1998 (12) TMI 115 - AT - Income Tax

Reassessment u/s147(b) and taxpayer submissions: tribunal rectifies earlier order that wrongly ruled on merits after allowing appeal

The dominant issue was whether the Tribunal's earlier order contained a 'mistake apparent from the record' warranting rectification. The Tribunal held ... Reopening of assessment u/s 147(b) - mistake apparent from the record - conversion of capital asset into stock-in-trade - HELD THAT:- By this application, the assessee has pointed out that the Tribunal has allowed the assessee's appeal on the ground of reopening of the assessment, which was held to be bad in law. However, instead of stopping at that stage, this bench went further and decided the appeal against the assessee on merits, which was not necessary. While doing so, certain mistakes apparent from the record have crept in the said order, which need rectification. It is the basic principle of jurisprudence that if there is a mistake committed by the Court or the Tribunal, it needs to be rectified as no one should suffer or come to grief on account of the mistake committed by the Court. Even the rules of procedure and technicalities should not come in the way in rendering the justice to parties by correcting the mistakes committed by Court or the Tribunal. Rectification of an order stems from the fundamental principle that justice is above all. It is exercised to remove error and not for disturbing finality. Once the jurisdictional issue was decided in favour of the assessee, there was no requirement/necessity to decide the other issues. Even otherwise, the Tribunal had proceeded to decide the alternate issue without referring to the written submissions of the assessee dated 7-5-1997. Had these been considered, perhaps the order of Tribunal would have been different. Therefore, latter part of the order of Tribunal suffers from patent mistake which has resulted in miscarriage of justice to the assessee on account of the adverse remarks damaging the reputation of the assessee who is one of the outstanding and reputed Industrialists of the Country. Such mistake therefore, needs to be rectified in view of the Supreme Court judgment in the case of S. Nagaraj [1993 (8) TMI 292 - SUPREME COURT]. Accordingly, the application filed by the assessee is allowed. Issues Involved:1. The validity of reopening of assessment u/s 147(b) of the Income-tax Act, 1961.2. The rejection of the claim for conversion of capital asset into stock-in-trade.3. The assessment of contribution of shares to the Partnership Firm as liable to capital gains.Summary:Issue 1: Validity of Reopening of Assessment u/s 147(b)The Tribunal held that the reopening of proceedings by the Assessing Officer on 20-2-1985 was 'bad in law' and quashed the reassessment order dated 19-2-1986. This decision was based on the comprehensive evaluation of the facts and circumstances of the case.Issue 2: Rejection of the Claim for Conversion of Capital Asset into Stock-in-TradeThe Tribunal initially decided against the assessee on the merits of the case, stating, 'On merits, therefore, the case is decided against the assessee.' However, this decision was later contested by the assessee, arguing that the Tribunal should not have addressed the merits after quashing the reassessment order.Issue 3: Assessment of Contribution of Shares to the Partnership Firm as Liable to Capital GainsSimilar to the second issue, the Tribunal initially ruled against the assessee on the merits. The assessee contended that the Tribunal's remarks on the merits were unnecessary and prejudicial, especially since the reassessment order had already been quashed.Rectification Application:The assessee filed a rectification application, arguing that the Tribunal should not have decided on the merits after quashing the reassessment order. The Tribunal acknowledged the mistake, citing the judgment of the Calcutta High Court in Rawatmal Harakchand v. CIT, which states that once an appeal is decided on a preliminary ground, the merits should not be addressed.Tribunal's Decision on Rectification:The Tribunal recognized the error and rectified its order by deleting paragraphs 17 to 30, which contained the adverse remarks on the merits. The Tribunal substituted paragraph 31 with a new paragraph 17, stating, 'In view of our finding in the preliminary ground, it is not necessary for us to go into the merits of the case.'Conclusion:The Tribunal allowed the rectification application, emphasizing that the purpose of the Tribunal is to render justice and not to negate it. The appeal was ultimately allowed in favor of the assessee, focusing solely on the preliminary issue of the invalid reopening of assessment.