TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 89
X X X X Extracts X X X X
X X X X Extracts X X X X
....e on the merits of addition before the 3rd Member, as well. 2. Whether in sustaining the aforesaid additions, the Tribunal erred in law in not appreciating that there was no embargo for the third Member (as nominated by the Ld. President ITAT) to adjudicate the controversy on merits, as well and has erred in limiting the scope of reference by the Ld. President ITAT. 3. The connected Income Tax Appeal No.67 of 2013 arises out of an order dated 11.1.2013 passed by the Income Tax Appellate Tribunal, Agra Bench, Agra in M.A. No.03/Agra/2012 in ITA No.55/Agra/2007 for the assessment year 2003-04 by which a Miscellaneous Application filed by the assessee-appellant under section 254 (2) of the Act was dismissed. The appeal has been preferred on following substantial questions of law:- "1) Whether the Tribunal has committed error of law in dismissing the Application of the Assessee U/s 254 (2), holding that there was no occasion for it to deal with the merits of addition, in a case of reference of a ground of appeal to the third Member, who did not deal with the merits of such addition in his order. 2) Whether the Tribunal has committed error of law in holding that non-adjudication of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Goyal. He does not know his address, and that in any case he is not residing at 2250 Naya Bazar, Delhi. The assessee submitted that as per statement of Shri Amar Singh Pal, the donor is resident of Delhi and he has given the gift. The assessee was thereafter directed to be present in person for evidence regarding both the gifts. She did not appear and instead submitted her written statement. On these facts the Assessing Officer found that she had failed to prove the donations and added the amount to her income. 5. The CIT (A) confirmed the findings of the Assessing Officer that the assessee has not proved the validity and bonafides of the gift of Rs. 2 lacs each from Shri Jay Singh Yadav and Shri Gajanand Goyal. The CIT (A) discussed the entire evidence all over again in confirming the findings of the Assessing Authority. 6. In the second appeal the Judicial Member and the Accountant Member of the Income Tax Appellate Tribunal, Agra Bench, Agra recorded difference of opinion on a question of law to establish the genuineness of gifts. The Judicial Member held that before dealing with the issue as to whether the gifts are genuine or not, it was necessary to deal with the legal que....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, for whatever reason, not a part of its books of accounts), so that the same does not stand included in its accounts, the provisions of Section 69 of the Act would become applicable, so that this legal plea is by itself of no moment. Support for the purpose stands drawn from the decision in the case of CIT vs. Jauharimal Goel, 147 Taxman 448 (All.), wherein it stands clarified that the deposit in the assessee's bank account would stand to be covered u/s. 69 or s. 69A of the Act. The observations of the Hon'ble Court would apply with more force where the bank account is not disclosed or does not form part of the assessee's books of account, or the same stand not maintained, so that the provision of s.68 would not be applicable thereto. The Act, it is trite, must be read as a whole to discern its scheme. For our purpose, rather, what is required is a whole some study of the relevant provisions, i.e., of the said Chapter (VI) of the Act, which requires a satisfactory explanation from the assessee, for it to be not deemed as its income for the relevant previous year, qua any credit in its books, or any other asset or money or valuable, of which it is found to be owner, and which stan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oceed any further in the matter." 8. On the difference of opinion recorded between the Judicial and Accountant Members of the ITAT, Agra, they by order dated 16.2.2009 referred the matter to the President, ITAT to nominate a 3rd Member as per provisions of Section 255 (4) of the Act on the question as follows:- "3. That the Commissioner of Income Tax (Appeals) was wrong in confirming in disallowing the gifts received by the assessee Rs.4,00,000/- a. Shri Jay Singh Yadav Rs.2,00,000/- b. Shri Gajanand Goyal Rs.2,00,000/- as cash credit and to assess as income u/s. 68 of the Income Tax Act by the Ld. Income Tax Officer." 9. The President, ITAT nominated Shri G.E. Veerabhadrappa, Vice President as the 3rd Member, who heard the matter and recorded his opinion, which was an agreement with the discussions of learned Accountant Member. He found that learned Accountant Member appreciated the fact that the assessee is a wholesale cloth merchant doing the business under the name 'Shri Ganesh Traders', maintaining accounts, which stand duly audited under Section 44AB of the Act, as also her personal account, compiling final accounts in the form of a combined profit & loss account, capit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the transactions of Shri Ganesh Traders were subject to audit report of even date, which does not qualify the shortcoming or non-maintenance of any books of account. There were sufficient indication in the directions of maintenance of books of account by the assessee. Learned Judicial Member did not even deal with these and went by the legal arguments taken in this regard, which were not even mentioned in the order of CIT (A). He thereafter held in paras 11, 12 and 13 of his order as follows:- "11. Even if the assessee is technically taken to be not maintaining any books of account in relation to the passbook entries, it must be appreciated that the passbook credits have ultimately gone into the books of the assessee by way of credit in capital account as found by the learned AM. In any case, I refrain from getting into that aspect of the matter. The addition could very well be justified even under Section 69 of the Act. It is for the assessee to prove the sources of the credits in the bank account as the bank itself has acknowledged that the assessee has an asset in the form of credits in the passbook. It is only for this reason that the assessee ventured into furnishing the evi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tant Member, the appeal of the assessee is treated as dismissed, giving rise to Income Tax Appeal (Defective) No.36 of 2013. 13. The assessee filed an application under Section 254 (2) before the Income Tax Appellate Tribunal, Agra, which was dismissed on 11.1.2013, giving rise to the Income Tax Appeal No.67 of 2013. While dismissing the application under Section 254 (2) of the Act, the ITAT observed that the alleged mistake to be rectified under Section 254 (2), must be so obvious that it can be easily corrected, such as any arithmetic mistake, a wrong quotation of section, etc. A debatable issue cannot be considered as mistake to be corrected by the Tribunal, which has no powers to review its orders. Relying upon Hindustan Lever Ltd 284 ITR 42 (Cal) and Earnest Export Ltd 323 ITR 577 (Bom.) it was held that since the matter was referred to the 3rd Member, therefore, its is a decision like a decision passed by Special Bench of three Members and therefore, the subsequent Division Bench is not competent to comment upon the order passed by the 3rd Member. 14. Shri Abhinav Mehrotra submits that the Judicial Member had not adverted to the facts of the case and had not decided the que....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess of the gifts received by the assessee. To this affect the application under Section 254 (2) of the Act was maintainable. The ITAT should have rectified the mistake of having failed to decide the question of genuineness of the gifts on merits. The assessee has on the mistake committed by the ITAT lost an opportunity of second appeal on the question of genuineness of the gifts, which is a mixed question of law and facts. He would also submit that ITAT further erred in law in holding that the earlier order passed by it was an order passed by the Three Member Bench and thus the two Member Bench did not have jurisdiction to entertain the application under Section 254 (2) of the Act. He submits that the order after receiving the opinion of the 3rd Member cannot be treated as the order of three Member Bench. The order would in any case be of decision of Income Tax Appellate Tribunal, which could be rectified by the two Members, who had subsequently formed the Bench. 17. Shri Shambhu Chopra, on the other hand, submits that the ITAT had not only considered the question of law raised before it regarding the disallowance of the gifts received by the assessee so as to assess it as income ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e examined the order in the light of the questions raised before us and find that the Tribunal, after receiving the opinion of the 3rd Member, who had concurred with the Accountant Member, only decided the question of law. The question, as to whether disallowance was made under Section 68 and under Section 69 depended on the question as to whether the credit was shown in the books of accounts of the assessee. It was found that though the bank pass book is not a book maintained by the assessee for the purpose of Section 68, it made no difference whether Section 68 and Section 69 of the Act would be applicable. The assessee is a wholesale cloth merchant doing the business under the name of Shri Ganesh Traders, which was maintaining the accounts. The accounts stood audited under Section 44AB of the Act in respect of the business as well as personal accounts, which were compiled as final accounts in the form of combined profit and loss account, capital account and personal balance sheet and reflected the capital investments in Shri Ganesh Traders. The assessee had produced these accounts before the Assessing Officer and thus the Tribunal opined in its majority opinion of the Accountant....