Commissioner of Income Tax vs Bimetal Bearings Limited

Thanikkachalam, J.—In compliance with the direction given by this Court in TCP Nos. 58 and 59 of 1978, dt. 9th November, 1978, the

Tribunal referred the following question, for the asst. yrs. 1966-67 and 1967-68, for the opinion of this Court, under s. 256(2) of the IT Act, 1961

hereinafter referred to as the ""Act"" :

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the mistake sought to be rectified by the ITO

under s. 154 of the IT Act was not an apparent one in the case of the assessee for the asst. yrs. 1966-67 and 1967-68 ?.

In the case of this assessee, assessment for the asst. yr. 1966-67 was re-opened under s. 147(b) of the Act and the revised assessment was

made. Subsequently that order was rectified for granting further depreciation allowance for certain assets. Later on, the ITO initiated action under

s. 154 of the Act, on the ground that there was a mistake in the regular assessment itself in the computation of capital for the purpose of grant of

relief under s. 84 r/w r. 19. The mistake alleged was that for the earlier assessment year, viz., 1965-66, the assessee filed its return of income on

30th June, 1965 and under s. 140-A a sum of Rs. 12,81,274 became due, that for asst. yrs. 1966-67 the average liability on 1st July, 1964 being

the first day of the computation period and the liability on 30th June, 1965 being the last of the computation period amounting to Rs. 6,40,637

should have been deducted as a liability from the capital and that this was not done. The assessee objected to the proposal for revising the

assessment on the ground that while completing the regular assessment for 1965-66 and 1966-67 the ITO had considered the tax liabilities and

had mentioned that the tax liabilities need not be taken into account and that, therefore, there was no mistake apparent from the record. The ITO

rejected the assessee''s contention and passed the order under s. 154 of the Act. For the next asst. yr. 1967-68 on the same date, the ITO

following the reasons mentioned by him in respect of the asst. yr. 1966-67, recomputed the relief under s. 84.

On appeal, the AAC held that the provisions of s. 154 would not apply to the facts of this case, since the issue involved was highly debatable.

On further appeal, filed by the Revenue before the Tribunal, it was held that the AAC was correct in holding that the provisions of s. 154 of the

Act would not apply to the facts of this case. Accordingly the Revenue appeal was dismissed.

Before us, the learned Standing Counsel appearing for the Department, relying upon r. 19(3) and sub-cl. (a) of the proviso thereunder,

submitted that the tax under s. 140A would become due when the payment first became due. According to the learned Standing Counsel even

though under s. 140A the assessee shall pay the tax so payable within 30 days of furnishing the return, the tax would become due on the day when

the payment first became due. The learned Standing Counsel submitted that there cannot be any debate or long drawn process of reasoning

involved in understanding when the tax under s. 140A would become due. Hence, it cannot be said that s. 154 will not apply to the facts of this

case. In as much the self assessment tax payment was due as on the last date of the accounting year when the return is liable to be submitted, and if

it is not paid within that period, the self assessment tax liability under s. 140A of the Act would become debt and therefore cannot be included in

the capital base for granting relief under s. 84 of the Act. It was, therefore, submitted that the Tribunal was not correct in holding that there is no

mistake apparent from the record, warranting application of provision under s. 154 of the Act. On the other hand, the learned counsel appearing

for the assessee, while supporting the order passed by the Tribunal, submitted that in as much as there are two views possible in the matter when

the payment of 140A tax would first become due, s. 154 of the Act cannot be invoked.

We have heard both the learned Standing Counsel appearing for the Department as well as the learned counsel appearing for the assessee. The

fact remains that in both the asst. yrs. 1966-67 and 1967-68 the assessee is liable to pay self-assessment tax under s. 140A of the Act. According

to the Department, self assessment tax would become due on the date when the return was filed under s. 139 of the Act.

Such payment of tax would become due on the date of furnishing the return. Even though under s. 140A the assessee can pay such a tax within 30

days from the date of filing the return, under s. 139 it would not mean that the tax would become due first after the expiry of 30 days.

For the purpose of granting relief under s. 84 of the Act, the ITO in the original assessment failed to deduct the self-assessment tax which were

due on the date when the returns were filed. Hence he invoked the provisions of s. 154 of the Act and notified the mistake and deducted the tax

due as a debt in the capital base for the purpose of granting relief under s. 84 of the Act.

The point for consideration is, whether s. 154 of the Act would apply to the facts of this case.

When there is a mistake apparent from the records, s. 154 of the Act would apply. The 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 opinions. In the present case, admittedly the self-assessment tax under s. 140A of the Act for both the assessment years under consideration

were not paid on the date of filing the return under s. 139; presumably s. 140A tax might have been paid within 30 days from the date of furnishing

the return. This can be vouchsafed, since there was no penalty proceedings for non-payment of tax under s. 140A.

Sec. 140A of the Act, as originally inserted by Finance Act, 1964 w.e.f. 1st April, 1964, stood thus :

Sec. 140A Self-assessment :

(1) Where a return has been furnished under s. 139 and the tax payable on the basis of that return as reduced by any tax already paid under any

provision of this Act exceeds rupees five hundred, the assessee shall pay the tax so payable within 30 days of furnishing the return.

Therefore, under s. 140A, the assessee can pay the self-assessment tax within 30 days after furnishing the return under s. 139 of the Act. Now it

remains to be seen whether the self-assessment tax would become due soon after the filing of the return under s. 139 or after the expiry of 30 days

given for payment of self assessment tax. Rule 19(3) sub-cl. (a) of proviso thereunder states that"" in case of any advance tax due under the

provisions of the Act or of any tax payable under s. 140A or under s. 141, on the date on which, under the provisions of s. 211 or s. 212 or s.

213 or s. 140A or s. 220, as the case may be, the payment first became due. Now, what is to be considered is, when the payment first became

due, payable under s. 140A of the Act. Sec. 140A did not say that the self-assessment tax is payable on the day when the return was filed under s.

139 of the Act. In fact, it says that the self-assessment tax is payable within 30 days from the date of furnishing the return under s. 139 of the Act.

Therefore a reading of s. 140A and r. 19(3) sub-cl. (a) to proviso thereunder would go to show that mistake occurred in the present case is not

apparent, obvious or patent, to warrant application of s. 154 of the Act. The tax payable under s. 140A would first become due at what period of

time is highly debatable and something, which can be established only by long drawn process of reasonings. Therefore the Tribunal was correct in

saying that s. 154 of the Act will not be applicable to the facts of this case. In view of the foregoing discussion, we answer the question referred to

us in the affirmative and against the Department, No costs.