Income Tax Appellate Tribunal - Kolkata
Assistant Commissioner Of Income Tax vs Nitu Trading Co. Ltd. on 12 September, 1997
Equivalent citations: [1998]65ITD157(KOL)
ORDER
R. Acharya, A.M.
1. This appeal is instituted by the Revenue against the order of the CIT(A) for the asst. yr. 1984-85 on the following grounds :
1. "That, on the facts and in the circumstances of the case, the learned CIT(A)-VI, Calcutta, did not have jurisdiction to pass the order under s. 154.
2. That, on the facts and in the circumstances of the case, the learned CIT(A)-VI, Calcutta, there could be no apparent mistake for rectification under s. 154."
2. In brief, the facts of the case are that in this case the original assessment was finalised under s. 143(3) by the AO on 11th March, 1988, on a total income of Rs. 18,33,260 as against the returned income of Rs. 83,150. The assessee filed appeal before the CIT(A) and disputed all the additions in the grounds. When the appeal was fixed for hearing the assessee in response to the notice of hearing, addressed a letter dt. 18th March, 1989, to the CIT(A) stating therein that as per guidelines of the CBDT the assessee has filed revised return and has paid tax in order to settle the dispute in assessment and is awaiting order of the CIT(A) accepting the settlement of tax liability. The assessee also requested the CIT(A) in that letter to adjourn the hearing on the ground that once the order of the CIT is received the assessee may consider to withdraw the appeal. The CIT(A) observed that vide petition dt. 27th December, 1988, filed before the CIT for settlement of tax liability, the assessee has declared Rs. 4,25,000 as additional income for the asst. yr. 1984-85 and Rs. 1,97,500 for the asst. yr. 1983-84 and has paid additional tax thereon and passed the following order on 21st March, 1989 :
"In view of these facts and the appellant's request to withdraw the appeal by letter dated March, 1989, the appeal is dismissed."
3. Thus, the CIT(A) dismissed the appeal as according to him, the assessee has requested to withdraw the appeal.
4. The assessee then filed a petition under s. 154, dt. 19th January, 1990, before the CIT(A) and requested him to rectify the mistake apparent from record by treating the appeal as not withdrawn and by disposing of the same as per the provisions of IT Act. The relevant portion of the petition is extracted as under :
"Vide letter dt. 18th March, 1989, a petition was made before your honour. Among other things, it was prayed to adjourn the hearing of the appeal and it was, also, stated that once the order of the CIT is received, the company may consider to withdraw the appeal.
It appears that by mistake, the above letter of the assessee has been treated as a petition for withdrawal of the appeal. This mistake is apparent from record which should be rectified and the Appeal should be treated as not withdrawn and subsisting. It should be disposed of as per the provisions of IT Act."
5. At the stage of hearing the petition under s. 154 the assessee submitted that it is apparent from the assessee's letter dt. 18th March, 1989, that a request had been made for adjournment and not to allow the withdrawal of the appeal and, therefore, the dismissal of appeal is erroneous. The assessee also strongly urged and requested that the said order dt. 21st March, 1989, may be recalled and the appeal be heard afresh. The CIT(A) considered the submissions and request of the assessee and took up the appeal afresh and decided the same groundwise on merit by passing order under s. 154 on 28th September, 1994. As the merit or quantum of relief is not disputed in appeal, in our opinion, it is not necessary and relevant to discuss the same. Being aggrieved by the order of the CIT(A), the Department has preferred this appeal to the Tribunal on the ground that on the facts and in the circumstances of the case, the CIT(A) had no jurisdiction to pass the order under s. 154 as there could be no apparent mistake for rectification under s. 154.
6. The learned Departmental Representative challenged the order of the CIT(A) under s. 154 and submitted that the CIT(A) has no jurisdiction under s. 154 as there is no apparent mistake from the record. According to him, what is appealed against is the order of the CIT(A) dt. 28th September, 1994, as the assessee has withdrawn the appeal vide letter dt. 18th March, 1989, as it is evident from the original order of the CIT(A), dt. 21st March, 1989. He filed a copy of the CIT(A)-XII's order dt. 5th April, 1991, in respect of the penalty and pointed out that in para 1.3 of his order this CIT(A) has also mentioned that for that very reasons the assessee withdrew the appeal filed against quantum assessment. In view of this, he pleaded that CIT(A)-VI, Calcutta, in his original order and the CIT(A)-XII, Calcutta, while dealing with the appeals against penalty order have mentioned in their orders in clear terms that appeal was withdrawn by the assessee on the ground of settlement petition dt. 9th February, 1989, filed before the CIT. He also contended that the CIT(A), therefore, has no jurisdiction to decide appeal under s. 154 when it was dismissed as withdrawn. According to him, the Department objects to the fresh hearing of the appeal by the CIT(A).
7. The learned counsel for the assessee Sri R. Salarpuria, Advocate, contended that the CIT(A) being one of the IT authorities does have power to rectify his order under s. 154. According to him, the Department had conceded and had no objection to quantum and only dispute is as to whether CIT(A) is empowered to recall and redecide appeal already dismissed wrongly. Shri Salarpuria pointed out that provisions of s. 254(2) and s. 154 are same and language is also same and, therefore, the CIT(A) also like the Tribunal is competent to recall his order and redecide. The learned representative of the assessee invited our attention to the assessee's letter dt. 18th March, 1989, a copy of which is placed at p. 1 of the paper-book and repeatedly clarified that the assessee requested the CIT(A) only to adjourn the hearing of the appeal and that once the matter is decided by the CIT, the appeal may be withdrawn. He, therefore, contended that the CIT(A) misread the assessee's letter and dismissed the appeal. Sri Salarpuria then argued that the observation of the CIT(A)-XII in his order dt. 5th April, 1991, is based on the appellate order of the CIT(A)-VI, Calcutta, dt. 21st March, 1989. He drew our attention to the assessee's petition under s. 154 dt. 19th January, 1990, placed at p. 4 of the paper-book and submitted that only the CIT(A)-VI's order dt. 21st March, 1989, and the assessee's petition dt. 19th January, 1991, were available on record to the CIT(A)-XII. According to him, the order under s. 154 dt. 28th September, 1994, was not available to the CIT(A)-XII and, therefore, the contention of the learned Departmental Representative is not correct. On the basis of this legal and factual position Sri Salarpuria strongly supported the order of the CIT(A) passed under s. 154 and vehemently argued that the CIT(A) was empowered to recall his order and pass fresh order under s. 154. In order to support his contentions and arguments he placed reliance on the following case law :
(1) ITO vs. M. K. Mohammed Kunhi (1969) 71 ITR 815 (SC);
(2) Neeta S. Shah & Ors. vs. CIT (1991) 191 ITR 77 (Kar);
(3) M. R. Narayanan vs. V. Mohanlal (1990) Suppl. SCC 76 (SC);
(4) Surinder Cycle Store vs. The State of Punjab 52 STC 33 (P&H);
(5) Gopi Krishna Agarwal vs. Union of India (1990) 25 Excise & Customs Cases 412 (All);
(6) Kapurchand Shrimal vs. CIT (1981) 131 ITR 451 (SC);
(7) Mrs. K. T. M. S. Umma Salma vs. CIT (1983) 144 ITR 890 (Mad);
(8) V. N. Purushothaman vs. Agrl. ITO & Anr. (1984) 149 ITR 120 (Ker);
(9) Murlidhar Surda vs. ITAT & Ors. (1973) 92 ITR 189 (Cal);
(10) CIT vs. ITAT & Anr. (1979) 120 ITR 231 (Ker);
(11) CIT vs. Shakuntala Rajeshwar (1986) 160 ITR 840 (Del);
(12) Dunlop Rim & Wheel Co. Ltd. vs. CIT 73 Taxman 134 (Cal) 2 ITD 107 (Del);
(13) CIT vs. Ballabh Prasad Agarwalla 90 Taxaman 283 (Cal);
(14) ITO vs. Dharam Chand & Ors. 82(4) Taxation 131 (Chd) (15) Prakash Chand Lunia vs. ITO (1996) 56 ITD 1 (Jaipur Bench), (16) Suresh Textiles vs. ITAT (1978) 114 ITR 680 (All);
(17) Joseph Michael & Bros. vs. ITAT (1993) 199 ITR 36 (Ker);
(18) ITO vs. Murlidhar Sarda & Anr. (1975) 99 ITR 485 (Cal);
8. In reply, the learned Departmental Representative submitted that the CIT(A) has acted upon a specified request of the assessee. He further contended that both the CIT(A) cannot be wrong in their orders to mention the withdrawal of appeal by the assessee.
9. We have carefully considered the rival contentions, relevant facts and materials placed on the record and we have also gone through the decisions on which reliance is placed by the learned counsel for the assessee. In order to appreciate the position of facts and law in a better way the s. 154 as existing at the relevant point of time is reproduced as under :
"154. Rectification of mistake. - (1) With a view to rectifying any mistake apparent from the record an IT authority referred to in s. 116 may, -
(a) amend any order passed by it under the provisions of this Act;
(b) amend any intimation sent by it under sub-s. (1) of s. 143, or enhance or reduce the amount of refund granted by it under that sub-section.
(1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-s. (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.
(2) Subject to the other provisions of this section, the authority concerned :
(a) may make an amendment under sub-s. (1) of its own motion, and
(b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee, and where the authority concerned is the Dy. CIT(A) or the CIT(A), by the AO also.
(3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard.
(4) Where an amendment is made under this section, an order shall be passed in writing by the IT authority concerned.
(5) Subject to the provisions of s. 241, where any such amendment has the effect of reducing the assessment, the AO shall make any refund which may be due to such assessee.
(6) Where any such amendment has the effect of enhancing the assessment or reducing a refund already made, the AO shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under s. 156 and the provisions of this Act shall apply accordingly.
(7) Save as otherwise provided in s. 155 or sub-s. (4) of s. 186 no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed."
10. What is first ingredient of the section is a mistake apparent from record. In this case we notice from the order of the CIT(A) that he has dismissed the appeal on the basis of the facts and request to withdraw the appeal by the assessee vide letter dt. 18th March, 1989. In other words, he has dismissed the assessee's appeal on the basis of the assessee's request to withdraw the appeal. But from the assessee's letter dt. 18th March, 1989, which is placed at p. 1 of the paper-book and which is reproduced as under :
"As per guideline of the CBDT, the company filed revised return and paid tax on the admitted tax liability in order to settle the dispute in the assessment. Company is awaiting the order of the CIT accepting the settlement of tax liability of the company.
We, therefore, request you to kindly adjourn the hearing since we may consider to withdraw the appeal once the order of the Hon'ble CIT is received."
It is evident from second para of the letter of the assessee that the assessee has requested the CIT(A) to adjourn the hearing since the assessee may consider to withdraw the appeal once the order of the CIT is received. Thus, it is clear that the assessee has requested the CIT(A) to adjourn the hearing and not to withdraw the appeal as has wrongly been misread by the CIT(A). The CIT(A) has dismissed the appeal by misreading the request of the assessee which was only for the adjournment of the hearing. This is an obvious mistake which is apparent from the assessee's letter dt. 19th March, 1989. The contention of the learned Departmental Representative that there is no apparent mistake is not correct. His contention that the assessee has withdrawn the appeal vide letter dt. 18th March, 1989 is equally and factually incorrect as the supporting evidence in the shape of CIT(A)-XII's order dt. 5th April, 1991 in respect of penalty is in turn based on the observation of the CIT(A)-VI, Calcutta in his order dt. 21st March, 1989 only. Thus, the mistake committed by the CIT(A) is apparent from record. It is glaring and self-evident mistake.
11. The assessee has also filed a petition under s. 154, dt. 19th January, 1990, and has pointed out that by mistake the assessee's letter dt. 18th March, 1989 has been treated as a petition for withdrawal of the appeal. The assessee also brought to the notice of the CIT(A) that this mistake is apparent from record which should be rectified and the appeal should be treated as not withdrawn and it should be disposed of as per provisions of IT Act. The CIT(A) has also admitted in his order dt. 28th September, 1994 that the dismissal of appeal on the alleged reasons of the request of the assessee was erroneous. Thus, it is well-established that the mistake is apparent from record and there cannot be any other interpretation of the request of the assessee contained in the letter dt. 18th March, 1989. Thus, we hold that there was a mistake apparent from record and the CIT(A) was justified in rectifying his original order. Our view is duly supported by the following case law :
1. CIT vs. Calcutta Steel Co. Ltd. (1985) 153 ITR 488 (Cal), wherein the Hon'ble Calcutta High Court has held that "a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning and points on which there may be conceivably two opinions."
In the present case one cannot conceive two opinions on the adjournment application of the assessee as it is only for an adjournment not for withdrawal of an appeal and, therefore, the mistake is obvious and patent one. Non-considering of request of assessee correctly is a glaring, obvious and self-evident mistake which is apparent from the record. The assessee requested for adjournment and the CIT(A) has treated the same as request for withdrawal of appeal.
2. In the case of West Bengal State Warehousing Corpn. vs. CIT (1986) 157 ITR 149 (Cal), the Hon'ble Calcutta High Court held that a glaring and an obvious error amounts to a mistake apparent from the record.
3. ITO vs. Raleigh Investment Co. Ltd. (1976) 102 ITR 616 (Cal), wherein the Calcutta High Court has held that in order to come within the ambit of s. 154, it is necessary that the mistake be obvious, patent and self-evident and a mistake on which conceivably there can be two opinions cannot be rectified by virtue of s. 154 of the Act. In case where two views are not possible, if by misreading the section or miscalculation of the rate provided in the section, a mistake is committed, such a mistake would come within the purview of s. 154."
In the instant case also the CIT(A) misread the adjournment application where two opinions were not possible at all.
Similar view was taken in the case of CIT vs. Bengal Assam Steamship Co. Ltd. (1985) 155 ITR 26 (Cal), wherein it was held as under :
"A mistake in the allowance of relief under s. 80L and 80M made because of the misreading of s. 80A would be a mistake apparent from the record and such mistake can be rectified under s. 154 of the Act."
5. In the instant case the CIT(A) has passed the original order which was founded on a mistaken assumption that the application for adjournment is an application for withdrawal of appeal. In the case of CIT vs. Shakuntala Rajeswar (1986) 160 ITR 840 (Del), the Hon'ble Delhi High Court has held as under :
"That, on the facts, the earlier order of the Tribunal was founded on a mistaken assumption on the part of all concerned, including the Tribunal, that the decision of the CIT(A), Chandigarh, had become final, an assumption which was clearly wrong. When the assumption apparent from its order and record was found to be erroneous, the Tribunal was justified in invoking its powers under s. 254(2)"
6. In Neetu S. Shah & Ors. vs. CIT (supra) the Karnataka High Court observed that when an earlier order of the Tribunal is founded on a mistaken assumption and the error is discovered the power of rectification under s. 254(2) of the IT Act, 1961 can be evoked because the very basis of the earlier order requires rectification. It was, therefore held that the Tribunal was justified in rectifying its order under s. 254(2).
Since the provisions of s. 254(2) and provisions of s. 154 are similar, these case laws also help the cause of the assessee.
12. The second ingredient of s. 154 is as to who is empowered to rectify his order if the mistake is apparent from record. Sec. 154(1)(a) empowers the IT authorities to amend any order passed by him under the provisions of this Act. As the CIT(A) is declared as one of the IT authorities under s. 116 of the IT Act, he is empowered to rectify and amend any order passed by him under the provisions of this Act. In the case of Kapurchand Shrimal vs. CIT (supra) the Hon'ble Supreme Court has pronounced as under :
"It is well-known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statute."
As the CIT(A) is one of the appellate authorities, he has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal. Thus, the CIT(A) has acted within the compass of his jurisdiction.
13. It is also noticed that according to the provisions of sub-s. (2)(b) of s. 154 the mistake apparent from record has been brought to the notice of the CIT(A) and as per provisions of sub-s. (4) of s. 154 he has passed an order also under s. 154 and that order has been passed within four years in accordance with the provisions of sub-s. (7). In this way, the CIT(A) has fulfilled all the conditions laid down in s. 154.
14. The third aspect to be looked into is whether any order sought to be rectified is in existence. We find that the original order passed by the CIT(A) on 21st March, 1989, is an order under s. 250 wherein the appeal is dismissed. As the CIT(A) has rectified that very order by passing the present order under s. 154 dt. 28th September, 1994, this condition is also satisfied and fulfilled. In the case of Bhubaneswar Flour Mills vs. State of Orissa 52 STC 192 the Hon'ble Orissa High Court has treated the dismissal of first appeal on some technical ground as on appellate order.
15. In our opinion, the CIT(A) has inherent power to rectify wrong committed by himself when that wrong causes prejudice to party for which the party is not responsible. We derive strength from the Allahabad High Court decision in the case of ITO vs. S. B. Singer Singh & Sons & Anr. (1970) 75 ITR 646 (All). The power under s. 154 is undoubtedly a limited power, it is not a power of revision or review but it is limited to correcting only those mistakes which are apparent from record. In the instant case the CIT(A) has corrected the mistake of dismissal of appeal as withdrawn by deciding the appeal on merit. As the CIT(A) has not originally decided this appeal on merit, there is no question of any review or revision of the same. There can be review or revision of only an order which is in existence. In view of this, in our opinion, once an order of rectification is passed the dismissal order of the CIT(A) is modified and what remains thereafter is not the order of the rectification but the appellate order as rectified.
16. Although at the stage of hearing under s. 154 the assessee has requested the CIT(A) to recall his order, neither the CIT(A) has recalled his order nor the assessee has requested to recall original order in its petition filed under s. 154. It is noticed that the CIT(A) has not recalled, reheard and re-decided the appeal separately. He has issued the notice under s. 154, heard the assessee and simply rectified the mistake by taking up the appeal afresh and by deciding the same on merit in order to remove the apparent mistake of dismissal of appeal.
17. The CIT(A) is not empowered to cancel the original order. He can only modify or amend and rectify the original order under s. 154 if there has occurred a mistake apparent from record. Under these circumstances, therefore, only rectification of mistake was a possible remedy left with him. Now the question arises how to rectify the mistake when the cancellation of the original order is not within the competence of the CIT(A) and recalling and reviewing the appeal separately is not allowed under the provisions of law. It may be pointed out that only the Tribunal is empowered to recall its ex parte order under r. 24 of the Appellate Tribunal, Rules, 1963. Therefore the only alternative action left with an authority is to rectify the original order of dismissal of appeal under s. 154 directly and this is what the CIT(A) has done to remove the obvious self-evident and glaring mistake from original order. The CIT(A) rectified the mistake of dismissal of appeal as withdrawn, by deciding the appeal afresh on merit under s. 154. In our opinion, he was well within his power, competence and jurisdiction.
18. In the case of CIT vs. Mithalal Ashok Kumar (1986) 158 ITR 755 (MP), the Hon'ble Madhya Pradesh High Court held that the direction of rehearing of the appeal did not amount to review in the strict sense of the term and, therefore, the Tribunal was justified in setting aside its order for fresh disposal. This means the rehearing of the appeal for fresh disposal under s. 154 is also allowed as it was approved under s. 254(2) by the Hon'ble MP High Court. In the case of ITO vs. Dharamchand & Ors. (supra), where the AAC while passing orders under s. 251(2) restored the appeal to himself as he felt that there was genuine mistake and, therefore, there was no intention to defy the notice. He also held that the powers of the AAC and the Tribunal were co-terminus and directed that the appeals be fixed for hearing afresh, the Tribunal, Chandigarh Bench held that there is nothing wrong in his doing so.
The present case of the assessee is on better footing in the sense that the CIT(A) has not restored the appeal to himself but has rectified the original order under s. 154 and has decided the appeal after hearing the assessee afresh under s. 154 only.
19. While passing the order under s. 154 the CIT(A) has not only rectified and corrected the mistake of dismissal of appeal as withdrawn but has also passed consequential order in deciding the appeal on merit. In our opinion, the action of the CIT(A) is fully justified from this angle also and is fully supported by the Bombay High Court decision in the case of Sidhramappa & Annappa Manvi vs. CIT (1952) 21 ITR 333 (Bom) wherein it was held as under :
"That the Tribunal was perfectly competent, at the instance of the Commissioner, in rectifying the mistake made by it under s. 35 and having rectified it, it was equally competent to pass the consequential order which was that the appeal was to be dismissed and not to be allowed."
20. This issue may be examined again from another angle also. It can be argued that although an appeal lies to the Tribunal against the order of the CIT(A) dismissing the appeal as withdrawn, no appeal is filed by the assessee and, therefore, order of the CIT(A) is accepted and becomes final. In our opinion, this argument cannot hold good and cannot be sustained in the eyes of law as, in our opinion, this view is not correct. Firstly, because the assessee has availed of first remedy lying in s. 154 which is available to the assessee by way of rectification of mistake which is apparent from record. If the assessee fails, it will certainly file a second appeal before the Tribunal. Secondly, the assessee's appeal is dismissed by the CIT(A) without examination of merit and, therefore, in second appeal the Tribunal could not have adjudicated the matter on merit. Our view is duly supported by the decision of Orissa High Court in the case of Bhubaneswar Flour Mills vs. State of Orissa (supra) wherein it was held as under :
"Where a first appeal is dismissed without examination of merits on some technical ground of procedural defect, in second appeal the merit of the matter would not be available to be adjudicated though a second appeal lay by treating the dismissal of the first appeal as an appellate order."
As the Orissa High Court has recognised that the dismissal of first appeal on some technical ground is an appellate order, in our opinion, the CIT(A) was well within his power and competence to rectify this kind of appellate order under s. 154 in the instant case.
On these facts and circumstances of the case and for the reasons discussed in the aforesaid paragraphs we see no merit in all the contentions and arguments raised by the learned Departmental Representative. They are therefore not tenable in the absence of any material and evidence in favour of the Revenue. We have also examined all the case laws on which reliance is placed by the learned counsel for the assessee but found that out of 19 case laws 12 pertains to ex parte orders and two relate to stay orders dealt with by the Tribunal. They are not discussed as they are not considered to be relevant to the facts of the present case as they relate to ex parte orders and are governed by s. 154(2) of the IT Act r/w r. 24 of the Appellate Tribunal Rules, 1963. The rest of the case laws on which reliance is placed by the assessee's counsel do help the cause of the assessee and go against the interests of the Revenue, as it is evident from the relevant paras of this order.
21. In view of this, as well as for the reasons discussed in the aforesaid paragraphs, we hold that there was a mistake apparent from record and the CIT(A) had jurisdiction to rectify the same under s. 154 of IT Act, 1961. He was justified in rectifying the original order of dismissal of appeal as withdrawn by deciding the appeal on merits and by passing the order under s. 154 of the IT Act, 1961.
22. As both the grounds of the Revenue fail, the Departmental appeal is dismissed.