TaxTMI 
TaxTMI 
2025 (12) TMI 75
X X X X Extracts X X X X
X X X X Extracts X X X X
.... much confusions. For better appreciation and understanding, short facts are culled out as under:- 2.1. A scheme to provide dhotis and sarees for the poor was formulated by the Tamil Nadu State Government. Tamil Nadu Textile Corporation (TNTC), a state subsidiary, was entrusted with the responsibility of procuring them. A large scam erupted in the scheme, which led to a search being conducted by the Income Tax Department in the premises of TNTC. During the search proceedings, details of various third parties, including the appellant, pertaining to some transactions were found out, which resulted in the initiation of proceedings under Section 158BD of the Act. Pursuant to the notice issued to the assessee, a return of income was filed on 21.02.1997 declaring undisclosed income of Rs. 1,23,01,430/-. A revised return was filed on 11.08.1997 admitting the income of Rs. 1,44,59,230/-. The assessment was completed under section 143(3), fixing a total undisclosed income of Rs. 9,25,52,290/-. 2.2. The assessee filed appeal before the ITAT challenging the block assessment and by order dated 28.01.2005, ITAT set aside the block assessment and remanded the case back to the assessing aut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....adopted on the gross turnover or not. The Tribunal, by order dated 09.03.2012, disposed of the application by clarifying that 5% profit ratio suggested by the Tribunal would obviously relate to gross turnover. Though it was only a clarification that the profit ratio would be on the gross turnover, still the revenue filed an appeal and challenged the same in T.C.A.No.251 of 2013. 2.7. Thereafter, the revenue also filed a rectification petition in M.P.No.31(Mds)/2012 under section 254(2). The Tribunal reappraised the materials and observed that on an erroneous presumption that the income in the remand assessment by the AO has been determined by applying gross profit rate of 8%, whereas, the AO has reduced the original income by 1/3rd in a lump sum and had not adopted different rates for different items, concluded that the Tribunal has overruled crucial points and therefore the mistake has to be rectified. 2.8. On finding so, the Tribunal, by order dated 26.03.2013, determined the estimated income in the hands of the assessee afresh and modified the income of the assessee at 50% of the income determined in the original assessment. In effect, when the AO had granted 1/3rd deducti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce resulted in the enhancement of the taxable total income as well as challenged even by the Revenue in the pending tax case appeal in T.C.A.No.114 of 2015 ? and (iii) Whether the Appellate Tribunal is correct in law in passing the rectification order even though the review of the original order within the scope of Section 254(2) of the Act is not permissible legally as well as admittedly ?" TCA No.538 of 2021:- "(i) Whether the Appellate Tribunal is correct in law in interfering with the original order passed by them in the rectification proceedings initiated by the Revenue under Section 254(2) of the Act, which interference resulted in the enhancement of the taxable total income as well as challenged even by the Revenue in the pending tax case appeal in T.C.A.No.114 of 2015 ? and (ii) Whether the Appellate Tribunal is correct in law in passing the rectification order even though the review of the original order within the scope of Section 254(2) of the Act is not permissible legally as well as admittedly ?" 4. Heard Mr.A.S.Sriraman, learned counsel for the assessee and Mrs.V.Pushpa, learned Senior Standing Counsel for the Income Tax Departm....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "3.2. Having gone through both the orders passed by the ITAT, we are of the opinion that the order passed by the ITAT dated 18-11-2016 recalling its earlier order dated 6- 9-2013 is beyond the scope and ambit of the powers under Section 254(2) of the Act. While allowing the application under Section 254(2) of the Act and recalling its earlier order dated 6-9-2013, it appears that the ITAT has re- heard the entire appeal on merits as if the ITAT was deciding the appeal against the order passed by the C.I.T. In exercise of powers under Section 254(2) of the Act, the Appellate Tribunal may amend any order passed by it under sub-section (1) of Section 254 of the Act with a view to rectifying any mistake apparent from the record only. Therefore, the powers under Section 254(2) of the Act are akin to Order XLVII Rule 1 CPC. While considering the application under Section 254(2) of the Act, the Appellate Tribunal is not required to re-visit its earlier order and to go into detail on merits. The powers under Section 254(2) of the Act are only to rectify/correct any mistake apparent from the record. 4. In the present case, a detailed order was passed by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....beyond the record to see whether the judgment is correct or not. An error apparent on the record means an error which strikes one on mere looking and does not need a long drawn out process of reasoning on points on which there may be conceivably two opinions. The error should not require any extraneous matter to show its incorrectness. To put it differently, it should be so manifest and clear that no court would permit it to remain on record. If the view accepted by the court in the original judgment is one of possible views, the case cannot be said to be covered by an error apparent on the face of the record. Section 254(2) specifically empowers the Tribunal to amend at any time within four years from the date of an order, any order passed by it under section 254(1) with a view to rectify any mistake apparent from the record either suo motu or on an application. In order to attract the application of section 254(2), the mistake must exist and the same must be apparent from the record. The expression "mistake apparent from the records" contained in sections 154 and 254(2) has wider content than the expression "error apparent on the face of the record" occurring in Order 47 Rule 1 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... SCR 1104, CIT v. Keshri Metal (P.) Ltd. [1999] 237 ITR 165 (SC), Deva Metal Power (P.) Ltd. v. CIT 2008 (2) SCC 439, CIT v. Hero Cycles (P.) Ltd. [1997] 228 ITR 463 (SC), Satyanarayan Laxminarayan Hegde v. Mallik Arjun Bhavanappa Tirumale [1960] 1 SCR 890, Thungabhadra Industries Ltd. v. Government of Andhra Pradesh Rep. by the Dy. CCT AIR 1964 SC 1372, Batuk K. Viyas v. Surat Borough Municipality ILR 1953 Bom. 191, Umma Salma (K.T.M.S.) v. CIT [1983] 144 ITR 890 (Mad), Kil Kotagiri Tea & Coffee Estates Co. Ltd. v. ITAT [1988] 174 ITR 579 (Ker), CIT v. R.Chelladurai [1979] 118 ITR 108 (Mad.), State of Tamil Nadu v. Thakorebhai & Bros. [1983] 52 STC 104 (Mad.), Jainarain Jeevraj v. CIT [1980] 121 ITR 358 (Raj.), CIT v. Vardhaman Spg. [1997] 226 ITR 296 (Punj. &Har.), Bata India Ltd. v. Dy. CIT [1996] 217 ITR 871 (Cal.) and CIT v. Prahlad Rai Todi [2001] 251 ITR 833 (Gau.). 10. From the various judgments of the Supreme Court above referred to and other High Courts, it is clear that the Tribunal's power under section 254(2) is not to review its earlier order but only to amend it with a view to rectify any mistake apparent from the record. What can be termed as "mistake a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a fresh order cannot be passed effacing the original order, which is clearly impermissible. 14. In the instant case, pursuant to a remand, the block assessment order came to be passed under section 143(3) on 27.03.2006, fixing an undisclosed income of Rs. 6,17,00,860/-. The AO concluded that only a realistic estimate of net profit could be resorted to and an appropriate allowance of expenditure could be given based on the preponderance of probabilities. The assessee not being a regular trader, the likely realisation of profits higher than the normal levels cannot be ruled out. In such circumstances, the AO came to the conclusion that the assessee could not have earned 120% profit on the sale of uniform cloth, had as such allowed 1/3rd of the total income computed in the original assessment order towards probable expenses. Thereby, a sum of Rs. 3,08,50,430/- was allowed as expenses towards the total income of the original assessment at Rs. 9,25,51,290/- and the income was estimated at Rs. 6,17,00,860/-. 15. On appeal by the assessee, ITAT had considered the appeal on merits. The Tribunal rejected the claim of the assessee that the profit rate of 2.5% as disclosed by similar w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le and therefore, modified the income of the assessee at 50% of the income determined in the original assessment. 19. In our considered opinion, the rectification order dated 26.03.2013 by ITAT is erroneous, perverse and clearly exceeding its jurisdiction. In fact, the Tribunal, while considering the petition under section 254(2), had exercised the power of the appellate jurisdiction, which is impermissible and the order of the Tribunal is patently illegal and beyond its powers conferred under section 254(2). 20. When once the Tribunal had partly allowed the appeal by order dated 21.09.2011 and had directed the adoption of 5% profit ratio by modifying the assessment order, the Tribunal was not within its power to readjudicate the issues. The rectification order dated 26.03.2013 being perverse and in excess of the jurisdiction is unsustainable and it is accordingly set aside. 21. Insofar as the third rectification petition filed by the assessee in M.P.No.175/Mds/2014, seeks for reconsideration of the order dated 26.03.2013, the same was rejected by the Tribunal, which is challenged in T.C.A.No.319 of 2016. In view of the above conclusion setting aside the order dated 26.03.....