Calcutta H.C : Whether the power under section 254(2) can be exercised in the case of a mistake apparent on the part of the litigant or his advisors?

High Court Of Calcutta

Binaguri Tea Co. (P.) Ltd. vs. DCIT, Circle-4, Kolkata

Section 254

Girish Chandra Gupta, Cj. And Arindam Sinha, J.

G.A. No. 2250 Of 2016

ITAT No. 304 Of 2016

October 4, 2016


1. The subject matter of challenge in this appeal is a judgement and order dated 1st June, 2016 by which the learned Income Tax Appellate Tribunal refused to exercise jurisdiction under section 254(2) of the Income Tax Act, for the following reasons:—

“The learned counsel for the Assessee reiterated the stand of the Assessee as contained in the miscellaneous application. We are of the view that jurisdiction u/s. 254(2) of the Act can be exercised only to rectify an error apparent on the face of the record. The contention in the miscellaneous application, even if true, cannot give rise to any mistake in the order of the Tribunal apparent on the face of the record. The miscellaneous application, in our view, cannot therefore be entertained and the same is hereby rejected.”

2. The facts of the case, briefly stated, are as follows:—

The question arose before the assessing officer, whether the Income Tax Rule-8 was applicable in assessing fringe benefit tax. The assessing officer answered the question in the affirmative and gave necessary relief. He, however, recalled the same in exercise of power under section 154 of the Income Tax Act. In an appeal preferred by the assessee, the appellate authority confirmed the order passed by the assessing officer. The assessee preferred an appeal before the learned Tribunal. The ground of the appeal was, inter alia, as follows:-

“For that on the facts and circumstances of the case the Ld.CIT (Appeals) has erred in upholding the contention of the AO that Rule 8 of the Income Tax Rules has no applicability while calculating eligible expenses of a company engaged in the business of cultivation, manufacturing and sale of tea for the purpose of Fringe Benefit Tax.”

3. The learned Tribunal had during the pendency of that appeal considered that point and held against the assessee in other matters. The point, however, travelled to the High Court and in the case of Apeejay Tea Ltd. v. CIT [2015] 370 ITR 775/62 131 (Cal.), it was held as follows:—

“The amount of expenditure incurred by the assessee-employer in extending fringe benefits to its employees was not solely for the purpose of business. The expenditure incurred was both for the purpose of business and for the purpose of agriculture. The submission that the expenditure on account of fringe benefits had already been taken into account was not correct. The net profit and loss of the business had to be arrived at after deducting all the expenses. Once that was done 40 per cent. of the net profit and loss had to be worked out which shall be chargeable to tax. Once this was done the expenditure on account of fringe benefits would automatically stand reduced to 40 per cent.”

4. The aforesaid judgement was rendered on 3rd July, 2014 of which the advisors of the appellant were not aware. The appellant was advised based on the earlier views of the Tribunal that he had no chance of success and was persuaded to write a letter dated 30th November, 2015 that the appellant was not desirous to press the appeal. Based on the aforesaid letter of the appellant the appeal was dismissed by the learned Tribunal by its order dated 3rd December, 2015.

5. Subsequent thereto, the appellant discovered that the learned Tribunal had changed its view as regards the applicability of Income Tax Rule 8 to the fringe benefit tax. The appellant, in the circumstances, had applied under section 254(2) of the Income Tax Act within less than two months from the day when the appeal was dismissed. The learned Tribunal however for reasons already indicated refused to recall the order or to reconsider the matter. Challenging the aforesaid order, the assessee has come up in appeal.

6. Mr. Dutta, learned advocate appearing for the appellant/assessee submitted that there can be no doubt that mistake on the part of the assessee and his advisor was at the root of the letter which was written on 30th November, 2015, on the basis whereof the order dated 3rd December, 2015 was passed. When the order was based on a mistake, the learned Tribunal should have, for the ends of justice, recalled that order and heard out the matter on merits. He, in support of his submission, relied on a judgement of the Apex Court in the case of Asstt. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227/173 Taxman 322. In that case, based on prior judgements of the jurisdictional court, the learned Tribunal had exercised power under section 254(2) and altered its decision.

7. The High Court confirmed the order of the learned Tribunal. In an appeal preferred by the revenue. Their Lordships held as follows:—

“In the present case, according to the assessee, the Tribunal decided the matter on October 27, 2000. Hiralal Bhagwati was decided a few months prior to that decision, but it was not brought to the attention of the Tribunal. In our opinion, in the circumstances, the Tribunal has not committed any error of law or of jurisdiction in exercising power under sub-section (2) of section 254 of the Act and in rectifying the “mistake apparent from the record”. Since no error was committed by the Tribunal in rectifying the mistake, the High Court was not wrong in confirming the said order. Both the orders, therefore, in our opinion, are strictly in consonance with law and no interference is called for.”

8. Mr. Agarwal, learned advocate for the revenue, submitted that there can be no question of any mistake because the order dismissing the appeal was passed on the basis of the prayer of the appellant himself. There is, as such, no question of any error or any mistake. In the absence whereof, power under section 254(2) could not have been exercised. The learned Tribunal passed a correct order which should not be interfered with. He, in support of his submission, relied on the following judgements:—

The first judgement relied upon by him is in the case of Sarguja Transport Service v. State Transport Appellate Tribunal AIR 1987 SC 88 wherein the question was whether a writ petition can be presented after an earlier writ petition on the self same cause of action was withdrawn without leave to apply afresh. That question was answered in the negative. This judgement, in our opinion, has no manner of application to the facts and circumstances of the case.

9. The second judgement cited by Mr. Agarwal is in the case of Jagtar Singh v. Pargat Singh [1996] 11 SCC 586. The question, which came up for consideration was, whether an order permitting a party to withdraw an appeal could be recalled when the contention raised by the appellant was that he had not authorized the counsel to withdraw the appeal. Naturally, the question arose as regards the authority of the counsel. Their Lordships held that the step taken by the counsel was consistent with the power he had under Order III Rule 4 of the Code of Civil Procedure. In case the counsel had acted contrary to the interest of his client, the remedies lay elsewhere. No elaborate reasoning is required to show that this judgement has no manner of application to the facts and circumstances of the case before us.

10. The next judgement cited by Mr. Agarwal, is in the case of Mahakoshal Ceramics v. CIT [1983] 143 ITR 976/13 Taxman 438 (MP). The question arose whether on the basis of a subsequent decision, a concluded matter could be reopened? That question was answered in the negative. The Madhya Pradesh High Court held as follows:—

“If the appeal was dismissed as withdrawn as it was clear that the appeal itself was not competent, merely because of subsequent decision that the view of the law has changed, it could not be said that there is an error apparent on the face of the record.”

11. This judgement, in our opinion, has no manner of application because in the case before us, the case was sought to be reopened on the basis of an earlier judgment of the jurisdictional High Court.

12. The last judgement cited by Mr. Agarwal is in the case of Paras Cold Storage & Ice Factory v. CIT [2005] 272 ITR 301/145 Taxman 46 (Punj. & Har.). What had happened in that case was that an appeal was filed by the assessee under section 260A. The assessee had also applied under section 254(2) before the learned Tribunal. The assessee withdrew the appeal under section 260A. After the application under section 254(2) had been dismissed, the assessee wanted to prefer an appeal. The Division Bench was of the opinion that the appellant could not be permitted to maintain an appeal which was earlier dismissed as withdrawn. This judgement has no manner of application to the facts and circumstances, before us. In that case the appeal was withdrawn so as to press the remedy under Section 254(2). The appellant in that case had elected his remedy. It is in that view of the matter that he was not permitted to revive the appeal or to maintain an appeal afresh.

The following facts in the case before us are not disputed nor are they disputable:—

(a) The prayer for not pressing the appeal was made on 30th November, 2015 in ignorance of the judgement passed by the jurisdictional High Court on 3rd July, 2014;

(b) The prayer for leave to withdraw the appeal was, made, based on the earlier views taken by the Tribunal holding that Income Tax Rule-8 had no applicability in the matter of fringe benefit tax.

(c) It does not appear that the learned Tribunal was alive of the fact that the jurisdictional High Court had already taken a different view. There is, as such, no doubt that the order was prayed for and passed under a mistaken belief that Income Tax Rule-8 had no applicability to the fringe benefit tax. Section 254(2) provides as follows:—

“The Appellate Tribunal may, at any time within (six months from the end of the month in which the order was passed), with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer.”

13. We already have demonstrated that the mistake is apparent. True, it is that it might not have been a mistake on the part of the Tribunal but the Tribunal obviously was not aware of the judgement of the jurisdictional High Court passed on 3rd July, 2014. Had it been aware of the judgement, it would have, in fairness we believe, brought this fact to the notice of the assessee. The assessee obviously was not aware. Therefore, the prayer for leave to withdraw the appeal and the order allowing the prayer were both based on a mistake. Section 254(2) does not provide that it has to be a mistake solely on the part of the learned Tribunal. We are, as such, of the opinion that the case was covered by sub-section 2 of Section 254.

14. We are also supported in our view by a judgement of a Division Bench of this Court in the case of Mahamaya Banerjee, In re AIR 1989 Cal. 106 wherein question arose whether misconception of counsel may be a sufficient cause for review of an order. The Division Bench held, inter alia, as follows:—

“As has been already noticed, the principal ground which was canvassed for setting aside the above orders was that whatever steps she had taken earlier in connection with the suit was under wrong advice of her Advocate; and as we have already noticed, the testimony of the learned Advocate also supports that view. By filing the application, therefore, the petitioner prayed for justice which was denied to her owing to patently wrong steps taken by her under legal advice. In such a situation the Court would be failing in its duty if it does not invoke its inherent powers to come to her rescue.”

15. In summing up, we may indicate the question which falls for consideration:—

“whether the power under section 254(2) can be exercised in the case of a mistake apparent on the part of the litigant or his advisors?”

16. For the reasons discussed above, we answer the question in the affirmative.

17. This appeal is, therefore, disposed of by setting aside the order under challenge. The learned Tribunal shall hear out the appeal on merits. Considering that this matter has been hanging fire for long, the learned Tribunal is directed to give some priority to this matter.

[Citation : 389 ITR 648]

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