Legal error apparent on record can be corrected by the AO in exercise of his power under s 154, as held byDelHC in Mitsubishi Corporation v CIT & Anr — In favour of: The revenue; ITA Nos 486–488 of 2008........
Case Name : Vijay Sachdev Vs JCIT (ITAT Delhi)
Appeal Number : ITA No. 5344 & 5345/Del/2016
Date of Judgement/Order : 21/03/2018
Related Assessment Year : 2009-10 & 2011-12
Courts : All ITAT (6186) ITAT Delhi (1409)
Download Judgment/Order
Vijay Sachdev Vs JCIT (ITAT Delhi)
It is well settled law that non-consideration of decision of Jurisdictional High Court is mistake apparent from record. Ld. Counsel for the assessee, therefore, rightly contended that Ld.CIT(A) did not follow the judgement of the Jurisdictional High Court and shall have to rectify the mistake in his order in calculating the disallowance u/s 14A r.w. Rule 8D(2)(iii) of the Act. In view of the above discussion and in the light of the above decisions, the order of Ld.CIT(A) is set aside and matter in issue is restored to the file of Ld.CIT(A)-18, New Delhi with direction to re-decide the appeal of the assessee in the light of the decision of Jurisdictional High Court.
FULL TEXT OF THE ITAT JUDGMENT
Both these appeals by same assessee are directed against the different orders of Ld.CIT(A)-18, New Delhi dated 01.08.2016 for AY 2009-10 & 2011-12. Since common issues are involved in both the appeals, therefore, both appeals are disposed of through this common order. Both the parties mainly argued in AY 2009-10.
2. We have heard Ld. Representatives of both the parties and perused the
material available on record. For the purpose of disposal of both the appeals, we decide the appeal for AY 2009-10 as under:-
3. The facts of the case are that the AO passed the assessment order u/s 143(3) of the Income Tax Act, 1961 (in short “Act”) on 20.10.2011 making addition of Rs.10,84,889/- [Rs.1,76,583/- + Rs.9,08,306/-] by making disallowance u/s 14A of the Act r.w. Rule 8D(2)(ii)(iii) of the Act. The assessee challenged the addition before Ld.CIT(A). Ld.CIT(A) confirmed the addition subject to certain modification/finding vide order dated 27.08.2013. The assessee filed application u/s 154 of the Act before Ld. CIT(A). Ld.CIT(A) reproduced the rectification application dated 16.11.2015 in the impugned order in which the assessee explained that the computation of disallowance was made by the AO vide para 7(c) of assessment order in which disallowance attributable to Rule 8D(2)(iii) i.e. 0.5% of average investment was computed at Rs.9,08,306/- and average investment was worked out by taking the figure of investment at Rs.19.58 crores and Rs.16.74 crores. The assessee filed one letter dated 05.09.2011 showing that average value of investment comes to Rs.1.46 crores only after those shares are to be taken into account on which tax exempt income was earned. The assessee relied upon the decision of Hon’ble Delhi High Court dated 24.03.2015 in the case of ACB India Ltd. vs ACIT [2015] in ITA No.615/2014 reported in 374 ITR 0108 (Del.) in which it was held that “for computing average investment for the purpose of Rule 8D(2)(iii) only those investments will be taken into account which have yielded tax exempt income.” Accordingly, the disallowance under Rule 8D(2)(iii) could be Rs.73,085/- and accordingly the disallowance was excessive by Rs.8,35,221/-. It was submitted that it is mistake apparent on record in view of the decision of the Hon’ble Supreme Court in the case of ACIT vs Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 0227 (SC). It was prayed that the appellate order may be rectified accordingly.
4. CIT(A) after considering the rectification application u/s 154 of the Act and material on record and by reproducing the facts noted that the letter of the assessee was filed before Ld. CIT(A) prior to passing of the order and after verification only impugned order have been passed, therefore, present application would amount to review of the order which power Ld.CIT(A) did not possess. He has noted certain decisions that Ld.CIT(A) has no power to review the orders passed on merits. It was also noted that the issue raised by the assessee debatable and no rectification of Ld.CIT(A)’s order is legally or factually permissible. The appeal of the assessee against the rectification application u/s 154 was rejected.
5. Counsel for the assessee reiterated the submissions made before Ld.CIT(A) and submitted that the investment that yield tax exempt income should be taken into consideration instead of total investment considered by Ld.CIT(A). In support of his contention, he has relied upon the decision of Hon’ble Delhi High Court in the case of ACB India Ltd. (supra) in which it was held that “where the AO, instead of adopting average value of investment of income which was not part of total income i.e. value of tax exempt investment, chose to factor in total investment itself and CIT(A) even though noticed exact value of investment which yielded taxable income, did not correct error but chose to apply his own equity; the findings of ITAT and the lower authorities were rightly set aside.” He has submitted that non-consideration of decision of Jurisdictional High Court is a mistake apparent from the record. He has submitted that Ld.CIT(A) did not follow the decision of Hon’ble Delhi High Court in the case of ACB India Ltd. (supra) which was delivered on 24.03.2015 after passing the original appellate order passed on 25.08.2013. He has further submitted that the decision of the Jurisdictional High Court have been delivered after passing of the impugned order by Ld.CIT(A) should have been considered by Ld. CIT(A) for rectifying the impugned order because the decision of the Jurisdictional High Court is applicable retrospectively. In support of his contention, he has relied upon the decision of Hon’ble Supreme Court in the case of ACIT vs Saurashtra Kutch Stock Exchange Ltd.(supra) in which it was held that “A judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a ‘new rule’ but to maintain and expound the ‘old one’. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood.” Ld. Counsel for the assessee submitted that the assessee never wanted for review of the order of Ld. CIT(A). The assessee made a request for rectification in the order of Ld.CIT(A) which is apparent from record in calculating the disallowance u/s 14A r.w. Rule 8D(2)(iii) of the Act. He has submitted that Ld. CIT(A) should decide the issue in accordance with the judgement of Hon’ble Delhi High Court. On the other hand, Ld. DR relied upon the impugned order.
6. After considering the rival submissions and in the light of the decision of Jurisdictional High Court in the case of ACB India Ltd. (supra) and in the light of the decision of Hon’ble Supreme Court in the case of ACIT vs Saurashtra Kutch Stock Exchange Ltd.(supra), we are of the view that there appears mistake apparent on the record of Ld.CIT(A) in calculating the disallowance u/s 14A r.w. Rule 8D(2)(iii) of the Act. It would not amount to review of the order of Ld. CIT(A). It is well settled law that non-consideration of decision of Jurisdictional High Court is mistake apparent from record. Ld. Counsel for the assessee, therefore, rightly contended that Ld.CIT(A) did not follow the judgement of the Jurisdictional High Court and shall have to rectify the mistake in his order in calculating the disallowance u/s 14A r.w. Rule 8D(2)(iii) of the Act. In view of the above discussion and in the light of the above decisions, the order of Ld.CIT(A) is set aside and matter in issue is restored to the file of Ld.CIT(A)-18, New Delhi with direction to re-decide the appeal of the assessee in the light of the decision of Jurisdictional High Court in the case of ACB India Ltd. (supra). CIT(A) shall re-decide the appeal after giving reasonable and sufficient opportunity of being heard to the assessee.
7. In the result, the appeal of the assessee is allowed for statistical purposes.
ITA No.5345/Del/2016 [A.Y.2011-12]
7.1. The issue is also same in AY 2011-12 in ITA No.5345/Del/2016. Following the reasons for decision in AY 2009-10 (supra), the order of Ld.CIT(A) is set aside and the matter in issue is restored to the file of Ld.CIT(A)-18, New Delhi with similar direction to pass an order afresh as is directed in AY 200910. Therefore, ITA No.5345/Del/2016 is also allowed for statistical purposes.
8. In the final result, both appeals filed by the assessee are allowed for statistical purposes.
Pronounced in the open court on 21.03.2018.
Tags: ITAT Judgments, Section 154
Case Name : Vijay Sachdev Vs JCIT (ITAT Delhi)
Appeal Number : ITA No. 5344 & 5345/Del/2016
Date of Judgement/Order : 21/03/2018
Related Assessment Year : 2009-10 & 2011-12
Courts : All ITAT (6186) ITAT Delhi (1409)
Download Judgment/Order
Vijay Sachdev Vs JCIT (ITAT Delhi)
It is well settled law that non-consideration of decision of Jurisdictional High Court is mistake apparent from record. Ld. Counsel for the assessee, therefore, rightly contended that Ld.CIT(A) did not follow the judgement of the Jurisdictional High Court and shall have to rectify the mistake in his order in calculating the disallowance u/s 14A r.w. Rule 8D(2)(iii) of the Act. In view of the above discussion and in the light of the above decisions, the order of Ld.CIT(A) is set aside and matter in issue is restored to the file of Ld.CIT(A)-18, New Delhi with direction to re-decide the appeal of the assessee in the light of the decision of Jurisdictional High Court.
FULL TEXT OF THE ITAT JUDGMENT
Both these appeals by same assessee are directed against the different orders of Ld.CIT(A)-18, New Delhi dated 01.08.2016 for AY 2009-10 & 2011-12. Since common issues are involved in both the appeals, therefore, both appeals are disposed of through this common order. Both the parties mainly argued in AY 2009-10.
2. We have heard Ld. Representatives of both the parties and perused the
material available on record. For the purpose of disposal of both the appeals, we decide the appeal for AY 2009-10 as under:-
3. The facts of the case are that the AO passed the assessment order u/s 143(3) of the Income Tax Act, 1961 (in short “Act”) on 20.10.2011 making addition of Rs.10,84,889/- [Rs.1,76,583/- + Rs.9,08,306/-] by making disallowance u/s 14A of the Act r.w. Rule 8D(2)(ii)(iii) of the Act. The assessee challenged the addition before Ld.CIT(A). Ld.CIT(A) confirmed the addition subject to certain modification/finding vide order dated 27.08.2013. The assessee filed application u/s 154 of the Act before Ld. CIT(A). Ld.CIT(A) reproduced the rectification application dated 16.11.2015 in the impugned order in which the assessee explained that the computation of disallowance was made by the AO vide para 7(c) of assessment order in which disallowance attributable to Rule 8D(2)(iii) i.e. 0.5% of average investment was computed at Rs.9,08,306/- and average investment was worked out by taking the figure of investment at Rs.19.58 crores and Rs.16.74 crores. The assessee filed one letter dated 05.09.2011 showing that average value of investment comes to Rs.1.46 crores only after those shares are to be taken into account on which tax exempt income was earned. The assessee relied upon the decision of Hon’ble Delhi High Court dated 24.03.2015 in the case of ACB India Ltd. vs ACIT [2015] in ITA No.615/2014 reported in 374 ITR 0108 (Del.) in which it was held that “for computing average investment for the purpose of Rule 8D(2)(iii) only those investments will be taken into account which have yielded tax exempt income.” Accordingly, the disallowance under Rule 8D(2)(iii) could be Rs.73,085/- and accordingly the disallowance was excessive by Rs.8,35,221/-. It was submitted that it is mistake apparent on record in view of the decision of the Hon’ble Supreme Court in the case of ACIT vs Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 0227 (SC). It was prayed that the appellate order may be rectified accordingly.
4. CIT(A) after considering the rectification application u/s 154 of the Act and material on record and by reproducing the facts noted that the letter of the assessee was filed before Ld. CIT(A) prior to passing of the order and after verification only impugned order have been passed, therefore, present application would amount to review of the order which power Ld.CIT(A) did not possess. He has noted certain decisions that Ld.CIT(A) has no power to review the orders passed on merits. It was also noted that the issue raised by the assessee debatable and no rectification of Ld.CIT(A)’s order is legally or factually permissible. The appeal of the assessee against the rectification application u/s 154 was rejected.
5. Counsel for the assessee reiterated the submissions made before Ld.CIT(A) and submitted that the investment that yield tax exempt income should be taken into consideration instead of total investment considered by Ld.CIT(A). In support of his contention, he has relied upon the decision of Hon’ble Delhi High Court in the case of ACB India Ltd. (supra) in which it was held that “where the AO, instead of adopting average value of investment of income which was not part of total income i.e. value of tax exempt investment, chose to factor in total investment itself and CIT(A) even though noticed exact value of investment which yielded taxable income, did not correct error but chose to apply his own equity; the findings of ITAT and the lower authorities were rightly set aside.” He has submitted that non-consideration of decision of Jurisdictional High Court is a mistake apparent from the record. He has submitted that Ld.CIT(A) did not follow the decision of Hon’ble Delhi High Court in the case of ACB India Ltd. (supra) which was delivered on 24.03.2015 after passing the original appellate order passed on 25.08.2013. He has further submitted that the decision of the Jurisdictional High Court have been delivered after passing of the impugned order by Ld.CIT(A) should have been considered by Ld. CIT(A) for rectifying the impugned order because the decision of the Jurisdictional High Court is applicable retrospectively. In support of his contention, he has relied upon the decision of Hon’ble Supreme Court in the case of ACIT vs Saurashtra Kutch Stock Exchange Ltd.(supra) in which it was held that “A judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a ‘new rule’ but to maintain and expound the ‘old one’. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood.” Ld. Counsel for the assessee submitted that the assessee never wanted for review of the order of Ld. CIT(A). The assessee made a request for rectification in the order of Ld.CIT(A) which is apparent from record in calculating the disallowance u/s 14A r.w. Rule 8D(2)(iii) of the Act. He has submitted that Ld. CIT(A) should decide the issue in accordance with the judgement of Hon’ble Delhi High Court. On the other hand, Ld. DR relied upon the impugned order.
6. After considering the rival submissions and in the light of the decision of Jurisdictional High Court in the case of ACB India Ltd. (supra) and in the light of the decision of Hon’ble Supreme Court in the case of ACIT vs Saurashtra Kutch Stock Exchange Ltd.(supra), we are of the view that there appears mistake apparent on the record of Ld.CIT(A) in calculating the disallowance u/s 14A r.w. Rule 8D(2)(iii) of the Act. It would not amount to review of the order of Ld. CIT(A). It is well settled law that non-consideration of decision of Jurisdictional High Court is mistake apparent from record. Ld. Counsel for the assessee, therefore, rightly contended that Ld.CIT(A) did not follow the judgement of the Jurisdictional High Court and shall have to rectify the mistake in his order in calculating the disallowance u/s 14A r.w. Rule 8D(2)(iii) of the Act. In view of the above discussion and in the light of the above decisions, the order of Ld.CIT(A) is set aside and matter in issue is restored to the file of Ld.CIT(A)-18, New Delhi with direction to re-decide the appeal of the assessee in the light of the decision of Jurisdictional High Court in the case of ACB India Ltd. (supra). CIT(A) shall re-decide the appeal after giving reasonable and sufficient opportunity of being heard to the assessee.
7. In the result, the appeal of the assessee is allowed for statistical purposes.
ITA No.5345/Del/2016 [A.Y.2011-12]
7.1. The issue is also same in AY 2011-12 in ITA No.5345/Del/2016. Following the reasons for decision in AY 2009-10 (supra), the order of Ld.CIT(A) is set aside and the matter in issue is restored to the file of Ld.CIT(A)-18, New Delhi with similar direction to pass an order afresh as is directed in AY 200910. Therefore, ITA No.5345/Del/2016 is also allowed for statistical purposes.
8. In the final result, both appeals filed by the assessee are allowed for statistical purposes.
Pronounced in the open court on 21.03.2018.
Tags: ITAT Judgments, Section 154
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