Commissioner of Income Tax, Delhi - III vs Samtel India Ltd.

We have heard learned counsel for the parties. With the consent of the learned counsel for the parties the appeal is taken up for final disposal. In our view the following substantial question of law arises for our consideration:-

a) Whether the Tribunal misdirected itself in law in canceling the rectification order of the Assessing Officer passed u/s 154 of the income tax Act, 1961 on the ground that it was based on the subsequent judgment of the Supreme Court in the case of Commissioner of Income Tax, Pune Vs. Shirke Construction Equipment Ltd., ?

It is not in doubt that it was the Assessee which had-, invoked jurisdiction u/s 154 of the income tax Act, 1961. The decision of the Assessing Officer, however, was not found favourable by the Assessee. The Assessee carried the matter in appeal to the CIT(A). The CIT(A) reversed the order of the Assessing Officer. Aggrieved by the order of the CIT(A), Revenue preferred an appeal to the ITAT. The ITAT dismissed the appeal of the Revenue on a specious finding that the Assessing Officer came to the conclusion that deduction u/s 80HHC was required to be calculated only after adjustments had been made for unabsorbed losses and depreciation of earlier years based on a subsequent decision of the Supreme Court in the case of Commissioner of Income Tax, Pune Vs. Shirke Construction Equipment Ltd., . In coming to the conclusion the ITAT, followed the decision of this Court in Jagan Nath Syal v. ITAT [2002] 123 Tax 314; which is to the effect that rectification cannot be carried out on the strength of a subsequent Judgment.

At this stage we may only note that in view of the decision in Shirke Construction Equipment Ltd case (supra); the law on merits of the matter is settled against the Assessee, that is, the said decision puts its seal of approval to the reasoning followed by the Assessing Officer in 2002. In our opinion the impugned Judgment of the Tribunal is flawed for two reasons:- First, the decision of the Supreme Court in Shirke Construction Equipment Ltd case (supra) was pronounced in 2007 much after the date of the order dated 28-7-2002 passed by the Assessing Officer u/s 154 of the Act. Second, the order of the Assessing Officer dated 28-7-2002 does not reflect that it has been passed on the basis of Shirke Construction Equipment Ltd case (supra) as it could not have been. The Assessing Officer after being invited to exercise jurisdiction u/s 154 of the Act by the Assessee came to a conclusion, which did not entirely find favour with the Assessee, on his own without resorting to any decision of a Court. Therefore, according to us the Tribunal fell in error by following Jagannath Syal case (supra). The question of law is thus answered in favour of the Revenue. In these circumstances we set aside the impugned Judgment and restore the order of the Assessing Officer.