2017 (3) TMI 528 - AT - Income Tax

ITAT Upholds Tax Addition for Machinery Transfer Despite Assessee's Exemption Claim

The ITAT dismissed the assessee's Miscellaneous Application seeking rectification of a mistake in the order regarding the taxation of a transfer of ... Review petition - ITAT sustained the addition made being transfer of machinery by the Individual to his HUF appellant, allegedly assessable under section 56 (2) - Held that:- Considering the submissions of the ld. AR, we are of the opinion that it leads to review of our order, which is not permitted u/s 254(2) of the Act. We have already considered the issue on merits and adjudicated. There is no mistake apparent on the record. The Hon’ble Calcutta High Court in the case of CIT Vs. Suman Tea and Plywood Industries (P) Ltd. [1997 (3) TMI 81 - CALCUTTA High Court] held that “by section 254(4) of the IT Act, an order which has been passed by the Tribunal reaches finality the moment the same is passed: it cannot be touched thereafter. By section 254(2) of the act, the Tribunal, however, has been authorized to rectify mistakes in its orders, which are apparent on the face of the records. The expression “mistake apparent on the record” means a mistake either clerical or grammatical or arithmetical or of like nature, which can be detected without there being any necessity to reargue the matter or to reappraise the facts as appearing from the records.” Thus it is clear that section 254(2) cannot be applied to seek review of the ITAT order. Once it is pronounced, it becomes final and can rectify only the mistakes apparent on the record. - Decided against assessee. Issues: Rectification of mistake in ITAT order regarding the taxation of transfer of machinery as per section 56(2)(vii) of the Act.Analysis:The assessee filed a Miscellaneous Application (M.A.) seeking rectification of a mistake in the order passed by the ITAT regarding the taxation of a transfer of machinery under section 56(2)(vii) of the Income Tax Act. The ITAT order had sustained the addition of a sum of Rs. 15,79,809 as the transfer of machinery by an Individual to their HUF appellant was deemed assessable under the aforementioned section. The ITAT had interpreted the narrow definition of 'property' under explanation to section 56(2)(vii) and held that the transfer of machinery should be taxed under this provision. However, the assessee argued that the transfer between the assessee and the Individual should be exempt as it falls under the definition of 'relative' under the Act. The ITAT failed to consider this argument and also overlooked the legal effect of the clause excluding transfers between relatives. The appellant further contended that the transaction should be exempt under section 56(2)(vii) despite the CIT (A) misunderstanding the nature of the properties involved. The ITAT dismissed the M.A. stating that it cannot review its order under section 254(2) of the Act, as the order becomes final once passed, and rectification can only be made for mistakes apparent on the record. Therefore, the M.A. filed by the assessee was dismissed on this basis.