Calcutta High Court
Kesoram Industries Ltd. vs Cit on 13 July, 2004
Equivalent citations: [2005]144TAXMAN192(CAL)
Author: D.K. Seth
Bench: D.K. Seth
JUDGMENT D.K. SETH, J.
Facts.
The appellant had submitted its return for the years 1981-82 and 1982-83 which was assessed under section 143(3)/144B. Subsequently, in respect of those two assessments years, the assessee/appellant submitted a return under the amnesty scheme and offered the gratuity liability on the basis of actuarial certification for taxation. The assessments were completed under section 143(3)/231/147 and interest was charged under sections 139(8) and 215 of the Income Tax Act, 1961. This was subjected to certain proceedings and ultimately by an order dated 17-3-1989, the CIT (A) held that no interest can be charged either under section 139(8) or under section 215 in a reassessment made under section 147.
While giving effect to this order dated 17-3-1989, instead of waiving interest since held not chargeable under section 139(8) and under section 215 by an order dated 1-5-1989, the assessing officer fully waived interest under section 139(8) for the year 1981-82 and partially for the assessment year 1982-83 ; and the interest under section 215 was partially waived for both the years. Subsequently, by an order dated 22-5-1989, in terms of the order dated 17-3-1989, of the CIT (A), the assessing officer had held that the interest under section 139(8) for the assessment year 1981-82 was fully waived and the other interest was partially waived, therefore, no further step need be taken.
3. Against this order an appeal was preferred. The CIT (A) by his order dated 14-6-1991, directed the assessee to file a rectification application under section 154 before the assessing officer. By an order dated 26-6-1992, passed on the application for rectification so filed, the assessing officer held that the interest had already been waived to the extent attributable to the income disclosed in the amnesty returns and there was no scope for further waiver.
4. On appeal the CIT (A) by an order dated 19-8-1993, deleted the entire interest charged under sections 139(8) and 215 for the assessment years 1981-82 and 1982-83 in view of the earlier order dated 17-3-1989, which had become final. On appeal by the revenue, the learned Tribunal by its order dated 9-4-1999, reversed the order of the Commissioner (Appeals). It may be noted that the Income Tax Appellate Tribunal in its order had also dealt with the appeals for the years 1977-78, 1978-79 and 1979-80 but the two years 1981-82 and 1982-83 were omitted to be mentioned at the penultimate paragraph of the decision.
5. On 16-6-1999, an application for rectification of the order dated 9-4-1999 was filed in respect of the assessment years 1981-82 and 1982-83 with regard to the omission to mention the said two assessment years in the decision and its omission to consider the question regarding finality of the appellate order dated 17-3-1989. By its order dated 30-3-2000, the learned Tribunal incorporated the two assessments years 1981-82 and 1982-83 in the order dated 9-4-1999, but rejected the contention of the assessee in respect of the other point, viz., the finality of the order dated 17-3-1989. Against this order the present appeal has since been preferred.
Appellants contention :
6. Mr. J.P. Khaitan, learned counsel for the appellant, submitted that the scope of rectification is confined only to the error apparent on the face of the record. It cannot stretch to the extent of review of the order sought to be rectified. According to him, the finality of the order dated 17-3-1989, was completely overlooked and omitted to be considered. The finality of the order dated 17-3-1989, was staring on the face of the Tribunal and on the strength of this finality, the Tribunal could not have reopened the issue and decided the question sitting in appeal against the order dated 17-3-1989. Therefore, this is amenable to rectification under section 254(2) of the Income tax Act, 1961.
7. In support of his contention, Mr. Khaitan had relied on the decision in Neeta S. Shah v. CIT (1991) 191 ITR 77 (Karn) to contend that when an earlier order of the Appellate Tribunal is founded on a mistaken assumption and the error is discovered, the power of rectification under section 254(2) of the Income Tax Act, 1961, can be invoked because the very basis of the earlier order requires rectification. He also relied on a decision in Bata India Ltd. v. Dy. CIT (1996) 217 ITR 871 (Cal), to support his contention that when the breach resulting from an order is attributable to the Tribunals mistake, error or omission, it is the bounden duty of the Tribunal to set it right.
8. Mr. Khaitan then relied upon a decision in CIT v. Ballabh Prasad Agarwalla (1998) 233 ITR 354 (Cal) and contended that the Tribunal has no inherent power to review, neither it can re-examine or give a second view but section 254(2) expressly confers power upon the Tribunal to correct any mistake apparent from the record and power to amend any order passed under sub-section (1) of section 254. Elaborating, he contended that it must be left to the Tribunal to reopen an appeal if it finds that it has omitted to deal with an important ground urged by the party. Failure to deal with a preliminary objection amounts to a mistake apparent from the record. The primary aim of legal policy flowing from section 254(2) is to do justice. Parliament did not intend to do injustice or to allow a wrong thing to continue contrary to law or public policy. Therefore, it has incorporated the provision for rectification of a mistake apparent on the record.
9. He then relied on the decision in Union of India v. Food Specialities Ltd. (1998) 97 ELT 402 (SC), to contend that once a decision has become final and the question of the consequential order comes before the authority, the same cannot be challenged by the department since the order reaching finality is no longer open to be interfered with. Reliance was placed by Mr. Khaitan on K. Govindan and Sons v. CIT (2001) 247 ITR 192 (SC) to contend the meaning of regular assessment defined in section 2(40) which did not include an assessment under section 147. In order to remove the anomaly Explanation 2 was added to sub-section (8) of section 139 and sub-section (6) added to section 215 clarifying that the first assessment made under section 147 is a regular assessment. In this case, the assessment under section 147 was a reassessment since the first assessment was made under section 143(3)/144B. Therefore, no interest was chargeable as was rightly held by the CIT (A) by his order dated 17-3-1989, against which no appeal was taken by the department and the order had become final. This is supported from the ratio decided in K. Govindan (2001) 247 ITR 192 (SC) on the basis whereof one other appeal involving a similar question of chargeability of interest under section 139(8) and section 215 in respect of a reassessment in CIT v. Keshoram Industries Ltd. (2004) 271 ITR 353 (Cal)-I. T. R. No. 184 of 1993 was disposed of on 7-4-2004, by honble Mr. justice M.H.S. Ansari and honble Mr. Justice Sournitra Pal holding inter alia, that the said question is now concluded in view of the decision in K. Govindan (2001) 247 ITR 192 (SC).
10. He distinguished the decision cited by Mr. Mullick and contended that this was a case fit for rectification. That the order dated 17-3-1989, has reached the finality is not dependent on any long drawn argument nor any two opinions could be formed in respect of the finality of the said decision. It is only the question whether this finality was overlooked or omitted to be considered or whether while dealing with the matter the Tribunal had disturbed the finality and interfered with the matter, which has since attained finality. In case it had purported to interfere with an order attaining finality, it is definitely an error apparent on the face of the record rectifiable under section 254(2). Therefore, the appeal should be allowed.
Respondents contention :
11. Mr. Mullick, learned counsel for the department, on the other hand, contended drawing our attention to the respective orders and materials available before us on record that the learned Tribunal had noted the fact with regard to the order dated 17-3-1989, and its impact and had noted the contention on behalf of the assessee. After having considered the question the Tribunal had given its decision. This decision may be wrong but then it would be a wrong decision or wrong judgment, it cannot be an error apparent rectifiable under section 254(2). According to him, in order to assert that there was an error apparent on the face of the record a long drawn argument is necessary and there is scope for forming two opinions with regard thereto.
12. He relied on the decision in CIT v. Gokul Chand Agarwal (1993) 202 ITR 14 (Cal) in support of his contention wherein it was held that it is only a mistake which can be corrected, it cannot re-evaluate the total effect of the facts found by it nor can it review its order. He also relied upon a decision in CIT v. Ramesh Electric and Trading Co. (1993) 203 ITR 497 (Bom) to contend that the Tribunal has no power to review its order. This decision has considered the decision in Laxmi Electronic Corporation Ltd. v. CIT (1991) 188 ITR 398 (All) where in it was held by the Allahabad High Court that if the Tribunal fails or omits to deal with an important contention affecting the maintainability or merits of an appeal, it must be deemed to be a mistake apparent from the record which can be rectified by the Tribunal. But following the decision in the case of T. S. Balaram, Income Tax Officer v. Volkart Bros. (1971) 82 ITR 50 (SC), the Bombay High Court had taken a view that this decision Volkart Bros. (1971) 82 ITR 50 (SC) was not brought to the notice of the Allahabad High Court.
13. In Volkart Bros. (1971) 82 ITR 50 (SC), it was held that the application under section 254(2) can be exercised only when the mistake is obvious and a patent mistake apparent from the record and not a mistake which requires to be established by argument and a long drawn process of reasoning on points on which there may conceivably be two opinions. Failure by the Tribunal to consider the argument advanced by either party for arriving at a conclusion is not an error apparent on the record although it may be an error of judgment. He then relied on a decision in Vijay Mallya v. Asstt. CIT (2003) 263 ITR 41 (Cal) to support his contention where all these decisions were considered and it was held that the mistake contemplated must be a mistake apparent on the face of the record; it must be obvious, clear and patent; it must not be a mistake to establish which a long and elaborate reasoning and argument is required on points on which there may conceivably be two opinions; it must not be a debatable point of law.
Appellants reply :
Mr. Khaitan, in reply, however, pointed out that the decision of the Allahabad High Court in Laxmi Electronic Corporation Ltd. (1991) 188 ITR 398 noted in Ramesh Electric & Trading Co. (1993) 203 ITR 497 by the Bombay High Court was considered in a decision by our High Court in Ballabh Prasad Agarwalla (1998) 233 ITR 354 and our High Court had preferred to follow the Allahabad view. Therefore, this High Court need not follow the Bombay view.
Scope : Issues to be determined :
After having heard learned counsel for the parties, to us it appears that the question to be ascertained in this case is as to whether the finality of the order dated 17-3-1989, though noted by the Tribunal and considered by it, yet it would come within the purview of section 254(2) for rectification as an error apparent on the face of the record ?
Finality of order dated 17-3-1989 From the facts disclosed, it appears that the order dated 17-3-1989, has since reached its finality. No appeal had since been preferred against the same. As rightly pointed out by Mr. Khaitan the interest under section 139(8) and section 215 are chargeable in respect of regular assessment which in Explanation 2 of section 139(8) and sub-section (6) of section 215, respectively, included the first time assessment under section 147 as a regular assessment. By converse analogy, it can be said that no interest can be charged under section 139(8) and section 215 when it is a case of reassessment under section 147 as in the present case. The law is clear. Following this principle as was held in Volkart Bros. (1971) 82 ITR 50, by the apex court, drawing the converse analogy the principle seems to be settled, and it was so accepted by the CIT (A) in his order dated 17-3-1989.
14. The facts revealed that in the process of giving effect to this order which had waived the interest charged under section 139(8) and section 215 in respect of the two assessment years 1981-82 and 1982-83, the assessing officer had purported to waive interest under section 139(8) fully in respect of the assessment year 1981-82 and partially in respect of the assessment year 198283 and as well as partial in respect of other interests which was repeated by the assessing officer in the second order dated 22-5-1989. Against this order seeking to give effect of the order of the CIT (A) an appeal was preferred in which the CIT (A) directed filing of an application for rectification before the assessing officer by its order dated 14-6-1991.
15. On the application for rectification the assessing officer held that there was nothing to be rectified by its order dated 26-6-1992, against which an appeal being preferred, the CIT (A) by its order dated 19-8-1993, waived the interest fully under section 139(8) and section 215 for the assessment years 1981-82 and 1982-83 in view of its earlier order dated 17-3-1989, which had become final. It is against this order that an appeal was preferred by the revenue before the Tribunal. Now the Tribunal had reversed the order of the CIT (A).
16. True, the Tribunal had referred to the contention of the assessee and referred to the fact of the order dated 17-3-1989. But, in our view, such reference or consideration would not change the position in law which was staring on the face of the Tribunal that the order dated 17-3-1989, passed by the CIT (A) had become final and the Tribunal was not sitting in appeal on the order dated 17-3-1989. It had no jurisdiction to reopen the order dated 17-3-1989, nor it can interfere with the order dated 17-3-1989. Neither it had jurisdiction to pass any order, which will render the order dated 17-3-1989, infructuous or redundant. No appeal against the order dated 17-3-1989, was preferred before the Tribunal. The Tribunal could not assume jurisdiction to deal with the merits of the said order, neither it could pass any order contrary thereto and which could eclipse or could come in conflict with the said order. In order to establish that the order dated 17-3-1989, has become final and it was no more open to interference by the Tribunal since the appeal that was preferred before the Tribunal was not an appeal against the order dated 17-3-1989, and it was preferred against an order seeking to give effect to the order dated 17-3-1989, no argument is necessary, neither there could be two opinions with regard thereto. The jurisdiction of the Tribunal was confined within the scope of looking into the question as to whether the assessing officer had rightly enforced or had given effect to the order dated 17-3-1989, which had fully waived the interest.
Whether there was any mistake amenable to section 254(2) Thus, even if the order dated 17-3-1989, was noted or even if the contention of the assessee was noted even then non-consideration of the fact or omission to note the fact of finality of the order dated 17-3-1989, staring on the face of the Tribunal outside the scope and jurisdiction of the Tribunals interference within the scope of the appeal preferred before it, is a mistake which comes within the scope of section 254(2) as an error apparent on the face of the record or a mistake. In the facts and circumstances of the case, it is a mistake on the part of the Tribunal in its assumption of jurisdiction to interfere with the order dated 17-3-1989.
17. The law relating to scope of rectification under section 254(2) is well settled. The decision in Cokul Chand Agarwal (1993) 202 ITR 14 (Cal) cited by Mr. Mullick is distinguishable from the facts noted in the said decision at page 17 of ITR as pointed by Mr. Khaitan is a distinguishing feature with regard to the facts involved in the said decision vis-a-vis the case at hand. The principle laid down therein cannot be disputed. But the said principle would not apply in the present case. The decision in Vijay Mallya (2003) 263 ITR 41 (Cal) has taken note of the decision in Volkart Bros. (1971) 82 ITR 50 (SC) and other decisions where the settled principles were enunciated. Having regard to the ratio laid down therein, in our view, the points made out by Mr. Khaitan, as discussed by us above, clearly brings the mistake within the purview of the settled principles of law rectifiable under section 254(2) within the ratio laid down in Vijay Mallya (2003) 263 ITR 41 (Cal).
18. The decision in Ramesh Electric and Trading Co. (1993) 203 ITR 497 (Bom) cited by Mr. Mullick by the Bombay High Court though may run counter to the proposition that omission to consider an argument is an error, yet in the present case whether the argument was omitted or not, we find that it was a case of wrong assumption of jurisdiction and proceeding on that basis without looking into the finality of the order which was staring on the face of the Tribunal, and oblivious of the fact that it was not sitting on appeal on the order dated 17-3-1989. Therefore, the decision of the Bombay High Court does not help us in the present context. On the other hand in Laxmi Electronic Corporation Ltd. (1991) 188 ITR 398, the Allahahad High Court and in Ballabh Prasad (1998) 233 ITR 354 (All), the Calcutta High Court had taken a view that failure to deal with a preliminary objection amounts to a mistake apparent from the record and omission to deal with an important ground urged by the party is also a ground for rectification under section 254(2). We would prefer to follow the ratio laid down by the Allahabad High Court and the Calcutta High Court in the said two decisions.
19. As already discussed, the order dated 17-3-1989, had reached the finality even on the question of law being a reassessment within the ratio decided in K. Govindan and Sons (2001) 247 ITR 192 (SC) since followed in Keshoram Industries Ltd. (2004) 271 ITR 353 (Cal) involving an identical question. Therefore, there is no doubt about the justifiability of the order dated 17-3-1989, against which no appeal having been preferred, the order had attained finality. Therefore, it was staring on the face of the Tribunal that this could not be interfered with in an appeal against an order seeking to give effect to the order dated 17-3-1989.
20. The decision in Neeta S. Shah (1991) 191 ITR 77 (Ker) by the Karnataka High Court had held that if the order is founded on a mistaken assumption and the error is discovered, the Tribunal has power to invoke jurisdiction under section 254(2) because the very basis of the earlier order sought to be rectified requires rectification. We are in agreement with the said view of the Karnataka High Court having regard to the facts and circumstances of the case where the very foundation of the orders of the learned Tribunal sought to be rectified herein was based on the misconceived notion that the learned Tribunal was sitting on appeal in the order dated 17-3-1989, overlooking that the appeal was related to the giving effect to the order dated 17-3-1989, since attained finality.
21. The decision in Bata India Ltd. (1996) 217 ITR 871 (Cal) has held that when the prejudicial results from the order impugned is attributable to the Tribunals mistake, error or omission, it is the bounden duty of the Tribunal to set it right. There is no doubt about the proposition laid down therein. Following the said ratio, in the present case, we also find that the mistake sought to be corrected is attributable to the Tribunals misconception and error or omission to note that the order dated 17-3-1989, has reached the finality and was no more open to interference in an appeal preferred against an order attempting to give effect to the order dated 17-3-1989, since attained finality. The decision in Food Specialities Ltd. (1998) 97 ELT 402 (SC) cited by Mr. Khaitan also supports the view we have taken inasmuch as it is no more open to the department to challenge the order dated 17-3-1989, after it had attained finality and at the same time it was not at all a challenge to the said order before the Tribunal.
Conclusion :
For all these reasons, we are of the view that the omission to note or consider that the order dated 17-3-1989, had reached the finality and it was no more open to interference and the learned Tribunal could not have reopened the decision in an appeal against an order attempting to give effect to the order dated 17-3-1989, which was staring at its face and its omission to consider that the Tribunal was not sitting in appeal over the order dated 17-3-1989, is an error or omission or mistake which does not require any argument to establish the same nor any two opinions could be formed with regard thereto and as such it is amenable to rectification under section 254(2) of the Income Tax Act.
Order :
In the result, the appeal succeeds. The impugned order dated 30-3-2000, passed on the application for rectification is hereby set aside only to the extent it had rejected the prayer of the assessee with regard to waiver of interest. Rest of the rectification incorporating the assessment years 1981-82 and 1982-83 shall remain effective. The order dated 9-4-1989, is rectified to the extent with regard to the question of interest by affirming the order dated 19-8-1993, passed by the CIT (A) in respect of the assessment years 1981-82 and 1982-83.
22. Xerox certified copy of this judgment be made available to the parties, if applied for, on usual terms.
R.N. Sinha, J.
I agree.