T.D.SUGLA,J. - (1.) THIS is an application by the Department under S. 256(2) of the IT Act, 1961. The questions sought to be raised are : "Whether, on the facts and in the circumstances of the case and in law, the Tribunal was (a) justified in taking the view that the authorities relied upon by the CIT (A) in his order under s. 154 are not of any assistance to the Revenue and having regard to the clear language in S. 154(7), the impugned order passed under S. 154 is without jurisdiction and thus setting aside the rectification order passed by the CIT (A) ? (b) justified in holding that the CIT (A) had re examined the question on facts which is not contemplated under S. 154 and thus accepting the assessee's contention on merits ?"
(2.) THE proceedings relate to the asst. year 1973 74. The question involved is regarding computation of deduction under S. 80M in respect of dividend income. The ITO had allowed the deduction, inter alia, by estimating expenditure that might have been incurred in relation to the dividend income at the rate of 26per cent of the dividend income. In appeal, the CIT (A), by his order dt. January 31, 1979, following our Court's judgment in the case of CIT vs.New Great Insurance Co. Ltd. (1973) 90 ITR 348 (Bom), held that deduction under S. 80M was required to be allowed on the basis of the gross dividend income and not the net dividend income as computed by the ITO. S. 80AA was inserted in the IT Act by the Finance (No. 2) Act, 1980, with retrospective effect from April 1, 1968, in terms of which deduction under S. 80M was required to be allowed on the basis of the net dividend income. On July 27, 1981, the ITO filed an application before the CIT (A) for rectification of his appellate order on the basis of S. 80AA so inserted. By his order dt. August 7, 1985, the CIT (A) rectified the appellate order by holding that deduction under S. 80M had to be allowed on the basis of the net dividend income. He also held that, in the absence of exact particulars as regards expenditure, it would be reasonable to estimate the expenditure at the rate of 5 per cent of the gross dividend income as was done by the Tribunal in some other cases. Against the above order, the assessee filed an appeal before the Tribunal. It was contended that the order passed by the CIT (A) rectifying his appellate order was barred by limitation in view of s. 154(7) of the IT Act, 1961. Alternatively, the contention was that, even on merits, the question was debatable and the order of rectification passed by the CIT (A) was not sustainable. The Tribunal accepted the contentions and set aside the rectifying order of the CIT (A).
(3.) THE Department's application for reference was rejected by the Tribunal as, in its opinion, no referable questions of law arose. Hence, this application under S. 256(2). Sec. 154(7) provides that save as otherwise provided in S. 155 or Sub S. (4) of S. 186, no amendment under this section shall be made after the expiry of four years from the date of the order sought to be amended. The impugned order of the CIT (A) has, admittedly, been passed after four years of the appellate order passed by him. The order is, thus, barred by limitation. The argument that, in case the assessee's applications for rectification are not disposed of by the Departmental authorities within four years, the Courts have held that the orders rectifying the orders passed earlier should be passed if the applications were filed within four years has no application in this case inasmuch as the principle behind those decisions is that nobody can take advantage of his own wrong. The Department certainly cannot refuse to pass an order under S. 154 on the ground that it had failed to pass such an order within four years and that now it cannot pass the order as it has become barred by limitation. This argument cannot apply to a case where the application for rectification is by one Departmental officer before another Departmental officer. The assessee is not taking advantage of its own wrong. The answer to the first question is, thus, obvious.;