Calcutta High Court
C.C.A.P. Ltd. vs Commissioner Of Income-Tax on 27 July, 2004
Equivalent citations: (2005)193CTR(CAL)74, [2004]270ITR248(CAL)
Author: D.K. Seth
Bench: D.K. Seth
ORDER OF TRIBUNALIn favour of assessee on revenue's appeal Catch Note: The assessee was carrying on the business of undertaking contracts in respect of which mobilisation fees was being received from time to time. The assessee used to maintain its accounts on basis of completion of contracts method but from the assessment year 1988-89, it changed the method of accounting and started showing receipt of mobilisation fee on the basis of the pro rata performance of the contract in that particular assessment year and offered it to tax accordingly. In respect of the assessment years 1988-89 and 1989-90, the CIT (A) held that the amount would become taxable on the completion of the contract and thus postponed the taxability till the completion of the contract. The Tribunal allowed assessee's appeal for these years. However, for assessment year 1990-91 it sustained order of CIT (A). Held : As the Tribunal's order was not in conformity with its earlier year's order therefore, same was modified to the extent of earlier year's findings. Ratio: Where Tribunal's order under consideration was not in conformity with its own, earlier year's order, same can be modified by the High Court. Held: In the present case, following the order passed by the Tribunal in respect of earlier two assessment years 1988-89 and 1989-90, the Tribunal had passed the main order under appeal dismissing the same and purporting to affirm the order of the CIT (A). These two cannot go together. In respect of the earlier two years, the proportionate pro rata taxability had been accepted on principle overruling the postponement theory held by the CIT (A). When this principle was being followed, if the order of the CIT (A) was upheld in respect of the assessment year 1990-91, in that event, it would uphold the postponement theory while following the principle of pro rata theory. Thus, the Tribunal was wrong, while following the principle laid down in respect of the earlier two years, in affirming the decision of the CIT (A) for the assessment year 1990-91. This appears to be wholly anomalous and incongruous. Therefore, the order could not be sustained. The order passed by the CIT (A) in respect of the assessment year 1990-91 was modified to the same extent as it was done in respect of the earlier two assessment years 1988-89 and 1989-90 the same manner following the pro rata theory. Therefore, the appeal was allowed and the order passed by the Tribunal was modified. Application: Also to current assessment year. Decision: In assessee's favour.4 Cases Referred: Bata India Ltd. v. Dy. CIT (1996) 217 ITR 871 (Cal), CIT v. Anand and Co. (1994) 207 ITR 418 (Cal), CIT v. Assam Travels Shipping Service (1993) 199 ITR 1 (SC), CIT v. Ballabh Prasad Agarwalla (1998) 233 ITR 354 (Cal), CIT v. Bhagwati Developers (P) Ltd. (2003) 261 ITR 658 (Cal), CIT v. Cochin Refineries Ltd. (1988) 173 ITR 461 (Ker). CED v. Narasamma (Estate of late) (Smt. K) (1980) 125 ITR 196 (AP) and Neeta S. Shah v. CIT (1991) 191 ITR 77 (Karn). Income Tax Act, 1961 Section 254 Income Tax Act, 1961 Section 260A Appeal (High Court)--POWERSModification of order of Tribunal Catch Note: There is no bar on the High Court under section 260A to pass appropriate order, as would be necessary in the appeal having regard to the facts and circumstances of the case. Therefore, modification of Tribunal's order is well within the jurisdiction of High Court under section 260A. Ratio: Modification of Tribunal's order is well within the jurisdiction of High Court under section 260A. Held: In any event, even if it is assumed that the Tribunal could not have passed any order since no appeal was preferred and no cross-objection was filed, even then in an appeal under section 260A in which the CPC is applicable as far as possible in view of sub-section (7) of section 260A and by reason of the provisions contained in section 260A(6), the High Court is empowered to pass appropriate order in an appeal. Under order 41, rule 33 of the CPC, the High Court is empowered to pass any order in an appeal before it and grant relief to a party even though such party may not have filed cross-objections or preferred any appeal or appeal was preferred against a part of the order. Therefore, there is no bar on the High Court in exercise of the power under section 260A to pass appropriate order as would be necessary in appeal having regard to the facts and circumstances of the case. Decision: Principle enunciated. Income Tax Act, 1961 Section 260A Code of Civil Procedure, 1908 Order 41 JUDGMENT D.K. Seth, J.
Facts :
1. The assessee was carrying on the business of undertaking contracts in respect of which mobilisation fees were being received from time to time. Initially, the assessee used to maintain accounts on the basis of the completion of the contracts; but from the assessment year 1988-89, the assessee had changed the mode of accounting and started showing receipt of mobilisation fee on the basis of the pro rata performance of the contract in that particular assessment year and offered it to tax. In respect of the assessment years 1988-89 and 1989-90, the Commissioner of Income-tax (Appeals) had held that the amount would become taxable on the completion of the contract when the bank guarantee would be released and thus postponed the taxability till the completion of the contract. Against these two orders of the Commissioner of Income-tax (Appeals), the assessee preferred appeal before the learned Tribunal. The learned Tribunal by a consolidated order passed in these two appeals had laid down the principle of pro rata receipt of the mobilisation fees on the basis of the pro rata performance of the contract and did not agree with the postponement of the taxability till the completion of the contract and had allowed these two appeals with regard to these grounds. Similar offer for taxation of mobilisation fee received on the basis of the pro rata performance in respect of the assessment year 1990-91 was also subjected to appeal before the Commissioner of Income-tax (Appeals) wherein the same principle of postponement and taxability on the completion of the contract was upheld. For some reason or other the assessee did not prefer any appeal against this order. Though in our view the order had affected the assessee's interest Mr. Khaitan had pointed out that it had enured to the benefit of the assessee, which we are unable to appreciate. Be that as it may/we need not go into this question. Ultimately, the departmental appeal was dismissed without interfering with the order of the Commissioner of Income-tax (Appeals). After the order in appeal in respect of the assessment year 1990-91, the assessee filed an application for rectification. This was dismissed by the learned Tribunal. I. T. A. No. 405 of 2000 was preferred against this order by the assessee before this court and I. T. A. No. 9 of 2001 against the main order.
Submission of behalf of the appellant :
2. According to Mr. J. P. Khaitan when the order passed in the appeals relating to the assessment years 1988-89 and 1989-90 was followed and which had modified the order of the learned Commissioner of Income-tax (Appeals) to the extent of pro rata taxability based on pro rata performance, it was not open to the learned Tribunal to dismiss the appeal without interfering with the order under appeal postponing taxability till completion of the contract contrary to the principle followed.
3. The learned Tribunal did not grant relief to the assessee on the ground that the assessee did not prefer any appeal. Mr. Khaitan had relied on certain decisions in order to contend that it was open to the Tribunal to pass appropriate order in the appeal preferred by the Department even though no appeal was preferred by the assessee.
4. In support of the appeal against the main order Mr. Khaitan relied on the decision in CED v. Estate of late Smt. K. Narasamma wherein it was held that since the entire matter was under consideration by virtue of the appeal preferred by the Department, it was open to the Appellate Tribunal to give relief on the entire value of the property notwithstanding that no cross-objections were filed by the accountable person. He then relied on the decision in CIT v. Assam Travels Shipping Service in which it was held that even if the appeal could not have been allowed then the Tribunal had power to remand the matter to the Commissioner of Income-tax (Appeals).
5. In support of the appeal against the rectification order Mr. Khaitan relied on Neeta S. Shah v. CIT [1991] 191 ITR 77 (Karn) to contend that when an earlier order of the Appellate Tribunal appeared to have been founded on a mistaken assumption and the error was discovered, the power of rectification under Section 254(2) of the Income-tax Act, 1961, could be invoked because the very basis of the earlier order required rectification. He then relied on Bata India Ltd. v. Deputy CIT to contend that the Tribunal is supposed to correct the mistake or error or omission and it is its bounden duty to set such mistake right if the said order would affect the assessee resulting into a prejudice. He then relied on CIT v. Ballabh Prasad Agarwalla to contend that though the Tribunal has no power of review but yet it can correct the mistake since it is the duty of the court to do justice and to ensure fair play and thereby correct any mistake, if there is any apparent on the record.
Respondents' submission :
6. On the other hand, Mr. Mihirlal Bhattacharya, learned counsel for the Department had relied on the decision in CIT v. Cochin Refineries Ltd. that if no appeal is preferred against an order the same becomes conclusive and binding on the assessee and the Tribunal cannot pass any order in respect thereof. He has also relied on Orissa Weavers Co-operative Spinning Mills Ltd. v. CIT [1991] 187 ITR 646 (Orissa) to contend that the Tribunal is a creature of the statute, it has to exercise that much of the power which is provided under the statute and can exercise powers ancillary to the power vested. It has no wide power to grant relief where an appeal and a cross-objection is not preferred since the same is not ancillary to the main power. He also relied on CIT v. Anand and Co. to substantiate his earlier contention. He also relied on the decision in CIT v. Bhagwati Developers (P.) Ltd. in order to propound the concept of rectification distinguishing the scope of reference. He contended that having regard to the principle laid down therein this is not a case where the principle of rectification could be invoked.
Extent of Tribunal's power to pass appropriate order in appeal :
7. We need not dilate on these principles which have been contended by the respective counsel since those are settled propositions of law and there is no doubt about the said propositions. In this case two appeals have been preferred. One against the main order passed by the learned Tribunal in the appeal preferred by the Department and the other against an order passed on the rectification application filed by the assessee since dismissed. Since both the main order and the rectification order are under appeal we would like to take up the appeal against the main order passed on appeal and the decision herein would have effect on the other appeal and will govern the same.
I. T. A. No. 9 of 2001 :
8. We, therefore, propose to take the appeal first which has been preferred against the main order passed by the learned Tribunal. When an appeal is preferred the learned Tribunal has to pass appropriate order on the appeal. When it follows certain principles, it cannot shirk its responsibility after laying down the principle of law without applying the same to the facts and circumstances of the case at hand, even though it might go in favour of the assessee who had not preferred any appeal. When the appeal is before the learned Tribunal, it is the whole appeal that is before it and in such appeal the exercise of power flows from the appellate authority vested in the Tribunal. The Tribunal has to discharge its function as an appellate authority and passing of appropriate order is the sine qua non for the exercise of such function. It is the bounden duty of the Tribunal, particularly when it follows a particular principle of law or lays down a law. Inasmuch as when a law is laid down in connection with an appeal, it has to apply the same in the facts and circumstances of the said case irrespective of the fact whether it would grant relief to the assessee or the Department.
9. When an appeal is preferred before the Tribunal by any of the parties, the whole appeal is before the Tribunal. The Tribunal is supposed to pass appropriate order as it may deem fit in the appeal preferred by any of the parties. It is immaterial whether such order will benefit one or the other of the parties or in the process it might be in favour of a party, who had not preferred the appeal but is a respondent therein, particularly, when the principle of law is laid down and on such legal principle the appellant may not be entitled to any relief. In case on the principle laid down, it appears that the order appealed against is contrary to the principle so laid down then the Tribunal cannot allow the order to remain intact after having laid down the law unless there are other reasons for not interfering with the order. There is nothing to prevent the Tribunal from passing appropriate order in such an appeal preferred by one of the parties even though it might amount to granting of relief to a party, who did not prefer any appeal. In case it is found that such order cannot be passed since no appeal has been preferred by the other party, in that event, the Tribunal has the power to remand the matter for a decision by the Tribunal in accordance with the law laid down.
10. The Tribunal discharges judicial function. It dispenses justice. The principle on which justice is dispensed is founded on fair play and doing justice in the case. Therefore, while the Tribunal lays down a particular proposition of law, it cannot close its eyes and withdraw its sleeves without applying the principle or the ratio laid down in the facts of the case. The Tribunal whenever sitting in appeal has to examine the case before it. In order to do justice, it has to apply the principle or the ratio laid down by it in the case on appeal before it. It cannot avoid its responsibility when deciding the appeal in a manner, which will render the entire order passed by the Tribunal contradictory. It cannot leave the matter in a fluid state deciding the principle in favour of one of the parties and passing an order in favour of the other against whom the principle has been laid down. The Tribunal is not supposed to pass an anomalous order. Neither can it create a confusing state and permit confusion to continue, nor can it pass an incongruous order. It has to decide the case irrespective of the fact as to whether it would amount to granting relief to the other party who did not prefer the appeal.
11. Our above view finds support from the decisions in Smt. K. Narasamma and Assam Travels Shipping Service , cited by Mr. Khaitan.
Application of the principle :
12. In the present case following the order passed by the learned Tribunal in respect of the earlier two assessment years 1988-89 and 1989-90, the Tribunal had passed the main order under appeal dismissing the same and purporting to affirm the order of the learned Commissioner of Income-tax (Appeals). These two cannot go together. In respect of the earlier two years, the proportionate pro rata taxability has been accepted on principle overruling the postponement theory held by the Commissioner of income-tax (Appeals). When this principle is being followed, if the order of the Commissioner of Income-tax (Appeals) is upheld in respect of the assessment year 1990-91, in that event, it would uphold the postponement theory while following the principle of pro rata theory. Thus, the Tribunal was wrong, while following the principle laid down in respect of the earlier two years, in affirming the decision of the Commissioner of Income-tax (Appeals) for the assessment year 1990-91. This appears to be wholly anomalous and incongruous. Therefore, the order cannot be sustained.
Conclusion :
13. In any event, even if it is assumed that the Tribunal could not have passed any order since no appeal was preferred and no cross-objection was filed, even then in an appeal under section 260A in which the CPC is applicable as far as possible in view of Sub-section (7) of Section 260A and by reason of the provisions contained in Section 260A(6) this court is empowered to pass appropriate order in an appeal. Under Order 41, Rule 33 of the CPC, this court is empowered to pass any order in an appeal before it and grant relief to a party even though such party may not have filed cross-objections or preferred any appeal or appeal was preferred against a part of the order. Therefore, there is no bar on this court in exercise of power under Section 260A to pass appropriate order as would be necessary in this appeal having regard to the facts and circumstances of the case. Since by reason of Sub-section (7) of Section 260A this principle is attracted in an appeal under Section 260A, and we find that the learned Tribunal was wrong in affirming the order of the Commissioner of Income-tax (Appeals), we are inclined to pass appropriate order.
Order:
14. The order passed by the Commissioner of Income-tax (Appeals) in respect of the assessment year 1990-91 is modified to the same extent as it was done in respect of the earlier two assessment years 1988-89 and 1989-90 in the same manner following the pro rata theory. We, therefore, allow the appeal and modify the order dated December 22, 1999, passed in I. T. A. No. 1273 (Cal) of 1994 by the learned Tribunal by modifying the order dated July 28, 1994, passed by in Appeal No. 35/DCSP-l/CIT(A)-l of 1993-94 by the Commissioner of Income-tax (Appeals) on pro rata theory to the extent indicated above. The appeal is thus allowed. No costs.
I. T. A. No. 405 of 2000 :
15. The appeal being I. T. A. No. 405 of 2000 against the order dated May 5, 2000, in connection with I. T. A. No. 1273 (Cal) of 1994 relating to rectification loses its significance in view of the order passed above and is hereby dismissed as infructuous.
16. Xerox certified copy of this judgment be made available to the parties, if applied for, on usual undertakings.
R.N. Sinha, J.
17. I agree.