High Court Of Madhya Pradesh : Indore Bench
CIT vs. Malwa Texturising (P) Ltd.
Section 254(2)
Asst. Year Block period 1994-95 to 20th Nov., 1995
A.K. Patnaik, C.J. & N.K. Mody, J.
IT Appeal No. 58 of 2004
20th July, 2006
Counsel appeared
R.L. Jain with Miss Veena Mandlik, for the Appellant : G.M. Chaphekar with Ravi Sarda, for the Respondent
ORDER
A.K. Patnaik, C.J. :
This is an appeal against the order dt. 16th Jan., 2004 passed by the Tribunal, Indore Bench, Indore in MA No. 8/Ind/2003.
The facts briefly are that the respondent (hereinafter referred to as the assessee) is a private limited company registered under the Companies Act, 1956. On 21st Nov., 1995, the business premises of the assessee were searched and pursuant to a notice, the assessee filed an original return on 2nd July, 1996 for the block period asst. yr. 1994-95 to 20th Nov., 1995 disclosing nil income. Thereafter, he filed a revised return showing the income at Rs. 30,50,000 on 26th Nov., 1996. The Asstt. CIT, Circle-I, Indore assessed the income at Rs. 30,50,000 on 29th Nov., 1996 under s. 158BC of the IT Act, 1961 (for short the Act). Aggrieved, the assessee preferred an appeal on 30th Dec., 1996 before the Income-tax Appellate Tribunal, Indore Bench, Indore (for short the Tribunal) under s. 253 of the Act.
When the appeal was pending before the Tribunal, Kar Vivad Samadhan Scheme, 1998 (for short KVSS) was introduced by the Finance (No. 2) Act, 1998. The assessee submitted an offer for settlement under the KVSS and submitted a declaration under s. 89 of the Finance (No. 2) Act, 1998 on 30th Jan., 1999 in the prescribed Form 1A in respect of block period 1994-95 to 22nd Nov., 1995. The CIT, Indore (hereinafter referred to as the ‘designated authority’) determined the amount payable and issued certificate on 25th Feb., 1999 under s. 90(1) of the Finance (No. 2) Act, 1998 setting forth therein the particulars of the tax arrears and sum payable towards full and final settlement of the tax arrears and the assessee paid an amount of Rs. 13,72,700 by challan as directed in the said certificate and intimated the fact of such payment to the designated authority. The designated authority then issued a certificate for full and final settlement of tax arrears under s. 90(2) of the Finance (No. 2) Act, 1998 in Form No. 3 on 28th April, 1999.
The Tribunal, after hearing learned counsel for the parties and after referring to the authorities cited by learned counsel for the parties held in its order dt. 26th Nov., 2001 [reported as Malwa Texturising (P) Ltd. & Ors. vs. Asstt. CIT (2002) 77 TTJ (Ind) 995—Ed.] that notwithstanding the provisions of sub-s. (4) of s. 90 of the Finance (No. 2) Act, 1998, it will have to decide the preliminary question raised by the Department that the appeal filed by the assessee was not maintainable. In the order dt. 26th Nov., 2001, the Tribunal, however, did not accept the contention of the Department that the assessee not having paid the tax on the return of income, the appeal was not maintainable in view of the provisions of s. 249(4) of the Act. But the Tribunal held in the said order that since the assessee had given his consent to the assessment order, it had lost the right to appeal against the said assessment order and hence the appeal filed by the assessee was not competent and void ab initio. In the said order dt. 26th Nov., 2001, the Tribunal also observed that the assessee had no right to appeal and thus, the appeal shall be treated to have never been filed and the Department is free to take action against the assessee. Thereafter, the assessee filed an application under s. 254(2) of the Act for correction of the said order dt. 26th Nov., 2001 of the Tribunal and the ground taken in the said application filed by the assessee was that under sub-s. (4) of s. 90 of the Finance (No. 2) Act, 1998, the appeal should have been treated to have been withdrawn on the day on which the designated authority passed the order under sub-s. (2) of s. 90 of the Finance (No. 2) Act, 1998, i.e., 28th April, 1999 and that the Tribunal in passing the order dt. 26th Nov., 2001 to the effect that the appeal of the assessee was not competent and void ab initio and is to be treated to have never been filed, exceeded its jurisdiction. The said application under s. 254(2) of the Act was registered as MA No. 8/Ind/2003 and after hearing learned counsel for the parties at length, the Tribunal allowed the said M.A. by the impugned order dt. 16th Jan., 2004 and substituted paras 10 to 12 of its appellate order dt. 26th Nov., 2001 with new paras 10 and 11 holding that as the assessee had opted for KVSS, 1998 and had paid the taxes settled thereunder, the appeal has to be treated as dismissed. This appeal of the Department is against the said order dt. 16th Jan., 2004 of the Tribunal.
At the time of admission of the appeal, the Court by its order dt. 15th July, 2004 formulated the following two substantial questions of law for decision : (1) Whether Tribunal was justified in allowing the application made under s. 254 of the IT Act made by the assessee ? (2) Whether any ground was made out for entertaining the application made under s. 254 of IT Act and if so, whether these grounds satisfy the requirement of s. 254 of IT Act, entitling the Tribunal to rectify their main order passed in appeal ?
7. Mr. R.L. Jain, learned senior counsel for the appellant-Department submitted that under s. 254 (2) of the Act, the Tribunal has the power only to rectify any mistake apparent from the record but by the impugned order, the Tribunal has not just corrected a mistake apparent from the record, but has reconsidered the contentions of the learned counsel for the parties, which were raised at the hearing of the appeal and passed a fresh order holding in effect that the appeal though competent has to be treated as dismissed in view of the order/certificate issued by the designated authority under s. 90(2) of the Finance (No. 2) Act, 1998.
Mr. Chaphekar, learned senior counsel for the assessee, on the other hand, submitted that the Tribunal had taken an incorrect view of the law in its appellate order dt. 26th Nov., 2001 and had lost sight of the fact that under sub- s. (4) of s. 90 of the Finance (No. 2) Act, 1998, once the designated authority issued an order or a certificate under sub-s. (2) of s. 90 of the Finance (No. 2) Act, 1998, the appeal stood withdrawn by operation of the law. Sec. 254(2) of the Act, which provides for rectification of any mistake apparent from the record by the Tribunal is quoted hereinbelow:
“254. Order of Tribunal.—(1) ….. (2) The Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record amend any order passed by it under sub-s. (1) and shall make such amendment if the mistake is brought to its notice by the assessee or the AO: Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this subsection unless the Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard.” Thus, under the aforesaid sub-s. (2) of s. 254 of the Act, the Tribunal can only rectify any mistake apparent from the record and cannot rehear an appeal and reverse its findings on the contentions raised by the parties at the time of hearing the appeal. Furthermore, mistakes apparent from the record would mean palpable mistakes on the face of the record and not mistakes which the Tribunal will come to learn from the long-drawn arguments advanced by the learned counsel for the parties.
10. In the present case, we find from the records that a contention was raised on behalf of the assessee before the Tribunal at the time of hearing of the appeal that preliminary objections raised by the Department to the appeal filed by the assessee are only academic as the appeal stood withdrawn in the month of April, 1999 when the assessee obtained a certificate of settlement under the KVSS but such a contention raised by the assessee was turned down by the Tribunal with the following reasons : “10. We have considered the rival contentions carefully and have perused the material on record and judgments relied on by the parties. We do not agree with the contention of learned Authorised Representative that in view of the group having gone for KVSS and obtained certificate accordingly, the preliminary objections raised by the Revenue are only academic and the appeals are deemed to have been withdrawn in the month of April, 1999 only. This is so because Revenue has raised the preliminary objections on the issue whether the assessee was competent to file these appeals or not and the dispute is not regarding the KVSS and effect thereof. Therefore, we will proceed to analyse and adjudicate the preliminary objections raised by the Revenue.” Thus, it will appear from the findings of the Tribunal in the appellate order dt. 26th Nov., 2001 quoted above that the Tribunal was of the view that the Revenue had raised the preliminary objection on the issue whether the assessee was competent to file the appeal or not and that the dispute before the Tribunal was not regarding the KVSS and the effect thereof and therefore it will have to proceed to analyse and adjudicate the preliminary objections raised by the Revenue. The aforesaid view taken by the Tribunal may have been an erroneous view as contended by the assessee but the error if any in the order of the Tribunal could be corrected in an appeal before the High Court and not on an application under s. 254(2) of the Act which is confined to only rectify the mistakes apparent from the record.
11. As a matter of fact, we find that in the impugned order dt. 16th Jan., 2004 of the Tribunal on the application filed by the assessee under s. 254(2) of the Act that the Tribunal has relied on the decision of the Madras High Court in CIT vs. D.P.F. Textiles Ltd. (1998) 149 CTR (Mad) 128 : (2000) 241 ITR 548 (Mad), of Bombay High Court in Ahmedabad Electricity Co. Ltd. vs. CIT (1993) 106 CTR (Bom)(FB) 78 : (1993) 199 ITR 351 (Bom)(FB), of Allahabad High Court in Gauri Sahai Ghisa Ram vs. CIT (1979) 120 ITR 338 (All) and of Punjab and Haryana High Court in Chhat Mull Aggarwal vs. CIT (1979) 8 CTR (P&H) 368 : (1979) 116 ITR 694 (P&H) to come to the conclusion that the assessee would have a right to appeal even if additions were made on the concessions made by the assessee. We also find that in the impugned order, the Tribunal has relied on the decision of the Supreme Court in Dr. (Mrs.) Renuka Datla & Ors. vs. CIT (2003) 179 CTR (SC) 218 : (2003) 259 ITR 258 (SC) in which it has been held that if an appeal is pending, it is not for the designated authority to question the possible outcome of the appeal, etc., nor for the High Court to hold that the appeal was sham, ineffective or infructuous. Hence, it appears to us that in the impugned order on the application under s. 254(2) of the Act, the Tribunal has reconsidered the contentions of the learned counsel for the parties raised at the time of hearing of the appeal and has reversed its earlier finding in the appellate order dt. 26th Nov., 2001 that the appeal was not competent and was void ab initio and that the fact that the assessee had obtained certificate under the KVSS would not bar the Tribunal to analyse and adjudicate the preliminary objections of the Department that the appeal was not competent and void ab initio. The Tribunal has thus reheard the appeal before it and has taken a different view on the merits of the contentions of the parties in the impugned order dt. 16th Jan., 2004 which was outside the scope and purview of s. 254(2) of the Act. Hence, both the substantial questions of law are answered in the negative and in favour of the Department and against the assessee.
12. In the result, the appeal is allowed and the impugned order of the Tribunal dt. 16th Jan., 2004 passed in MA No. 8/Ind/2003 is set aside.
[Citation : 292 ITR 488]
