Income Tax Appellate Tribunal - Mumbai
Joint Cit, Special Range-23 vs Milton'S Ltd. on 5 September, 2006
ORDER
D.K. Srivastava, Accountant Member
1. The department has filed the present Miscellaneous Application with the following submissions:
"2. The Hon'ble ITAT, vide order ITA No. 3385/Mum./1999 dated 8-12-2003, has dismissed the appeal of the department. The Hon'ble ITAT has decided the issue in favour of the assessee by following the decision of Jurisdictional High Court in the case of Shirke Construction Equipment Ltd., 246 ITR 429 (Bom). However, it is to be stated that the Hon'ble Supreme Court has decided this issue in favour of the department in the case of IPCA Laboratories Ltd. (266 ITR 521 (SC)) overruling the Bombay High Court's decision of Shirke Construction Equipment Ltd. Theref ore, the Hon'ble Tribunal would have followed the decision of IPCA Laboratories and would have decided the issue in favour of the revenue instead of deciding the issue against the revenue. The Hon'ble ITAT is, therefore, requested to recall the order passed on 8-12-2003 and decide the issue in favour of the department as the Hon'ble Supreme Court has settled the issue.
3. Under the above circumstances, I hereby make this application with a request to allow the department's appeal on merits and also due to the fact that there was no representation from the assessee's side."
2. We have heard both the parties. The issue involved in the department's appeal filed before this Tribunal was whether carried forward losses could be set off for computing profits for the purpose of Section 80HHC. The issue was decided by this Tribunal on 8-12-2003 against the department with the following observations:
"5. Aggrieved by the order, revenue is before us with the above ground. Before us the learned Counsel submitted that the issue involved is squarely covered in favour of assessee by the decision of Jurisdictional High Court in the case of Shirke Construction Equipments Ltd. 246 ITR 429. To this proposition, learned Departmental Representative also agreed. Respectfully following the decision (supra), the order of Commissioner (Appeals) is upheld and the revenue's appeal is dismissed."
3. department is indeed right in its submission that this Tribunal, while dismissing the department's appeal, has followed the law laid down in CIT v. Shirke Construction Equipments Ltd. in which it was held that Section 80HHC was a complete code in itself and that it was not controlled by Section 80AB. It was further held that profits had to be computed under Section 29 and that Section 72 was not applicable. It was also held that carried forward losses could not be set off for computing profits for the purpose of Section 80HHC. These very propositions were subsequently considered and overruled by the Hon'ble Supreme Court in IPCA Laboratories Ltd. v. Dy. CIT with the following observations:
"Section 80B(5) is also relevant. Section 80B(5) provides that 'gross total income' means the total income computed in accordance with the provisions of the Income Tax Act.
Section 80AB is also in Chapter VI-A, It starts with the words 'where an y deduction is required to be made or allowed under any section of this Chapter'. This would include Section 80HHC. Section 80AB further provides that 'notwithstanding anything contained in that section'. Thus Section 80AB has been given an overriding effect over all other sections in Chapter VI-A. Section 80FIFIC does not provide that its provisions are to prevail over Section 80AB or over any other provision of the Act. Section 80HHC would thus be governed by Section 80AB. The decisions of the Bombay High Court and the Kerala High Court to the contrary cannot be said to be the correct law. Section 80AB makes it clear that the computation of income has to be in accordance with the provisions of the Act. if the income has to be computed in accordance with the provisions of the Act, then not only profits but also losses have to be taken into consideration."
4. By this application, the department seeks rectification of the aforesaid order of the Tribunal so as to bring the same in conformity with the law laid down by the Hon'ble Supreme Court in IPCA Laboratories Ltd.'s case (supra). It is fairly conceded that the issue raised in the department's appeal is now covered in favour of the department by the aforesaid decision of the Hon'ble Supreme Court and that the law declared by the Hon'ble Bombay High Court in Shirke Construction Equipments Ltd.s case (supra) stands overruled by the Hon'ble Supreme Court in IPCA Laboratories Ltd.'s case (supra) and is therefore no longer good law.
5. The Learned Counsel for the assessee however resists the application of the department on the ground that subsequent judgment delivered by the Supreme Court in IPCA Laboratories Ltd.'s case (supra) would not render the earlier order passed by this Tribunal following the decision of Hon'ble Jurisdictional High Court in Shirke Construction Equipments Ltd.'s case (supra), as erroneous and thereby amenable to rectification under Section 254 of the Income Tax Act. The learned Counsel for the assessee has placed reliance on the decisions in Surajmull Choteylal v. CIT and another decision in Controller of Estate Duty v. Murarilal Sovasaria in support of his submission.
6. Sub-section (2) of Section 254 of the Income Tax Act empowers the Tribunal to correct any mistake provided it is "apparent from the record". Mistake can be both of law as well as of fact. The plain language of the provision suggests that the mistake should be apparent and must appear ex facie from the record. It must not be a mere possible view. The issue should also not be a debatable one. It is the mandate of article 141 of the Constitution that the law declared by the Hon'ble Supreme Court shall be binding on all Courts within the territory of India. The mistake, in question, is of law, which is quite apparent on bare perusal of the decision of the Hon'ble Supreme Court in IPCA Laboratories Ltd.'s case (supra). Besides, the issue is also covered directly by the decision of the Hon'ble jurisdictional High Court in Synco Industries Ltd. v. Assessing Officer of Income-tax . No factual investigation is necessary to establish the apparent nature of the mistake in the aforesaid order of this Tribunal. All these conditions are fully satisfied in the case before us. However, learned Counsel for the assessee submits that this Tribunal, while deciding the matter under appeal, could not have anticipated the view that would be taken by the High Court or the Supreme Court on a subsequent date. According to him, if at the time of the passing of the order, the Tribunal takes a particular view, which is not contrary to the existing interpretation of law at the time when the order is passed, the provision of Section 254(2) cannot be pressed into service.
7. The effect of overruled decision has been explained at page 148 in Salmond on Jurisprudence (Twelfth Edition by PJ Fitzgerald) as under:
"As we have seen, the theory of case law is that a Judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence, any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicata, or accounts that have been settled in the meantime."
8. The overruling is retrospective except as regards the matters that are res judicata or accounts that have been settled in the meantime. A matter does not become res judicata when it is available and to the extent it is available for rectification under Section 254(2). An order passed by this Tribunal, based upon an interpretation or application of law which is ultimately found to be wrong in the light of judicial pronouncements rendered subsequently by the jurisdictional High Court or the Supreme Court, would always disclose a mistake apparent from the record. When the court decides a matter, it does not make the law in any sense but all it does is that it interprets the law and states what the law has always been and must be understood to have been. Where an order is made by this Tribunal on the basis of a particular decision of the High Court, the reversal of such decision in further proceedings will justify a rectification of the order based on that decision in terms of Section 254(2). Thus, the declaration of law by the Supreme Court in a subsequent case overruling the previous decision of the High Court provides a sound legal basis for rectification of the order passed by this Tribunal following an overruled decision so as to bring the same in conformity with the law declared by the Supreme Court. Any other view, in our humble opinion, will run counter to the mandate of article 141 of the Constitution. The view that we have taken is fortified by the following observations made by the Hon'ble jurisdictional High Court in Bhagwandas Kevaldas v. N.D. Mehrotra :
"When the court decides a matter it does not make the law in any sense but all it does is that it interprets the law and states what the law has always been and must be understood to have been. A question of error of law apparent on the face of the record does arise on this petition and what we have to see is whether at the date of the petition, the petitioner is able to establish from the record including the order of the Commissioner of Income Tax that there is an error of law apparent on the face of the record."
9. Whittaker, Charles E, has very appropriately remarked in "Some Reminiscences", 47, American Bar Association Journal 1087 (November, 1961) that "Being composed of human beings, the court has doubtlessly made mistake and will make them in future, regardless of who may be its justices." To the same effect is the observation made by Ellis, Albert, Dr., at page 57 in "The Intelligent Woman's Guide to man-Hunting" (New York : Lyle Stuart, 1963) : "To blame a person for being wrong is equivalent to blaming him for being alive. When he is dead, he will make no mistakes whatever. But not till then." In Distributors Baroda (P) Ltd. v. Union of India , the Hon'ble Supreme Court has cited with approval the dissenting opinion of Jackson, J., who said in Massachusetts v. United States, 330 US 611 : "I see no reason why I should be consciously wrong today because I was unconsciously wrong yesterday." Exemption from error is not the privilege of mortals. It would be a folly not to correct it. In a given case, on an interpretation of a provision, this Tribunal can take a view in favour of one of the parties. Subsequent to the order of this Tribunal, the jurisdictional High Court or their Lordships of the Supreme Court may interpret the same provision and take a contrary view. The apparent effect of the judgment interpreting the provision is that the view taken by this Tribunal is rendered erroneous. It is not in conformity with the provision of the statute. Thus, there is a mistake. Should it still be perpetuated? If the contention of the learned Counsel for the assessee were accepted, the result would be that even though the order of this Tribunal is contrary to the law declared by the highest court in the State or the country, still the mistake would not be amenable to rectification for the reason that the decision is subsequent to the date of the order passed by this Tribunal. Section 254(2) has been enacted to enable this Tribunal to rectify a mistake. The legislative intent is, therefore, loud and clear that the mistake should not be allowed to continue. This purpose has to be promoted. The legislative will have to be carried out. By placing a narrow construction, the object of the legislation shall be defeated. Such a consequence should not be countenanced as it will be detrimental not only to the judicial discipline but also to the sound administration of justice in consonance with the law declared by the highest court of the State or the country.
10. It also deserves to be mentioned that Section 254(2) prescribes a period of four years for correction of the mistake. The obvious intention of the Legislature is that if a mistake has conit, to the notice of the Tribunal within the prescribed time, it should not be allowed to continue. It should be rectified regardless of the fact that the limitation for filing an appeal has elapsed. The learned Counsel for the assessee however submits that there was no error in the order when it was passed by this Tribunal in that the decision of the Hon'ble jurisdictional High court in Shirke Construction Equipments Ltd.'s case (supra) was binding. In other words, the order passed by this Tribunal, according to the learned Counsel, did not suffer from any mistake or error on the date on which it was passed. In our humble view, such a view is not possible as Section 254(2) does not provide that the error in the order should be seen with reference to the date on which it was passed. Such words are not there in the statute. Resultantly, such a restriction cannot be introduced by us in Section 254(2). Thus, the contention raised by the learned Counsel for the assessee in this behalf cannot be accepted. In taking this view, we are very ably guided by the decision of the Hon'ble jurisdictional High Court in Bhagwandas Kevaldas' case (supra) in which it has been specifically observed that "what we have to see is whether at the date of the petition, the petitioner is able to establish from the record...that there is an error of law apparent on the face of the record."
11. The issue whether an order passed following a decision subsequently overruled by the High Court or the Supreme Court can be rectified has come up in several cases. In Kil Kotagiri Tea & Collee Estates Co. Ltd. v. ITAT (1988) 174 ITR 5791 (Ker.), the Hon'ble court has held as under:
"When the Bench of this Court overruled the decision of the Single Judge in Sethumadhavans case , the said decision was never the law. The law on the point at all times was stated by the Bench in the decision Santha S. Shenoy's case . It cannot admit of any doubt that exhibit P-5 application dated 17-6-1982, is within four years from the date of exhibit P-4, and was one filed within the time allowed by law. So understood, we are of the view that exhibit P-4 order, passed by the Appellate Tribunal in the appeal, discloses a mistake apparent from the record, namely, that the assessee is not entitled to interest on the advance tax paid beyond the due date, which should be rectified. This should have been done by the Appellate Tribunal in exercise of the powers vested in it under Section 254(2) read with Section 154 of the Income Tax Act."
12. it has been held in Bhagwandas Kevaldas case (supra) that where an order is made by an authority, on the basis of a particular decision, the reversal of such decision in further proceedings will justify a rectification of the order based on that decision. The issue before us is thus squarely covered by the decision of the Hon'ble jurisdictional High Court with which we are in respectful agreement. Similar view has been taken in Parshuram Pottery Works Co. Ltd. v. D.R. Trivedi, Wealth Tax Officer ; Bhauram Jawahirmal v. CIT ; Kil Kotagiri Tea & Coffee Estates Co. Ltd.'s case (supra) and CIT v. Smt. Aruna Luthra (2001) 252 ITR 761 (Punj. & Har.).
13. The learned Counsel for the assessee has placed reliance on the decision in Surajmal Choteylal's case (supra) and another decision in Murarilal Sovasaria case (supra). We have perused the aforesaid decisions. Both the decisions are in the context of review of an order of the High Court as provided for in order 47, rule I of the Code of Civil Procedure in Reference matters under Section 260 of the Income Tax Act and not in the context of the provisions of Section 154/254(2) of the Income Tax Act. Scope of Order 47, Rule 1 of the CPC is altogether different from the provisions of Section 154/254(2) of' the Income Tax Act. In our humble view, the aforesaid judgments have no application to the matter before us. In any case, the issue before us is squarely covered by the decision of the Hon'ble jurisdictional High Court, cited supra which is binding on us.
14. In view of the foregoing, the order of the Tribunal based on an overruled decision cannot be allowed to stand. We are duty-bound to pass an order in conformity with the law declared by the Hon'ble Supreme Court in IPCA Laboratories Ltd's case (supra) and the Jurisdictional High court in Synco Industries Ltd.'s case (supra). The department is entitled to succeed. We, therefore, allow the miscellaneous application filed by the department and decide the issue raised by the department in its appeal in its favour and consequently direct that paragraphs 5 and 6 of the order dated 8-12-2003 passed by this Tribunal in the aforesaid department's appeal shall now be read as under:
"5. Aggrieved by the order of the Commissioner (Appeals), the revenue is in appeal before us. The issue raised by the department is squarely covered in its favour by the decision of the Hon'ble Supreme Court in IPCA Laboratories 266 ITR 521 (SC) and Synco Industries Ltd. v. Assessing Officer 254 ITR 608 (Bom.). Respectfully following the aforesaid decision of the Hon'ble Supreme Court and High Court, the order of the learned Commissioner (Appeals) is reversed and that of the assessing officer restored.
In view of the foregoing, the appeal filed by the revenue stands allowed."
15. MA filed by the department is allowed and the order dated 8-12-2003 passed by this Tribunal is hereby amended to the extent indicated above.