TaxTMI 
TaxTMI 
2011 (9) TMI 84
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Tax Appellate Tribunal was justified in modifying its earlier order. (B) Whether on the facts and in the circumstances of the case the findings of the Income Tax Appellate Tribunal in accepting the 'Miscellaneous Petition for rectification' of the department are wrong and perverse. (C) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that there is a mistake apparent from the record committed in its earlier order and thus liable for rectification. (D) Whether on the facts and in the circumstances of the case, the action of Income Tax Appellate Tribunal amounts to review of its earlier order passed after due deliberations to the past history, legal provisions, judicial pronouncements and due application of mind, and thus impermissible under the provisions of the Income Tax Act, 1961. (E) Whether on the facts and in the circumstances of the case, once the ITAT had granted a relief vide order passed under Section 254 (1) of the Income Tax Act, 1961 to the appellant which he was entitled as per law, was it justified in imposing unlawful taxes on appellant by way of rectification on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....55% of the receipts was considered as revenue receipt for the assessment year under appeal. 4. The order for the assessment year 1997-98 was passed on 29.2.2000 (Annexure A-2), however, the appellant was served with a notice (Annexure A-3) dated 18.3.2002 under Section 263 of the 'IT Act' by the Commissioner of Income Tax (Central) (for short 'CIT') who after considering the objections of the appellant vide its order dated 28.3.2000 (Annexure A-4) set aside the assessment order, treating the whole of the receipt taxable in the year when the membership fee was received, thereby treating the verdict of 'AO' erroneous and prejudicial to the interest of the revenue and giving direction to 'AO' to make it de novo. Being aggrieved, appellant preferred an appeal i.e. ITA No.219/Chandi/2002, which too was disposed of by 'ITAT' vide its order dated 11.3.2003 with directions and observations. 5. The respondent / revenue, being aggrieved, filed an appeal before this Court, namely, ITA No.40 of 2003 which is pending adjudication. The respondent / CIT (Central) preferred a miscellaneous petition under Section 254 (2) of 'IT Act' before 'ITAT' for rectification of its earlier order dated 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and considering the sum as of capital nature is concerned, the assessment order of M/s.Sterling Resorts is really silent on this point. We have no option but to accept the submission of Ld. Departmental Representative that the actions of 'AO' considering 45% of the receipts as of capital nature by relying on assessment order in case of M/s.Sterling Resorts was misplaced and had rendered the assessment order to that extent erroneous in nature. Further, this erroneousness having resulted in loss to the revenue, the assessment to that extent was erroneous so as to be prejudicial to the interest of the revenue. We, therefore, uphold the validity of order u/s 263 to that extent, though subject to our further findings on the issue." (Emphasis by appellant). (ii) In Paragraph-16 of its order, 'ITAT' further indicated in continuation to his observations made in Paragraph-11 (above). The contents of Paragraph-16 read as under:- "16. Coming to the 45% part of the receipts, which has been considered by the Commissioner not only as revenue nature but also as income in the current year alone, we, so far as the revenue nature is concerned, have already upheld the order....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n with which he initiated the proceedings u/s 263 of the Act and therefore, the same is bad in law and liable to be struck down. Respectfully following the decision of the Hon'ble High Court of Punjab & Haryana and in the facts and circumstances of the case we strike that portion of the order u/ s 263 of the Act, i.e. the findings of the Commissioner, relating to consideration of 55% of the receipts as income for current year are set aside / deleted." 9. The modification / rectification sought by revenue in the order dated 11.3.2003 (Annexure A-6) of 'ITAT' by way of MA No.91/Chandi/03 (Annexure A-5) are mainly on the grounds given as follows:- (i) The order of 'ITAT' is self contradictory: As in Para-11 of its order 'ITAT' is contradictory to Para-17, whereas, in Para-11, 'ITAT' has confirmed the order of 'CIT' in treating the 45% portion as revenue but in Para-17 it has directed that the same should not be taxed fully in the year of receipt as contended by Commissioner but be taxable proportionately over the period of lease / agreement. (ii) 'ITAT' cannot grant relief more than that claimed for: As the appellant during assessment had agreed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e such appeal is not so disposed of within the said period of stay as specified in the order of stay, the Appellate Tribunal may, on an application made in this behalf by the assessee and on being satisfied that the delay in disposing of the appeal is not attributable to the assessee, extend the period of stay, or pass an order of stay for a further period or periods as it thinks fit; so, however, that the aggregate of the period originally allowed and the period or periods so extended or allowed shall not, in any case, exceed three hundred and sixty five days and the Appellate Tribunal shall dispose of the appeal within the period or periods of stay so extended or allowed: Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceed three hundred and sixty five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee. (2B) The cost of any appeal to the Appellate Tribunal shall be at the discretion of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed to in sub-section (1) (7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section." Section 263 of the 'IT Act' reads as below: "(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation : For the removal of doubts, it is hereby declared that, for the purposes of this sub-section, - (a) An order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include - (i) An order of assessment made by the Assistant Commissioner or Joint Commis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mment upon 'tax implications' of the 'receipts of future years', meaning thereby the revenue receipt of 55% was to be spread over as income as per the scheme/agreement with each customer i.e. 33, 49 or 99 years as the case may be, so much so, it was imperative to mention that the remaining part of 55% pertaining to future years would be taxed proportionately in such future years. Whereas, there was no recommendation about the taxability of the receipts of subsequent years and same was wrongly understood by the revenue, and thus to this extent the filing of Miscellaneous Petition was misconceived as such the orders passed in pursuance thereof is erroneous; (iii) 'ITAT' has passed its initial order after a long discussion and thorough analysis of the subject matter and thus has erred in carrying out review of a debatable issue in the garb of rectification, which is impermissible as per observations of Hon'ble Supreme Court made in T.S. Balaram, I.T.O Company Circle IV versus Volkart Brothers &others (1971) 82 ITR 50 (SC). 12. In support of the above contentions, following submissions have also been advanced:- (A) In respect of issue that order of 'ITAT' is self c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eement runs so the receipt relating to the same should be proportionately taxed in those years. (C) It has also been submitted on behalf of the appellant that 'ITAT' can grant any relief. In support of such proposition, following submissions have also been made:- (i) In National Thermal Power Co.Ltd. Versus Commissioner of Income Tax, (1998) 229 ITR 383 (SC) Hon'ble Supreme Court has observed on the Powers of 'ITAT' as under:- "3. Under Section 254 of the 'IT Act' 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 purpose 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 nontaxable item is taxed or a permissible deduction denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uj), it has been observed that "Officers of the department must not take advantage of the ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officer should take the initiative in guiding a tax payer where proceedings or other particulars before them indicate that some refund or relief is due to him. (E) It has been submitted for and on behalf of the appellant that 'ITAT' has not actually given its opinion even for tax treatment of future years which is not in its domain. The contents of relevant Paragraph-19 of order of 'ITAT' are given as below:- "19. In view of above discussion, the order of the commissioner is modified as per observations / conclusions / findings / directions in the foregoing part of this order and the 'Assessing Officer' is directed to consider only the proportionate part of total receipts keeping in view the period of lease, in this assessment year and similarly in subsequent assessment years." (F) Learned counsel for the appellant has submitted that reference to 'subsequent years' in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r on appellant or on any Court and thus can be challenged / rebutted in higher forums. Central Council for Research in Ayurveda & Siddha & Another versus Dr.K.Santhakumari, (2001) 5 SCC 60 (Paragraph-12). In view of the foregoing submissions, learned counsel for the appellant has also vehemently submitted as below:- (a) The order dated 11.3.2003 of 'ITAT' is not self contradictory, if Paragraphs 11, 16 and 17 are read jointly and harmoniously; (b) 'ITAT' has granted only that much relief as the appellant herein was entitled to as per law and as per his income tax return; (c) 'ITAT' can even grant more relief than that claimed in the Income Tax Return in view of the decisions in 229 ITR 383 (SC), 187 CTR 212 (Guj) 128 ITR 486 (Guj). (d) The rectification regarding comment on 'subsequent years' is totally misconceived. (e) 'ITAT' has wrongly reviewed and thereby reversed its order in the garb of rectification. 15. When primary facts necessary for assessment were fully disclosed by the appellant, in such situation 'AO' was not entitled on change of opinion to commence proceedings for reassessment as observed by Hon'ble Supreme Court in [....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section (1) of section 254 confers ample powers on the Tribunal to pass such orders in any appeal filed before it as it thinks fit. Sub-section (2) of section 254 postulates that the Tribunal may amend any order passed by it under sub-section (1) of section 254 with a view to rectify any mistake apparent from the record. Thus, the power exercisable under sub-section (2) of section 254 is subject to two limitations. Firstly, it has to be confined to rectify any mistake apparent from the record and secondly it has to be confined to an order passed under sub-section (1) of section 254. Accordingly, it is apparent that the power exercisable under sub-section (2) of section 254 is not available to be exercised for amending any order passed by it under any section other than sub-section (1) of section 254. In other words, the power of the Tribunal conferred by sub-section (2) of section 254 for rectifying any mistake apparent from the record cannot be exercised by the Tribunal to recall any order passed by it under section 256 of the Act." 17. In Malabar Industrial Co. Ltd. versus Commissioner of Income Tax, (2000) 243 ITR 83, following observations are made:- "A bare reading....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... relevant to mention that in M/s.Northern India Caterers (India) Ltd. versus Lt. Governor of Delhi, AIR 1980 Supreme Court 674, it was held by the Supreme Court that the review is not for the purpose of a re-hearing or for making a fresh decision. The normal principle is that the judgment pronounced by the Court is final. The Supreme Court has observed in Para-8 which reads as below:- "8. It is well settled that a party is not entitled to seek a review of a judgment delivered by this Court merely for the purpose of a rehearing and a fresh decision of the case. The normal principle is that a judgment pronounced by the Court is final, and departure from that principle is justified only when circumstances of a substantial and compelling character make it necessary to do so. Sajjan Singh v. State of Rajasthan, (1965) 1 SCR 933 at p. 948. For instance, if the attention of the Court is not drawn to a material statutory provision during the original hearing, the Court will revise its judgment. G.L. Gupta v. D. N. Mehta, (1971) 3 SCR 748 at p. 760. The Court may also reopen its judgment if a manifest wrong has been done and it is necessary to pass an order to do full and effective....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t miscarriage of justice or to correct grave and palpable errors committed by it. But, there are definitive limits to the exercise of the power of review. The power of review may be exercised on the discovery of new and important matter or evidence which, after the exercise of due diligence was not within the knowledge of the person seeking the review or could not be produced by him at the time when the order was made; it may be exercised where some mistake or error apparent on the face of the record is found; it may also be exercised on any analogous ground. But, it may not be exercised on the ground that the decision was erroneous on merits. That would be the province of a Court of Appeal. A power of review is not to be confused with appellate power which may enable an Appellate Court to correct all manner of errors committed by the Subordinate Court," The Supreme Court has observed in the case of Satyanarayan Laxminarayan Hegde & Others versus Mallikarjun Bhavanappa Tirumale, AIR 1960 SC 137: (1960) 1 SCR 890, wherein K.C. Das Gupta, J., speaking for the Supreme Court has made the following observations in connection with an error apparent on the face of the record: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., for there is a distinction which is real, though it might not always be capable of exposition, between a mere erroneous decision and a decision which could be characterized as vitiated by 'error apparent'. A review is by no means an appeal in disguise whereby an erroneous decision is reheard and corrected, but lies only for patent error". In Lily Thomas, Etc. versus Union of India & Others, AIR 2000 SC 1650, the Supreme Court has held that mistake apparent on the face of the record cannot mean error which has to be fished out and searched. The words "any other sufficient reasons" has been elaborated and it means that "a reason sufficient on grounds at least analogous to those specified in the rule" and it was observed in para 52, para 55 and Para-57 which reads as below:- "52. The dictionary meaning of the word "review" is "the act of looking, offer something again with a view to correction or improvement. It cannot be denied that the review is the creation of a statute. This Court in Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji, AIR 1970 SC 1273 held that the power of review is not an inherent power. It must be conferred by law either specifi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fest defects in order to enable the decrees to be enforced, or have added explanatory matter, or have reconciled inconsistencies.' Basis for exercise of the power was stated in the same decision as under : 'It is impossible to doubt that the indulgence extended in such cases is mainly owing to the natural desire prevailing to prevent irremediable injustice being done by a Court of last resort, where by some accident, without any blame, the party has not been heard and an order has been inadvertently made as if the party had been heard.' 'Rectification of an order thus stems from the fundamental principle that justice is above all. It is exercised to remove the error and not for disturbing finality. When the Constitution was framed the substantive power to rectify or recall the order passed by this Court was specifically provided by Art. 137 of the Constitution. Our Constitution makers who had the practical wisdom to visualise the efficacy of such provision expressly conferred the substantive power to review any judgment or order by Art. 137 of the Constitution. And Cl. (c) of Art. 145 permitted this Court to frame rules as to the conditions subject to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... after the exercise of due diligence was not within their knowledge or could not be brought to the notice of the Court at the time of passing of the judgment. All pleas raised before us were in fact addressed for and on behalf of the petitioners before the Bench which, after considering those pleas, passed the judgment in Sarla Mudgal's case. We have also not found any mistake or error apparent on the face of the record requiring a review. Error contemplated under the rule must be such which is apparent on the face of the record and not an error which is to be fished out and searched. It must be an error of inadvertence. No such error has been pointed out by the learned counsel appearing for the parties seeking review of the judgment. The only arguments advanced were that the judgment interpreting S. 494 amounted violation of some of the fundamental rights. No other sufficient cause has been shown for reviewing the judgment. The words "any other sufficient reason appearing in O. 47, Rule 1, C.P.C." must mean "a reason sufficient on grounds at least analogous to those specified in the rule," as was held in Chhajju Ram v. Neki Ram, AIR 1922 PC 112 and approved by this Court in Mo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....proceedings in any miscellaneous application by way of clarification/ implementation, which provides fresh cause of action, however, there is no bar against seeking clarification if the order is not clear and the other party is trying to take undue advantage of the ambiguity. Hon'ble Supreme Court in Dinkar Sridhar Tamhankar versus Bhalchandra Sadashiv Kavadi, (2009) 7 SCC 514, has held rejection of review application justifiable when there was no error apparent on the face of record in reference to Order 47 Rule 1 CPC. Hon'ble Supreme Court in Inderchand Jain (D) Through L.Rs versus Motilal (D) through L.Rs, 2009 (9) SCALE-777, has elaborated the scope of review petition under order 47 Rule 1 CPC and Section 114 of CPC and has held that the review court does not sit in appeal over its own order. A re-hearing of the matter is impermissible in law. It constitutes an exception to the general rule that once a judgment is signed or pronounced, it should not be altered. It is also trite that exercise of inherent jurisdiction is not invoked for reviewing any order as the review is not appeal in disguise. 19. In our considered view, there was no error or mistake evide....