Andhra HC (Pre-Telangana)
Commissioner Of Income-Tax And Anr. vs Income-Tax Appellate Tribunal And Anr. on 12 March, 1993
Equivalent citations: [1994]206ITR126(AP)
ORDER--Scope. Facts : The assessee filed application under s. 254(2) on the ground that the decision cited by counsel was not dealt with in the order. The Tribunal recalled its order. The justifiability thereof is questioned by the CIT. Held : (i) The Tribunal, being a creature of the statute, has to confine itself in the exercise of its jurisdiction to the enabling or empowering terms of the statute. It has no inherent power. Even otherwise, in cases where specific provision delineates the powers of the court or the Tribunal, it cannot draw upon its assumed inherent jurisdiction and pass orders as it pleases. The power of rectification which is specifically conferred on the Tribunal has to be exercised in terms of that provision. It cannot be enlarged on any assumption that the Tribunal has got an inherent power of rectification or review or revision. It is axiomatic that such power of review or revision has to be specifically conferred; it cannot easily be inferred. Unless there are manifest errors which are obvious, clear and self-evident, the Tribunal cannot recall its previous order in an attempt to rewrite the order.--T. S. Balaram, ITO v. Volkart Brothers (1971) 82 ITR 50 (SC) and Mrs. Khorshed Shapoor Chenai v. Asstt. CED (1980) 122 ITR 21 (SC) followed. (ii) Reading the application which the assessee had filed along with the order which the Tribunal made under s. 254(2), the attempt of the Tribunal was not to rectify any mistake apparent or self-evident but to review or revise or rewrite its own order. Rectification of mistake will not justify its anxiety to improve upon the earlier order. As the application was not justified in terms of s. 254(2), the Tribunal had no jurisdiction to pass an order recalling its order and the same was quashed. Conclusion : Tribunal has no power to review, revise or recall its order under s. 254(2). Application : Also to current assessment years. Income Tax Act 1961 s.254(2) Writ--ALTERNATIVE REMEDY--Order under s. 254(2) recalling order for further hearing. Held : A reference lies from orders under s. 254(1) or final orders made under s. 254(2). In the latter case, the order which may be subject to a reference under s. 256(1) will only be an order passed by the Tribunal amending its earlier order rectifying the mistake brought to its notice by the assessee or the assessing officer. Finality is attached only to orders disposing of the appeal under s. 254(1) or orders amending such appellate orders in exercise of the power of rectification under s. 254(2). An order on a miscellaneous application in the nature of the impugned order, though passed under s. 254(2) deciding to recall its previous order and to post the matter afresh for hearing, is not an order from which a reference can be made under s. 256. There, thus being absence of alternative remedy, writ petition is maintainable.--CIT v. N. J. Dadabai (1978) 115 ITR 317 (AP) and CIT v. (MTT. AR. S. AR.) Arunachalam Chettiar (1953) 23 ITR 180 (SC) followed. Conclusion : Order under s. 256(2) recalling earlier order not being appealable, writ lies thereagainst. Application : Also to current assessment years. Citation : Income Tax Act 1961 s.254(2) Constitution of India art 226 JUDGMENT Sivaraman Nair, J.
1. The commissioner of Income-tax, Visakhapatnam, and the Assistant Commissioner of Income-tax, Circle-I, Vijayawada, are the petitioners. They have filed this writ petition, seeking the issue of a writ of certiorari to quash the order of the Income-tax Appellate Tribunal, B-Bench, Hyderabad, in Miscellaneous Petition No. 85, dated April 29, 1991, so as to restore the order of the Income-tax Appellate Tribunal in I. T. A. Nos. 756 to 759/(Hyd) of 1986 dated September 13, 1990.
2. The facts which led to the filing of the writ petition are the following :
The second respondent was an assessee on the file of the second petitioner. For the assessment years 1977-78, 1978-79 and 1979-80 assessment orders were issued determining the income chargeable to tax of the second respondent as Rs. 1,01,470, Rs. 1,19,178 and Rs. 1,19,420, respectively. Those assessments were made virtually accepting the returns filed by the assessee. A survey operation conducted by the Department under section 133A of the Income-tax Act, 1961, on September 11, 1980, revealed some secret books of account of the second respondent. The Department thereupon issued notices under section 148 of the Income-tax Act calling upon the second respondent to file its returns. The second respondent filed returns declaring total incomes of Rs. 2,43,920, Rs. 4,01,050 and Rs. 3,52,870, respectively, for the above three assessment years. By order dated November 30, 1981, the Income-tax Officer completed the reassessments on the basis of the above returns. Simultaneously, he found the second respondent to have concealed its income and proposed penalties under section 271(1)(c) of the Income-tax Act. The second respondent responded stating that it had voluntarily disclosed the income which was brought to tax in respect of the three years and the fact that there was difference between the income as returned originally and the income which was brought to tax in reassessment proceedings should not be a reason for imposing penalty. The Assessing Officer overruled those objections and levied penalty of Rs. 91,793, Rs. 1,96,043 and Rs. 1,49,571, respectively, for the above three assessment years.
3. Against the above orders, the second respondent filed appeals before the Commissioner of Income-tax (Appeals), who, by order dated January 24, 1986, affirmed the penalty orders on a finding that the assessee had been maintaining duplicate sets of books and had concealed income which would have been subjected to tax. The second respondent then filed appeals before the Income-tax Appellate Tribunal, Hyderabad, in I. T. A. Nos. 757 to 759. (Hyd) of 1986 reiterating its earlier contentions. The appellate or its counsel did not appear at the hearing on May 10, 1989, even though counsel had filed an application for adjournment on May 4, 1989. By order dated May 18, 1989, the first respondent-Tribunal held that the assessee was guilty of concealment of its income and, therefore, the penalty was properly levied.
4. The second respondent filed Miscellaneous Petitions Nos. 39 and 40/(Hyd) of 1989 contending that it could not effectively represent its case before the Tribunal and the matter therefore may be heard afresh after recalling the previous order. The first respondent-Tribunal allowed the application by its order dated February 27, 1990, setting aside its earlier order dated May 18, 1989, and posted the appeals for hearing on July 16, 1990. After hearing the appeals afresh, the Tribunal dismissed the same again by its order dated September 13, 1990. The second respondent filed Miscellaneous Petition No. 85/(Hyd) of 1990 contending that the Tribunal may recall its order dated September 13, 1990, for the reason that it had not discussed in the order the judgments of various High Courts cited by counsel not had the Tribunal given a finding on some of the contentions urged by the assessee. The petitioners contended that there was no "mistake apparent on the record" in the order of the Tribunal. It was submitted further that the reasons mentioned in the application would justify only a review of the order of the Tribunal for which it had no jurisdiction nor did it have jurisdiction to recall its own order for the purpose of improving upon its prior order.
5. The Tribunal, however, in its order dated April 29, 1991, allowed the application holding that, in its previous order dated September 13, 1990, it had not recorded findings on a point raised at the time of hearing of the appeal and that was a mistake which justified exercise of the power under section 254(2) of the Income-tax Act. It is that order which the petitioners assail in this writ petition.
6. The question which we have to consider in this writ petition is whether the impugned order dated April 29, 1991, falls within or outside the purview of section 254(2) of the Income-tax Act. We have also to consider the preliminary objection which counsel for the second respondent has raised, viz., that impugned order passed under section 254(2) can be the subject-matter of a reference under section 256(1) of the Income-tax Act and, therefore, this court may not grant any relief in this writ petition.
7. We have heard counsel on both sides at considerable length during the course of which counsel referred us to a plethora of authorities in support of their respective positions.
8. Even though counsel for the petitioners referred us to the facts preceding the order dated February 27, 1990, we are not persuaded to enter into those regions, since the only question which we have to consider is whether the order dated April 29, 1991, recalling the earlier order dated September 13, 1990, was legal and within the jurisdiction of the Tribunal, and whether the relief has to be declined, because the impugned order could have been the subject-matter of a reference under section 256(1) of the Income-tax Act.
9. In view of the submissions, it is necessary for us to deal first with the preliminary objection raised by counsel for the second respondent.
10. Section 256 of the Income-tax Act provides for a statement of the case to the High Court. Such reference of the case may be made by the Tribunal either on its own (under sub-section (1)) or on a requisition by the High Court under sub-section (2). Such reference lies from an order under section 254 of the Act. Counsel for the second respondent submits that section 256 providing for a reference to the High Court takes in any order passed under section 254 of the Act including an order which the Tribunal may pass under section 254(2) allowing an application to recall an earlier appellate order with a view to rectify any "mistake apparent from the record". It is, therefore, open to the petitioners to take up the impugned order in an application for reference under section 256(1) of the Income-tax Act. Counsel submits that such an alternative remedy from the order under section 254(2) being available, the petitioners are not entitled to invoke the extraordinary jurisdiction of this court under article 226 of the Constitution of India.
11. In Chemicals and Allied Products v. ITAT , it was held that since a reference would lie against an order passed by the Tribunal under section 254(2), a writ could not issue to quash that order. That decision rested on the very peculiar facts and does not lay down any principle of general application. The Appellate Tribunal, in its order under section 254(1), decided against the assessee. The Tribunal rejected the application under section 254(2) of the Act on the ground that there was no mistake apparent from the record in the first appellate order dated March 13, 1987. The assessee filed an application for reference under section 256(1) against the order under section 254(1). He also filed a writ petition for quashing the order rejecting the rectification application. The court held that the petitioner had an alternative remedy by way of reference against the order under section 254(1) as also against the order under section 254(2) and had actually sought reference from the former order, and therefore, he was not entitled to invoke the jurisdiction of the court under article 226 of the Constitution of India. If the same logic is applied to the present case, it may perhaps be that the second respondent could rather have filed an application for reference under section 256(1) rather than for rectification under section 254(2) of the Act.
12. Exactly to the contrary effect is the decision in CIT v. N. J. Dadabai . A Division Bench of this court held that no question of law can arise from an order refusing a plea for rectification under section 254(2; and such questions of law, if at all, can arise only from the order passed by the Appellate Tribunal under section 254(1) of the Act.
13. In CIT v. (MTT.AR.S.AR.) Arunachalam Chettiar , the Supreme Court considered the provisions of the Indian Income-tax Act, 1922, viz., sections 33(4) and 66(2), and held that the order passed by the Appellate Tribunal could not be regarded as an order passed by the Appellate Tribunal under section 33(4) so as to attract the operation of section 66 and, therefore, the High Court could decline to entertain the reference.
14. On a closer reading of sections 254 and 256 of the Income-tax Act, we are of the opinion that a reference lies from orders under section 254(1) or final orders made under section 254(2) of the Act. In the latter case, the order which may be subject to a reference under section 256(1) will only be an order passed by the Tribunal amending its earlier order rectifying the mistake brought to its notice by the assessee or the Assessing Officer. Finality is attached only to orders disposing of the appeal under section 254(1) or orders amending such appellate orders in exercise of the power of rectification under section 254(2) of the Act. We are of the opinion that an order on a miscellaneous application in the nature of the impugned order, though passed under section 254(2) deciding to recall its previous order and to post the matter afresh for hearing, is not an order from which a reference can be made under section 256 of the Act. In this view, the preliminary objection which counsel for the respondent has raised can only be dismissed.
15. That leads us to the merits of the matter. We have to consider the controversy on merits with reference to the application which the second respondent had filed under section 254(2) of the Act and the order dated April 29, 1991, which the Tribunal had passed thereon. On the admitted facts, the second respondent had included in its return under section 148 of the Act, the income which was alleged to have been concealed and which came to light as a result of the search of the premises on September 11, 1980. There was no dispute about that fact. The only point on which the parties joined issue was whether the mere filing of another set of returns voluntarily offering or surrendering some amounts not offered for assessment in the original proceedings would or would not amount to concealment. The Tribunal referred to the detailed submissions made by counsel for the assessee and the Departmental representative with reference to various decisions. In paragraph 18 of the first appellate order the Tribunal found :
"We have heard the rival submissions in the light of material placed before us and precedents relied upon. It is a fact that the income was admitted only in the return filed in response to the notice issued under section 148 of the Act. In this connection, it is pertinent to note that the Income-tax Officer has jurisdiction in reassessment proceedings for any year to impose penalty for concealment of income in the return filed in original assessment proceedings for that year, notwithstanding the fact that the assessee had submitted a correct return in compliance with the notice for reassessment. This view was taken by the jurisdictional High Court in the case of CIT v. Angara Satyam [1959] 37 ITR 230 (AP). Similar view was taken by the apex court also in the case of Narain Das Suraj Bhan v. CST [1968] 21 STC 104 (SC)."
16. In its application under section 254(2) of the Act, the assessee disputed the date of the search operation and its venue. It contended that paragraph 16 of the order of the Appellate Tribunal dated September 13, 1990, merely reproduced paragraph 5 of the order of the first appellate authority and that did not amount to a finding on its contentions. An attempt was also made to argue that the levy of penalties for the three assessment years was based on several factual and legal grounds and those were not considered elaborately in the order dated September 13, 1990. It was, therefore, asserted that the Appellate Tribunal committed a "mistake apparent from the record" in confirming the finding of the authorities regarding concealment of income without applying its mind to the infirmities in the order of the Tribunal.
17. In the impugned order, the Tribunal recorded the following finding in paragraph 6 and 7 of the order :
"The assessee is a dealer in dry fish. Department conducted survey proceedings under section 133A of the Act in the house of the accountant on September 11, 1980, and the residential premises of the partners under section 132 of the Act. Some duplicate books were seized. As per the seized books, the net profits earned by the assessee for the relevant assessment years was as under :
Rs.
1977-78 1,93,800
1978-79 3,26,400
1979-80 2,95,800
On the basis of the seized material, notices under section 148 were issued. In compliance with these notices, the assessee filed the return on December 27, 1980, declaring therein a total income of Rs. 2,43,920, Rs. 4,10,050 and Rs. 3,52,870, respectively, for the three assessment years under appeal. The explanation of the assessee before the Revenue authorities was that the assessee in an act of rare candour indicated its willingness to come forward and accept the income found to have been earned in the seized books whereupon the learned Inspecting Assistant Commissioner was stated to have given an assurance that the appellant would be dealt with sympathetically in respect of levy of penalty and interest.
In order to support this contention, the assessee came forward with some additional evidence before the Tribunal. The factual details apropos the same is discussed in the order, but we find that appropriate finding in regard to the same was not given in the order. In fairness, the case of the assessee is to be examined from all the angles. Fairness itself is a flexible, pragmatic and relative concept, not a rigid, ritualist or sophisticated abstraction. In view of the fact that finding is not given on a point raised at the time of hearing by the assessee, we are of the opinion that a mistake has crept into the order. Ends of justice would be met adequately by recalling the order and by giving a fresh opportunity to the assessee to make appropriate representation at the time of hearing."
18. On a reading of the application of the second respondent under section 254(2) of the Act, we are satisfied that instead of pointing out a mistake apparent from the record, it attempted to argue out a case for review or rewriting of the appellate order of the Tribunal. The application proceeded on the assumption that paragraph 16 of the order dated September 13, 1990, contained findings adverse to the assessee. But those findings were said to be only reproductions of paragraph 5 of the order of the Appellate Assistant Commissioner.
19. We are of the opinion that what the second respondent wanted was to recast the order of the Appellate Tribunal dated September 13, 1990, in its entirety by detailed arguments why a revised order should be made. The attempt was not to point out why an obvious and patent mistake should be rectified, but to make out inexactitudes and deficiencies in the order by a long drawn process of reasoning. We have to consider the question on the merits in the light of these factual details.
20. Counsel for the second respondent referred us to the decision of Jeevan Reddy C.J. and V. N. Mehrotra J., of the Allahabad High Court in Laxmi Electronic Corporation Ltd. v. CIT , wherein it was held that (headnote) :
"Where the Tribunal fails or omits to deal with an important contention affecting the maintainability/merits of an appeal, it must be deemed to be a mistake apparent from the record which empowers the Tribunal to reopen the appeal and rectify the same if it is so satisfied."
21. The court held (headnote) :
"The proposition that a contention urged but not dealt with by the Tribunal can be taken as having been negatived, is not inconsistent with the power of the Tribunal to reopen the appeal where it is brought to its notice that an important contention raised by the party was not dealt with by the Tribunal in its order. "
22. Reference was made to CIT v. ITAT , wherein a Division Bench of the Madhya Pradesh High Court held (headnote) :
"If a point which is material for determining the amount of tax was pressed but not considered by the Tribunal, it would certainly constitute a mistake apparent from the record within the meaning of section 254(2) of the Act."
23. On the question of the amplitude of the power of the Tribunal to rectify its appellate orders, the decision of the Supreme Court in T. S. Balaram, ITO v. Volkart Brothers seems to have settled the controversy for all times. The court therein held that (headnote) :
"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 on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record."
24. To the same effect is the decision in Mrs. Khorshed Shapoor Chenai v. Asst. CED . In that decision, the court held that the power to rectify orders did not justify an order resulting from the change of opinion of the authority about the valuation of acquired lands because some other authority, that is, the civil court, had valued the land differently.
25. In the light of the above decisions of the Supreme Court, it is not necessary for us to refer to the number of precedents which counsel for the Revenue has cited before us. We may, however, for the sake of completeness, refer to a few such authorities.
26. In CIT v. K. L. Bhatia , the Delhi High Court held that the Appellate Tribunal has no inherent powers to review its order on the merits (headnote) :
"It cannot, in the purported exercise of its inherent powers, rehear a case on the merits."
27. The Orissa High Court in CIT v. ITAT [1992] 196 ITR 590 held that (headnote) : "the power to rectify the mistake does not cover cases where a revision or review of the order is intended. 'Mistake' means to take or understand wrongly or inaccurately; to make an error in interpreting; it is an error; a fault; a misunderstanding; a misconception. 'Apparent' means visible; capable of being seen; easily seen; obvious; plain. A mistake which can be rectified under section 254(2) is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration".
28. In CIT v. ITAT [1992] 193 ITR 377 (Orissa), the same court held that (headnote) :
"the power of amendment under section 254(2) of the income-tax Act, 1961, is to be exercised only when there is a mistake apparent from the record."
29. It has to be observed that the above decision was rendered on a writ petition against an order of recall of its order by the Tribunal, just as in the present case.
30. We are of the opinion that the Appellate Tribunal, being a creature of the statute, has to confine itself in the exercise of its jurisdiction to the enabling or empowering terms of the statute. It has no inherent power. Even otherwise, in cases where specific provision delineates the powers of the court or Tribunal, it cannot drawn upon its assumed inherent jurisdiction and pass orders as it pleases. The power of rectification which is specifically conferred on the Tribunal has to be exercised in terms of that provision. It cannot be enlarged on any assumption that the Tribunal has got an inherent power of rectification or review or revision. It is axiomatic that such power of review or revision has to be specifically conferred; it cannot easily be inferred. We are, therefore, of the opinion that, unless there is a mistake apparent from the record in the sense of patent, obvious and clear error or mistake, the Tribunal cannot recall its previous order. If the error or mistake is one which could be established only by long drawn arguments or by a process of investigation and research, it is not a mistake apparent from the record. If two views are possible on a point of law, and one of the alternatives is accepted in its previous order, it cannot be held that the mistake is apparent from the record. Unless there are manifest errors which are obvious, clear and self-evident, the Tribunal cannot recall its previous order in an attempt to rewrite the order. Reading the application which the respondent had filed along with the order which the Tribunal made under section 254(2), we are of the opinion that the attempt of the Tribunal was not to rectify any mistake apparent or self-evident but to review or revise or rewrite its own order. Rectification of mistake will not justify its anxiety to improve upon the earlier order.
31. We are, therefore, of the opinion that the first respondent-Tribunal exceeded its jurisdiction in passing the impugned order recalling its order dated September 13, 1990, and posting the appeal for rehearing for the purpose of rewriting its earlier order under section 254(2) of the Act.
32. Counsel for the petitioner invited our attention to the decisions in Ramesh Chandra Verma v. R. D. Verma, , M. D. Thakar v. Labour Appellate Tribunal, and Basudeb Prasad Modi v. Biswanath Modi, , in support of the proposition that, where an order passed by the subordinate authority is quashed, it cannot, in the absence of any direction to the contrary in the order passed by the court, prohibit the Tribunal or authority to proceed further in the matter according to law.
33. We do not propose to leave it to the Tribunal to pass fresh orders on the application which the second respondent had filed under section 254(2) of the Act. As the application was not justified in terms of section 254(2), the Tribunal had no jurisdiction to pass an order recalling its order dated September 13, 1990. We quash the order. We also interdict the Tribunal from passing any order on the application of the second respondent under section 254(2) of the Act. We hold that the only order which the Tribunal could have passed on that application was an order rejecting the request of the second respondent to rectify the order of the Tribunal dated September 13, 1990.
34. In the result, we allow the writ petition, quash the order of the Tribunal dated April 29, 1991, and restore the order of the Tribunal dated September 13, 1990. Parties will suffer their respective costs.
35. Immediately after the judgment was pronounced, counsel for the petitioners made an oral application for leave to file an appeal to the Supreme Court under article 134A of the Constitution of India. Since we have based ourselves mostly on decisions of the Supreme Court on the points which have been urged before us, we do not find that this case involves any question of law of such public importance as requires to be decided by the Supreme Court. The application for leave is, therefore, rejected.