding the issue in favour of assessee. Lastly it has also been pointed out by the ld. counsel for the assessee that even otherwise the tax effect in this case was less than Rs. 1 lakh which could well nullify the appeal of the revenue in view of the decision of the Hon'ble Bombay High Court in case of CIT v. Camco Colour Co. [2002] 254 ITR 565.

11. We have given our careful consideration to the rival submissions made before us and have perused the orders of tax authorities. We have also considered the various case laws relied by both the parties. The Assessing Officer in this case has rejected the application filed by the assessee for rectification of the intimation observing that the jurisdiction was not available with him to rectify such intimation as there was no mistake on the part of the Department while processing the return and the assessee could have rectified the mistake vide revised return which was not filed by him in this case. The Assessing Officer has also held that so far as taxability of the above receipt is concerned, the same was taxable in view of the provision contained in section 56 of the Income-tax Act. The ld. CIT(A), however, so far as the taxability of the amount is concerned as held that the above receipt could not be taxed in the hands of the assessee either under section 28 or under section 56 of the Act in view of the decision by the Hon'ble Calcutta High Court in case of Justice R.M. Dutta. The ld. CIT(A) has further observed that the Assessing Officer has jurisdiction to rectify the intimation under section 143(1)(a) under section 154 in the present case.

12. We first take up the issue regarding taxability of the receipt by the assessee. So far as the taxability of the above receipt in the hands of the assessee is concerned, in our considered opinion, the ld. CIT(A) was justified in holding that the above receipt was not taxable under section 28 or 56 or under section 176(4) of the Income-tax Act keeping in view the decision of the Hon'ble Calcutta High Court on identical issue in case of Justice R.M. Datta, wherein it was held as under:-

"Held, that it was admitted that the assessee had been maintaining his accounts on receipt basis. It was also admitted that the sums in question had been received by the assessee by way of receipts of professional fees for the professional services rendered by the assessee before he was appointed as a Judge in 1967. The income was not taxable under section 28, 56 or 176(4) of the Act."

13. We also find that while passing such order, the Hon'ble Calcutta High Court followed the judgment of the Hon'ble Supreme Court in the case of Nalinikant Ambalal Modi, wherein it was held as under:-

"That the receipts were not chargeable to tax at all. The receipts were the outstanding dues of professional work done and were clearly the fruits of the assessee's professional activity. They were the profits and gains of a profession and they fell under the fourth head, namely, "profits and gains of business, profession or vocation". They were not, however, chargeable to tax under that head because under the corresponding computing section, i.e., section 10 of the Income-tax Act, 1922, an income received by an assessee, who kept his accounts on the cash basis, in an accounting year in which the profession had not been carried on at all was not chargeable to tax. Nor could the receipts be brought to tax under section 12 as "Income from other sources". As the heads of income were mutually exclusive and the receipts could be brought under the fourth head, they could not be brought under the residual head "Income from other sources".

14. Apart from the above judgment, the case law relied by the ld. A.R. in case of D.P. Sandhu Bros. Chembur (P.) Ltd. of the Hon'ble Supreme Court, also strengthened the above ratio laid down by the Hon'ble Calcutta High Court, wherein it was held that if a particular income could not be taxed under section 45 then it cannot otherwise be taxed under section 56 or it could not be taxed at all.

15. Coming to the jurisdictional aspect whether the Assessing Officer was competent under section 154 of the Act to rectify the mistake and we find weightage in the contention of the ld. A.R. while relying on section 143(1)(ii) and section 154(2) of the Act. So far as the section 143(1)(ii) is concerned, it reads as under:-

"If any refund is due on the basis of such return, it shall be granted to the assessee and an intimation to this effect shall be sent to the assessee."

The above definition clearly laid down the intention of the Legislature that the Assessing Officer is well competent to rectify the intimation under section 143(1) and thereafter making a refund thereof.

16. Further the provision as laid down in section 154(2)(b) reads as under:-

"Subject to the other provisions of this section, the authority concerned- (b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee."

The above definition clearly laid down that the Assessing Officer is well-competent to rectify any mistake, which is brought to its notice by the assessee also and, therefore, the observation of Assessing Officer and the ld. D.R., that such mistake committed by the assessee could be rectified vide revised return only, does not stand at all. As the above provision laid down in section 154(2)(b) clearly suggests the jurisdiction is available to the Assessing Officer under section 154, in case the mistake is brought to his notice by the assessee also.

17. Even otherwise the Assessing Officer cannot assess an amount which is not taxable in law even if the same is shown by the assessee as held by the Hon'ble Calcutta High Court in case of Bhaskar Mitter, wherein it was held as under:-

"The revenue authorities, in our view, cannot be heard to say that merely because the assessee has returned a figure which is higher than the annual value determined in accordance with the correct legal principles, such higher amount and not the correct amount should be lawfully assessed. An assessee is liable to pay tax only upon such income as can be in law included in his total income and which can be lawfully assessed under the Act. The law empowers the ITO to assess the income of an assessee according to law and determine the tax payable thereon. In doing so he cannot assess an assessee on an amount, which is not taxable in law, even if the same is shown by an assessee. There is no estoppel by conduct against law nor is there any waiver of the legal right as much as the legal liability to be assessed otherwise than according to the mandate of the law (sic). It is always open to an assessee to take the plea that the figure, though shown in his return of total income, is not taxable in law."

18. The judgment relied by the ld. counsel in case of Premier Polymers (P.) Ltd. also laid down the ratio in favour of assessee as laid down by the Hon'ble Calcutta High Court vide para 5 of its order which reads as under:-

"It is well-settled that an obvious glaring mistake can be corrected under the provisions of section 154 of the Income-tax Act, 1961. In the instant case, the point of law in dispute was settled by a judgment of this Court. It was not the case of the Department that the judgment was under appeal or that the judgment had been set aside or that even a contrary view had been taken in some other case on this point. The Department was bound to apply the principles of law laid down by the Calcutta High Court. Since the point of law had already been decided by the Calcutta High Court the ITO had to follow the law laid down by this Court. If that was not done than an obvious and glaring mistake of law had been committed. Such mistake can be rectified under section 154 of the Act."

19. In view of the above facts and circumstances and considering the decision by the Hon'ble Supreme Court and Calcutta High Court, it is apparently clear that the above amount received by the assessee prior to his elevation could not be taxed and, therefore, the assessee has rightly moved a petition under section 154 to rectify the intimation sent by Assessing Officer, and the Assessing Officer was well-competent to rectify such intimation in view of the provision as laid down in sections 143(1)(ii) and 154(2)(b) of the Act and in view of the decision by the Hon'ble Calcutta High Court in case of Bhaskar Mitter and in case of Premier Polymers (P.) Ltd. We, therefore, in the light of above discussion, are of the considered opinion that the ld. CIT(A) while deciding the above two issues has passed a well reasoned and speaking order which does not call for any interference from our side. We, therefore, uphold the same and reject the grounds raised by the revenue.

20. In the result, the appeal filed by the revenue is dismissed.

 

DISCLAIMER: Though all efforts have been made to reproduce the order accurately and correctly however the access, usage and circulation is subject to the condition that VATinfoline Multimedia is not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.