Gujarat High Court
Income Tax Officer vs Madhav Cotton Ginning And Pressing ... on 8 August, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
C/SCA/15362/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 15362 of 2014
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INCOME TAX OFFICER....Petitioner(s)
Versus
MADHAV COTTON GINNING AND PRESSING FACTORY &
1....Respondent(s)
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Appearance:
MRS MAUNA M BHATT, ADVOCATE for the Petitioner(s) No. 1
RULE SERVED BY DS for the Respondent(s) No. 1 - 2
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Date : 08/08/2016
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Though served, no one appears for the respondents.
2. This petition is filed by the revenue challenging an order dated 29.4.2014 passed by the Income-Tax Appellate Tribunal (for short 'the Tribunal').
3. Brief facts are as under :
3.1 For the Assessment Year 2009-10, the respondent -
assessee had filed a return of income declaring total income of Rs.9.63 lacs. Such return was taken in scrutiny by the Assessing Officer. During the course of assessment Page 1 of 5 HC-NIC Page 1 of 5 Created On Wed Aug 10 03:13:45 IST 2016 C/SCA/15362/2014 ORDER proceedings, the Assessing Officer noticed that the assessee had shown secured loan from the bank to the tune of Rs.5.02 crores and unsecured loan of Rs.82.30 lacs from various parties. The assessee also claimed interest expenditure of Rs.1.11 crores. As against this, assessee had given loan advances to one M/s.Om Kailash Cotton to the tune of Rs.3.07 crores without charging interest. The Assessing Officer further noticed that the assessee had advanced further sums in the range of Rs.5 to 13 lacs to various other individuals again without charging interest.
4. The Assessing Officer put the assessee to notice of such advances and passed the order of assessment dated 14.12.2011 disallowing the interest expenditure of Rs.35.07 lacs out of the total claim by the assessee of Rs.1.11 crores.
5. The assessee carried the matter in CIT (Appeals). The CIT (Appeals) by order dated 6.12.2012 rejected such appeal and confirmed the disallowance of interest made by the Assessing Officer. Against the order of CIT (Appeals), assessee approached the Tribunal. The Tribunal by its judgment dated 25.10.2013 rejected the appeal on this ground in following terms :
"5. We have heard the rival contentions and perused the material on record. The ld. A.O. had calculated the interest on day to day basis. It is admitted that the assessee had borrowed interest bearing fund which has been advance to the sister concerns without charging any interest. The assessee's explanation is totally imaginary. The firm had granted interest free loans to M/s.Om Cotton at Rs.3,07,88,727/-, wherein the assessee firm partners holding interest. If at all the interest @ 12% had been charged on loans given Kailash Cotton then interest worked out Rs.35,07,7081/- then the incor Page 2 of 5 HC-NIC Page 2 of 5 Created On Wed Aug 10 03:13:45 IST 2016 C/SCA/15362/2014 ORDER return would show less return of M/s.Om Kailash Cotton as against which Madhav Ginning & Pressing Factory earned much income computation at pg.28 shows that total business income had been shown by the assessee at Rs.9,65,080/-. The profit calculated by the assessee under the Company Act. Thus, the argument put forth by the appellant before us factually incorrect. The case laws referred by the assessee are squarely not applicable because reserve and surplus is only Rs.60.39 lacs. There is no interest free loan had taken by the appellant. The principle of res judicata do not apply in case of IT law, however, year is separate and is to be decided on facts of the case. The assessee also has not established any business relevancy or business expediency that interest free loan advances for business purposes. Thus, we upheld the order of the CIT(A)."
6. The assessee thereupon filed a rectification application. In such application, the assessee argued that the Tribunal has not fully and properly considered the case laws cited by the assessee. The Tribunal has, thus, committed an error. On the other hand, revenue contended before the Tribunal that scope of rectification application was limited and would not permit the Tribunal to review its own decision. After recording such contentions, the Tribunal, by the impugned order, recalled its earlier decision making following observations :
"3. We have heard the rival contentions and perused the material on record. We find that the assessee had a case and is required to reconsider the facts of the case and case laws cited by the assessee. Therefore, we recall our order dated 25.10.2013 on this issue. This case may be fixed on regular basis.
4. In the result, the M.A. of the assessee is allowed. This order pronounced in open Court on 29.4.2014."
7. Above noted portion of the Tribunal's impugned order is only portion containing reasons for the Tribunal to recall its Page 3 of 5 HC-NIC Page 3 of 5 Created On Wed Aug 10 03:13:45 IST 2016 C/SCA/15362/2014 ORDER earlier order and post that appeal for fresh hearing. Various reasons recorded cannot be sustained. Firstly, the scope of rectification proceedings, as the Tribunal was well aware, was extremely narrow and would be confined to error of fact or law apparent on the face on the record. Through several judgments, the Courts have held that that the power of rectification cannot be equated with that of review. The Tribunal therefore, as to recall its earlier order, had to record and demonstrate through reasons that there was an error apparent on the record committed while rejecting the assessee's appeal. Once the Tribunal considered the rival contentions and came to a decision on merits, there would be very limited grounds on which such order would be open to rectification. In any case, the primary requirement of exercising such powers was that there had to be proper reasons recorded in the order restraining the original order in exercise of rectification power. The Tribunal merely observed that it found that the assessee has a case and is required to be reconsidered on the basis of facts and the case laws cited by the assessee. Thus, recording of the opinion by the Tribunal nowhere demonstrated the nature of error apparent on the record, in the opinion of the Tribunal, was committed by the Tribunal while disposing of the appeal of the assessee originally.
8. For such reasons, the impugned order dated 29.4.2014 passed by the Tribunal is quashed and set aside. Petition is allowed and disposed of.
(AKIL KURESHI, J.) Page 4 of 5 HC-NIC Page 4 of 5 Created On Wed Aug 10 03:13:45 IST 2016 C/SCA/15362/2014 ORDER (A.J. SHASTRI, J.) vipul Page 5 of 5 HC-NIC Page 5 of 5 Created On Wed Aug 10 03:13:45 IST 2016