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Judgment
A.M. Sapre, J.
This is an appeal filed by the assessee u/s 260A of the Income Tax Act against an order dated 13-6-2000, passed by Income Tax Appellate Tribunal (hereinafter referred to as Tribunal) in ITA No. 96/Ind/1996 in respect of assessment year 1992-93. This appeal was admitted for final hearing on following substantial questions of law :
"1. Whether, in the facts and circumstances of the case, the Tribunal is justified in holding that the CIT(A) was correct in exercising power u/s 154 of the Act, when the facts as to application of notification required investigation ?
Whether, in the facts and circumstances of the case, the Tribunal is justified in holding that the Notification No. 1953, dated 23-6-1992, when it was not in existence on the first day of the assessment year i.e., 1-4-1992 ?
Whether in the facts and circumstances of the case, the Tribunal was justified in holding that an industry, though established in a rural area and also commenced its production, can be denied benefit of section 80HHA on the ground that the area in the instant assessment year 1992-93 has ceased to be a rural area ?,
In order to appreciate the issue sought to be raised in this appeal, it is necessary to take note of the facts brought on record by the assessee.
The appellant (an assessee) is a private limited company engaged in the business of manufacture and sale of industrial gas. The manufacturing unit of appellant is situated at village Sukhlia Gram (Industrial area, Sanwer Road, Indore).
For the year in question i.e., 1992-93, the assessee claimed deduction u/s 80HHA in respect of their unit No. II i.e., 20 per cent of their profit. The assessing officer declined to grant this deduction and rejected the claim. The assessee i.e., appellant herein filed appeal before CIT(A). The CIT(A) finding that in the earlier years (1990-91), the benefit was granted to assessee, allowed the appeal and granted the benefit in favour of assessee as claimed in the year in question (1992-93) by his order dated 29-9-1995. This led the assessing officer to make an application before CIT(A) u/s 154 of the Act seeking rejection of the order dated 29-9-1995. By this application, the assessing officer contended that there exists an error apparent on the face of the order dated 29-9-1995 because admittedly the assessee had not fulfilled the requirement of Explanation (ii) appended to section 80HHA. According to assessing officer, since the CIT(A), while granting the benefit u/s 80HHA to assessee, did not record any factual finding as contemplated by Explanation (ii) nor took note of its requirement and hence, it amounts to an error apparent on the face of an order within the meaning of section 154 ibid requiring rectification of the order dated 29-9-1995. It is this application of assessing officer made u/s 154 of the Act which was entertained by CIT(A). A notice of this application was issued to assessee as to why this application be not allowed and order dated 29-9-1995 passed by CIT(A) granting benefit to assessee u/s 80HHA be not withdrawn by taking recourse to the provisions of section 154 ibid i.e., by rectifying the mistake pointed out by assessing officer in his application. The assessee on being noticed, replied to application and opposed the prayer. In substance, according to assessee, the ground alleged by assessing officer in his application does not fall within the meaning of section 154 and hence, the same cannot be granted.
The CIT (A) by order dated 15-11-1995, allowed the application made by assessing officer u/s 154 ibid and recalled the order dated 29-9-1995 insofar as it related to grant of benefit u/s 80HHA was concerned, In other words, the CIT(A) accepted the contention of assessing officer and held that non-fulfilment of requirement of Explanation (ii) appended to section 80HHA amounts to a mistake apparent on its face and hence need to be rectified by taking recourse to the provisions of section 154 ibid. As a result, the benefit u/s 80HHA which was initially granted to assessee stood withdrawn by subsequent order dated 15-11-1995, passed u/s 154 ibid by CIT(A). The appellant/assessee felt aggrieved of aforementioned order (and) filed an appeal before Tribunal. By impugned order, the Tribunal dismissed the appeal and upheld the order of CIT(A). In other words, in the opinion of the Tribunal, the CIT(A) while passing the rectification order referred supra, did not commit any mistake. It is against this order of Tribunal, the assessee has felt aggrieved and filed this appeal u/s 260A of the Income Tax Act. As observed supra, the appeal was admitted on aforementioned substantial questions of law.
Heard Mr. S.C. Bagadia, learned senior advocate, with Mr. D.K. Chhabra, learned counsel for appellant, and Mr. R.L. Jain, learned senior advocate with Ku. V. Mandlik, learned counsel for respondent.
Learned counsel for appellant in the first place, contended that both CIT(A) and later Tribunal erred in allowing the application made by assessing officer u/s 154 ibid. Secondly, his submission was that the grounds, which was made basis for submitting an application u/s 154 was not a ground empowering the CIT(A) to rectify the so-called mistake. Thirdly, since in the earlier assessment years, the assessing officer had already granted the benefit udder the same section along with other sections and hence, the same having been granted in the year in question, could not be said to be illegal or against any provision of law. Fourthly, if on the date when the factory was installed fell within the zone of eligibility criteria then by subsequent notification, the benefit cannot be withdrawn.
In reply, learned counsel for the revenue supported the impugned order.
Having heard the learned counsel for the parties and having perused the record of the case, we find no merit in this appeal.
The controversy involved in this appeal centres around the interpretation of section 80HHA and in particular its Explanation (ii). It may be mentioned that Explanation in question was substituted by Direct Tax Laws (Amendment) Act, 1987, with effect from 1-4-1989. It reads as under :
"Explanation - For the purpose of this section-
(a) "rural area" means any area other than-
(i) an area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or
(ii) an area within such distance, not being more than fifteen kilometers from the local limits of any municipality or cantonment board referred to, in sub-clause (i), as the Central Government may, having regard to the stage of development of such area (including the extent of, and scope for, urbanization of such area) and other relevant considerations specify in this behalf by notification in the Official Gazette,-
(b) an industrial undertaking shall be deemed to be a small-scale industrial undertaking which is, on the last day of the previous year, regarded as a smallscale industrial undertaking u/s 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951)."
In exercise of this power, the Central Government has issued a Notification SO/1993, dated 23-6-1992 (at p. 7 of paper book) specifying the areas and distance. So far as city of Indore is concerned, it reads as under. It has come to force with effect from 1-4-1989 :
Schedule
Sr. No
Names of municipality or cantonment board
Details of areas
3.
Agra, Allahabad, Arnritsar, Bhopal, Cochin, Coimbatore, Dhanbad, Gwalior, Indore, Jabalpur, Jaipur, Jamshedpur, Ludhiana, Madurai, Patna, Salem, Sholapur, Srinagar, Surat, Tiruchirapalli, Trivandrum, Varanasi (Benaras) and Vadodara (Baroda)
Area upto a distance of 10 kilometres in all directions from the municipal limits, or as the case may be, cantonment limits.
It is not in dispute being an admitted fact that appellant (assessee) does not fulfil the requirement of aforesaid notification, In other words, no attempt was made by appellant/assessee to show either before assessing officer or CIT(A) or Tribunal or even before this court that they satisfy the conditions as specified in col. 3 quoted supra as per Explanation (ii). In The writ petition is, therefore, allowed. There will be a direction to the first respondent not to proceed against the petitioner without consent being obtained so long as proceedings , in appeal are pending under the Act. this view of the matter, one thing which is clear is that appellant''s factory (manufacturing unit) is not situated within the specified distance as per aforementioned notification.
The question, therefore, that arises for consideration is whether in view of this admitted position, assessee was still entitled to claim the benefit u/s 80HHA. In our opinion, no.
In order to claim any statutory benefit under any fiscal law, it is necessary for an assessee to strictly comply (with) the statutory requirements prescribed under the Act. Failure to comply, results in denial of benefits. Indeed, there can be no dispute to this well settled proposition of law.
In order to claim any benefit u/s 80HHA, it is necessary for the assessee to prove the conditions specified in Explanation appended to the section quoted supra. This involves inquiry and documents. It requires scrutiny of papers submitted by an assessee. In the absence of any such inquiry and satisfaction of proof, no benefit can be granted to any assessee. If granted, it has to be recalled either by appellate court or by CIT u/s 263 or by taking recourse to provisions of section 154 or 254, as the case may be, dealing with rectification of mistake. It is a mistake apparent on face of order, calling interference by the taxing authorities. In other words, granting a benefit to an assessee in ignorance of a statutory requirement is a mistake attracting rigour of section 154 of the Act.
We are not impressed by the submission of learned counsel for appeflant/assessee when he contended that since for one previous year, the benefit was granted to assessee, the same should continue for next assessment year. A mistake once committed cannot be allowed to be repeated for the next year. Rather, it needs to be rectified even in respect of the year in which it was granted. We are constrained to observe inaction on the part of taxing authorities in not initiating action for the earlier year in time, (such as section 154 by assessing officer or section 263 by CIT). We are not, however, concerned with these years and hence, no orders are called for except to make observations against the revenue.
In our opinion, no flaw can, thus, be noticed in the order passed by CIT(A) u/s 154 of the Act and upheld by the Tribunal. In the absence (sic-view) of non-compliance of the statutory requirement contained in section 80HHA, the assessing officer was perfectly justified in not granting the benefit so was the CIT(A) who was justified in later withdrawing it by taking recourse to the provisions of section 154 ibid.
Accordingly, and in view of the aforesaid discussion, all the questions framed being interlinked with each other and based on basic question with regard to applicability of section 154 ibid, they are answered against the assessee/appellant and in favour of revenue. As a consequence this appeal fails and is dismissed. No cost.