Income Tax Appellate Tribunal - Amritsar
Sarishti Pal vs Income Tax Officer on 27 July, 2001
ORDER
H.L. Karwa, J.M.
1. This miscellaneous application arises out of the order of the Tribunal, dt. 16th July, 1999, passed in ITA No. 338/Asr/1996 and order, dt. 24th April, 2000, passed in M.A. No. 87/Asr/1999.
2. The applicant-assessee filed an appeal, i.e., ITA No. 838/Asr/1996 before this Bench of the Tribunal and the Tribunal vide its order, dt. 16th July, 1999, disposed of the appeal on merits. In this application, the assessee has stated as under :
"1. That the above noted appeal had been disposed of by the Bench vide order dt. 16th July, 1999. after hearing the appellant on 2nd June, 1999.
2. That above order of the Bench suffered from various errors and omissions which were patent on the face of record and went to the root of the matter, which were adequately pointed out by the appellant in his application filed under Section 254(2), dt. 12th Oct., 1999, a copy of which is being enclosed herewith for kind perusal.
3. That the said application of the appellant filed on 12th Oct., 1999, has been disposed of by the Bench vide its order in M.A. No. 87/Asr/1999, dt. 24th April, 2000, thereby rejecting the application filed by the appellant.
4. That the appellant in his application filed earlier on 12th Oct., 1999, mentioned supra, had brought to the notice of the Bench that material points raised at the time of hearing by his counsel, though heard and accepted by the Bench after confronting the same to the Departmental Representative were nowhere discussed and dealt with in the order passed on 16th July, 1999. All these points have been discussed in detail in the application, dt. 12th Oct., 1999.
5. That the learned Bench, while rejecting the application, vide its order dt. 24th Feb., 2000, has nowhere observed that the points mentioned in the application were not raised or discussed, thereby conceding the fact that the said points were raised and argued by the counsel of the appellant. Still instead of allowing the application, dt. 12th Oct., 1999, it has been rejected by the Bench by making observations in the last para No. 7 :
"In these facts and circumstances, to our mind, this application has no merit because the averments contained in the application are beyond the scope of relevant provision of rectification and consequent upon the same, we have come to the conclusion that this is not a fit case where we shall recall our order and fix the same for rehearing for considering this rectification application moved by the assessee."
6. That at the cost of repetition, the facts in brief and the material points raised but not considered by the Bench are enumerated hereunder :
6.1. That the assessee is engaged in the manufacturing and trading of sports goods. He constructed a factory building at Noida (near Delhi) over a period of three years starting from asst. yr. 1988-89 to 1990-91 for a total declared cost of Rs. 19,20,561. While framing assessment under Section 143(3) for asst. yr. 1990-91, the issue of construction of building was referred to the DVO by the ITO towards the end of the assessment period. The DVO estimated the cost at Rs, 27,21,030 and the difference came to be added by the ITO. On appeal, the learned CIT(A) set aside the assessment with the direction to afford the assessee with adequate opportunity and also to file/consider his objections. Thereafter, the matter remained dormant till the end of the period available for second assessment. The matter was referred back to the DVO by the ITO and his revised report was delivered to the assessee only on 27th March, 1996, and assessment framed on 31st March, 1996 (28th and 29th March, 1996, were holidays) and the difference at Rs. 2,48,048 based on the revised report, came to be added again. It is thus an obvious case where on the two occasions, the assessee was not given any time to properly meet the report of the DVO.
6.2. In the course of second assessment, the ITO raked a fresh dispute that while going through the vouchers of the assessee, in one of the vouchers name of a contractor Shri Krishan Sharma was found written. These vouchers pertained to the earlier period of June to Sept., 1998, covering labour payments. He also raised another dispute that for the initial digging of foundations, there was no labour payment found debited in books of account.
6.3. It was explained to the ITO vide letter, dt. 27th March, 1996, that there was no contractor engaged and the payment was made to a headman for the sake of convenience and the word 'contractor' had been mentioned inadvertantly by the accountant. As to labour for digging, it was stated that for foundations and basement, the digging was got done against the cost of earth to be excavated from this digging. In Noida, the earth (soil) is used for filling and it attracted a cognizable price. But without appreciating the factual position, the ITO below both the above issues out of proportions and unfortunately, even the learned CIT(A) as also the learned Tribunal Amritsar were also swayed by the whims and fancies of the ITO.
6.4. Without realising the hard fact the assessee had not been allowed any time to file his objections to the revised report of the DVO, the learned CIT(A) dismissed the assessee's appeal on the issue of cost of construction and so much so the learned Tribunal also upheld the findings of the CIT(A) ignoring all the material points raised and vehemently argued at the time of hearing. So much so, the assessee had filed a detailed report of Government approved valuers namely, M/s Shelter Consulting Engineers, Noida, based on item-wise cost analysis before the CIT(A) as also before the Tribunal. This report based on the Delhi Schedule Rates of 1989, reflected the cost at Rs. 18,03,653, which was even little less than the cost shown by assessee. But this report has nowhere been seen and considered.
6.5. In the course of hearing before the Bench, it was specifically pointed out that the construction having been completed in three years, the difference in cost, if any, could be considered only of the year in hand and not of all the earlier years as well. This point was fully appreciated by the Bench and even the Departmental Representative when confronted by the Bench on this point, had no objection to this contention. Needless to mention that under the Income-tax law, it is the annual income or investment which is subjected to tax in a particular year. There is no provision to tax the income/investment of any other year in one year. But surprisingly, this point never figured in the order ultimately passed by the Bench, which has thus resulted into an overassessment by Rs. 1,69,728 (2,48,048-78,320).
6.6. The AO's observation of a 'contractor' having appeared in one of the vouchers, prevailed so heavily on the minds of the CIT(A) as also the Bench that the assessee's claim for 10 per cent rebate on account of self-supervision, against 7.5 per cent allowed by the DVO, was not only negated but even the authenticity of 7.5 per cent rebate given by the DVO was also doubted. With due regards, it is really surprising as to how the fact of assessee having maintained complete accounts with supporting vouchers, failed to convince the appellate authorities that it was a case of self-supervision and direct procurement of materials. Had it been a contract case, then the entire payment would have been made directly to the contractor instead of maintaining year-wise detailed accounts. Even if the ITO's observation is assumed to be correct, that at the most takes care of labour and not for the construction and raising of entire structure. And if the labour for digging of basement/foundations is also considered, as per the report of Government approved valuers of Noida, entioned supra, it worked out to Rs. 17,441 for 1630 cu mtr. based on '89 DSR rates, though the work was done in mio 88. No authority has realised that the price of earth excavated from this digging has not been accounted for/capitalised obviously for the reason that it had been taken away by the labour. Thus, by picking such holes in the accounts of the assessee, he has been disallowed the rebate at 10 per cent for self-supervision. Had the same been allowed, the virtual difference would have remained much below the tolerance limit of 10 per cent.
6.7. The learned Bench in its order, dt. 16th July, 1999, has observed that no defects in the report of the DVO were pointed out. The defects pointed out have been specifically discussed in the application, dt. 12th Oct., 1999, on p. 2, which are requested to be read as reiterated here. These defects resulted into overestimation of cost by Rs. 2,07,060.
6.8. It was also argued before the Bench that when in the other cases of Shri La HUF v. ITO, Jalandhar, the Bench had allowed the difference even upto 13.78 per cent as within the tolerance limit, how in the case in hand, difference as such at 11.43 per cent could be held to be not within the said limit. But this point also remained untouched in the order of the Bench.
7. That all the above points which have a direct bearing on the outcome of the issues under dispute, ought to have been considered and disposed of by the Bench, which have not so been disposed of. In the application earlier filed dt. 12th Oct., 1999, all these points were vividly raised and the learned Tribunal still erred in law as also on facts in rejecting the application so filed on the ground that the averments contained therein were beyond the purview of rectification'.
7.1. The Hon'ble Madhya Pradesh High Court in CIT v. ITAT and Anr. (1988) 172 ITR 158 (MP) has held that the material points raised during arguments but not considered, could be validly considered under rectification. Hon'ble Delhi High Court in CIT v. G. Sagar Suri & Sons (1990) 185 ITR 484 (Del) has held that if the written order of the Tribunal was at variance with the order announced in open Court, it was a clear mistake which the Tribunal had rightly corrected. In Rahul Kumar Bajaj v. ITO (1999) 64 TTJ (Nag) (SB) 200 : (1999) 69 ITD 1 (Nag) (SB) learned Tribunal Nagpur Bench (Spl. Bench) has also held that an order passed by the Tribunal without considering the submissions made by the assessee amounts to a mistake committed by Tribunal and it needs to be rectified. While drawing support from the Hon'ble Supreme Court's decision in the case of S. Nagaraj v. State ofKarnataka (1993) Suppl. (4) SCC 595, the Special Bench held that if there is a mistake committed by the Court or the Tribunal it needs to be rectified as no one should suffer or come to grief on account of the mistake committed by the Court. Even the rules of procedure and technicalities should not come in the way in rendering the justice to parties by correcting the mistakes committed by Court or the Tribunal (kindly see para 16). Reliance in this behalf is also placed on Dhansimm Agarwaila v. CIT (1996) 217 TTR 4 (Gau).
8. In the light of the above submissions, it is once again prayed that the orders dt. 10th July, 1999, be kindly recalled and fresh orders be passed taking into consideration the material points mentioned hereinbefore.
3. From the above application, it is clear that M.A. No. 87(Asr)/1999 filed by the assessee has been disposed of by the Tribunal vide its order, dt. 24th April, 2000. It would also be relevant to reproduce the contents of the M.A. No. 87(Asr)/1999 (arising out of ITA No. 838 (Asr)/1996), which reads as under :
"1. That the abovesaid appeal has been disposed of by the Bench vide order dt. 16th July, 1999, after hearing the appellant on 2nd June, 1999.
2. That a perusal of the above order shows that following points pertaining to the main addition of Rs. 2,48,048 which were specifically raised, discussed and accepted by the Bench, do not find mention in the order:
(i) At the very threshold, it was brought to the kind notice of the Bench that the construction of the factory building having been made in a span of three years, the entire difference could not be legally made in one year. The yearwise break-up of investment as per appellant and as estimated by the DVO is as under :
Asst. yr.
As per appellant As per DVO Rs.
Rs.
1988-89 5,120 6,705 1989-90 12,96,190.30 14,65,330 1990-91 6,19,260,74 6,97,671 The above figures stand incorporated in the report of the DVO on the backside of p. 16 of the appellant's paper book. It was categorically accepted by the Bench that addition on account of difference of the year under appeal i.e., asst. yr. 1990-91 could only be made or sustained which worked out to Rs. 78,320.26 only and the addition pertaining to earlier two years had to be deleted. But in the order passed, this issue has nowhere been discussed.
(ii) On p. 6 of the order, it has been observed that no defect was pointed out by the appellant in the DVO's report and therefore, it was justified. This observation of the Bench is factually incorrect. As very vital defect, as mentioned below was highlighted before the Bench, which was admitted by the Bench in the open Court more particularly, when the same was specifically put to the Departmental Representative who too had conceded to it.
"While inviting the attention of the Bench to the report of the DVO (addressed to ITO) placed on p. 14 of the assessee's paper book, the following comments of the DVO under para 1 (General para) were specifically pinpointed :
"There is no marked difference between the factory and office. The same. premises can be used as office as well. The rate for office as applied on the premises are justified."
Then the attention of the Bench was invited to the cost sheet as drawn by the DVO on p. 16 of the paper book, wherein the rates for working hall and administrative block were applied as under :
Working hall 406 sq. mt. (c) Rs. 2,124 sq. mt.
Admn. Block 326 sq. mt. @ Rs. 1,614 sr. mt.
Thus, by applying higher rates for working hall, the cost of the building was overestimated by Rs. 2,07,060. There is thus a clear contradiction in the working of the DVO. While on p. 14, he is himself justifying the application of office rates on the premises, in calculation sheet, he is applying a much higher rate for working hall. It was also highlighted that if the difference of Rs. 2,07,060 on this account only is allowed, the overall difference would automatically come down very much within the tolerance limit of 10 per cent. But in the order now passed, this point has absolutely escaped any mention.
3. On p. 4 para 10 of the order, the assessee's contention that if the rebate for self-supervision at 10 per cent was allowed, the resultant difference of 8.8 per cent was ignorable being within the tolerance limit of 10 per cent, has been rejected by observing that since the assesses had engaged a contractor, he was not entitled to 10 per cent rebate for self-supervision. In the course of hearing, the assessee had also taken an alternate plea that since the Amritsar Bench itself had accepted the difference upto 13.70 per cent as very much within the tolerance limit in the cases of Shri La HUF v. ITO, Jalandhar, in ITA No. 141 (Asr), 1996, dt. 28th Feb., 1997, and ITA No. 143(Asr)/1996, dt. 28th Feb., 1997. (copies of which were also filed before the Bench and even the same find mention in the order), the difference in the case in hand was only 11.43 per cent which is 2.35 per cent less than what has already been allowed in the cases mentioned supra. Thus, even if no further rebate was to be allowed, the difference of 11.43 per cent was still allowable in view of the above orders of the Hon'ble Tribunal Amritsar Bench.
(iv) On p. 4 of the order, it has been observed based on the order of the ITO, that the assessee had engaged a contractor named Shri Krishan Sharma, whom payments of Rs. 1,29,000 (from 29th June, 1988 to 23rd Jan., 1989) were made as per ledger folio No. 55 and thus, the assessee was not entitled to the rebate of 10 per cent for self-supervision. It has been further observed in the order that neither these findings of the CIT(A) were challenged nor anything contrary was brought to the notice of the Bench. It is submitted, in this context that the attention of the Bench was invited to p. 18 of the assessee's paper book, wherein it was categorically explained to the AO that no contractor whatsoever was engaged. It was for the sake of convenience that the. payment of labour was made to one of their headman, who was erroneously mentioned as 'contractor; on one of the vouchers by the accountant. Attention of the Bench was further drawn to p. 4 para 5 of the assessment order, wherein while acknowledging this reply of the assessee, the AO had not specifically met with the same, which was enough to suggest that he had accepted this explanation. Even otherwise, the AO had not made any other observation with regard to materials purchased for construction. Had it been a case of 'contract' work, then the assessee rather than having himself purchased the materials throughout, should have simply made lump-sum payment to contractor, which is not the actual position. It may also be mentioned that the labour payment was not amounting to Rs. 1,29,000 but Rs. 2,29,500, as mentioned in assessee's reply at the backside of p. 17 of paper book and even this payment was made in the year ending 31st March, 1989 (as per the dates noted in the order also), and therefore, it had no bearing on the year under appeal, being a different year.
In view of the above errors and omissions, it is prayed that the orders be kindly suitably amended, after hearing the appellant, if it is so deemed fit by the Hon'ble Bench."
4. After hearing the patties and going through the contents of above application, i.e., M.A. No. 87(Asr)/99, the Tribunal vide para 4 to 8 of its order dt. 24th April, 2000, has held as under :
"4. We have carefully gone through the submissions of the parties, perused the records and also considered the order passed by this Bench and also took into consideration the averments contained in the application.
5. We are of the opinion that by a detailed and well-reasoned order this Bench has very rightly upheld the addition of Rs. 2,48,048 made by the AO and sustained by the CIT(A) towards unexplained income in the construction of factory building. We are also of the opinion that this error or omission, as pointed out by the assessee, in the order of this Bench are not such obvious and patent mistakes, on the face of records, on the basis of which the order of this Bench in sustaining the addition against the assessee should be rectified.
6. In our view, the reconsideration of these errors and omissions by this Bench would amount to rehearing of the case and of reconsidering this matter afresh and thereafter passed an order on the basis of arguments advanced by the parties. On the contrary, the averments of the assessee, in our opinion, points to only one fact that without rehearing the case and unless the assessee is allowed to establish these points raised by him, this case cannot be decided. Hence we are of the opinion that in case the fresh conclusions as to be drawn and fresh reasoning is to be given by this Bench in support of these conclusions after hearing long arguments/it can well be said that then it becomes a matter which on the face of it can have two opinions.
7. In these facts and the circumstances, to our mind, this application has no merits because the averments contained in the application are beyond the scope of relevant provisions of rectification and consequent upon the same, we have come to the conclusion that this is not a fit case where we shall recall our previous order and fix the same for rehearing for considering this rectification application moved by the assessee.
8. In the result, the application filed by the applicant-assessee is rejected."
5. Before us, Shri J.S. Bhasin, advocate, the learned counsel for the assessee, reiterated submissions stated in the above application. In view of all these submissions, it was claimed that the order, dt. 16th July, 1999, passed by the Tribunal may be recalled for reconsideration. Shri J.S. Bhasin, advocate, the learned counsel for the assessee, also relied on the decisions stated in para. 7.1 of the present application.
6. Shri B.M. Verma, the learned Departmental Representative submitted that power vested in the Tribunal under Section 254(2) of the Act can be exercised only for rectifying the mistake apparent from the record and not reviewing any order made under Section 254(1) of the IT Act, 1961. Shri B.M. Verma, the learned Departmental Representative, drew our attention to the orders of the Tribunal dt. 16th July, 1999, passed in ITA No. 338/(Asr)/1996 and M.A. No. 87/Asr/1999, dt. 24th April, 2000, and submitted that the order passed in the appeal by the Tribunal did not suffer from any mistake apparent justifying its review under the garb of rectification. He also drew our attention to an order of this Bench of the Tribunal, dt. 30th Nov., 2000, passed in M.A. No. 16(Asr)/2000 [arising out of M.A. No. 23(Asr)/1996 in ITA No. 259(Asr)/1995] in the case of Arun Sameer Associates (P) Ltd. v. ITO Ward 1(i) Amritsar, wherein the Tribunal held that second application under Section 254(2) for rectification is not maintainable.
7. We have considered the rival submissions and have also gone through the orders of the Tribunal, dt. 16th July, 1999, passed in ITA No. 838(Asr)/1996 and dt. 24th April, 2000, passed in M.A. No. 87(Asr)/1999. We have also carefully gone through the contents of the applications reproduced hereinabove. It is true that in the instant case the assessee had moved M.A. No. 87(Asr)/1999, dt. 25th Oct., 1999, under Section 254(2) of the Act and the Tribunal vide its order dt. 24th April, 2000, rejected the application. The finding of the Tribunal has been reproduced hereinabove. From these findings, it is crystal clear that after considering the relevant facts of the case, the Tribunal rejected the rectification application of the assessee on the ground that there was no error and all the materials were taken into consideration. It seems that now the assessee has moved the second rectification application on 19th April, 2001, raising similar grounds as those were taken in M.A. No. 87(Asr)/1999. In other words, in sum and substance, the contents of the two applications are identical. It would be relevant to point out that vide para 6.5 of the instant application, the assessee has stated that "the construction having been completed in three years, the difference in cost, if any, could be considered only of the year in hand and not of all the earlier years as well."
7.1 On a perusal of para 2.1 of M.A. No. 87(ASR), 1999. It would be clear that the assessee had raised the same points stating that "the construction of the fact any building having been made in a span of three years, the entire difference could not be legally made in one year. The yearwise break-up of investment--as per appellant--and as estimated by the DVO for the asst. yrs. 1988-89, 1989-90 and 1990-91 are as under :"
7.2 Similarly, the submissions made by the assessee vide para. 6.6 of the instant application, are similar to the submissions made in para. 3 of the earlier application. It is also relevant to note that the contentions raised vide paras. 6 to 8 of the instant application are also similar to the contentions raised by the assessee vide para 3 of the first application. In fact, in the instant case, the assessee has not taken any new fact. Considering all these facts, we are of the view that the assessee has moved the present application for rectification of order, dt. 24th April, 2000 passed in M.A. No. 87(Asr)/1999 under Section 254(2) of the Act. As we have already noted above that while disposing of the M.A. No. 87(Asr)/1999 the Tribunal has considered all the contentions raised by the assessee. Now the assessee by means of present application requires the Tribunal to rectify the order, dt. 24th April, 2000, passed in M.A. No. 87(Asr)/1999, which is not permissible under the law. It is true that the order rejecting an application for rectification under Section 254(2) is not an order passed under Section 254(1) of the Act and, therefore, order, dt. 24th April, 2000, cannot be rectified under Section 254 of the Act. It is also true that second application for rectification is not maintainable. At this stage, it would be relevant to state that the Hon'ble Orissa High Court in the case of CIT and Anr. v. ITAT and Ors. (1992) 196 ITR 838 (Ori) has held (at p. 840) as under :
"Section 254(2) empowers the Tribunal to amend any order passed by it under Sub-section (1) with a view to rectify any mistake apparent from the record at any time within four years from the date of the order. Therefore, to attract the applicability of Section 254(2), the mistake which is sought to be rectified must be apparent from the record, and the same must be in any order passed under Sub-section (1) of Section 254. The order referred to in Section 254(1) is the one relating to an appeal filed by either the assessee or the Revenue. Section 254(1) reads as follows:
"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."
The "appeal" referred to in the provision is one filed under Section 253. Therefore, the order which can be rectified must be one which has been passed by the Tribunal in an appeal filed under Section 253. In our view, an order rejecting an application for rectification under Section 254(2) is not available to be rectified under Section 254(2). The same may relate to an appeal, but it is not an order passed by the Tribunal under Sub-section (1) of Section 254. As indicated above, the assessee's application for rectification under Section 254(2) was rejected by the Tribunal. The second application was for rectification of some alleged mistakes in the said order of rejection. Section 254(2) had no application to such an order. The Tribunal was not justified in purporting to act under Section 254(2) and passing the impugned order."
8. In the case of CIT v. Smt. Gunwanti Bai (1996) 219 ITR 632 (MP), the Hon'ble Madhya Pradesh High Court has held that second application for rectification is not maintainable. In the said case, an application under Section 254(2) of the Act or rectification was moved before the Tribunal which was rejected on 16th Aug., 1982, on the ground that there was no error and all the material was taken into consideration and, therefore, there was no occasion to recall the earlier order, dt. 12th Feb., 1982. Thereafter, the second application for rectification was moved on 2nd Feb., 1983, before the Tribunal and this application was allowed by the Tribunal vide its order, dt. 23rd Dec., 1983. On reference, the Hon'ble High Court has held (pp. 635-636 of 219 ITR) as under :
"Normally, rectification only means to correct an error which is apparent on the face of the record and not to decide the matter over again on the merits. In the present case, in the second application which has been allowed by the Tribunal, the Tribunal has acted on merit part which was considered by all the three authorities, i.e., the ITO, the AAC and the Tribunal and recorded their findings. Such findings of fact cannot be rectified in a rectification application under Section 254(2) of the Act. Moreso, in the present case, the first rectification application was rejected. Notwithstanding that, a second application was entertained and this act of the Tribunal, in our opinion, was absolutely not warranted and the Tribunal had no jurisdiction to interfere, under the garb of rectification, a decision on the merits could not be given. Hence, we are of the opinion that the view taken by the Tribunal in its order, dt. 23rd Dec., 1983, was beyond the scope of rectification under Section 254(2) of the Act."
In our view, The decision of the Hon'ble Madhya Pradesh High Court, referred to above, is also fully applicable to the facts of the present case.
9. It would be also relevant to point out that while deciding the similar issue in M.A. No. 16(Asr)/2000 arising out of M.A. No. 23(Asr)/1996 and ITA No. 259(Asr)/1995] in the case of Arun Sameer Associates (P) Ltd. Amritsar v. ITO Ward-I(i), Amritsar (supra), this Bench of the Tribunal has taken a view that when the Tribunal has already taken the view on the same facts that there was no error and all the material was taken into consideration while deciding the first application and, therefore, the second application under Section 254 on similar facts/grounds was not maintainable.
10. In view of the above discussion, we do not find any merit in the application and accordingly, the same is dismissed.
11. In the result, the miscellaneous application is dismissed.