Income Tax Appellate Tribunal - Delhi
Finquick Finance (P) Ltd. vs Deputy Commissioner Of Income Tax on 25 August, 2003
Equivalent citations: (2003)81TTJ(DELHI)319
ORDER
C.L. Bokolia, A.M. February, 2002
1. This miscellaneous petition for rectification of mistakes apparent from record under Section 254(2) of the IT Act, arising out of order dt. 24th Aug., 2001, in ITA No. 842/DeI/2000 for asst, yr. 1997-98 is moved by the appellant. The misc. petition contains 56 pages in all. Therefore, on 4th Jan., 2002, when the case was first fixed for hearing, assessee was directed to file brief to the point and precise of mistakes claimed to be on the face of record arising from the order passed by the Tribunal. On 1st Feb., 2002, learned authorised representative filed a summary of the main application narrating therein 30 mistakes from the order. The case was partly heard and adjourned to 4th Feb., 2002 and again on 6th Feb., 2002.
2. Learned authorised representative arguing on behalf of the assessee submitted that the order requires to be recalled for de novo disposal for ground Nos. 8, 9 and 10 have not been disposed of and that norms of natural justice have been violated and further that reliance placed on a wrong case noted as 41 ITD 273 instead of 41 TTJ 273. It was further pleaded that Tribunal has filed to comply with the decision of the apex Court in the case of Tin Plate Co. of India v. CIT (2001) 249 TTR 216 (SC) which was relied upon during the hearing of the appeal and copy was also placed on record. It was further pleaded that observations of the Tribunal in the body of the order and also at the end from para 23.1 onwards which implicate the assessee and the counsel and casting aspersions on them was erroneous and based on misappreciation and misreporting of facts needs to be deleted. In sum, the contention is that the entire order suffering as if did from several infirmities should be recalled.
3. During the hearing, the learned authorised representative pleaded that there was clear sanction in law to recall an erroneous order in the interest of justice relying upon AIR 1981 SC 606. It was also pointed out that the apex Court had held that the Tribunal had power to pass/recall orders if it thought fit in the interest of justice. In the said case though there was no expressed provision in the Act or rules framed thereunder giving the Tribunal jurisdiction to do so, the apex Court observed that it is well known rule of statutory construction that a Tribunal or a body should be considered to be endowed with such ancilliary or incidental powers as are necessary to discharge its function effectively for the purpose of doing justice. Reliance was also placed on the decision of the Supreme Court in AIR 1996 SC 3527 where it was held that the Tribunal had power to set aside an order passed not only ex parte but on merits as well against the respondent before it if it was found that the respondent had for sufficient cause been unable to appear. Relying on the decision in CIT v. Ramesh Chand Modi paras 6 and 7 of the judgment, it was submitted that recall of an erroneous order through the process of rectification did not amount to review. To the same effect, observations of the Supreme Court in the case of Grindlays Bank (supra) were relied upon to show, that such recall would not tantamount to a review. It was urged that when a couple of facts relied upon material, partly relevant and partly irrelevant, it was impossible to say to what extent the mind of the Court was affected by the irrelevant material used by it in arriving at its findings. It was, therefore, submitted that considering and taking into account 41 ITD 273 (supra) was relied upon irrelevant material. Omission to consider Shiv Charan Gupta v. IAC (1991) 41 TTJ (Del) 273 was failure to consider relevant material. Since it could not be predicted as to the extent to which the irrelevant material had influenced the thought process the only available course in law would have been recall the order in toto. Observations in Dhiralal Girdharilal v. CIT (1954) 26 ITR 736 (SC) were read. It was also pleaded that there was violation of the norms of natural justice, inasmuch as no effective show cause notice under the first proviso to Section 144 was given and as such violation was fatal to the very validity of the proceedings warranting an annulment of the same in toto. Relying upon the case of L. Hardey Narain v. ITO (1970) 78 ITR 26 (SC), it was submitted that where a mistake was apparent and pointed out by the assessee, the Court had no option but to correct the same. A similar observation in the case of Distributors (Baroda) (P) Ltd. v. Union of India (1985) 155 ITR 120 (SC) and S. Nagraj v. State of Karnataka (1993 SCC 4 Supp. 575 were relied upon. It was submitted that the Tribunal failed to abide by and follow the decision of the apex Court in Tin Box Co. v. CIT (2001) 249 ITR 216 (SC) which was relied upon and copy placed on record earlier, inasmuch as, the fixation of the quantum of income had to be done by the AO and such function could not be taken over by the Tribunal especially in a situation where there was no effective show cause and opportunity of effective hearing. In the end, it was pleaded that the order was not judicious and, therefore, requires to be recalled. Other decisions on which reliance was placed by the learned authorised representative were CIT v. Bhaichand H. Gandhi (1983) 141 ITR 67 (Bom), Jawahar Lal Oswal v. Asstt. CIT (2001) 71 TTJ (Chd) 240, Smt. Prabhavati S. Shah v. CIT (1998) 231 ITR 1 (Bom) and Tranancore Rubber & Tea Co. Ltd. v. CIT (2000) 243 ITR 158 (SC).
4. On the other hand, Ms. Ruchika Govil, learned Departmental Representative submitted that in the guise of rectification, the assessee was seeking a review of the order. The mistakes that were being pointed out were neither obvious nor patent and, therefore, not capable of rectification. She also relied upon the decisions cited at CIT and Anr. v. ITAT and Anr. (1994) 206 ITR 126 (AP), T.S. Balaram, ITO v. Volkart Bros. and Ors. (1971) 82 ITR 50 (SC), Mrs. Khorshed Shapoor Chenai v. Asstt. CED (1980) 122 ITR 21 (SC), CIT v. K.L Bhatia (1990) 182 ITR 361 (Del), CIT v. ITAT & Am. (1992) 196 ITR 590 (On), Asstt. CIT v. Dr. Ved Prakash and Am. (1994) 209 ITR 448 (AP), CIT v. Ballabh Prasad Agarwalla (1998) 233 ITR 354 (Cal) and Shaw Wallace & Co. Ltd. v. ITAT and Ors. (1999) 240 ITR 579 (Cal).
5. We have heard the rival parties and considered the rival submissions as well the material relied upon including the case laws cited by the parties and also the rectification application and summary thereof, We are of the view that keeping in view the totality of the facts, the order dt. 24th Aug., 2001, deserves to be recalled for de novo disposal. For doing so, we find that ground Nos. 9 and 10 have not been disposed of by the Tribunal at all. Admittedly, there is some discussion with regard to each of the three additions objected to vide Ground No. 8, yet we find that the requirements of Section 144 and also the case laws on that point as cited in (1991) 41 TTJ (Del) 273 (supra) and (2001) 249 ITR 216 (SC) (supra) had not been taken note and discussed. We also find that in a situation like this, the Tribunal at its level could not have appreciated the evidentiary value of the documents and papers in the absence of any finding after expression thereof by the lower authorities in terms of (2001) 249 ITR 216 (SC) (supra) to remit the matter back to the assessing authorities for de novo appreciation and assessment in accordance with law.
6. We are also of the view that several adverse observations of the Bench on the aspect of certification of the paper book have not been properly appreciated and, therefore, all such comments and findings are considered as not proper and, therefore, expunged and deleted. This would specifically be directed the deletion of paras 23.1 to 23.6 of the order but also call for extensive modification by way of deletion and expunction of the adverse comments made in the body of the order. To cut the matter short and in the interest of substantive justice and also infirmity with the decision of the apex Court cited by the learned authorised representatives, we find it proper to vacate the order and restore the appeal for de novo disposal and hearing in accordance with law. The miscellaneous application filed by the assessee is, therefore, allowed and the Registry is directed to list the appeal for hearing afresh. We order accordingly.
K.C. Singhal, J.M. 18th March, 2002
7. After going through the proposed order I have not been able to persuade myself to agree with the conclusion arrived at by my learned Brother. Therefore, I proceed to dissent for the reasons given hereafter.
8. The operative portion of the proposed order is in para 5 & 6 wherein following findings have been recorded by my learned Brother:
(1) The Ground Nos. 9 and 10 have not been disposed of by the Tribunal at all.
(2) That though there is some discussion with regard to the three additions objected to in Ground No. 8 yet it is found that the requirement of Section 144 and also the case law on that point cited as Shiv Charan Gupta v. IAC (1991) 41 TTJ (Del) 273 (supra) and Tin Box Co. v. CIT (2001) 249 ITR 216 (SC) had not been taken note of and discussed.
(3) The Tribunal should not have appreciated the evidentiary value of the documents and the papers in the absence of any finding by the lower authorities in terms of the ratio laid down by Supreme Court in the case of Tin Box Co. Ltd. (supra).
(4) Several adverse observations of the Bench on the aspect of certification of paper book have not been properly appreciated and, therefore, all such comments and findings are considered as not proper and, therefore, should be expunged and deleted."
In view of the above findings, my learned Brother has vacated the order of Tribunal dt. 24th Aug. 2001 passed under Section 254(1) in ITA No. 842/Del/2000 and has restored to appeal for de novo disposal and hearing in accordance with law.
9. The aforesaid proposed order, in my opinion, is contrary to the binding decision of the Hon'ble Delhi High Court in the case of Karan & Co. v. ITAT (2002) 243 ITR 131 (Del) wherein at p. 135, their Lordships observed :
"In our view, the amendment of an order does not mean obliteration of the order originally passed and its substitution by a new order."
Again at p. 136, their Lordships observed as under:
"The scope and ambit of application of Section 254(2) is very limited. The same is restricted to rectification of mistakes apparent from the record. We shall first deal with the question of the power of the Tribunal to recall an order in its entirety. Recalling the entire order obviously would mean passing of a fresh order. That does not appear to be the legislative intent. The order passed by the Tribunal under Section 254(1) is the effective order so far as the appeal is concerned. Any order passed under Section 254(2) either allowing the amendment or refusing to amend gets merged with the original order passed. The order as amended or remaining unamended is the effective order for all practical purposes. The same continues to be an order under Section 254(1). That is the final order in the appeal. An order under Section 254(2) does not have existence de hors the order under Section 254(1). Recalling of the order is not permissible under Section 254(2). Recalling of an order automatically necessitates rehearing and readjudication of the entire subject-matter of appeal. The dispute no longer remains restricted to any mistake sought to be rectified. Power to recall an order is prescribed in terms of r. 24 of the IT (Appellate Tribunal) Rules, 1963, and that too only in cases where the assessee shows that it had a reasonable cause for being absent at a time when the appeal was taken up and was decided ex parte. This position was highlighted by one of us (Justie Arijit Pasayat, Chief Justice) in CIT v. ITAT (1992) 196 ITR 640 (On). Judged in the above background the order passed by the Tribunal is indefensible."
The perusal of the above observations clearly shows that recalling of an order is not permitted because such order necessitats rehearing and readjudication of the entire subject-matter of the appeal, which is not permitted under Section 254(2) except in terms of r. 24 of the ITAT Rules, 1963 where it is shown that there was reasonable cause for being absent at a time when the appeal was taken up. Mistake, if any, can be rectified only by amending the order under Section 254(1) and not by obliterating the same by recalling the order. The word "amend" used by the legislature in Section 254(2) itself suggest the continued existence of the original order. Much has been argued by the learned counsel for assessee regarding inherent powers of the Tribunal and reliance was placed on Supreme Court's decision in the case of ITO v. U.K. Mohd. Kunhi (1969) 71 ITR 815 (SC). Such contention, in my opinion, cannot be accepted since concept of inherent powers is invoked only in the absence of specific legislation. The legislature has provided specific powers under Section 254(1) for rectifying the mistake and, therefore, the question of invoking inherent powers does not arise.
10. However, I would like to mention about the settled legal position that a judgment of a Court has to be understood in the context in which it was delivered. The judgment has to be read as a whole and the observations have to be considered in the light of the question which was before the Court. Reference can be made to the judgment of the Hon'ble Supreme Court in the case of CIT v. Sun Engg. Works (P) Ltd. (1992) 198 ITR 297 (SC). Therefore, the decision of the Delhi High Court in the case of Karan & Co. (supra) has to be considered in a situation where the entire order is sought to be recalled for fresh adjudication. However, there may be a genuine case where a particular ground raised by the appellant is left to be considered by the Tribunal. Non-consideration/adjudication of the grounds raised by the appellant, certainly, tantamounts to mistake apparent from the record which can be rectified only after hearing the parties to the appeal in respect of such grounds. Therefore, in such peculiar/exceptional circumstances, in my opinion, the Tribunal may partially recall the order passed under Section 254(1) so that the grounds left to be decided may be adjudicated upon after hearing both the parties. Such order would also not amount to obliteration of the original order passed under Section 254(1) and, therefore, would be in consonance with the spirit of the decision of the Hon'ble Delhi High Court. But in cases where the issues are adjudicated upon by the Tribunal after considering the material on the record and contentions of the parties, the recalling of order, wholly or partially is not permissible.
In view of the above discussion, I am of the considered opinion that in the present case, the entire order of the Tribunal passed under Section 254(1) cannot be recalled as held by the Hon'ble Delhi High Court, even assuming for the sake of argument that there was any mistake apparent from the record particularly when conscious decision was taken by the Tribunal in respect of the various additions made under Section 68. If there is any mistake, that can be rectified but in the guise of Section 254(2), the parties cannot be allowed to reargue the case by recalling the order. If such course is allowed, it would lead to reviewing the earlier decision, which is not permissible in rectification proceedings.
11. Now let me examine whether the impugned order under Section 254(1) suffers from any mistake apparent from the record so that the same may be rectified. As far as the first finding as recorded by me learned brother is concerned, I am in agreement with him that a mistake apparent from record is committed by the Tribunal in so far as ground Nos. 9 and 10 raised by the assessee remained to be considered. Accordingly, such mistake can be rectified only after hearing of both the parties in respect of these grounds.
12. As far as finding Nos. 2 and 3 are concerned, which are inter-connected. I am of the view that no mistake apparent from record was committed by the Tribunal while passing the impugned order under Section 254(1). The main plank of the argument of the assessee's counsel is that provisions of first proviso to Section 144 were not complied with by the AO resulting in violation of the principle of natural justice. Accordingly, the entire assessment order was vitiated in view of the Supreme Court judgment in the case of Tin Box Co. v. CIT (supra) wherein it has been held that having found that assessee was not given proper opportunity of being heard, the Tribunal should have restored the matter to the file of AO instead of deciding the issue itself. According to the assessee's counsel, the first proviso to Section 144 provides that before proceeding to make the best judgment assessment under Section 144, the assessee shall be given an opportunity of being heard by serving a notice upon the assessee to show cause on a date and time to be specified in the notice, as to why such assessment should not be completed to the best of his judgment. According to him, no such notice was served upon the assessee and, therefore, assessee was deprived of the statutory opportunity in terms of Section 144. It is not possible for me to accept the aforesaid contention raised by the learned counsel for the assessee since such opportunity is not required to be given where a notice under Sub-section (1) of Section 142 has been issued prior to the making of an assessment under Section 144 as is apparent from the second proviso to Section 144. In the present case, undisputedly the notices under Section 142(1) dt. 13th Dec., 1999, and 6th Jan,, 2000, were issued to the assessee as is apparent from the finding recorded by the Tribunal in the impugned order in para No. 12.1 at p. 23. This being the factual position, it cannot be said that there was any violation of the provisions of Section 144 as contended by the assessee's counsel and consequently, the decision of the Hon'ble Supreme Court in the case of Tin Box Co. (supra) as well as the decision of the Tribunal in (1991) 41 TTJ (Del) 273 (supra) cannot be applied to the present case. It may also be added that such plea of the assessee's counsel has been dealt with in the impugned order of the Tribunal under Section 254(1) at p. 46 wherein it has been observed specifically that there was no necessity of providing an opportunity or serving a show cause notice in terms of the first proviso to Section 144 in as much as notices under Section 142(1) had been issued to the assessee. Therefore, it cannot be said that there was any mistake apparent from the record in the impugned order on this aspect.
13. As far as finding No. 4 is concerned, I am in agreement with my learned Brother that adverse comments of the Bench with reference to the conduct of assessee's counsel were not required considering the powers of the Tribunal under Section 254(1) which provide that the Tribunal shall pass such orders thereon as it thinks fit. The scope of the word "thereon" was considered by the Hon'ble Supreme Court in the case of Hukam Chand Mills Ltd. v. CIT (1967) 63 ITR 232 (SC) and it was held that it restricts the jurisdiction of the Tribunal to the subject-matter of the appeal. Therefore, in my opinion, it was unnecessary for the Tribunal to comment upon the behaviour and conduct of the counsel for the assessee. It may be noted that the powers of the High Courts and Supreme Court are much wider than the powers of the Tribunal and, therefore, any decision of the High Court/Supreme Court vis-as-vis conduct of the counsel should not be applied while deciding the appeal under Section 254(1). However, if the counsel is considered to be guilty of professional misconduct, then the Tribunal may refer the matter to the Bar Council or Institute of Chartered Accountants, as the case may be, for taking appropriate action against such counsel since such statutory bodies are appropriate forums for adjudicating upon the misconduct of the counsel. Therefore, I agree with my learned Brother that the adverse comments against the assessee's counsel wherever appearing in the impugned orders under Section 254(1) should be expunged.
14. In view of the above discussion, it is held as under:
(1) A mistake apparent from the record was committed by not adjudicating upon Ground Nos. 9 and 10 raised by the assessee in its appeal.
(2) No mistake apparent from record was committed by the Tribunal by holding that no opportunity was required to be given to the assessee in terms of first proviso to Section 144 inasmuch as notices under Section 142(1) were issued and accordingly, the second proviso to Section 144 was applicable dispensing with the requirement of first proviso. The decision of the Supreme Court in the case of Tin Box Co. (P) Ltd. (supra) and the decision of the Tribunal reported as (1991) 41 TTJ (Del) 273 (supra) were, therefore, not applicable.
(3) The mistake apparent from the record was committed in passing adverse comments against the conduct of the assessee's counsel.
(4) The total recall of the impugned order under Section 254(1) is not warranted in view of the binding judgment of the Delhi High Court in the case of Karan & Co. (supra).
In view of the above findings, the adverse comments against the conduct of assessee's counsel are hereby expunged. The impugned order is partially recalled for the limited purpose of adjudicating ground No. 9 and 10.
15. In the result, the application of assessee is partly allowed.
REFERENCE UNDER SECTION 255(4) OF THE IT ACT, 1961 18th April, 2002 Since there was difference of opinion on the issue raised in the captioned misc application, the following question is referred to the Hon'ble President of the Tribunal under Section 255(4) of the IT Act, 1961 :
"Whether, on the facts of the case and in law, the entire impugned order of the Tribunal can be recalled under Section 254(2) ?"
R.M. Mehta, Vice President (as Third Member) 25th Aug., 2003
1. There was a difference of opinion between the learned Members while deciding the misc. application filed by the assessee against the order of the Tribunal passed under Section 254(1) and pursuant thereto the following question has been referred to me by the Hon'ble President of the Tribunal under Section 255(4) of the IT Act, 1961 :
"Whether, on the facts of the case and in law, the entire impugned order of the Tribunal can be recalled under Section 254(2) ?"
2. The brief facts of the case are that the assessee's appeal was decided by means of an order dt. 24th Aug., 2001, and a perusal thereof shows that as may as 10 grounds were raised and the order runs into 70 pages, but the net result being a dismissal of the appeal.
3. The assessee filed a Misc. application under Section 254(2) against the said order of the Tribunal and this runs into as many as 56 pages. A reference to p. 1 of the order passed by the Bench on the Misc. application reveals that the Tribunal taking note of the lengthy misc. application asked the assessee to file a summarized resume of the mistakes which it claimed as apparent from the record in the order of the Tribunal and this was done and the hearing of the misc. application being proceeded with.
4. The learned AM passed the initial order on the misc. application and the stand of the assessee, at the outset, what that the order of the Tribunal was required to be recalled for de novo disposal since ground Nos. 8, 9 and 10 had not been disposed of and there had been a violation of the principles of natural justice. The further submission was to the effect that during the course of the hearing of the appeal reliance had been placed on the decision of the Tribunal reported in Shiv Charan Gupta v. IAC (1991) 41 TTJ (Del) 273 whereas the Tribunal had noted 41 TTD 273. Another submission was to the effect that the judgment of the Hon'ble Supreme Court in the case of Tin Box Co. v. CIT (2001) 249 ITR 216 (SC) had not been complied with and which had been relied upon by the assessee during the course of the hearing of the appeal. The next submission was to the effect that there were certain observations in the body of the order, which implicated the assessee and its counsel and casting aspersions on them was not appropriate and such observations needed to be deleted. The sum and substance of the misc. application accordingly was that the entire order of the Tribunal suffering as it did from several infirmities was required to be recalled.
5. Further submissions of the assessee's counsel in the course of arguing the misc. application were that there was clear sanction in law for recalling an erroneous order in the interest of justice and reliance was placed on AIR 1981 SC 606. It was emphasized that the Supreme Court in the aforesaid judgment had held that the Tribunal had power to recall an order if it thought fit to do so in the interest of justice. With reference to the same very decision the submission was that without there being an express provision in the Act or Rules a Tribunal or a body should be considered to be endowed with such inherent or incidental powers as were necessary to discharge its functions effectively for the purpose of rendering justice. Reliance was also placed on the judgment of the Hon'ble Supreme Court in AIR 1996 SC 3527 for the proposition that the Tribunal had the power to set aside an order passed not only ex parte, but on merits as well against the respondent before it if it was found that the respondent had for sufficient cause been unable to appear. Reliance was also placed on a judgment of the Hon'ble Rajasthan High Court in CYT v. Ramesh Chand Modi for the proposition that the recall of an erroneous order through the process of rectification did not amount to review. To the same effect were cited the observations of the Hon'ble Supreme Court in the case of Grindlay's Bank Ltd. v. The Central Government Industrial Tribunal and Ors. (supra) i.e., a recall would not tantamount to a review.
6. The further submission during the course of the hearing of the misc. application was that there could be a situation where relevant material and irrelevant material had been referred to/relied upon and it could not be predicted as to what extent the irrelevant material had influenced the thought process, then the only available course in law would be to recall the order in toto. The connected plea was that the consideration by the Tribunal of the decision in 41 ITD 273 was irrelevant since the decision cited was the one appearing in (1991) 41 TTJ (Del) 273 (supra) and there was, therefore, a failure to consider relevant material. Reliance was placed on the judgment of the Hon'ble Supreme Court in Dhirajlal Girdharilal v. CIT (1954) 26 ITR 736 (SC).
7. The next submission in the misc. application was that there had been a violation of the principles of natural justice inasmuch as no effective show-cause notice under the first proviso to Section 144 had been given and this violation was fatal to the very validity of the proceedings warranting an annulment of the same in toto.
8. Reliance was placed upon the judgment of the Hon'ble Supreme Court in the case of L. Hirday Narain v. CIT (1970) 78 ITR 26 (SC) for the proposition that where there was a mistake apparent from the record and the same was pointed out by the assessee, then the Court had no option but to correct the same. Similar observations in the cases of Distributors Baroda (P) Ltd. v. Union of India and Ors. (1985) 155 ITR 120 (SC) and S. Nagraj and Ors. v. State of Karnataka (1993) Suppl. (4) SCO 595 were relied upon. It was also submitted that the Tribunal had failed to abide by and follow the decision of the apex Court in (2001) 249 TTR 216 (SC) (supra) and lastly, it was pleaded that the order of the Tribunal passed under Section 254(1) was not judicious and, therefore, required to be recalled. The other decisions relied upon and which have been noted by the learned AM in his order are CIT v. Bhaichand H. Crandhi (1983) 141 TTR 67 (Bom), Jawahar Lal Oswal v. Asstt. CIT (2001) 71 TTJ (Chd) 240, Smt. Prabhavati S. Shah v. CIT (1998) 231 ITR 1 (Bom), Travancore Rubber & Tea Co. Ltd. v. CIT (2000) 243 ITR 158 (SC).
9. The learned Departmental Representative on behalf of the Revenue to counter the aforesaid argument submitted that in the guise of a rectification application the assessee was seeking a review of the order and the alleged mistakes which were being pointed out were neither obvious nor patent and, therefore, not capable of rectification. Reliance was placed upon the decisions reported in CIT and Am. v. ITAT and Anr. (1994) 206 ITR 126 (AP), 82 ITR 40 (SC), Mrs. Khorshed Shapoor Chenai v. Asstt. CED (1980) 122 ITR 12 (SC), CIT v. K.L. Bhatia (1990) 182 ITR 361 (Del), CIT v. TTAT and Anr. (1992) 196 ITR 590 (Ori). Asstt. CIT v. Dr. Ved Prakash and Anr. (1994) 209 ITR 448 (AP), CIT v. Ballabh Prasad Agarwalla (1998) 233 TTR 354 (Cal) and Shaw Wallance & Co. Ltd. v. TTAT and Ors. (1999) 240 ITR 579 (Cal).
10. In considering the aforesaid submissions of the parties with reference to the case law cited, the learned AM proceeded to recall the order of the Tribunal passed under Section 254(1) for de novo disposal on the following main grounds :
(i) Ground Nos. 9 and 10 had not been disposed of by the Tribunal at all;
(ii) Admittedly, there was some discussion with regard to each of the three additions objected to vide ground No. 8, yet the requirements of Section 144 as also the case law on the point cited in (1991) 41 TTJ 273 (Del) (supra) and (2001) 249 TTR 216 (SC) (supra) had not been taken note of and discussed; and
11. In view of the aforesaid, the learned AM opinied that in the interest of substantive justice and there being an infirmity in not considering the judgment of the apex Court in (2001) 249 ITR 216 (SC) (supra) cited by the assessee's counsel, the order of the Tribunal under Section 254(1) was required to be vacated and he ordered accordingly.
12. The learned JM, however, did not agree with the "conclusion" arrived at by the learned AM and this would mean the recall of the entire order passed by the Tribunal under Section 254(1). According to the learned JM, the view expressed by the learned AM was contrary to the binding decision of the Hon'ble Bombay High Court in the case of Karan & Co. v. ITAT (2002) 253 ITR 131 (Del). In extracting the relevant observations of Their Lordships at p. 136 of the judgment, the learned JM observed that recalling of an order was not permitted because this necessitated rehearing and readjudication of the entire subject-matter of the appeal, which was not permitted under Section 254(2). Further, according to the learned JM, complete recall of an order was permissible only under r. 24 of the IT (Appellate Tribunal) Rules, 1963, when it was shown that there was a reasonable cause for being absent at the time when the appeal was taken up. Further, according to the learned JM mistake if any, could be rectified only by amending the order under Section 254(1) and not by one obliterating the same by recalling the order. The word "amend" used in Section 254(2), according to him, suggested the continued existence of the original order.
13. As regards the inherent power of the Tribunal and reliance being placed by the assessee on the judgment of the Hon'ble Supreme Court in the case of ITO v. M.K. Mohd. Kunhi (1969) 71 ITR 815 (SC) the view of the learned JM was that inherent powers could be invoked in the absence of specific legislation and the legislature had provided specific powers under Section 254(2) for rectifying the mistake and the question of invoking inherent powers did not, therefore, arise.
14. The learned JM thereafter proceeded to deal with a case where a particular ground raised by an appellant was left to be considered by the Tribunal and according to him non-consideration of a ground tantamounted to a mistake apparent form the record and which could be rectified only after hearing the parties in respect of such ground and this, according to the learned JM was a situation where the Tribunal could partially recall the order passed under Section 254(2) for the limited purpose of hearing the parties on the ground omitted to be adjudicated upon. This situation, according to the learned JM, did not amount to the obliteration of the order passed under Section 254(1) and the same would, therefore, be in consonance with the spirit of the decision of the Hon'ble Delhi High Court in the case of Kaiana & Co. (supra). The learned JM also referred to the judgment of the Hon'ble Supreme Court in the case of CIT v. Sun Engineering Works (P) Ltd. (1992) 198 ITR 297 (SC) for the proposition that a judgment of a Court had to be understood in the context in which it was delivered.
15. In conclusion, the learned JM took the view that vis-a-vis facts of the present case, the entire order of the Tribunal passed under Section 254(1) could not be recalled as held by the Hon'ble Delhi High Court and in so far as the mistakes apparent from the record were concerned, these could be rectified under Section 254(2), but the parties could not be allowed to reargue the case pursuant to the recalling of the entire order and which was not permissible in rectification proceedings, The learned JM thereafter proceeded to deal with the various mistakes apparent from the record and sought to be pointed out by the assessee and on which the learned AM had already given his opinion. He agreed, at the outset, with the view taken by the learned AM to hold that there was a mistake apparent from the record in the order passed by the Tribunal in so far as ground Nos. 9 and 10 remained to be adjudicated upon. The learned JM, therefore, observed that this mistake could be rectified, after hearing both the parties on the grounds.
16. Further, according to the learned JM, there was no mistake apparent from the record in the order passed by the Tribunal whereby it had been held that no opportunity was required to be given to the assessee in terms of the first proviso to Section 144 inasmuch as notices under Section 142 had been issued and accordingly the second proviso to Section 144 was applicable dispensing with the requirement of the first proviso. According to the learned JM the judgment of the Hon'ble Supreme Court in the case of Tin Box Company (P) Ltd. (supra) as also the decision of the Tribunal reported in (1991) 41 TTJ (Del) 273 (supra) were not applicable.
17. The learned JM agreed with the view expressed by the learned AM to delete the adverse comments passed by the Tribunal in its order under Section 254(1) against the assessee's counsel. In conclusion, the learned JM took the view that the total recall of the order passed under Section 254(1) was not warranted in view of the binding judgment of the Hon'ble Delhi High Court in the case of Karan & Company (supra).
18. Before me the matter was argued at length by both the parties on more than one occasion, the initial stand of the learned counsel for the appellant being that the view expressed by the learned AM to recall the entire order was valid in law finding support from numerous reported decisions. At the outset, he placed on record a copy of the order of the Tribunal in the case of Star Estates Management (P) Ltd. v. Dy. CIT in Misc. App, No. 60(Del) of 2002 dt. 11th Feb., 2002 [reported at (2003) 78 TTJ (Del) 637--Ed.], contending that on identical facts the order of the Tribunal passed under Section 254(1) had been recalled by a Bench consisting of the same Hon'ble Members as were the party to the order in the present Misc. application. In emphasizing that some of the decisions, which were relied upon for seeking a recall of the entire order were those delivered under the Excise & Customs Laws, the submission of the learned counsel was that the provisions under the aforesaid laws were pan materia to the provisions of Section 254(2) of the IT Act, 1961.
19. The further submission of the learned counsel was to the effect that the judgment in the case of Karan & Co. (supra) was not binding since there were judgments of the Hon'ble Supreme Court taking a view to the effect that where there had been a violation of the principles of natural justice, then the order was required to be recalled and the entire matter to be heared afresh. The learned counsel emphasized that the learned JM in his order had not considered the judgments of the Hon'ble Supreme Court in AIR 1981 SC 606 and AIR 1996 SC 3527 whereas the learned AM had done so. According to the learned counsel the judgment of the Hon'ble Delhi High Court in CIT v. Shakuntala Rajeshwar (1986) 160 ITR 840 (Del) had not been brought to the notice of Their Lordships deciding the case of Karan & Company (supra). He also made a reference to the judgment of the Hon'ble Delhi High Court in CWT v. Smt. Illa Dalmia (1987) 168 ITR 306 (Del) further contending that the judgment of the Hon'ble Supreme Court in (1985) 155 ITR 120 (SO (supra) at 124 had not been taken note of by the learned JM although the learned AM had considered the same.
20. The learned counsel further referred to the judgments of the Hon'ble Supreme Court in AIR 1999 SC 2979 at p. 3025; AIR 1999 SC 462 and AIR 2002 SC 1771 contending that the Court should lean in favour of rendering justice rather than proceed on technicalities. A reference was also made to AIR 1988 SC 1531 at p. 1570 and the further submission was to the effect that whereas the learned AM had considered numerous judgments of the Hon'ble Supreme Court to come to the conclusion that he did, the learned JM had omitted to do so and further where an issue had been decided by the Hon'ble Supreme Court, then the decision so rendered was required to be followed in preference to the judgment of the jurisdictional High Court. A reference was made to (1970) 78 ITR 26 (SC) (supra).
21. I may mention that the learned counsel for the assessee filed a synopsis of the oral submissions made by him aforesaid and these have been placed on record and the submissions made therein are being taken into account for the purposes of deciding the present reference.
22. The learned Departmental Representative, on the other hand, contended that the powers and scope of action under Section 254(2) on the part of the Tribunal were limited and issues on which the learned Members of the Division Bench had taken a conscious decision in the order passed under Section 254(1) could not be modified or reviewed. According to him, as many as seven opportunities had been given by the AO to the assessee and statutory notices under Section 143(2) and 142(1) issued, but there was complete non-compliance on the part of the assessee in response to the aforesaid notices. The plea, in other words, was that the assessee could not argue at this stage of the proceedings that principles of natural justice had been violated and the matter required to be reexamined. In conclusion, the learned Departmental Representative vehemently supported the view expressed by the learned JM and quoted extensively from his dissenting order. Reliance was placed on the decisions reported in CIT and Anr. v. ITAT and Anr. (1992) 196 ITR 640 (Ori), Smt. Baljeet Jolly v. CIT (2001) 250 ITR 113 (Del), J.N. Sahni v. ITAT and Ors. (2002) 257 ITR 16 (Del) as also the other decisions to which the learned JM had adverted in writing his dissenting order.
23. In reply the learned counsel for the assessee stated that complete information had been given to the AO, but he did not issue a notice proposing adverse action at any stage of the proceedings. I must mention at this stage that not a word was said by the learned counsel at the time of hearing on the issue and receipt of the various statutory notices and non-compliance thereto as alleged by the learned Departmental Representative.
24. I have considered the rival submissions and, at the outset, I would observe that the Tribunal is obliged to rectify mistakes apparent from the record within the meaning of Section 254(2), but review of the order is not permissible and the latter proposition is not challenged before me by either party.
25. A rectification of an order can be done without recalling the order in entirety or for that matter partly, but in the present reference the dissent between the learned members vis-a-vis the facts and circumstances of the case is whether the order is to be recalled in toto as held by the learned AM for a de novo hearing or the view of the learned JM to rectify the mistakes apparent from the record without recalling the entire order is correct and justified. As already observed earlier, both the learned members have agreed on partial recall for purposes of disposing of ground Nos. 9 and 10 which remained to be adjudicated upon by the Division Bench and they are also agreed on the expunging of adverse comments against the assessee's counsel. The area of dissent is with reference to the provisions of Section 144 and the applicability of the decisions in (2001) 249 ITR 216 (SC) (supra) and (1991) TTJ (Del) 273 (supra). At p. 46 of the Tribunal's order passed under Section 254(1), the following observations have been made :
"We are unable to accept this argument of Mr. Santhanam because third proviso to Section 144 states that there is no necessity of providing any opportunity or serving a show cause notice as required by first and second proviso to Section 144 in cases where a notice under Section 142(1) of the Act has been issued/served upon the appellant.
So far as the present case is concerned, it is quite clear that the appellant had been issued and served with two notices under Section 142(1), requiring the assessee to furnish specific details which have been duly acknowledged by the assessee and, therefore, the AO's action in not allowing any further specific opportunity or issuing specific show cause notice before proceeding to make an ex parte assessment is saved and gets validated and therefore, there was no illegality in the assumption of jurisdiction, by the AO under Section 144 of the Act. The assessee's this plea also fails."
26. It is apparent that both the learned Members of the Bench are agreed on the point at issue and the learned AM in para 5 of his order on the misc. appln. very oddly observes that the requirements of Section 144 have not been taken note of and discussed and this is also his observation in respect of the two judgments cited i.e., (2000) 249 ITR 216 (SC) (supra) and (1991) 41 TTJ (Del) 273 (supra).
27. As against the aforesaid the learned JM at p. 12 of his dissenting order refers not only to the relevant provisions of law, but also to the factual aspect of the numerous statutory notices being issued to the assessee and there being no further requirement in law for providing an opportunity or serving a show cause notice in terms of the first proviso to Section 144. The learned JM also took note of the observations at p. 46 of the order passed by the Tribunal under Section 254(1) (reproduced earlier).
28. In coming to the two judgments (supra) relied upon by the assessee, I would only like to say that in a given case, where decisions cited before the Tribunal are not considered at all, then it may be a case of a mistake apparent from the record, but there may be a situation when the decisions relied upon have been considered, but not to the advantage of a party before the Tribunal. The latter situation is not rectifiable under Section 254(2), but the former is and it would suffice in case the judgments are dealt with in the order passed under Section 254(2) and carried to their logical conclusion, which may or may not lead to any change in the ultimate conclusion of the Tribunal, but in case there is a change, then it may only amount to a rectification of the order, and not a review. The learned JM in his dissenting order has taken the view that the decision of the Hon'ble Supreme Court in the case of Tin Box Company (supra) as also the decision of the Tribunal reported in (1991) 41 TTJ (Del) 273 (supra) are not applicable to the assessee's case. In other words, the learned JM has not found this as one of the grounds for recalling the entire order of the Tribunal as has been done by the learned AM.
29. In my opinion, the view expressed by the learned JM is the correct one in law and there was no necessity for making this as a ground for recalling the entire order as has been the view expressed by the learned AM.
30. One of the main submissions made before me by the assessee's counsel was that the decision of the Hon'ble Delhi High Court in the case of Karan & Co. (supra) should not be followed since these are decisions of the Hon'ble Supreme Court taking a view to the contrary. Let me examine some of the decisions so referred to :
Grindlay's Bank Ltd. v. Central Government Industrial Tribunal and Ors. AIR 1981 SC 606
31. This was a case in which an ex parte award was given by the Industrial Tribunal and on the matter travelling to the Hon'ble Supreme Court at the instance of the bank, their Lordships took the view that where a party was prevented from appearing at the hearing due to a sufficient cause and is faced with an ex parte award, it is as if the party is visited with an award without a notice of the proceedings. According to Their Lordships an award without notice to a party was nothing, but a nullity and in such circumstances the Tribunal had not only the power, but also the duty to set aside the ex parte award and direct the matter to be heard afresh. Their Lordships took due note of the fact that there was no express provision in the Act or the Rules framed thereunder which gave the Tribunal jurisdiction to recall the ex parte order, but it opined that a Tribunal or a body should be considered to be endowed with such inherent or incidental powers as were necessary to discharge its functions effectively for the purpose of doing justice between the parties.
32. This judgment, in my opinion, is not applicable since in the case before me the hearing before the Tribunal was not ex parte and the matter was decided on merits by the Division Bench. The learned JM has very aptly noted in his order that under the IT (Appellate Tribunal) Rules, 1963, Rule 24 provides for a recall of an ex parte order and there is, therefore, no need to press into service the inherent powers which have been vested in the Tribunal vis-a-vis the judgment of the Hon'ble Supreme Court in the case of Mohd. Kunhi (supra).
J.K. Synthetics Ltd. v. Collector of Central Excise AIR 1996 SC 3527
33. This case also dealt with an ex parte dismissal of a matter by CEGAT and on the matter travelling to the Hon'ble Supreme Court, Their Lordships took note of r. 20 of the CEGAT (Procedure) Rules which dealt with cases where an appellant had defaulted. Rule 21 which empowers CEGAT to hear appeals ex parte and there being absence of a specific rule which provided for setting aside of an ex parte order due to the absence of the respondent and lastly, a reference to r. 41 which according to Their Lordships of the Hon'ble Supreme Court gave wide powers to the CEGAT to make such orders or to give such directions as might be necessary or expedient to give effect or in relation to its orders or to prevent abuse of its process or, most importantly to secure the ends of justice. The conclusion, in other words, was that CEGAT had the power to set aside the order passed ex parte against the respondent before it if it was found that the respondent had for sufficient cause been unable to appear.
34. It is apparent that the aforesaid decision is not applicable to the facts of the present case where the matter has not been heard ex parte and further there was an absence of a specific rule for recall in the absence of the respondent unlike the specific power with the Tribunal under r. 24 of the IT (Appellate Tribunal) Rules, 1963, and the wide powers given to the CEGAT as a result of the judgment of the Hon'ble Supreme Court to recall the ex parte order against the respondent in the absence of a specific rule.
Rupa Ashok Hurra v. Ashok Hurra and Anr./Birla Textiles and Anr. v. Union of India and Ors. AIR 2002 SC 1771
35. The writ petitions in the aforesaid case came up before a Bench of three learned Judges of the Hon'ble Supreme Court and the matter was referred to the Constitution Bench with the following observations :
"Whether the judgment of this Court dt. 10th March, 1997, in Civil Appeal No. 1843 of 1997 can be regarded as a nullity and whether a writ petition under Article 32 of the Constitution can be maintained to question the validity of a judgment of this Court after the petition for review of the said judgment has been dismissed are, in our opinion, questions which need to be considered by a Constitution Bench of this Court."
36. The Constitution Bench of the Hon'ble Supreme Court consisting of five learned judges formulated the question of constitutional law as follows :
"Whether an aggrieved person is entitled to any relief against a final judgment/order of this Court, after dismissal of review petition, either under Article 32 of the Constitution or otherwise."
37. Their Lordships took the view that a final judgment/order passed by the Supreme Court could not be assailed in an application under Article 32 of the Constitution of India by an aggrieved person whether he be a party to the case or otherwise. The jurisdiction of the Supreme Court under Article 32, according to the Constitution Bench, could not be invoked to challenge the validity of a final order passed by the Court exhausting the remedy of review under Article 137 of the Constitution r/w 0. XI r. 1 of the Supreme Court Rules, 1966. According to Their Lordships, however, the Supreme Court in exercise of its inherent power with a view to prevent abuse of its process and to cure a gross miscarriage of justice could reconsider its judgments, but only in the rarest of rare cases.
38. I do not really understand vis-a-vis the facts of the present case as to how the aforesaid judgment of the Hon'ble Supreme Court can support the line of argument canvassed by the assessee's counsel. The issue before me is whether the Tribunal in dealing with an application under Section 254(2) can recall the entire order when it is in law obliged only to rectify mistakes apparent from the record and the recalling of the order in entirety is normally restricted to situations envisaged by r. 24 of the ITAT Rules, 1963. That apart, in the judgment of the Hon'ble Supreme Court aforesaid, the view expressed was that Court may reconsider its judgment in situations where there has been a gross miscarriage of justice or it is required to prevent abuse of its process. In the present case, the learned counsel has not been able to pin-point any of these two situations and there is a great degree or agreement between the learned Members of the Division Bench on issues which constitute mistakes apparent from the record and which are liable to be set right.
Srinivasiah v. Balaji Krishna Hardware Stores AIR 1999 SC 462
39. This was the case of a review petition before the Hon'ble Supreme Court bringing on record the fact that the Rent Controller and the appellate authority in their judgments had noted as a fact that the accommodation behind the tenants' premises was a "godown" and not a "shop", but since these judgments had not been placed before the Hon'ble Supreme Court, Their Lordships had dismissed the eviction suit filed by the landlord holding that the area behind the shop could be used as a shop and there was, therefore, no bona fide need for evicting the tenant. The Hon'ble Supreme Court allowed the review petition setting aside its earlier judgment and directing in the process the tenant to vacate the premises by a stipulated date.
40. The aforesaid decision has been delivered on its own facts, but it is not the case of the assessee in the proceedings before me that the decision of the Division Bench has proceeded on any wrong factual aspects or assumptions.
41. I may mention at this stage that subsequent to the conclusion of the hearing in the present reference the assessee by means of a written communication invited attention to the judgment of the Hon'ble Delhi High Court in the case of Seth Madan Lal Modi v. CIT contending that Their Lordships are considering the three earlier decisions of the same Court in the cases of Deeksha Sun, Karan & Co. and Smt. Baljeet Jolly (supra) had taken the view that under Section 254(2) the Tribunal had the power to recall its order when such order was based on an erroneous understanding of the provisions of law. The prayer, in other words, on the part of the assessee was that this latest judgment of the Hon'ble Delhi High Court be considered and applied to the facts of the assessee's case.
42. I have perused the judgment of the Hon'ble Delhi High Court in the case of Seth Madan Lal Modi v. CIT (supra) and do note that this pertains to a situation where the order of the Tribunal is based on a wrong provision of law and this has been considered to be an error apparent from the record within he meaning of Section 254(2). As rightly contended by the assessee in its written submission, the numerous judgments of the Hon'ble Delhi High Court on the scope of Sections 154 and 254(2) of the IT Act have been taken into account and I now proceed to reproduce the relevant observations of Their Lordships, as follows :
"Before taking up the main point, we may first deal with the question with regard to the propriety of the Tribunal in recalling its order dt. 30th Aug., 1978, on assessee's application under Section 254(2) of the Act.
While interpreting and explaining the scope of Section 154 of the Act, which provision is in pari materia with Section 254(2) of the Act, the Supreme Court in T.S. Balaram, ITO v. Volkart Bros. and Ors. (1971) 82 ITR 50 (SC) held that a mistake apparent from the record within the meaning of Section 154 of the Act must be an "obvious" and "patent" mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. In Hotz Hotels (P) Ltd. case (supra), a Division Bench of this Court, to which one of us (D.K. Jain, J.) was a party, observed thus :
'In order to attract the application of Section 154, the mistake must exist and the same must be apparent from the record. The power to rectify the mistake, however, does not cover cases where a revision or review of the order is intended. "Mistake" means to take or understand wrongly or inaccurately, to make an error in interpreting, it is an error, a fault, a misunderstanding, a misconception. 'Apparent' means visible, capable of being seen, obvious, plain. It means open to view, visible, evident, appears, appearing as real and true, conspicuous, manifest, obvious, seeming. A mistake, which can be rectified under Section 154 is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration.' In Master Construction Company (P) Ltd. v. State of Orissa (1966) 17 STC 360 (SC), the Supreme Court dilated on the term "an error apparent from record" to be one which is not an error which depends 'for its discovery on elaborate arguments on questions of fact or law. A similar view has been expressed by the apex Court in a recent decision in CIT v. Hero Cycles (P) Ltd. (1997) 228 ITR 463 (SC), wherein it is again said that for invoking jurisdiction under Section 154 of the Act, for exercising power of rectification of mistake, it is a condition precedent that the mistake must be "glaring and obvious".
Applying the aforenoted principles, governing an application under Section 254(2) of the Act, we are of the opinion that the Tribunal was justified in recalling its order dt. 30th Aug., 1978, on the ground that while deciding the appeal, it had admittedly relied on a wrong section, which had no application to the year under appeal. We do not find any illegality in the observation of the Tribunal that it was difficult for them to say as to what extent reliance on a wrong section had affected the mind of the Tribunal. Obviously, reliance on a wrong provision of law is tantamount to an error apparent from the record within the meaning of the said section. Accordingly, the question referred at the instance of the CIT in R.A. No. 1339 (Del) of 1980 is answered in the affirmative i.e., in favour of the assessee and against the Revenue."
43. It is quite apparent from reading the numerous judgments of the Hon'ble Delhi High Court (supra) that a mistake apparent from the record can be rectified under Section 254(2), but a review cannot be carried out under the guise of rectification proceedings and considering specifically Karan & Co. and Seth Mandan Lal Modi's cases, the end result is not a decisive factor since in a given case mistakes apparent from the record can be rectified and the order under Section 254(1) allowed to stand with the modifications whereas in another situation mistakes apparent from the record may lead to the obliteration of the entire order passed under Section 254(1) and the appeal required to be heard de novo. In other words, each case is to be decided on its own facts.
44. In conclusion and in the final analysis, I, on the facts of the present case hold that the order of the Tribunal passed under Section 254(1) did not merit a total recall since the mistakes apparent from the record pointed out by the assessee were capable of being rectified and both the learned members while deciding the misc. appln. were substantially in agreement with each other and on the point of dissent I am in agreement with the view expressed by the learned JM. The two judgments of the Hon'ble Delhi High Court i.e.. Karan & Co. and Seth Madan Lal Modi are not in conflict with each other and, these in fact clearly support/approve the proposition that Section 254(2) is restricted to mistakes apparent from the record and in carrying out a rectification of such mistakes the end result is not relevant and review of an order of the Tribunal in the guise of an application under Section 254(2) is not permitted by law.
45. Before I part with this reference. I may mention that the Tribunal is not expected to reconcile judgments of the Hon'ble High Courts as this is within the powers of the Hon'ble Supreme Court and a party before the Tribunal cannot be contending that a particular decision of the Hon'ble Supreme Court was not considered by the Hon'ble jurisdictional High Court. To elaborate, a judgment of the jurisdictional High Court is binding and to be followed religiously by the Tribunal till such time as the Hon'ble Supreme Court expresses a view to the contrary.
46. Further, all decisions cited by the parties in this reference have been considered whether specifically discussed or not.
47. The matter is now directed to be listed before the Division Bench for passing an order in accordance with the majority opinion.