The Judgment of the Court was delivered by
A.M Sapre, J.:— This is an appeal filed by an assessee under section 260A of the Income-tax Act, 1961, against an order dated June 13, 2000, passed by the Income-tax Appellate Tribunal (for short hereinafter called “the Tribunal”), in I.T.A No. 96.IND of 1996 in respect of the assessment year 1992–93. This appeal was admitted for final hearing on the following substantial questions of law:
“1. Whether, on the facts and circumstances of the case, the Tribunal is justified in holding that the Commissioner of Income-tax (Appeals) was correct in exercising power under section 154 of the Act, when the facts as to the application of notification required investigation?
2. Whether, on the facts and circumstances of the case, the Tribunal is justified in holding that the Notification No. S. 0.1953 dated June 23, 1992 (see [1992] 198 ITR (St.) 66), when it was not in exist-ence on the first day of the assessment year, i.e, April 1, 1992?
3. Whether, on 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?”
2. 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 (the assessee) is a private limited company engaged in the business of manufacture and sale of industrial gas. The manufacturing unit of the appellant is situated at village Sukhlia Gram (Industrial area, Sanwer Road, Indore).
3. For the year in question, i.e, 1992–93, the assessee claimed deduction under section 80HHA in respect of their unit No. II, i.e 20 per cent. of this profit. The Assessing Officer declined to grant this deduction and rejected the claim. The assessee, i.e, the appellant herein, filed appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) finding that in the earlier year (1990–91), the benefit was granted to the assessee, allowed the appeal and granted the benefit in favour of the assessee as claimed in the year in question (1992–93) by his order dated September 29, 1995. This led the Assessing Officer to make an application before the Commissioner of Income-tax (Appeals) under section 154 of the Act seeking rejection of the order dated September 29, 1995. By this appli-cation, the Assessing Officer contended that there exists an error apparent on the face of the order dated September 29, 1995, because admittedly the assessee had not fulfilled the requirement of Explanation (a)(ii) appended to section 80HHA. According to the Assessing Officer since the Commissioner of Income-tax (Appeals) while granting the benefit under section 80HHA to the assessee did not record any factual finding as contemplated by Explanation (a)(ii) nor took note of its requirement and hence, it amounts to an error apparent on the face of the order within the meaning of section 154 ibid requiring rectification of the order dated September 29, 1995. It is this application of the Assessing Officer made under section 154 of the Act which was entertained by the Commissioner of Income-tax (Appeals). A notice of this application was issued to the assessee as to why this application be not allowed and the order dated September 29, 1995, passed by the Commissioner of Income-tax (Appeals) granting benefit to the assessee under section 80HHA be not withdrawn by taking recourse to the provisions of section 154 ibid, i.e, by rectifying the mistake pointed out by the Assessing Officer in his application. The assessee on being noticed replied to the application and opposed the prayer. In substance, according to the assessee, the ground alleged by the Assessing Officer in his appli-cation does not fall within the meaning of section 154 and hence, the same cannot be granted.
4. The Commissioner of Income-tax (Appeals) by order dated November 15, 1995, allowed the application made by the Assessing Officer under sec-tion 154 ibid and recalled the order dated September 29, 1995, in so far as it related to grant of benefit under section 80HHA. In other words, the Commissioner of Income-tax (Appeals) accepted the contention of the Assessing Officer and held that non-fulfilment of requirement of Explanation (a)(ii) appended to section 80HHA amounts to a mistake apparent on its face and hence need to be rectified by taking recourse to the pro-visions of section 154 ibid. As a result, the benefit under section 80HHA which was initially granted to the assessee stood withdrawn by the sub-sequent order dated November 15, 1995, passed under section 154 ibid, by the Commissioner of Income-tax (Appeals). The appellant/assessee felt aggrieved by the aforementioned order filed an appeal before the Tribunal. By the impugned order, the Tribunal dismissed the appeal and upheld the order of the Commissioner of Income-tax (Appeals). In other words, in the opinion of the Tribunal, the Commissioner of Income-tax (Appeals) while passing the rectification order referred supra did not commit any mistake. It is against this order of the Tribunal, the assessee has felt aggrieved and filed this appeal under section 260A of the Income-tax Act. As observed supra, the appeal was admitted on the aforementioned substantial ques-tions of law.
5. Heard Mr. S.C Bagadia, learned senior advocate, with Mr. D.K Chhabra, learned counsel for the appellant, and Mr. R.L Jain, learned senior advocate, with Ku. V. Mandlik, learned counsel for the respon-dent.
6. Learned counsel for the appellant in the first place, contended that both the Commissioner of Income-tax (Appeals) and later the Tribunal erred in allowing the application made by the Assessing Officer under section 154 ibid. Secondly, his submission was that the grounds, which was made basis for submitting an application under section 154 was not a ground empow-ering the Commissioner of Income-tax (Appeals) to rectify the so-called mistake. Thirdly, since in the earlier assessment years, the Assessing Officer had already granted the benefit under 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 the subsequent notification, the benefit cannot be withdrawn.
7. In reply, learned counsel for the Revenue supported the impugned order.
8. Having heard learned counsel for the parties and having perused the record of the case, we find no merit in this appeal.
9. The controversy involved in this appeal centres around the interpreta-tion of section 80HHA and in particular its Explanation (a)(ii). It may be mentioned that the Explanation in question was substituted by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. It reads as under:
“Explanation.— For the purposes 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 corpora-tion, 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 kilometres 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, urbanisation 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 small-scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951).”
10. In exercise of this power, the Central Government has issued a Notification No. S.O 1953, dated June 23, 1992 (see [1992] 198 ITR (St.) 66) (at page 7 of the paperbook), specifying the areas and distance. So far as city of Indore is concerned it reads as under. It has come into force with effect from April 1, 1989.
“Schedule
Sr. No.
Name of municipality or cantonment board
Details of the areas
3.
Agra, Allahabad, Amritsar, Bhopal, Cochin, Coimbatore, Dhanbad, Gwalior, Indore, Jabalpur, Jaipur, Jamshedpur, Ludhiana, Madurai, Patna, Salem, Sholapur, Srinagar, Surat, Tiruchirapalli, Trivandrum, Varanasi (Benaras) and Vadodara (Baroda).
Areas up to a distance of 10 kilo meters in all directions from the municipal limits or, as the case may be, cantonment limits.”
11. It is not in dispute being an admitted fact that the appellant (assessee) does not fulfil the requirement of the aforesaid notification. In other words, no attempt was made by the appellant/assessee to show either before the Assessing Officer or the Commissioner of Income-tax (Appeals) or the Tribunal or even before this court that they satisfy the conditions as specified in column 3 quoted supra as per Explanation (a)(ii). In this view of the matter, one thing which is clear is that the appellant's factory (manufacturing unit) is not situated within the specified distance as per the afore-mentioned notification.
12. The question, therefore, that arises for consideration is whether in view of this admitted position, the assessee was still entitled to claim the benefit under section 80HHA. In our opinion, no.
13. In order to claim any statutory benefit under any fiscal laws, 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.
14. In order to claim any benefit under section 80HHA, it is necessary for the assessee to prove the conditions specified in the Explanation appended to a section quoted supra. This involves inquiry and documents. It requires scrutiny of papers submitted by the 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 the appellate court or by the Commissioner under section 263 or by taking recourse to the provisions of section 154 or 254, as the case may be, dealing with rectification of mistake. It is a mistake apparent on face of the 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 the rigour of section 154 of the Act.
15. We are not impressed by the submission of learned counsel for the appellant/assessee when he contended that since for one previous year, the benefit was granted to the assessee for the same should continue for the 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 the taxing authorities in not initiating action for the earlier year in time, (such as section 154 by the Assessing Officer or section 263 by the Commissioner). We are not, however, concerned with these years and hence no orders are called for except to make the observations against the Revenue. In our opinion, no flaw can thus be noticed in the order passed by the Commissioner of Income-tax (Appeals) under section 154 of the Act and upheld by the Tribunal. In the absence of non-compliance with the sta-tutory requirements contained in section 80HHA, the Assessing Officer was perfectly justified in not granting the benefit, so was the Commissioner of Income-tax (Appeals) who was justified in later withdrawing it by taking recourse to the provisions of section 154 ibid.
16. Accordingly and in view of the aforesaid discussion, all the questions framed being interlinked with each other and based on the basic question with regard to the applicability of section 154 ibid, they are answered against the assessee/appellant and in favour of the Revenue. As a conse-quence this appeal fails and is dismissed. No costs.