Income Tax Appellate Tribunal - Chandigarh
Budhewal Co-Operative Sugar Mills Ltd. vs Deputy Commissioner Of Income Tax on 25 May, 2005
Equivalent citations: (2006)102TTJ(CHD)336
ORDER
M.A. Bakshi, Vice President
1. The appeal of the assessee for asst. yr. 1993-94 was disposed of by the Tribunal vide order dt. 30th Nov., 2004. The assessee has filed an application under Section 254(2) claiming a mistake in our order. We have heard the parties and perused the records. In order to appreciate the controversy raised by the assessee, it will be relevant to point out that the AO had made assessment in this case under Section 143(3) vide order dt. 22nd Dec., 1994. A sum of Rs. 2,53,23,741 on account of additional sugarcane purchase price was disallowed by the AO for the reasons recorded in para 2 of the assessment order. The basis on which the disallowance was made by the AO is summarized in last para of pp. 4 and 5 of the assessment order which is reproduced hereunder:
From the foregoing discussions, it is very clear that the main purpose of the assessee is to divert the taxable profits by making the above said theoretical book entries so that its tax liability of the current year can be reduced. Even, if the assessee had made proper entries in the share capital account (which is not so in the assessee's case) even in then, those entries could never have been considered as a revenue expenditure against the taxable business profits because, firstly, these entries are back-dated as the liability had crystallized only on 17th April, 1993, i.e., after the close of the accounting period and secondly, such entries do not partake the nature of revenue expenditure, being a one-sided act on the part of the sugar mill to enhance the sugarcane price without either informing the shareholders and even without paying the same to such sugarcane growers. From the above discussion, it is very clear that the assessee had no intention to provide tangible benefits to its shareholders.
2. The assessee appealed to the CIT(A) against the disallowance. The CIT(A) confirmed the disallowance. The following finding of the CIT(A) which has also been quoted by the assessee in the application under Section 254(2) is relevant for the purposes of appreciating the controversy arising in this application:
On consideration of this entire matter, I am of the view that the action of the Dy. CIT in disallowing this amount deserves to be upheld and because the appellant had applied its income after it was earned but on the ground that the liability to pay it had not accrued within the accounting year. It is not a question of quantification, which took place in April, 1993 but as on 31st March, 1993 there was in fact no requirement to make any extra payment to the cane growers and it would be safe to comment that nobody could enforce any extra liability on the assessee as far as the price of cane is concerned. The bye-laws also require that final payment has to be made after the crushing season and this crushing season having been ended in April, 1993 and not before 31st March, 1993 it could safely be said that the liability also accrued in April, 1993 and not before 31st March, 1993. The appellant's claim that this should be allowed in the following year may be considered by the Dy. CIT. The appellant, in fact, appears to have acted in a unilateral manner to enhance the share capital and not making any payment of this amount to the cane growers but this is only a mode of payment debited by it though it should have been ratified in the general body meeting of the society and there is nothing on record to show that this resolution has been passed. However, liability cannot be allowed in the accounting year ending 31st March, 1993 and, therefore, the action of the Dy. CIT is upheld.
3. The Tribunal has confirmed the disallowance for the detailed reasons contained in the impugned order.
4. The claim on behalf of the assessee is that the Tribunal has travelled beyond its jurisdiction to uphold the disallowance on the ground different from the ground on which the CIT(A) confirmed the disallowance and, accordingly, there is a mistake in the order of the Tribunal. In support of the claim, reliance has been placed on the decision in the case of CIT v. Jagadhri Electric Supply & Industrial Co. (1981) 25 CTR (P&H) 94 : (1983) 140 TTR 490 (P&H).
5. The learned Departmental Representative, on the other hand, contended that the Tribunal has decided the issue relating to the disallowance of additional sugarcane price of Rs. 2,53,23,741 which was the subject-matter of the appeal before it in accordance with law. According to the learned Departmental Representative, the assessee is seeking review of the order which is not permissible. Reliance was placed on the following decisions:
(i) East West Rescue (P) Ltd. v. Dy. CIT (2004) 83 TTJ (Del)(SB) 183 : (2004) 89 ITD 259 (Del)(SB)
(ii) Paras Cold Storage & Ice Factory v. Asstt. CIT (2003) 79 TTJ (Chd) 584 : (2003) 84 ITD 108 (Chd).
It was further contended by the learned Departmental Representative that the Tribunal has vast powers to decide the appeal "as it thinks fit" and so long as the Tribunal decides the subject-matter of the appeal in accordance with law, there are no limitations on the powers of the Tribunal for deciding the issue.
6. We have given our careful consideration to the rival contentions. It is not disputed even by the learned Counsel for the assessee before us that under Section 254(2) the power of the Tribunal is limited to the rectification of mistakes which are apparent from record. It is also not disputed that the Tribunal does not have the powers to review its decision. Though the law on this issue is well-settled, following decisions may be quoted for the sake of ready reference:
(i) T.S. Balaram, ITO v. Volkart Bros. .
In this case, the Hon'ble Supreme Court held as under:
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.
(ii) Smt. Baljeet Jolly v. CIT (2000) 164 CTR (Del) 37 : (2001) 250 ITR 113 (Del)
(iii) CIT v. Rajasthan Land Development Corporation
(iv) CIT v. ITAT
(v) CIT v. Hero Cycles (P) Ltd. .
7. It is in the light of these limitations upon the powers of the Tribunal under Section 254(2), the grievance of the assessee is to be appreciated. As per the application under Section 254(2) and the contention advanced before us, the grievance of the assessee can be summarized as under:
That the CIT(A) has recorded a finding that the disallowance is not to be confirmed because the assessee had applied its income after it was earned but on the ground that the liability to pay it had not accrued within the accounting period. The disallowance was confirmed on the ground that the quantification of the additional sugarcane price had been quantified after the end of the previous year. According to the learned Counsel, the mode of payment of sugarcane price had become final/and the Tribunal had no power to adjudicate upon that issue. It has further been pleaded that the Tribunal has recorded a finding that the deduction on account of liability of additional sugarcane price could be allowed as a deduction notwithstanding the quantification of the price having been done in the subsequent year. According to the learned Counsel, the mode and manner of payment of additional sugarcane price or proper procedure as prescribed, not having been followed or no additional sugarcane price having been paid after the asst. yr. 1996-97, were not the relevant issue to be adjudicated since this issue does not arise from the order of the CIT(A), According to the learned Counsel, the Tribunal has also wrongly placed reliance on the decision of the jurisdictional High Court in the case of Shahabad Cooperative Sugar Mills Ltd. v. CIT as the said decision is distinguishable on facts.
8. As is evident from the claim on behalf of the assesses, the grievance expressed is about the correctness of the decision of the Tribunal. Whether the Tribunal has decided the appeal in accordance with law or whether it has exceeded its jurisdiction, is not a matter which can be debated in proceedings under Section 254(2). The power of the Tribunal under Section 254(2) is not a power to review of its own order but its scope is limited to the rectification of mistakes apparent from record and the issue which can be decided by long drawn process of reasoning or debate, does not fall within the ambit of powers of the Tribunal under Section 254(2) as held by the Hon'ble Supreme Court in the case of Volkart Bros, (supra). The application of the assessee, in our considered view, is accordingly beyond the scope of Section 254(2) and, therefore, liable to be dismissed on this ground alone.
9. Even otherwise, the application of the assessee is misconceived in view of well-settled principle of law regarding the powers of the Tribunal on disposal of an appeal. Section 254(1) of the IT Act, 1961, provides that the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. Their Lordships of Hon'ble Supreme Court in the case of CIT v. Mahalakzhmi Textile Mills Ltd. , explained the powers of the Tribunal:
Under Section 33(4) the Tribunal is competent to pass such orders oh appeal 'as it thinks fit'. There is nothing in the IT Act which restricts the Tribunal to the determination of questions raised before the Departmental authorities. All questions, whether of law or of facts, which relate to the assessment of the assessee may be raised before the Tribunal. If for- reasons recorded by the Departmental authorities in respect of a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the Departmental authorities and the Tribunal, and indeed they would be under a duty, to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him.
10. In the case of National Thermal Power Co. Ltd. v. CIT , Their Lordships of Supreme Court held as under:
Under Section 254 of the IT Act, 1951, the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purposes of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. There is no reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the CIT(A). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. The view that the Tribunal is confined only to issues arising out of the appeal before the CIT(A) as too narrow a view to take of the powers of the Tribunal.
11. This principle has been reiterated by the jurisdictional High Court of Punjab & Haryana in the case of Atlas Cycle Industries Ltd. v. CIT and in the case of Patiala Biscuit Manufacturers (P) Ltd. v. CIT . There are several other decisions of various High Courts on this issue. But in the light of the decision of the Hon'ble Supreme Court and the decisions of the jurisdictional High Court referred to above, it is not necessary to refer to all these decisions.
12. Reference may also be relevant to Rule 27 of the Tribunal Rules which reads as under:
27. The respondents, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.
13. Rule 11 of the Tribunal Rules also reads as under:
11. The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule.
We have referred to the basis adopted by the AO for disallowance in para 1 of this order and that of CIT(A) in para 2 of the order and we have decided the issue in accordance with law. The view canvassed on behalf of the assessee that the Tribunal cannot go beyond the reasons given by the CIT(A), is not well founded.
14. We taking the totality of the facts and circumstances of this case into consideration, hold:
(a) That the application filed by the appellant under Section 254(2) is an application for review not falling within the ambit of said section; and
(b) On merits, there is no mistake in the order of the Tribunal,
15. In the result, the application of the assessee is accordingly dismissed.