Tribunal Rejects Application for Order Rectification; Emphasizes Limited Power to Rectify, Not Review Decisions.

S.S. Enterprises Versus Asst. Commissioner of Income Tax-25 (3), Mumbai

S.S. Enterprises Versus Asst. Commissioner of Income Tax-25 (3), Mumbai - TMI Issues Involved:
1. Alleged mistakes apparent from the record in the ITAT order dated 28/10/2019.
2. Reliability of the figures provided by the assessee.
3. Application of the matching principle and mercantile system of accounting.
4. Consideration of the assessee's explanations and submissions.
5. Tribunal's power to rectify its order under section 254(2) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Alleged Mistakes Apparent from the Record in the ITAT Order:
The assessee filed a Miscellaneous Application (MA) under section 254(2) seeking recall of the ITAT order dated 28/10/2019, alleging mistakes apparent from the record. The assessee argued that the Tribunal did not consider the explanation provided in the rejoinder regarding the difference in figures of anticipated loss, which was due to the presentation of Work-in-Progress (WIP) with and without 'profit declared in the earlier years'.

2. Reliability of the Figures Provided by the Assessee:
The Tribunal noted discrepancies in the figures provided by the assessee regarding the total cost incurred and the estimated loss on the project "S.S. House". The Tribunal observed that the figures Rs. 91,07,85,390/- or Rs. 97,88,86,048/- for total cost incurred and Rs. 3,95,51,736/- or Rs. 10,84,31,736/- for total estimated loss were not reliable due to the lack of supporting computation. The assessee's explanation that the difference of Rs. 6.81 crores was due to profit offered in earlier years was not considered sufficient to rectify the discrepancies.

3. Application of the Matching Principle and Mercantile System of Accounting:
The Departmental Representative (DR) argued that the reversal of profits declared in earlier years on account of estimated loss in WIP dislocated the mercantile system of accounting and the matching principle. The Tribunal agreed, stating that recording expenses in the same accounting period in which the revenues were earned is essential, and the assessee's reversal of profits did not adhere to this principle.

4. Consideration of the Assessee's Explanations and Submissions:
The Tribunal reviewed the assessee's explanations and submissions, including the reasons for cost escalation due to project delays and disputes. However, it found that no supporting details were filed before the Assessing Officer (AO). The Tribunal emphasized that the assessee's explanations were considered, but the decision was based on the entirety of the facts available on record.

5. Tribunal's Power to Rectify its Order under Section 254(2):
The Tribunal highlighted that its power under section 254(2) is limited to rectifying mistakes apparent from the record and does not extend to reviewing its own orders. The Tribunal referred to various judicial precedents, including the Supreme Court's decision in Honda Siel Power Products Ltd. v. CIT, which clarified that non-consideration of a decision of a co-ordinate Bench amounts to a mistake apparent from the record. However, in this case, the Tribunal found no such mistake and concluded that the assessee's request was essentially for a review rather than a rectification.

Conclusion:
The Tribunal dismissed the Miscellaneous Application, holding that the alleged mistakes were not apparent from the record and that the Tribunal had duly considered all explanations and submissions. The Tribunal reiterated that it does not have the power to review its own decisions under the guise of rectification under section 254(2). The order was pronounced in the open Court on 20/03/2020.