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Judgment
K. Raviraja Pandian, J.—The Revenue has filed this appeal by formulating the following Substantial Questions of Law.
i. Whether, in the facts and in the circumstances of the case, the rectification of assessment by deducting the amount eligible for deduction u/s
80HHC from the profits, and not from 30% of the book profit was not erroneous as not being on a debatable issue?
ii) Whether the adjustment to any deduction claimed by the assessee in total contravention to the provisions of statute would not amount to
rectification of a mistake apparent on record for the purpose of Section 154?
The facts of the case culled out from the statement of facts filed by the Revenue goes as follows.
The assessee is a Private Limited Company whose return for the assessment year 1999-2000 was processed u/s 143(1) of the Income Tax Act
(hereinafter referred to as the ""Act""). Thereafter, the Assessing Officer found a mistake apparent on the record that inasmuch as deduction u/s
80HHC of the Act was deducted from 30% of the book profit. According to the Assessing Officer, this mistake was glaring mistake apparent on
the face of the record. The Assessing Officer issued notice u/s 154 of the Act for rectification and an order was passed by him u/s 154 of the Act
after hearing the assessee who contended that there is no jurisdiction to revise the assessment u/s 154 of the Act as there was no mistake apparent
on the face of the record. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax
(Appeals) who by his order dated 25.5.2006, confirmed the assessment. The assessee carried on the matter on further appeal in the Income Tax
Appellate Tribunal by filing appeal in ITA.No.1881 of 2006. The Tribunal allowed the appeal on the ground that the debatable issue cannot be a
subject matter for rectification u/s 154 of the Income Tax Act. The tribunal has also relied the decision of the Supreme Court in T.S. Balaram,
Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay, , wherein it has been held 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 opinions. A decision on a debatable point of law is not a mistake apparent from the record, which is not
amenable for rectification u/s 154 of the Income Tax Act. A similar view is also taken by the Supreme Court in the case of Commissioner of
Income Tax (CNTL), Ludhiana Vs. Hero Cycles Pvt. Ltd., Ludhiana, .
Mr. Nareshkumar, learned Counsel appearing for the revenue submitted that the mistake is glaring on the face of the order and it can be
regarded as apparent on the face of the record.
We heard the argument of the learned Counsel on either side and perused the materials on record.
The error pointed out by the appellant herein is that the assessing officer has committed a mistake inasmuch as deduction u/s 80HHC was
deducted from 30 percent of the book profit instead of deducting the same from the whole profit. Hence, it is a glaring mistake, which could be
rectified u/s 154. But it is the contention of the assessee that the procedure followed by the assessing officer in granting the deduction u/s 80HHC
from out of the book profit is the correct procedure and the procedure now sought to be projected by the revenue is not correct and it is sought to
be done in order to have an advantage in favour of the revenue. In any event it was contended that the issue was one of debatable issue. We are
also of the view that the issue in controversy is a debatable issue.
It is well recognised law that any erroneous assessment cannot be the subject matter for rectification u/s 154 of the Income Tax Act. The
erroneous order of assessment can be rectified only under procedure known to law by carrying the matter before the appropriate authority to
rectify the erroneous order or revise it as per law. A debatable point cannot be a reason for rectification u/s 154. Further, in order to invoke
Section 154 for rectification of the 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 u/s 154 of the Income Tax Act. Useful reference can be had to the judgments of T.S. Balaram, Income Tax Officer, Company
Circle IV, Bombay Vs. Volkart Brothers, Bombay, and Commissioner of Income Tax (CNTL), Ludhiana Vs. Hero Cycles Pvt. Ltd., Ludhiana, .
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.