Income Tax Appellate Tribunal - Panji
The Dy. Commissioner Of Income Tax, ... vs Sh Inderjit Mehta, Bathinda on 30 November, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR
BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND
SH.N. K. CHOUDHRY, JUDICIAL MEMBER
M. A. No. 27/(Asr)/2017
(Arising out of I.T.A. No. 405/(Asr)/2013)
Assessment Year: 2007-08
PAN: ABQPM6434M
A. C. I. T., Vs. Sh. Inderjit Mehta Prop.
Circle- 1, M/s. Mehta's Mega Mart,
Bathinda. G-1817, Birla Mill Colony,
Badhinda.
(Appellant) (Respondent)
Appellant by: Sh. Rahul Dhawan (D.R.)
Respondent by: Sh. Ashwani Kalia (C.A.)
Date of hearing: 08.09.2017
Date of pronouncement: 30.11.2017
ORDER
PER T. S. KAPOOR (AM):
This Miscellaneous Application has been filed by revenue against the order of the Hon'ble Tribunal dated 18.05.2016.
2. In the Miscellaneous Application, the revenue had submitted that assessee had surrendered an amount of Rs.47 lacs during survey u/s 133A and same was assessed by Assessing Officer as deemed income and which was also upheld Ld. CIT(A). However, the Hon'ble ITAT had deleted the addition amounting to Rs.42 lacs relying on the judgment of Hon'ble Punjab & Haryana High Court in the case of 'Kim Pharma Ltd.'
3. The Ld. DR submitted that the income was rightly assessed as deemed income on the basis of Hon'ble Gujarat High Court in the case of Faqir Mohammed Haji Vs. CIT, 247 ITR 290. The Ld. DR submitted that the Hon'ble Tribunal had deleted the addition by holding that the 2 MA No. 27 (Asr)/2017 (Arising out of I.T.A. No.405/(Asr)/2013 Asst. Year:2007-08 surrendered income was from business income whereas the Hon'ble Punjab & Haryana High Court in the case of Pr. CIT Vs. M/s Khushi Ram & Sons Foods (P) Ltd., in ITA No. 126 of 2015 and order dated 21.07.2016 had held that merely because an assessee carries on certain business, it does not necessarily follow that the amounts surrendered by him were on account of its business transactions and Hon'ble Court had held that it is for the assessees to establish the source of such surrendered income and since the judgment of Hon'ble Punjab & Haryana High Court in the case of M/s Khushi Ram & Sons Foods (P) Ltd., has been delivered after the judgment of Hon'ble Tribunal which is variance with that of the order of Hon'ble Court, therefore a mistake has crept in the order of Hon'ble Tribunal which needs to be rectified.
4. The Ld. AR on the other hand submitted that the Hon'ble Bench had given its decision relying upon the decision of Punjab & Haryana High Court in the case of 'Kim Pharma Ltd. Vs. CIT 250 CTR 454, wherein it has been held that cash amount surrendered as income is to be assessed as deemed income and the other surrendered amount of on account of sundry credits, repairs to building and advances to staff was allowed to be treated as business income being relatable to business, and therefore the Hon'ble Tribunal had rightly allowed appeal of the assessee for amount of Rs. 42 lacs which related to the excess stock surrendered and unexplained transaction recorded in the books of account. The Ld. AR submitted that the surrender made on account of excess stock and unexplained transactions itself means that assessee had earned these 3 MA No. 27 (Asr)/2017 (Arising out of I.T.A. No.405/(Asr)/2013 Asst. Year:2007-08 incomes from the business and these surrendered amounts were relating to the business. In this respect the Ld. AR invited our attention to the findings of Hon'ble Tribunal as contained in para 12 to 19.
From the above findings recorded by Hon'ble Tribunal the Ld. AR submitted that it becomes apparent that assessee had surrendered the amount due to discrepancies in stick which definitely is from business and therefore the case law relied on by Ld. DR is not applicable. The Ld. AR submitted that the powers of the Hon'ble Tribunal u/s 254(2) are restricted to rectify any mistake apparent from record. "Apparent" means visible, capable of being seen, obvious and patent and whose discovery is not dependent on arguments or elaboration and in this respect was placed on the following case laws:
(1) CIT V ITAT (1992) 196 ITR 590 (Ori) (2) CIT V ITAT (1993) 206 itr 126 (AP) (3) CIT V Prahlad Rai Todi (2001) 251 ITR 833 (Gau) (4) CIT V Anamika Builders Pvt Ltd (2001) 251 ITR 585 (Cal) (5) Baljeet Jolly V CIT (2001) 250 ITR 113(Del) (6) Transworld International Inc. V JCIT 192 CTR (Del) 97"
5. We have heard the rival parties and have gone through the material placed on record. We find that Hon'ble Tribunal has passed the order dated 18.05.2016 after recording its detailed findings from para 12 to 19 and wherein it has held that the assessee had earned income from business. For the sake of completeness, the findings of the Hon'ble Tribunal as contained in para 12 to 19 are reproduced below:
"12. The stand of the assessee, to the effect that 'Kim Pharma Ltd.' (supra), is per incuriam two decisions of the of the Hon'ble Gujarat High .Court, wherein, 'Faqir Mohd. Haji Hassan', (supra), has been over-ruled, 4 MA No. 27 (Asr)/2017 (Arising out of I.T.A. No.405/(Asr)/2013 Asst. Year:2007-08 is not unmd to carry any force whatsoever. In our considered opinion, this argument might be available to the assessee in appropriate proceedings before the Hon'ble High Court, or before the Hon'ble Supreme Court.
However, the arguments of the assessee themselves how that 'Kim Pharma Ltd.' (supra), has not been hitherto held to be per incuriam in any proceeding. Moreover, as an inferior Tribunal, we are bound by the orders of the Hon'ble jurisdictional High Court. The orders of the Hon'ble jurisdictional High Court are binding on us. Their Lordships in "Kim Pharma Ltd.' (supra), have held unexplained money recovered in surrender to be assessable as deemed income u/s 69A and not as business income. The ratio is down-right binding on us. This argument of the assessee, is accordingly, rejected. 'IGm Pharma' (supra) is directly applicable to the amount of Rs.5 lakhs surrendered on account of excess cash found in the books. Therefore, the addition of Rs. 5 lakhs surrendered on account of excess cash found physically as against that recorded in the books of account is confirmed. However, so far as regards the other two additions of Rs.32 lakhs on account of excess stock found in the books of account and Rs. 10 lakhs on account of unexplained entries not recorded in the books of account are deleted.To quote from 'Kim Pharma' (supra) itself, such amounts have been held to be assessable as business income:
"In the facts of the present case, we find that assessee during the course of survey had surrendered the income as income from other sources, though a plea has been raised by the assessee that the income was surrendered as income from job work but no evidence to prove the stand of the assessee has been brought on record. The assessee had also surrendered additional income of Rs.10 lacs in assessment year 2005-06 on account of sundry credits, repairs to building and advances to staff, which being relatable to business carried on by assessee was included as income from business. However, in respect of cash found during survey, which was not reflected in the books of account, no source was declared by the assessee and in the absence of nature of source of cash being proved; the same is not assessable as income from business. In the circumstances, we hold the order of the CIT(A) in including the additional income as deemed income u/s 69A of the Act and not allowing the benefit of the business losses determined against the said deemed income. The grounds of appeal raised by the assessee are dismissed."
12.1 From the above finding, it is apparent that the surrender made on account of sundry credits, repairs to building and advances to staff have been held to be relatable to business, whereas only in respect of cash, it was held to be not relatable to business. Therefore, the surrender on account of stock and unexplained investment related to business, whereas the cash is not assessable as income from business.
13. Accordingly, reliance on 'Faqir Mohd. Haji Hassan', (supra), by the Taxing Authorities also cannot be said to be incorrect. Therefore, the grievance of the assessee by way of Ground nos. 1 to 4 is partly rejected.
14. As regards Ground No.5, the AO made an addition of Rs. 1,16,184/- on account of low G.P. rate. The Id. CIT(A) confirmed the addition made by the AO.
5 MA No. 27 (Asr)/2017
(Arising out of I.T.A. No.405/(Asr)/2013 Asst. Year:2007-08
14. The Id. counsel for the assessee contended that since the amount in this addition was a part of the surrendered income of Rs.47,00,,000/-, no such addition was called for.
15. On the other hand, the Id. DR has again placed reliance on the impugned order.
16. While confirming the addition, the Id. CIT(A) has observed that the assessee could not furnish inventory of opening stock and closing stock and thus, the book results shown were not subject to verification, due to which, for possible leakage of profits, a reasonable and fair addition was required to be made.
17. The assessee maintains that the surrendered amount covered all the discrepancies and that for the A.Y. 2005-06, the G.P. rate of 16.34% was accepted by the Tribunal.
18. Here, the grievance of the assessee, in our considered opinion, is justified. In the survey conducted, a surrender of Rs.47,00,000/- has been made which included discrepancies in stock also and therefore separate addition is not called for. Therefore, the Id. CIT(A) was no correct in confirming the addition made of Rs. 1,16,184/-. Accordingly, the grievance of the assessee is accepted and this ground of appeal is allowed.
19. Thus, the appeal of the assessee is partly allowed." The case law relied on by Ld. DR is not applicable as in that case, the assessee was not able to demonstrate that the surrendered income was from business whereas in the present case, the assessee had clearly established that the surrendered income was from business income. The items of surrendered related to discrepancies in stock and other unexplained transactions which necessarily related to the business of the assessee. The case laws relied on by Ld. AR that Hon'ble Tribunal cannot review its own order and under the provisions of section 254(2) and it has very limited power to rectify mistake also is in favour of assessee.
"A bare look at section 254(2) of the Act, which deals with rectification, makes it amply clear that a 'mistake apparent from the record' is rectifiable. In order to attract the application of section 254(2), 6 MA No. 27 (Asr)/2017 (Arising out of I.T.A. No.405/(Asr)/2013 Asst. Year:2007-08 a mistake must exist and the same must be apparent from the record.
The power to rectify the mistake, however, 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. The language used in section 254(2) is permissible where it is brought to the notice of the Tribunal that there is any mistake apparent from the record. Accordingly, the amendment of an order does not mean obliteration of the order originally passed and its substitution by a new order which is not permissible under the provisions of section 254(2). Further, where an error is far from self evident, it ceases to be an apparent error. It is no doubt true that a mistake capable of being rectified under section 254(2) is not confined to clerical or arithmetical mistakes. On the other hand, it does not cover any mistake which may be discovered by a complicated process of investigation, argument or proof. As observed by the Supreme Court in Master Construction Co. (P) Ltd. v. State of Orissa [1966] 17 STC 360, an error which is apparent on the face of the record should be one which is not an error which depends for its discovery on elaborate arguments on questions of fact or law. A similar view was also expressed in Satyanarayan Laxminarayan Hedge v. Mallikarjun Bhavanappa Tirumale AIR 1960 SC 137. It is to be noted that the language used in Order 47, 7 MA No. 27 (Asr)/2017 (Arising out of I.T.A. No.405/(Asr)/2013 Asst. Year:2007-08 Rule 1 of the Code of Civil Procedure, 1908 is different from the language used in section 254(2) of the Act. Power is given to various authorities to rectify any 'mistake apparent from the record' is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of 'an error apparent on the face of the record'. Mistake is an ordinary word, but in taxation laws, it has a special significance. It is not an arithmetical or clerical error alone that comes within its purview. It comprehends errors which, after a judicious probe into the record from which it is supposed to emanate, are discerned. The word 'mistake' is inherently indefinite in scope, as what may be a mistake for one may not be one for another. It is mostly subjective and the dividing line in border areas is thin and indiscernible. It is something which a duly and judiciously instructed mind can find out from the record. In order to attract the power to rectify under section 254(2) it is not sufficient if there is merely a mistake in the orders sought to be rectified. The mistake to be rectified must be one apparent from the record. A decision on the debatable point of law or undisputed question of fact is not a mistake apparent from the record. The plain meaning of the word 'apparent' is that it must be something which appears to be so ex facie and it is in capable of argument or debate. It is therefore, follows that a decision on a debatable point of law or fact or failure to apply the law to a set of facts which remains to be investigated cannot be corrected by way of rectification."
The Hon'ble Supreme Court in the case of CIT Vs. Karan Chand Thapar & Br. P. Ltd., 176 ITR 535 has held as under:
8 MA No. 27 (Asr)/2017
(Arising out of I.T.A. No.405/(Asr)/2013 Asst. Year:2007-08 "It is equally well settled that the decision of the Tribunal has not to be scrutinized sentence by sentence merely to find out whether all facts have been set out in detail by the Tribunal or whether some incidental fact which appears on the record has not been noticed by the Tribunal in its judgment. If the court, on a fair reading of the judgment of the Tribunal, finds that it has taken into account all relevant material and has not taken into account any irrelevant material in basing its conclusions, the decision of the Tribunal is not liable to be interfered with, unless, of course, the conclusions arrived at by the Tribunal are perverse.
It is not necessary for the Tribunal to state in its judgment specifically or in express words that it has taken into account the cumulative effect of the circumstances or has considered the totality of the facts, as if that were a magic formula; if the judgment of the tribunal shows that it has, in fact, done so, there is no reason to interfere with the decision of the Tribunal."
Similarly, the Hon'ble Madras High Court decisions in T.C.(A) No. 156 of 2006 dated 21.08.2007 in the case of CIT Vs. Tamil Nadu Small Industries Development Corporation Ltd. wherein the Hon'ble High Court held as under:
"The Tribunal has no power to review its order. When the Tribunal has already decided an issue by applying its mind against the assessee, the same cannot be rectified under Section 254 (2) of the Act. There was no necessity whatsoever on the part of the Tribunal to review its own order. Even after the examination of the judgments of the Tribunal, we could not find a single reason in the whole order as to how the Tribunal is justified and for what reasons. There is no apparent error on the face of the record and thereby the Tribunal sat as an appellate authority over its own order. It is completely impermissible and the Tribunal has traveled out of its jurisdiction to allow a Miscellaneous Petition in the nake of reviewing its own order."
"In the present case, in the guise of rectification, the Tribunal reviewed its earlier order and allowed the Miscellaneous Petition which is not in accordance with law. Section 254(2) of the Act does not contemplate rehearing of the appeal for a fresh disposal and doing so, would obliterate the distinction between the power to rectify mistakes and power to review the order made by the Tribunal. The scope and ambit of the application of Section 254(2) is limited and narrow. It is restricted to rectification of mistakes apparent from the record. Recalling the order obviously would mean passing of a fresh order.
Recalling of the order is snot permissible under Sec. 254(2) of the Act. Only glaring and any mistake apparent on the face of the record alone can be rectified and hence anything debatable cannot be a subject matter of rectification."9 MA No. 27 (Asr)/2017
(Arising out of I.T.A. No.405/(Asr)/2013 Asst. Year:2007-08 Further, the Hon'ble Delhi High Court judgment on the scope of rectification u/s 254(2) as reported in the case of Ras Bihari Bansal Vs. CIT 293 ITR 365 has held as under:
"Section 254 of the Income Tax Act, 1961, enables the concerned authority to rectify any "mistake apparent from the record". It is well settled that an oversight of a fact cannot constitute an apparent mistake rectifiable under this section. Similarly, failure of the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment. The mere fact that the Tribunal had not allowed a deduction, even if the conclusion is wrong, will be no ground for moving an application under section 254(2) of the Act. Further, in the garb of an application for rectification, the assessee cannot be permitted to reopen and re-argue the whole matter, which is beyond the scope of the section."
Therefore, in view of the facts and circumstances of the case, and in the light of ratio of the decisions cited and discussion as above, we do not find any substance in the application of revenue and dismiss the same being devoid of any merits".
6. In view of the above, the Miscellaneous Application filed by Revenue is dismissed.
Order pronounced in the open Court on 30.11.2017.
Sd/- Sd/-
(N. K. CHOUDHRY) (T. S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated 30/11/2017
GP/Sr./PS
Copy of the order forwarded to:
(1) The Assessee:
(2) The
(3) The CIT(A),
(4) The CIT,
(5) The SR DR, I.T.A.T.,
True copy
By Order