Income Tax Appellate Tribunal - Delhi
Shahid Atiq vs Ito, Ward 5(8) on 30 June, 2005
Equivalent citations: [2005]97ITD22(DELHI)
ORDER
P.N. Parashar, J.M. This miscellaneous application, filed by the assessee, arises out of the order dated 12-12-2003 rendered in ITA Nos. 3046 and 3049/Del./2000.
2. Shri C.S. Aggarwal, Sr. Advocate appeared for the assessee whereas Shri Jyoti Shankar, Sr. Departmental Representative represented the revenue.
3. In paras 1 to 4 of the miscellaneous application it is averred that the ITAT committed an error in recording an incorrect finding in regard to the fact that the assessment had been made on the legal heir of the deceased assessee, who was representing him. Para 4 of the miscellaneous application contains the allegation that while allowing the appeal of the revenue and reversing the finding of learned Commissioner (Appeals), the Tribunal has recorded incorrect finding of fact. Para 4 of the miscellaneous application is as under:
"4. It is most respectfully submitted that while allowing the appeals of the revenue and reversing the findings of the learned Commissioner (Appeals), as it will be apparent from the above, that the very basis contention of the assessee has been rejected by recording an incorrect finding of fact by the Hon'ble Bench. In fact in the instant case as a matter of fact, the Income Tax Officer did not serve notices on all the legal representatives of the deceased assessee. The notice under section 148 was served only to one of the legal representatives of the deceased. However, while passing the final order, he framed an assessment against the deceased assessee against the provisions of the law. It is thus most humbly submitted that there has not been disposal of the appeal in accordance with law and, it has been erroneously held that in this case the assessment was passed on the legal heir of the assessee who was representing the deceased and not against the deceased person."
4. In paras 5 and 6 of the miscellaneous application, it has been pleaded that the Tribunal has omitted to deal with certain judicial pronouncements to which reference was made on behalf of the assessee in support of the contention that the assessment order made after the death of the assessee was nullity in law. In this regard reference has been made to the following decisions:
CIT v. Amarchand N. Shroff (1963) 48 ITR 59 (SC);
CIT v. James Anderson (1964) 51 ITR 345 (SC); and ITO v. Ram Prasad (1968) 70 ITR 59 (All.) ITO v. Ram Prasad (1972) 86 ITR 145 (SC).
5. In support of the order of learned Commissioner (Appeals), it is further submitted that Jodhpur Bench of the ITAT, in the case of Asstt. CIT v. Late Mangi Lal through L/H Badri Prasad Bhatia (20041 83 TTJ 590, had decided the issue in favour of the assessee and in view of that decision also the order of the learned Commissioner (Appeals) should have been upheld.
6. In para 7 of the miscellaneous application it has been submitted that the memo of appeal was not served upon the assessee due to which cross objection by the assessee could not be filed to support the order of the learned Commissioner (Appeals). In this regard, reference has been made to the application made for seeking adjournment during the course of hearing appeal on 22-8-2003. The contents of this application are as under:
"The above appeals are fixed for hearing today.
We have received the notice from the assessee a few days ago. We require time to prepare for these appeals. Also, we are informed that the assessee has received only the notice but not the grounds of appeal. In these circumstances, we pray to the Hon'ble Bench for an adjournment. The inconvenience caused to this Hon'ble Bench is regretted. Accordingly prayed.
Sd/ Counsel for the assessee*
7. In para 8 the applicant has made following submissions:
"8. It is further submitted that in the instant case the Commissioner (Appeals) did not go into the merits of the contentions raised by the assessee. In these circumstances the Hon'ble Tribunal has committed a mistake apparent from record for having not restored the matter to the file of the Commissioner (Appeals) for adjudication on merits."
8. On a closer scrutiny and analysis of the contents of miscellaneous application, it is found that whereas in paras 1 to 6, the assessee has pointed out error or mistake on the part of the Tribunal in not disposing of the appeal in accordance with law, in paras 7 and 8 the remedy sought is for rectifying the mistake in not restoring the matter to the file of Commissioner (Appeals) for adjudication of grounds on merits. In other words, there are two types of remedies sought through this miscellaneous application. We can classify such remedies by grouping paras 1 to 6 in part "A" and paras 7 to 8 in part "B". While the remedy sought in part "A" requires reconsideration of the issue already adjudicated by the Tribunal, i.e., validity of the notice issued under section 148 of the Income Tax Act and consequently the validity of the assessment order, part "B" relates to remedy for issuing additional directions by amending the order of the Tribunal. We will take up these two parts separately in the following manner:
Part 'A' - Remedy by way of reconsideration of the issue already adjudicated:
9. On going through the miscellaneous application it is found that the assessee is seeking rectification in the order of the Tribunal by pointing out mistakes of law as well as mistakes of facts. The alleged mistakes have been pointed in paras 1 to 6 referred to above. On examination of the order of the Tribunal dated 12-12-2003, it is found that the facts relating to the issue involved in the appeal of the revenue as well as the case law on which reliance has been placed on behalf of the parties, have been duly considered and hence no apparent mistake in relation to fact and law is found in the order of the ITAT. It may be pointed out that after narrating the relevant facts, in paras 1 to 6 of the order of Tribunal dated 12-12-2003, the submissions made by the learned counsel for the assessee have been considered and the case law on which reliance was placed by him at the time of hearing, have been discussed in detail in paras 10 to 21 of the order. Hence the allegation of the assessee that the Tribunal has omitted to deal with certain judicial pronouncements and that there are mistakes of facts or of law is not substantiated. The learned counsel for the assessee has not been able to point out any material evidence which has been ignored or any other omission on the part of ITAT while deciding the issue relating to the validity of the assessment order. Thus, by making averments in paras 1 to 6 of the miscellaneous application, the assessee, in fact, is seeking a review of the findings recorded by the Tribunal in relation to validity of the assessment order. If the prayer of the assessee is considered and allowed then it will amount to recalling of the order of the Tribunal and reviewing the same. The assessee, therefore is requiring the Tribunal to recall its order, which course is not open to us while exercising jurisdiction under section 254(2). It is now well-settled legal position that the Tribunal does not have the power to recall its order. The position in this regard has been clarified by the Hon'ble Delhi High Court-in the cases of Ms. Deeksha Suri v. ITAT (1998) 232 ITR 3951; Karan & Co. v. ITAT (2002) 253 ITR 131 (Delhi); and CIT v. Vichtra Construction (P) Ltd. (2004) 269 ITR 371 (Del).
10. In the case of Vichtra Construction (P) Ltd. (supra), the Hon'ble High Court has held as under:
"The provisions of section 254 of the Income Tax Act, 1961 are not similar to those of review under the Civil Procedure Code. The words used in section 254(2) are 'Shall make such amendments, if the mistake is brought to its notice". Clearly, if there is a mistake, then an amendment is required to be carried out in the original order to correct that particular mistake. The provision does not indicate that the Tribunal can recall the entire order and pass a fresh decision. That would amount to a review of the entire order and that is not permissible under the Income Tax Act. The power to rectify a mistake under section 254(2) cannot be used for recalling the entire order. No power of review has been given to the Tribunal under the Income Tax Act. Thus, what it could not do directly, could not be allowed to be done indirectly."
10.1 The decision in the case of Vichtra Construction (P) Ltd. (supra) has been further followed by the Hon'ble Jurisdictional High Court in the case of CIT v. Mayur Recreational & Development Ltd. (IT Appeal Nos. 491 and 662 of 2004 vide order dated 16-11-2004). In the aforesaid case, the Hon'ble High Court has observed as under:
"3. We heard learned counsel appearing for the parties. In the case of CIT v. Vichtra Construction (P) Ltd. (2004) 269 ITR 371, this court had examined an identical question in detail. This court is of the opinion that the power conferred under section 254 of the Act does not contemplate rehearing which would have the effect of rewriting an order affecting the merits of the case. Else there would be no distinction between a power to review and a power to rectify a mistake. What is not permissible under the statute cannot be indirectly done by recourse to section 254(2) of the Act. Statute deliberately confers the power to rectify the order and does not authorize to review the order. The answer is required to be given in favour of the revenue in affirmative and against the assessee."
10.2 This proposition also finds support from proviso to rule 34A(3) of ITAT Rules, 1963 which prohibits even posting of miscellaneous application for hearing if it prima facie appears to be a petition for review. This proviso is as under:
"Provided it shall not be necessary to post miscellaneous application for hearing if it prima facie appears to be petition for review."
11. It has to be pointed out that a power which has not been specifically granted under a statute cannot be implied. Reference in this regard may also be made to section 114 of Civil Procedure Code which specifically empowers the Civil Courts to review their orders. This provision is as under:
"114. Review - Subject as aforesaid, any person considering himself aggrieved-
(a) by a decree or order from which an appeal is allowed by this Code, but from which no appeal has been preferred,
(b) by a decree or order from which no appeal is allowed by this Code, or;
(c) by a decision on a reference from a court of Small Causes, may apply for a review of judgment to the court which passed the decree or made the order, and the court may make such order thereon as it thinks fit."
11.1 The same power has not been granted to ITAT under the Income Tax Act.
12. In view of the ratio of the above decisions, the prayer made by the applicant on the basis of averments made in paras 1 to 6 of miscellaneous application cannot be allowed.
Part "B" - Rectification of the order under section 254(2) by amending it:
13. Coming to the averments made in paras 7 and 8 of the miscellaneous application, it is found that different grounds have been taken in these paras to point out the mistake on the part of the Tribunal in not restoring the matter to the file of Commissioner (Appeals).
14. The learned counsel for the assessee submitted that the grounds taken by the assessee before learned Commissioner (Appeals) have not been adjudicated by him and since grounds of appeal filed by the revenue against the order of Commissioner (Appeals) were not supplied to the assessee, the assessee could not avail the opportunity to file cross objection. According to learned counsel, as the Tribunal has reversed the order of learned Commissioner (Appeals) and has upheld the validity of the assessment order, the assessee should have been granted opportunity to agitate the addition before learned Commissioner (Appeals). It was further contended that merely because the assessee did not file cross objections, he cannot be deprived of his right to challenge the addition particularly when he did challenge the additions on merits before the learned Commissioner (Appeals). It was pointed out that after the appeal having been decided in his favour by the learned Commissioner (Appeals), who annulled the assessment order, the assessee might have remained under the impression that he is not required to agitate the issue on merits before the Tribunal.
15. The learned Departmental Representative on the other hand submitted that there is no mistake, much less a mistake apparent on the face of record in the order of ITAT and, therefore, the application should be rejected. He further submitted that since the assessee did not file any cross-objection or cross appeal before the ITAT, he cannot claim that further opportunity should be provided to do so or that learned Commissioner (Appeals) be directed to adjudicate the grounds not considered by him.
16. On going through the entire material, we find force in this contention of the learned counsel for the assessee. The assessee had taken following grounds before the learned Commissioner (Appeals):
1. The Income Tax Officer had erred in making an addition of Rs. 1,60,548 (Rs. 1,58,050 for assessment year 1993-94) to the returned income which is invalid in law and should therefore be deleted. That this amount representing lease money given to Shri Shahid Atiq and Shri Nasir Atiq does not in law become income to be assessed in the hands of the appellant and in the circumstances of this case.
2. That the interest of Rs. 8,000 (Rs. 5,537 for assessment year 1993-94) levy under section 234A and Rs. 1,68,000 (Rs. 99,516 for assessment year 1993-94) levy under section 234B are invalid in law because this was levied only on account of addition made by the Income Tax Officer to the returned income. Further, since no opportunity was given to the assessee before levy of interest, such a levy is bad in law as the assessee was denied an opportunity to make any submission to the Income Tax Officer against such levy. Moreover, no interest can be charged in section 148 proceedings."
16.1 The learned Commissioner (Appeals) has not at all considered these grounds. He has decided only legal ground which was pressed before him as an additional ground for challenging the validity of notice under section 148. Thus, the original grounds as taken before the learned Commissioner (Appeals) remained unadjudicated.
17. The crux of the issue, therefore, is as to whether the right of the assessee to challenge the additions on merits can be maintained by the Tribunal despite the fact that the assessee failed to agitate and assert such rights before ITAT by filing a cross appeal or cross objection. On this issue, the parties have advanced arguments in relation to the powers of ITAT.
18. In the context of controversy relating to power of the Tribunal, as argued before us, we consider it proper to refer to the relevant statutory provisions contained under section 254, which are as under
"254(1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.
254(2) The Appellate 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-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the assessing, officer."
19. So far as section 254(1) is concerned, for a proper understanding of this provision, the meaning of the words "pass such orders thereon as it thinks fit", require interpretation in the context of legislative intention behind introducing these words, which was to clothe the Tribunal with broad power and not to restrict its power to the matters raised or complained by the assessee but to consider all matters arising out of the proceedings which may have been considered and determined by the assessing officer in the course of the assessment, although such matters may not have been raised before him by the assessee. The power of the Tribunal has been examined with reference to the above terms in the following cases:
19.1 In the case of Ramgopal Ganpatrai & Sons v. CEPT (1953) 24 ITR 362 (Bom.), while considering the scope of analogous provision in section 17 of the Excess Profits Tax Act, Hon'ble Chief Justice Shri Chagla, speaking for the Bench observed as under:
"it must be borne in mind that when a statute confers a right of appeal and permits an order of a trial court to be challenged, the appellate court has full jurisdiction to reverse or modify that order on any ground which is open to it in law. The appellate court may even reverse or modify the order on a point of law taken by itself suo motu without being asked to do so by the appellant."
19.2 In the case of Hukumchand Mills Ltd. v. CIT (1967) 63 ITR 232 (SC), while discussing the power of Appellate Tribunal in dealing with appeals, as expressed in section 33(4) of the Income Tax Act, 1922, the Hon'ble Supreme Court observed that the powers of the Tribunal are expressed in widest possible terms. In that case the word "thereon" and the words "pass such orders as the Tribunal thinks fit", were explained by the Hon'ble Supreme Court by observing as under:
"The power of the Appellate Tribunal in dealing with appeals are expressed in section 33(4) of the Income Tax Act in the widest possible terms. The word "thereon" in section 33(4) restricts the jurisdiction of the Tribunal to the subject-matter of the appeal. The words "pass such order as the Tribunal thinks fit" include all the powers (except possibly the power of enhancement) which are conferred on the Appellate Assistant Commissioner by section 31 consequently, the Tribunal has authority under section 33 to direct the Appellate Assistant Commissioner or the Income Tax Officer to hold a further enquiry and dispose of the case on the basis of such enquiry."
19.2-1 The Hon'ble Supreme Court also explained the scope of Rules 12 and 27 by observing as under:
"Rules 12 and 27 of the Appellate Tribunal Rules, 1946, are not exhaustive of the powers of the Tribunal. They are merely procedural in character and do not, in any way, circumscribe or control the power of the Tribunal under section 33(4)."
19.3 In the case of S.N. Swarnammal v. CED (1973) 88 ITR 366 (Mad), it was observed by the Hon'ble Madras High Court that an appeal before the Appellate Assistant Commissioner /Appellate Tribunal is of rehearing and the appellate authority has got all the powers of assessing authority.
19.4 The issue relating to powers of Appellate Tribunal was again examined by the Hon'ble Supreme Court in the case of Jute Corpn. of India Ltd v. CIT (1990) 53 Taxman 85 (SC). In this case, reversing the decision of Hon'ble Calcutta High Court in the case of Jute Corpn. of India Ltd. v. CIT (1981) 131 ITR 412 (Cal), the Hon'ble Supreme Court observed as under:
"An appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is rested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income Tax Officer."
19.5 In the case of Kerala Chemicals & Proteins Ltd. v. CIT (1999) 235 ITR 467 (Ker.), the assessment was completed on a total income of Rs. 19,94,620 and demanding a total sum of Rs. 11,18,460 towards income tax and interest etc. The learned Commissioner (Appeals) granted certain relief in appeal and consequently the advance tax paid by the assessee was found to be in excess of the advance tax paid by the assessee which resulted in a refund. Consequently, the assessee became entitled to interest in terms of section 214(1A). However, the assessing officer did not allow interest under section 214A. On appeal, the Commissioner (Appeals) directed the assessing officer to grant interest under section 214. On appeal by the revenue, the Tribunal held that the interest under section 214A is payable only up to the date of first assessment order under section 143 or under section 144 on the amount found to be in excess of the tax demand. The assessee filed miscellaneous application before the Tribunal and contended that it had committed a mistake in not referring to the provisions of sub-section (1A) of section 214. The Tribunal rejected the said petition by holding that no reference was made by the assessee in the course of hearing of revenue's appeal. However, in view of the submission of the assessee that it was the duty of Tribunal to make a reference to the provisions contained under section 214(1A) of the Act, the Tribunal made a reference on the question.
19.5-1 While deciding the reference the Hon'ble Kerala High Court, after considering the decision of Hon'ble Supreme Court in the case of CIT v. Mahalaxmi Sugar Mills Co. Ltd. (1986) 160 ITR 920 (SC), observed as under:
"The only question is whether the Tribunal is bound to take note of the provision contained in sub-section (1A) of section 214 and to apply the same while deciding the quantum of interest. The said provision was there in the statute when the question came up for decision before the Tribunal. Even though the assessee did not specifically refer to sub-section (1A), we cannot say that the Tribunal can ignore the said provision when taking the decision. We are of the view that the Tribunal ought to have considered and referred to the said provision. It is the duty of the Tribunal to consider the law as it existed then even though the assessee failed to bring it to its notice. The Supreme Court in CIT v. Mahalaxmi Sugar Mills Co. Ltd (1986) 160 ITR 920 (SC) observed thus:
"In the second place, there is a duty cast on the Income Tax Officer to apply the relevant provisions of the Indian Income Tax Act for the purpose of determining the true figure of the assessee's taxable income and the consequential tax liability. Merely because the assessee fails to claim the benefit of a set off, it cannot relieve the Income Tax Officer of his duty to apply section 24 in an appropriate case."
It is difficult for us to say that the principle emerging from the above decision cannot be extended to the cases before the other authorities under the Income Tax Act. We are of the view that the above principle can equally be applied to the cases coming before the Income Tax Appellate Tribunal. Also refer to the decision of this court in Parekh Brothers v. CIT (1984) 150 ITR 105. In the result, the question referred to us for decision is answered in the affirmative, that is to say, in favour of the assessee and against the revenue."
20. On the basis of the observations made in the aforesaid decision, it may be concluded that the powers of the Tribunal are co-extensive with the powers of the assessing officer and that of the first appellate authority and are, in fact, wider powers than those authorities, subject to the limitation that the Tribunal does not have the power to enhance the assessment which power has been specifically conferred upon the Commissioner (Appeals) under section 251(1)(a) of the Income Tax Act and which power has been specifically denied to ITAT under proviso to section 254, which is as under:
"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 sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard."
20.1 Thus, as the limitation on the jurisdiction of the ITAT having been specifically incorporated under a statutory provision, no further limitation can be implied or imposed in the exercise of appellate jurisdiction of the Tribunal for adjudicating the subject-matter in appeal before it.
21. The scope of the jurisdiction and powers of the Appellate Tribunal came before the Hon'ble Supreme Court in the case of Union of India v. Paras Laminates (P) Ltd. (1990) 186 ITR 722 (SC). In that case the Hon'ble Supreme Court, while examining the powers of Customs, Excise & Gold (Control) Appellate Tribunal, observed as under:
"There is no doubt that the Tribunal functions as a court within the limits of its jurisdiction. It has all the powers conferred expressly by the statute. Furthermore, being a judicial body, it has all those incidental and ancillary powers which are necessary to make fully effective the express grant of statutory powers. Certain powers are recognized as incidental and ancillary, not because they are inherent in the Tribunal, nor because its jurisdiction is plenary, but because it is the legislative intent that the power which is expressly granted in the assigned field of jurisdictional is efficaciously and meaningfully exercised. The powers of the Tribunal are no doubt limited. Its area of jurisdiction is clearly defined but, within the bounds of its jurisdiction, it has all the powers expressly and impliedly granted. The implied grant is, of course, limited by the express grant and, therefore, it can only be of such powers as are truly incidental and ancillary for doing all such acts or employing all such means as are reasonably necessary to make the grant effective."
22. In view of the above decision, the doctrine of incidental or implied power has been recognized for the exercise of powers by the Appellate Tribunal. On the same logic it can be said that the Income Tax Appellate Tribunals which has wide powers in respect of the subject-matter of an appeal before it, can decide any question which is material to the subject matter even though it was not raised. Such proposition was also laid down in the case of CIT v. Mahalaxmi Textile Mills Ltd. (1967) 66 ITR 710 (SC).
23. In the case of Pokhraj Hirachand v. CIT(1963) 49 ITR 293 (Bom), it was held that the Tribunal in deciding the appeal, shall not be confined to the grounds set forth in the memo of appeal or taken by leave of Tribunal in rule 11 of ITAT Rules.
23.1 In the case of CIT v. Edward Kelventer (Successors) (P) Ltd. (1980) 123 ITR 200 (Del), it was held that the subject-matter of an appeal should be understood not in a narrow and unrealistic manner but should be so comprehended as to encompass the entire controversy between the parties which is sought to be got adjudicated upon by the Tribunal.
23.2 In view of the above authorities, the word "thereon" is to be taken so as to refer to the subject-matter of the appeal and as held in the case of Ahmedabad Electricity Co. Ltd. v. CIT (1993) 199 ITR 351 (Bom) (FB), the subject-matter of appeal is the entire tax proceedings of the assessee which is before the Tribunal for consideration and this will cover the proceedings before the assessing officer, before the first appellate authority as well as before the Tribunal, including the grounds raised before the Tribunal, any additional grounds which may be allowed to be raised before the Tribunal as also cross-objections, if any, before the Tribunal. In view of the said decision it is clear that the view that Tribunal is confined only to issues arising out of the appeal before the first appellate authority is a narrow view.
23.3 The decision of the Full Bench of the Hon'ble Bombay High Court in the case of Ahmedabad Electricity Co. Ltd. (supra), has been followed and applied in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC).
23.4 The Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC), held that the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The Hon'ble Supreme Court has held as under:
"Under section 254 of the Income Tax Act, 1961, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the department have a right to file an appeal/ cross-objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) is too narrow a view to take of the powers of the Tribunal."
23.5 In view of the observation of the Hon'ble Supreme Court, the Tribunal should decide relevant issues irrespective of the fact whether specific ground has been taken or not.
23.6 The expression "as it thinks fit", occurring in section 254(1) has been explained by the Hon'ble Supreme Court in the case of CWT v. Sharbati Devi Jhalani (1994) 207 ITR 1 (SC). In that case it was held that assessment, appeal to the first appellate authority and further appeal to the Tribunal are parts of an integrated process. It was further held that the Tribunal has to consider the orders passed by the authorities below in the light of law application to those authorities.
23.7 The extent and scope of the powers of the Tribunal as well as the legal obligation cast upon it, has been elucidated in clear and categorical terms by the Hon'ble Madras High Court in the case of CIT v. Rayala Corpn. (P) Ltd. (1995)215 ITR 883 (Mad). The Hon'ble court has observed as under:
"The Appellate Tribunal is not a court. Its powers, however, are expressed in the widest possible terms under section 254 of the Income Tax Act, 1961. Its powers are almost similar to the powers of an appellate court under the Code of Civil Procedure. A wide power, however, is not such that it can be exercised in any manner. The Tribunal can interfere with the orders of the lower authorities, but can do so only on judicial considerations and on the basis of the reasons that suggest clearly that the lower authorities had committed an error of law or such facts that had vitiated its considerations. Its primary task is not to go into the return of the assessee and decide what amount of tax should be levied upon is income, but to see whether the taxing authorities, including the Appellate Assistant Commissioner, have committed any error of law or of fact and on account of such error, the assessee has suffered. The Tribunal has got to protect, on the one hand, the interest of the assessee in the sense that he is not subjected to any amount of tax in excess of what he is bound to pay, and, on the other hand, it has duty to protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the tax."
23.8 In view of the propositions laid down by the various Hon'ble Courts, as referred to above, it is the duty of the Tribunal to consider the subject-matter of the appeal and pass 'such orders' as are required to adjudicate the subject-matters before it. If for adjudicating various aspects of the subject-matter or matters incidental thereto, an order or direction is required to be issued, then, 'such order' or 'directions' are legally justified in view of the provisions contained under section 254(l) of the Income Tax Act.
24. It may also be pointed out that Rules 11, 27 and 28 of the Appellate Tribunal Rules also regulate power and procedure to be exercised by the Tribunal. Rule 28 of the Appellate Tribunal Rules also justifies directions for remanding the matter, if the same is called for. Thus, where particular issue has been omitted to be considered or has not been adjudicated properly or where perverse findings have been recorded in total disregard of the material on record, the Tribunal is competent enough to set aside the order of the lower appellate authority to that extent, although no specific ground is taken for that purpose by the concerned party. Thus, in a given situation, firstly, there is an obligation on the part of the Tribunal to consider the subject-matter of appeal and secondly to issue effective directions for adjudicating the subject-matter of appeal, which, as observed earlier, includes the entire process of assessment and which has been held to be an integrated process.
25. Now the next issue is as to whether a mistake can be pointed out on the part of ITAT even when the assessee did not seek any relief from the Tribunal. As observed earlier, in order to effectively adjudicating the issue and the subject-matter, such duty is cast upon the Tribunal. To conclude, direction should be issued to the Commissioner (Appeals) for deciding such issues, as such directions are essentially incidental to the subject-matter and mistake on the part of the Tribunal in not restoring the matter to the Commissioner (Appeals) can be rectified by amending its earlier order. The power to amend being different to the power of review, can definitely be exercised in such a case.
26. A similar issue came up before the Hon'ble Gujarat High Court in the recent judgment in the case of Sheth Construction Co. v. ITO (2005) 274 ITR 304 (Guj). In that case in the assessment for assessment year 1994-95 the assessing officer made addition on account of bad debts of Rs. 70,025 and on account of disallowance of interest payment of Rs. 6,580. The assessee challenged these additions before the Commissioner (Appeals). A preliminary objection was also raised by the assessee on the ground that the assessment was not valid as it was not signed by the assessing officer. This plea was accepted by the learned Commissioner (Appeals) who set aside the assessment order. However, the learned Commissioner (Appeals) did not adjudicate the original grounds of appeal which challenged the two additions referred to above. On appeal, the Tribunal found that there was a valid assessment order which bore the signatures of the assessing officer as two different pleas, hence the Tribunal allowed the department's appeal and restored the, order of assessing officer. On further appeal to the High Court the order of the Tribunal was supported by the revenue. It was also submitted that when the department had filed an appeal before the Tribunal, it was incumbent upon the assessee to have raised a cross objection challenging the decision of the Commissioner (Appeals) in having failed to decide the original grounds of appeal. The following question arose for the decision of the Hon'ble High Court:
"Whether, on the facts and in the circumstances of the case, the Tribunal having reversed the order of the Commissioner (Appeals) on preliminary point, was the Tribunal not required to restore the matter to the file of the Commissioner (Appeals) for deciding other grounds on merits, which had not been decided by the Commissioner (Appeals) in the first round?"
26.1 The Hon'ble High Court after considering the relevant facts observed as under:
"Held, that it was apparent that the assessee had at no stage given up its right of appeal which was available under the statute. In fact the assessee had challenged the addition and disallowance made by the assessing officer on the merits before the Commissioner (Appeals). However, the Commissioner (Appeals) having entertained the additional ground regarding validity of the assessment order and upheld the same holding the assessment order to be non-existent in the eyes of law, there was no occasion for the assessee to file any cross-objection in the revenue's appeal before the Tribunal. Once the Tribunal had come to the conclusion that the assessment order had been signed by the assessing officer and was valid in the eyes of law, it was incumbent upon the Tribunal to restore the matter to the file of the Commissioner (Appeals)."
26.2 Thus, in view of the decision of Hon'ble "Gujarat High Court also the matter should have been restored to the file of Commissioner (Appeals) so as to enable the Commissioner (Appeals) to decide the merits of the original grounds of appeal raised by the assessee before him.
26.3 As observed by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. (supra), the power of the Tribunal in dealing with the appeals is very wide and while exercising the statutory authority and statutory duty, it has got all powers which are reasonably necessary for the accomplishment of the object intended to be secured. Hence, whereas the Tribunal has no power to recall and review its orders, in view of the decisions of Jurisdictional High Court in the cases of Vichtra Construction (P) Ltd. (supra) and Mayur Recreational & Development Ltd. (supra), it has got power to amend the order if the proper adjudication of the subject-matter so warrants. Thus, in a given situation, like the one before us, the order may not be recalled but at the same time it may require amendment by making additions. Such an amendment or addition being different from review of the order, is very much permissible within the scope of powers under section 254(2) of the Income Tax Act, 1961.
26.4 Thus, on proper examination of section 254(2) of the Income Tax Act, reproduced in para 18 of this order, it is clear that the Tribunal is under legal obligation to amend its order, passed by it under sub-section (1) of section 254, if any mistake pointed out or is found apparent from the record. If the Tribunal has failed to issue directions or failed to pass such orders, as are required to be passed under section 254(l), then it shall amount to a mistake apparent from record and for rectifying such mistakes the Tribunal "shall make such amendment" in its order as are necessary for correcting such mistake.
26.5 Thus, in view of the language adopted in sub-clause (2), as referred to above, it is mandatory obligation on the part of the Tribunal to amend its order if the mistake or error so requires.
26.6 In the case of Kapurchand Shrimal v. CIT (1981) 131 ITR 4511 (SC) the duty of the appellate authority has been explained and laid down by the Hon'ble Supreme Court by observing as under:
"It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statute."
27. On examination of the scope of jurisdiction of Income Tax Appellate Tribunal in deciding the appeals and miscellaneous applications under sections 254(1) and 254(2) of the Act and on the analytical appreciation of the propositions laid down in various decisions in relation to the powers of the Tribunal referred to above, we can cull out the following postulates :
(1) The power of Tribunal as defined under section 254(1) has been expressed in widest terms as the Tribunal can pass 'such orders as it thinks fit on the subject-matter of appeal before it.
(2) In hearing and deciding the appeal, the Tribunal is not prevented from considering questions of law arising in assessment proceedings although not raised earlier.
(3) The process of appeal before ITAT is part of integrated process of assessment and, therefore, the powers of Tribunal are co-extensive with the powers of assessing officer and that of Commissioner (Appeals) subject to the limitation that ITAT cannot enhance the assessed incomeHukamchand Mills Ltd. v. CIT(I 967) 63 ITR 232 (SC) (4) The Tribunal has also incidental and ancillary powers for doing such acts as are reasonably necessary in exercise of Powers granted by the ActUnion of India v. Paras Laminates (P) Ltd. (1990) 186 ITR 722 (SC).
(5) The subject-matter of an appeal before Income Tax Appellate Tribunal encompasses the entire controversy between parties which is sought to be got adjudicated upon by the TribunalAhmedabad Electricity Co. Ltd. v. CIT (1993) 199 ITR 351 (Bom) (FB).
(6) The subject-matter of appeal is the relief sought by the appellant and objected to by the respondent. It is not proper to circumscribe the subject-matter of appeal by taking into account the rival submissions or the reasons or grounds which are put forward by the partiesCIT v. Sundaram & Co. (P) Ltd. (1963) 50 ITR 35 (Mad.) (Sh. N).
While exercising its rectificatory powers under section 254(2) of the Income Tax Act, the Tribunal has no power to review its earlier order (see proviso to rule 34A of Appellate Tribunal Rules, 1963 and decision of Hon'ble Delhi High Court in the case of CIT v. Vichtra Construction (P) Ltd. (2004) 269 ITR 371 (Del).
(8) The Tribunal can recall its order passed ex parte (See rule 24 of Appellate Tribunal Rules, 1963 and decision of Honble M.P. High Court in the case of Estate of Late Tukoji Rao Holkar v. CWT (1997) 223 ITR 480 (MP).
(9) The power to rectify mistake can be exercised suo motu by Tribunal or on the notice of parties.
(10) It is a mistake apparent on record, if the Tribunal has omitted to consider a ground of appeal taken before it or if it has failed to pass such order or to issue such directions which were necessary for proper adjudication of subject-matter of appeal, even if the assessee/or revenue has not requested for such a direction by filing cross appeal or cross-objections.
(11) Without recalling or reviewing the order, on issues already adjudicated by the Tribunal, the omission or error on the part of ITAT can be corrected or rectified by amending and adding something to it without subtracting anything from the main order.
(12) There is legal obligation on the part of ITAT to rectify errors committed by the authorities below even if neither party objects to such mistake. Such obligation can be discharged by exercising jurisdiction suo motu alsoKapurchand Shrimal v. CIT (1981) 131 ITR 451 (SC).
(13) If a mistake is found in the order of ITAT, then such mistake can be rectified by amending the order in the course of deciding the miscellaneous application itself and the order of ITAT need not be recalled for this purpose.
(14) A mistake arising as a result of subsequent interpretation of law by Hon'ble Supreme Court and of Hon'ble Jurisdictional High Court, would constitute a mistake apparent from the records and rectifications action under section 254(2) of Income Tax Act would be in order.
28. On application of the above postulates, it is found that there was a legal obligation on the part of Tribunal to restore the subject-matter to learned Commissioner (Appeals) and failure to do so amounts to a mistake apparent on face of record which mistake has to be rectified by issuing directions and by amending the order of ITAT accordingly.
29. In the instant case if the contention of the learned Departmental Representative that as the assessee has not filed cross objection, he cannot insist on adjudication of grounds on merits by the learned Commissioner (Appeals), is accepted, then great prejudice shall be caused to the assessee and there shall be miscarriage of justice. While deciding the appeal, the Tribunal has to undertake a meaningful and effective exercise of its jurisdiction to ensure and provide substantial justice in relation to the subject-matter under its consideration and for doing so, it has the power to "pass such orders thereon as it thinks fit", in view of the provisions contained under section 254 of the Income Tax Act. On the facts and the peculiar circumstances relating to this case, therefore, the Tribunal while reversing the order of learned Commissioner (Appeals) on the point of validity of notice under section 148, should have also directed the learned Commissioner (Appeals) to decide the other grounds on merits. The omission to do so i.e., not restoring the matter to the file of Commissioner (Appeals) and not issuing direction for adjudicating the grounds on merit, therefore, amounted to be a mistake on the part of the Tribunal.
30. In view of the aforesaid obligation and duty of the Tribunal, we have to consider the remedies sought in two parts of this miscellaneous application. On part A, in view of the decision of the Hon'ble Delhi High Court in the cases of Vichtra construction (P) Ltd. (supra); and Mayur Recreational & Development Ltd. (supra), we are of the considered opinion that the Tribunal has no power to, rehear, reconsider, recall and review its order under section 254(l) of the Income Tax Act. However, so far as part 'B' is concerned, after considering the scope under section 254(2), relating to power available to the ITAT for rectifying its mistakes, we have to hold that the Tribunal has not only power but legal obligation to amend its order, so as to rectify and cure the mistake found on its part in not restoring the matter to learned Commissioner (Appeals).
31. In view of the above, in the instant matter, it was the obligation on the part of the Tribunal to have issued appropriate direction to the learned Commissioner (Appeals) to decide the grounds on merits. On considering the above aspect and on the totality of the facts and circumstances relating to this matter and with a view to prevent miscarriage of justice and to ensure substantial justice in relation to the subject-matter of appeal, the prayer made in part 'B' of the miscellaneous application deserves to be allowed.
32. Thus, while maintaining our order on the legal issue, and without recalling or reviewing the same, we consider it necessary to amend the order of the Tribunal dated 12-12-2003 for rectifying the mistake on the part of ITAT in not restoring the matter to learned Commissioner (Appeals) for deciding the grounds on merits.
33. In view of the above, in the end of para 23, relating to order of ITAT in ITA No. 3046/Del./2000 for assessment year 1992-93, we amend the order by adding the following direction:
"The learned Commissioner (Appeals) is directed to adjudicate ground Nos. 1 and 2 taken before him, which have been reproduced in para 10 of this order. For doing so, he shall consider the entire relevant material and shall provide full opportunity of hearing to the assessee."
34. A similar direction shall be added after para 24 relating to order in ITA No. 3049/Del./2000 for assessment year 1993-94.
35. The matter is, therefore, restored to the file of learned Commissioner (Appeals) for making compliance of the above directions.
36. In the result, miscellaneous application stands allowed and disposed of as above.