Analysis, Income Tax

Per Incuriam Cases – III

Even after a judgement has been declared per incuriam, they are routinely cited by the courts. For example, the case CIT vs Avi-Oil India Pvt Ltd.which was declared per incurium by V.R.A Cotton Mills (P) Ltd. vs U.O.I on 27-09-2011 has been cited 15 times since then. Identification of per incuriam cases can be useful to both lawyers and courts and save time spent considering such cases.

In continuation with our per incuriam judgements series (you can see Part 1 here and Part 2 here) , we discuss a few more per incuriam cases.

Whether the meaning of “serve” u/s 143(2) includes both issue of notice by the AO and receipt of notice by the assesse within the time period.   

Per Incuriam case

 CIT vs Avi-Oil India Pvt Ltd., (2010) 323 ITR 242 (P&H)

The HC of Punjab and Haryana in this case held that notice u/s 143(2) is not only to be issued but must be served before the expiry of 12 months from the end of the month in which return was furnished.

Held Per Incuriam in 

V.R.A Cotton Mills (P) Ltd. vs U.O.I (2012) 250 CTR 188

The court observed that the judgement of CIT vs Avi-Oil India Pvt Ltd was passed without considering the binding precedents and statutory provisions. It further observed that as per the principles laid down in Kunj Bihari vs ITO, non-issue of notice or mistake in issue of notice does not affect the jurisdiction of AO, if otherwise reasonable opportunity of being heard is given. The date of receipt of notice is irrelevant to determine whether the notice has been issued within the prescribed period of limitation. The expression serve means date of issue of notice. 

Whether a subsequent reversal or modification of the existing interpretation renders the earlier judgement open to review u/s 154 as constituting mistake or error apparent on the face of record.

Per Incuriam Case

Kil kotagiri Tea & Coffee Estates Co. Ltd. vs Income Tax Appeallate Tribunal (1988) 174 ITR 579 (KER)

The court in this case held that subsequent reversal or modification of the existing interpretation renders the earlier judgement open to review u/s 154. The court observed that the expression “mistake apparent from the record” used in s. 154 has wider meaning than the expression “error apparent on the face of the record” used in Order 47 rule 1 of CPC. Therefore, the restrictions of power to review under CPC do not hold good in case of s. 154 of IT Act. 

Held Per Incuriam in

 Geo Millers and Co. Ltd. vs DCIT,  (2003) 262 ITR 237 (CAL)

The court in this case held that the case of Kil kotagiri Tea & Coffee Estates Co. Ltd. is per incurium since they failed to notice the explanation of Order 47 rule 1 which reads as follows

“The fact that the decision on a question of law on which the judgement of the court is based s been reversed or modified by the subsequent decision of a superior court in any other case, shall not be a ground for review of such judgement.”

In construing s. 154, the court is justified in taking into consideration other enactments where identical provisions have been defined.  

Whether the rent received from non-factory building should be assessed as income from house property or income from business? 

Per Incuriam case

CIT vs Ajmera Industries Pvt Ltd.  (1976) 103 ITR 245 (CAL)

The assesse company was formed with object of manufacturing pipes. The manufacturing business could not be started due to want of certain machinery. Due to spare capacity, the assesse let out the surplus portions after using the required space for his business and claimed rental income as income from business. The High court held that the non-factory building are the commercial assets of the assesse-company and the rent derived by the assesse from letting out these assets will be considered as Business income and not income from house property. 

Held Per Incuriam in

 CIT vs New India Industries Ltd (1993) 201 ITR 208 (BOM)

The court in this case observed that the case of CIT vs Ajemra Industries Pvt Ltd is bad in law because it failed to follow the binding precedent of the Supreme court laid down in CEPT vs Shri Lakshmi Silks Mills Ltd. The surplus non-factory buildings including godown cannot be considered as commercial assets of the company and therefore the rental income is not income from business. In each case, it has to be seen whether the asset is being exploited commercially by letting out or whether it is being let out for the purpose of enjoying the rent. The distinction between the two is narrow one and has to depend on certain facts peculiar to the case.

Written by Anuj Sharma, Product Counsel @ Riverus

Also Read: Per Incuriam Cases – IV

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