Income Tax Appellate Tribunal - Delhi
Silicon Graphics Systems (I) Ltd. vs Assistant Commissioner Of Income Tax on 8 February, 2008
Equivalent citations: (2008)114TTJ(DELHI)825
ORDER
R.V. Easwar, Vice President
1. This miscellaneous application has been filed by the assessee under Section 254(2) of the IT Act. It arises under the following circumstances. One of the issues before the Tribunal, at the instance of the Department, was whether the CIT(A) was right in deleting the; disallowance of Rs. 8,20,24,365 claimed by the assessee as deduction under Section 4313 of the Act on account of customs duty on stock, forming part of the closing stock. In support of the order of the CIT(A), the assessee contended before the Tribunal that its case was covered by the order of the Special Bench in the case of ITO v. Food Specialties Ltd. and Indian Communication Network (P) Ltd. v. IAC which order has been approved by the Supreme Court in Merger Paints India Ltd. v. CIT and by the Hon'ble Delhi High Court in CIT v. Nestle India Ltd. (2006) 206 CTR (Del) 345 : (2006) 156 Taxman 419 (Del). The assessee also raised a legal contention that Section 4313 has overriding effect and, therefore, Section 145A of the Act introduced w.e.f. 1st April, 1999 can have no application to the assessee's case. In support of this legal contention, the assessee placed reliance on an order of the Co-ordinate Bench of the Delhi Benches of the Tribunal in the case of Mandi Udyog Ltd. v. Dy. CIT (2005) 92 TTJ (Del) 987 : (2005) 92 ITD 119 (Del). The Tribunal sought clarifications from the assessee as to the entries for customs duty made in the P&L a/c and balance sheet. In compliance with these directions, the assessee placed detailed written submissions as also the entries passed by it in an attempt to show that the customs duty was included in the closing stock as on 31st March, 2001 and. therefore, the payment made by it should be allowed as a deduction as claimed in the return. It was also submitted by the assessee that its similar claim has been accepted by the IT Department in subsequent years and the deduction has been allowed in those years as claimed.
2. The Tribunal in principle held that in view of the decision of the Supreme Court in Berger Paints (supra) and the order of the Special Bench (supra), the deduction of Rs. 8,20,24,365 on account of customs duty paid during the year is allowable to the assessee "irrespective of the fact that the same has not been included in the valuation of the closing stock by the assessee". However, the Tribunal restored the matter to the AC) on the ground that for deciding the allow ability of deduction of customs duty separately which has not been included in the valuation of the closing stock, it is imperative to see that the valuation is done in accordance with law. The Tribunal thereafter noticed Section 145A of the Act under which in computing the profits of the business the amount of any duty paid by the assessee to bring the goods to the place of their location and condition as on the closing date is to be included in its value. According to the Tribunal, the implication of this provision was not correctly applied by the Departmental authorities. So saying the Tribunal restored the issue to the file of the AO for passing fresh orders after considering Section 145A and affording sufficient opportunity to the assessee. The Revenue's ground was allowed for statistical purposes. These directions are contained in para 11 of the Tribunal's order.
3. In support of the miscellaneous application, the learned representative for the assessee has pointed out to four mistakes said to have been committed by the Tribunal which according to him would justify the recall of its order insofar as it relates to the first ground. The first mistake, according to him. is factual. Me says that the Tribunal was wrong in saying that the customs duty was not included in the closing stock, He has drawn our attention to para 10 of the order in which there is reference; to the fact that the assessee has been consistently following the inclusive method of accounting for customs duty payment while valuing the stock, which was not contradicted in the assessment order. He further has drawn our attention to the observation in the same para that "the amount of customs duty forming part of the closing stock not debited to the P&L a/c would be Rs. 8,20,24,365 which was separately claimed deduction in the return of income for the asst. yr. 2001-02 under Section 43B". According to the learned representative for the assessee, the Tribunal having accepted the asscssee's contention after due scrutiny of the entries made in the P&L a/c and balance sheet, that the customs duty has in fact been included in the closing stock, it committed an error apparent from the record when in para 11 of his order it contradicted itself by saying that the customs duty has not been included in the valuation of the closing stock and, therefore, the effect of Section 145A has to be examined by remitting the matter to the AO. According to the learned representative for the assessee, this inherent contradiction is a clear mistake which has caused prejudice to the assessee in the sense that if the assessee has admittedly included the customs duty in the valuation of the closing stock, there is no need to set aside the matter to the AO for examination of the effect of Section 145A which has given rise to multiplicity of proceedings, delaying the finality of the matter, thus causing prejudice to the assessee. It is pointed out that no reasons have been given by the Tribunal as to why the earlier finding in para 10 that the assessee has included the customs duty in the valuation of the closing stock has been changed in para 11 and it was held that the customs duty has not been so included.
4. The second mistake committed by the Tribunal, according to the learned representative for the assessee, is that the Tribunal has not dealt with a very crucial contention raised by the assessee in the course of the hearing of the appeal to the effect that Section 43B has overriding effect over Section 145A. Our attention was drawn in this connection to para 1.5 of the written submissions filed by the assessee before the Tribunal. According to the learned representative for the assessee, the omission of the Tribunal to deal with this contention has caused prejudice to it in the sense that the contention is clearly supported by the order of a Coordinate Bench of the Tribunal, Delhi in the case of Maruti Udyog Ltd. (supra) and if the Tribunal had dealt with the contention and noticed the aforesaid order of the Co-ordinate Bench, it could not have taken the view, having regard to the legal position that an order of a Co-ordinate Bench is binding on another Bench, that Section 145A needs to be looked into by the AO and consequently the assessee would not have been put to prejudice by having to face the proceedings all over again. According to the learned representative for the assessee, the failure of the Tribunal to follow the order of the Co-ordinate Bench has caused prejudice to the assessee and such prejudice has to be removed by atonement. Our attention was drawn to the recent judgment of the Supreme Court in Honda Siel Power Products Ltd. v. CIT (2007) 213 CTR (SC) 425 : (2007) 295 ITR 466 (SC) where it was held that no party should suffer on account of the mistake committed by the Tribunal and if such mistake is committed by the Tribunal, there should be atonement by rectification of the same and further that non-advertence of a Co-ordinate Bench of the Tribunal in the order of the Tribunal gives rise to a mistake apparent from the record since the rule of precedent is an important aspect of legal certainty in rule of law.
5. The third mistake committed by the Tribunal, according to the learned representative for the assessee, is the non-following of decision of a Coordinate Bench, which was cited before the Tribunal as acknowledged by the Tribunal in para 7 of its order (the first line of p. 5). This has already been noticed in the earlier para.
6. The fourth and last mistake, according to the learned representative for the assessee, is that the Tribunal completely overlooked the assessee's contention that its claim for deduction of the customs duty under Section 43B of the Act for the subsequent years has been accepted by the AO himself though this was pointed out clearly with facts and figures in para 1.9 of the written submissions filed before the Tribunal. It is submitted that this crucial aspect does not even find place in the Tribunal's order. Our attention is drawn to the order of the Special Bench, Delhi in Asstt. CIT v. Apollo Tyres Ltd. (2006) 102 TTJ (Del)(SB) 15 where in para 11 it has been held that in not taking note of the submissions of the Revenue, the Tribunal did commit a mistake apparent from the record. It is further pleaded that the rule of consistency is a celebrated rule and ensures certainty in the law and. the Tribunal committed a grave error in not referring to the assessee's contention that the Department has consistently accepted its claim in the subsequent years, showing consistency of conduct.
7. On the other hand, the learned senior Departmental Representative vehemently opposed the miscellaneous application. She drew our attention to para 8 of the order of the Tribunal in which the contentions of the learned representative for the assessee have been summarized and submitted that the Tribunal cannot be accused of not paying due attention to any vital submissions made on behalf of the assessee. She drew our attention to the judgment of the Supreme Court in CIT v. Karam Chand Thapar & Bros. (P) Ltd. in which it was held that the order of the Tribunal has to be read and understood as a whole and not sentence by sentence and if this principle is applied to the present case, it would be clear that the Tribunal has dealt with the case in a wholesome manner paying due regard to all its aspects. It is submitted that while summarizing the submissions of the Department in para 7, the Tribunal did make a reference to the decision of the Co-ordinate Bench in Marutt Udyog Ltd. (supra) and has noted the submission of the Department that this decision in fact supports the Department. She submitted that in this background, it cannot be said that the decision of the Co-ordinate Bench escaped the attention of the Tribunal and thereby a mistake was committed by it. According to the learned senior Departmental Representative, the assessee is not justified in making out a grievance against the order of the Tribunal nor is it right to say that some prejudice has been caused to the assessee by the order of the Tribunal which should be atoned in the manner laid down by the Supreme Court in the case of Honda Siel Power Products Ltd. (supra). According to her, the present miscellaneous application is in fact a plea for review of the order of the Tribunal which is not permissible under Section 254(2) as held in the following judgments:
(i) T.S. Balaram, ITO v. Volkart Brors ;
(ii) CIT v. Ramesh Electric & Trading Co. ;
(iii) Gay ways Publicity (P) Ltd. v. CIT (1995) 211 ITR 506 (Del); and
(iv) CIT v. Vichtra Construction (P) Ltd. .
8. We have carefully considered the rival submissions and the material on record. The record shows that in the course of the hearing of the appeal, the assessce was directed to explain the entries for eustoms duty payment in the P&L a/c and balance sheet. In response to the same, the assessee filed a "supplementary paper book" dt. 21st Feb., 2007 which includes written submissions as well. The paper book runs into 148 pages and it contains, inter alia and apart from the written submissions, the explanation of the entries made regarding the closing stock to show that the customs duty had been included therein, the audited financial statements as well as para-wise submissions explaining the entries as well as the legal position. This paper book is in addition to an earlier paper book containing 172 pages. In the supplementary paper book filed on 21st Feb., 2007, which was also explained before the Bench on that date with reference to the entries made regarding the customs duty, the assessee has also explained in detail how the provisions of Section 145A introduced w.c.f. 1st April. 1999 can have no effect, in view of the overriding provisions of Section 43B. These submissions have been briefly adverted to in para 8 of the order of the Tribunal as also para 10. Para 10 gives the impression that the contention of the assessee that since inception from the asst. yr. 1994-95 till the asst. yr. 2006-07 the assessee has been following the inclusive method of accounting for customs duty payment while valuing the stock was accepted by the Tribunal. It is further seen that the Tribunal even stated in this para that this claim of the assessce was not contradicted even in the assessment order. In the same para, the Tribunal also made an observation to the effect that: in the year under appeal, the customs duty formed part of the closing stock, though the duty was not debited to the P&L a/c and also referred to the fact: that the duty was separately claimed as deduction in the return of income. In para 11, the Tribunal has accepted the assessee's claim in principle and has observed that it is supported by the Special Bench order of the Tribunal in the ease of Indian Communication Network (P) Ltd. (supra), which was approved by the Supreme Court in Benjer Paints India Ltd. (supra). However, the observations that follow in the said para towards the close of p. 9 show that the Tribunal considered that the customs duty was not included in the valuation of the closing stock. This observation is at variance with and contradictory to its earlier finding of para 10 to the effect that the duty has been included in the closing stock as per the consistent accounting practice adopted by the assessee and accepted in the assessment. It is only in view of the latter contradictory finding that the Tribunal thought it necessary to restore the matter to the AO with the direction to him to examine the applicability of Section 145A to the assessee's case. Even if it is assumed for the sake of argument that, the case would have had to be restored to the AO to be processed with reference to Section 145A notwithstanding the earlier finding of the Tribunal that the customs duty was included in the value of the closing stock, the fact that the assessee's argument based on the order of the Co-ordinate Bench of the Tribunal in Maruti Udyog Ltd. (supra) was not considered by the Tribunal shows that there is a mistake apparent from the record in the light of the recent decision of the Supreme Court in the case of Honda Siel Power Products Ltd. (supra). The omission to examine the applicability of the binding order of the Coordinate Bench with regard to the question whether Section 43B would have overriding effect over Section 145A is a mistake committed by the Tribunal for which the party before the Tribunal should not be made to suffer. In the case of Marutt Udyog Ltd. (supra), as pointed out by the assessee in para 1.5 at p. 6 of its written submissions filed on 21st Feb., 2007, it was held that Section 43B overrides Section 145A. This decision was referred to by the Tribunal in para 7 of its order while summarizing the contentions of the Department but unfortunately the Tribunal omitted to deal with this decision and consider its applicability while taking a decision to remit the matter to the AO with a direction to him to examine the applicability of Section 145A. We are in agreement with the submissions of the learned representative for the assessee that this omission has caused prejudice to the assessee in the sense that it has given rise to further proceedings before the AO involving further delay in finalising the assessment proceedings when the legal position already stood concluded by the binding order of the Tribunal in Marutt Udyog Ltd. (supra). The assessee will now have to face the entire proceedings again even though by virtue of the order of the Tribunal in the case of Marutt Udyog Ltd. (supra) there was no need to do so. This unfortunate state of affairs has resulted because of the mistake committed by the Tribunal in not dealing with the order of the Co-ordinate Bench which was cited before it. The other mistake committed by the Tribunal to the prejudice of the assessee is its omission to refer to the assessee's plea in para 1.9 at p. 10 of the supplementary paper book that in the subsequent years, the AO has accepted the assessee's claim under Section 43B and assessments have been completed accordingly. As rightly pointed out on behalf of the assessee, the rule of consistency is an important principle in IT law which has formed the basis of the judgment of the Supreme Court in the case of Berger Paints (supra) and the assessee is entitled to reasonably expect that its case on similar facts would be accepted in all the assessment years without demur. It pointed out this position to the Tribunal but again unfortunately the Tribunal has not adverted to this aspect at all in its order.
9. It is no doubt true, as pointed out on behalf of the Department, that the order of the Tribunal has to be read as a whole and not sentence by sentence in order to find out whether there is an omission or mistake committed by the Tribunal. At the same time, it is equally true, as has been held by the Supreme Court in Omar Salay Mohamed Salt v. CIT that it is the duty of Tribunal to record each and every contention raised before it and render its findings thereon. The omission to deal with crucial contentions of the assessee in the present case, the omission to deal with the binding order of another Co-ordinate Bench and the contradictory findings given in paras 10 and 11 of its order in respect of the inclusion of the customs duty in the valuation of the closing stock have given rise to mistakes apparent from Tribunal's order and for such mistakes committed by the Tribunal, the party before it should not be made to suffer. As held by the Supreme Court in Honda Siel Power Products Ltd. (supra), there should be atonement to the party wronged by the Court or the Tribunal. In the present case, for the above reasons, we are satisfied that the decision of the Tribunal in respect of ground No. 1 taken by the Department before it has to be recalled. We do so. We further direct the Registry to post in due course the appeal for fresh hearing in respect of the above ground only.
The miscellaneous application is allowed in the above terms.