Madhya Pradesh High Court
The Commissioner Of Income Tax vs K.D. Wires Pvt. Ltd. on 13 September, 2007
Author: A.M. Sapre
Bench: A.M. Sapre
ORDER S.K. Kulshrestha, J.
1. BY this appeal under Section 260A of the Income Tax Act, the Revenue has assailed the order dated 5/3/2004, passed by the Tribunal in M.A. No. 56/IND/03 for the assessment year 1996 - 1997 by which the Income Tax Appellate Tribunal, Indore, acting upon the application under Section 254(1) of the Income Tax Act, at the instance of the assessee, has recalled its earlier order for passing an order afresh. In pursuance of the said order, the Tribunal has also passed an order dated 23/4/2004, in I.T.A. No. 78/2000 which has also been challenged by the Revenue before this Court in I.T.A. No. 76/2004. Since both the orders are the offshoots of the same proceeding, both these appeals are being disposed of by this common order.
2. ITA No. 59/04 was admitted by order dated 15/7/2004 on the following substantial questions of law:
(1) Whether the ITAT was justified in entertaining the application made under Section 254 of the Income Tax Act and further, justified in recalling the original order passed in appeal?
(2) Whether grounds, stated in the order passed by the I.T.A.T. satisfy the requirements of Section 254 ibid for the purpose of recalling the original appellate order?
3. Likewise, ITA No. 76/04 was admitted by order dated 1/10/04 on the following substantial questions of law:
1. Whether the Tribunal was justified in entertaining and eventually allowing the application made by the assessee under Section 254 of the Income Tax Act?
2. Whether the Tribunal was justified in recalling the order passed in Appeal M.A. No. 78/Ind/2004 and if so, whether the Tribunal had the jurisdiction to do so?
4. Although the counsel for the parties submit that the case has a chequered history, the counsel are unanimous that both the orders passed by the Tribunal cannot withstand the scrutiny of law. It is stated that the Dy. Commissioner of Income Tax, while framing the assessment, rejected the account of the assessee and proceeded under Section 145 to make a best judgment assessment. The doubt which the A.O. harboured was that the selling price indicated by the assessee was less than what it should have fetched. The order passed by the I.T.A.T. in respect thereof was assailed on the ground that it was a non-speaking order, in appeal I.T.A. No. 60/2001. The said appeal was admitted on 12/9/01 but, during its pendency, the assessee filed an application under Section 254(2) for rectification of the order and the Tribunal allowed the application and set aside its own order for passing an order afresh. The first order has been challenged I.T.A. No. 59/2004 while the subsequent order passed after setting aside the order has been assailed by the Revenue in ITA No. 76/04.
5. Section 254(1) and (2) of the Income Tax Act 1961 make the following provision:
254 (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.
(2) The Appellate Authority may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under Sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer.
6. From a perusal of the Section 254(2), it is luculent that rectification under that Section implies amendment if the mistake is brought to the notice of the Tribunal by the assessee or the assessing officer. Learned Counsel has also brought to our notice the judgment of this Court in Dr. Hukumchand Marothi v. Commissioner of Income Tax to the effect that scope of the proceedings under Article 254(2) of the Income Tax Act is limited and is narrower than the proceedings for review. Attention has also been invited to the decision of the Delhi High Court in Commissioner of Income Tax v. Honda Siel Power Products Ltd. [2007] 293 ITR 132 (Delhi) that power of rectification under Section 254(2) of the I.T. Act does not imply the power to recall or review the order.
7. It is not disputed before us that on an application under Section 254(2) of the I.T. Act having been filed, the Tribunal set aside its own order in its entirety for passing an order afresh. This was tantamount to reviewing the order and not rectifying it. Under these circumstances, the order of the Tribunal passed under the provisions of Section 254(2) of the I.T. Act and the subsequent fresh order passed on 23/4/2004 cannot be sustained.
8. Ex consequentia, in both the cases, the questions formulated are answered in favour of the Revenue and against the assessee. Needless to add, that the impugned orders shall stand set aside. Parties shall bear their own costs.
A copy of this order be kept in the record of ITA No.76/2004.