COMMISSIONER OF INCOME TAX v. MALWA TEXTURISING (P) LTD
[Citation -2006-LL-0720-1]

Citation 2006-LL-0720-1
Appellant Name COMMISSIONER OF INCOME TAX
Respondent Name MALWA TEXTURISING (P) LTD.
Court ITAT
Relevant Act Income-tax
Date of Order 20/07/2006
Assessment Year BLOCK PERIOD 1994-95 TO 20TH NOV., 1995
Judgment View Judgment
Keyword Tags kar vivad samadhan scheme • private limited company • reasonable opportunity • business premises • mistake apparent • original return • returned income • right to appeal • void ab initio • block period • kvss
Bot Summary: The Tribunal held in the said order that since the assessee had given his consent to the assessment order, it had lost the right to appeal against the said assessment order and hence the appeal filed by the assessee was not competent and was void ab initio. In the said order dated November 26, 2001, the Tribunal also observed that the assessee had no right to appeal and thus, the appeal shall be treated to have never been filed and the Department is free to take action against the assessee. Thereafter, the assessee filed an application under section 254(2) of the Act for correction of the said order dated November 26, 2001, of the Tribunal and the ground taken in the said application filed by the assessee was that under sub-section of section 90 of the Finance Act, 1998, the appeal should have been treated to have been withdrawn on the day on which the designated authority passed the order under sub-section of section 90 of the Finance Act, 1998 i.e., April 28, 1999, and that the Tribunal in passing the order dated November 26, 2001, to the effect that the appeal of the assessee was not competent and void ab initio and is to be treated to have never been filed, exceeded its jurisdiction. The said application under section 254(2) of the Act was registered as M. A. No. 8/IND/2003 and after hearing learned counsel for the parties at length, the Tribunal allowed the said M. A. by the impugned order dated January 16, 2004, and substituted paragraphs 10 to 12 of its appellate order dated November 26, 2001, with new paragraphs 10 and 11 holding that as the assessee had opted for the Kar Vivad Samadhan Scheme, 1998 and had paid the taxes settled thereunder, the appeal has to be treated as dismissed. Mr. Chaphekar, learned senior counsel for the assessee, on the other hand, submitted that the Tribunal had taken an incorrect view of the law in its appellate order dated November 26, 2001, and had lost sight of the fact that under sub-section of section 90 of the Finance Act, 1998, once the designated authority issued an order or a certificate under subsection of section 90 of the Finance Act, 1998, the appeal stood withdrawn by operation of the law. In the present case, we find from the records that a contention was raised on behalf of the assessee before the Tribunal at the time of hearing of the appeal that preliminary objections raised by the Department to the appeal filed by the assessee are only academic as the appeal stood withdrawn in the month of April, 1999 when the assessee obtained a certificate of settlement under the Kar Vivad Samadhan Scheme but such a conten tion raised by the assessee was turned down by the Tribunal with the following reasons: 10. The aforesaid view taken by the Tribunal may have been an erroneous view as contended by the assessee but the error if any in the order of the Tribunal could be corrected in an appeal before the High Court and not on an application under section 254(2) of the Act which is confined to only rectify the mistakes apparent from the record.


JUDGMENT judgment of court was delivered by A. K. Patnaik C. J. This is appeal against order dated January 16, 2004, passed by Income-tax Appellate Tribunal, Indore Bench, Indore in M. A. No. 8/IND/2003. facts briefly are that respondent (hereinafter referred to as assessee) is private limited company registered under Companies Act, 1956. On November 21, 1995, business premises of assessee were searched and pursuant to notice, assessee filed original return on July 2, 1996, for block period assessment year 1994-95 to November 20, 1995, disclosing nil income. Thereafter, it filed revised return showing income at Rs. 30,50,000 on November 26, 1996. Assistant Commissioner of Income- tax, Circle-1, Indore, assessed income at Rs. 30,50,000 on November 29, 1996, under section 158BC of Income-tax Act, 1961 (for short Act ). Aggrieved, assessee preferred appeal on December 30, 1996, before Income-tax Appellate Tribunal, Indore Bench, Indore (for short Tribunal) under section 253 of Act. When appeal was pending before Tribunal, Kar Vivad Samadhan Scheme, 1998 (for short KVSS ) was introduced by Finance (No. 2) Act, 1998. assessee submitted offer for settlement under Kar Vivad Samadhan Scheme and submitted declaration under section 89 of Finance (No. 2) Act, 1998 on January 30, 1999, in prescribed Form No. 1A in respect of block period 1994-95 to November 22, 1995. Commissioner of Income-tax, Indore (hereinafter referred to as designated authority ) determined amount payable and issued certificate on February 25, 1999, under section 90(1) of Finance (No. 2) Act, 1998, setting forth therein particulars of tax arrears and sum payable towards in full and final settlement of tax arrears and assessee paid amount of Rs. 13,72,700 by challan as directed in said certificate and intimated fact of such payment to designated authority. designated authority then issued certificate for full and final settlement of tax arrears under section 90(2) of Finance (No. 2) Act, 1998 in Form No. 3 on April 28, 1999. Tribunal, after hearing learned counsel for parties and after referring to authorities cited by learned counsel for parties held in its order dated November 26, 2001, that notwithstanding provisions of sub- section (4) of section 90 of Finance (No. 2) Act, 1998, it will have to decide preliminary question raised by Department that appeal filed by assessee was not maintainable. In order dated November 26, 2001, Tribunal, however, did not accept contention of Department that assessee not having paid tax on returned income, appeal was not maintainable in view of provisions of section 249(4) of Act. But Tribunal held in said order that since assessee had given his consent to assessment order, it had lost right to appeal against said assessment order and hence appeal filed by assessee was not competent and was void ab initio. In said order dated November 26, 2001, Tribunal also observed that assessee had no right to appeal and thus, appeal shall be treated to have never been filed and Department is free to take action against assessee. Thereafter, assessee filed application under section 254(2) of Act for correction of said order dated November 26, 2001, of Tribunal and ground taken in said application filed by assessee was that under sub-section (4) of section 90 of Finance (No. 2) Act, 1998, appeal should have been treated to have been withdrawn on day on which designated authority passed order under sub-section (2) of section 90 of Finance (No. 2) Act, 1998 i.e., April 28, 1999, and that Tribunal in passing order dated November 26, 2001, to effect that appeal of assessee was not competent and void ab initio and is to be treated to have never been filed, exceeded its jurisdiction. said application under section 254(2) of Act was registered as M. A. No. 8/IND/2003 and after hearing learned counsel for parties at length, Tribunal allowed said M. A. by impugned order dated January 16, 2004, and substituted paragraphs 10 to 12 of its appellate order dated November 26, 2001, with new paragraphs 10 and 11 holding that as assessee had opted for Kar Vivad Samadhan Scheme, 1998 and had paid taxes settled thereunder, appeal has to be treated as dismissed. This appeal of Department is against said order dated January 16, 2004, of Tribunal. At time of admission of appeal, court by its order dated July 15, 2004, formulated following two substantial questions of law for decision: 1. Whether Income-tax Appellate Tribunal was justified in allowing application made under section 254 of Income-tax Act made by assessee? 2. Whether any ground was made out for entertaining application made under section 254 of Income-tax Act and if so, whether these grounds satisfy requirement of section 254 of Income-tax Act, entitling Tribunal to rectify their main order passed in appeal? Mr. R. L. Jain, learned senior counsel for appellant Department submitted that under section 254(2) of Act, Appellate Tribunal has power only to rectify any mistake apparent from record but by impugned order, Tribunal has not just corrected mistake apparent from record, but has reconsidered contentions of learned counsel for parties, which were raised at hearing of appeal and passed fresh order holding in effect that appeal though competent has to be treated as dismissed in view of order/certificate issued by designated authority under section 90(2) of Finance (No. 2) Act, 1998. Mr. Chaphekar, learned senior counsel for assessee, on other hand, submitted that Tribunal had taken incorrect view of law in its appellate order dated November 26, 2001, and had lost sight of fact that under sub-section (4) of section 90 of Finance (No. 2) Act, 1998, once designated authority issued order or certificate under subsection (2) of section 90 of Finance (No. 2) Act, 1998, appeal stood withdrawn by operation of law. Section 254(2) of Act, which provides for rectification of any mistake apparent from record by Appellate Tribunal is quoted herein below: 254. Orders of Appellate Tribunal. (1).... (2) Appellate Tribunal may, at any time within four years from date of order, with view to rectifying any mistake apparent from record, of order, with view to rectifying any mistake apparent from record, amend any order passed by it under sub-section (1), and shall make such amendment if mistake is brought to its notice by assessee or Assessing Officer: Provided that amendment which has effect of enhancing assessment or reducing refund or otherwise increasing liability of assessee, shall not be made under this sub-section unless Appellate Tribunal has given notice to assessee of its intention to do so and has allowed assessee reasonable opportunity of being heard. Thus, under aforesaid sub-section (2) of section 254 of Act, Appellate Tribunal can only rectify any mistake apparent from record and cannot rehear appeal and reverse its findings on contentions raised by parties at time of hearing appeal. Furthermore, mistakes apparent from record would mean palpable mistakes on face of record and not mistakes which Tribunal will come to learn from long-drawn arguments advanced by learned counsel for parties. In present case, we find from records that contention was raised on behalf of assessee before Tribunal at time of hearing of appeal that preliminary objections raised by Department to appeal filed by assessee are only academic as appeal stood withdrawn in month of April, 1999 when assessee obtained certificate of settlement under Kar Vivad Samadhan Scheme but such conten tion raised by assessee was turned down by Tribunal with following reasons: 10. We have considered rival contentions carefully and have perused material on record and judgments relied on by parties. We do not agree with contention of learned Authorised Representative that in view of group having gone for Kar Vivad Samadhan Scheme and obtained certificate accordingly, preliminary objections raised by Revenue are only academic and appeals are deemed to have been withdrawn in month of April, 1999, only. This is so because Revenue has raised preliminary objections on issue whether assessee was competent to file these appeals or not and dispute is not regarding Kar Vivad Samadhan Scheme and effect thereof. Therefore, we will proceed to analyse and adjudicate preliminary objections raised by Revenue. Thus, it will appear from findings of Tribunal in appellate order dated November 26, 2001, quoted above that Tribunal was of view that Revenue had raised preliminary objection on issue whether assessee was competent to file appeal or not and that dispute before Tribunal was not regarding Kar Vivad Samadhan Scheme and effect thereof and therefore it will have to proceed to analyse and adjudicate preliminary objections raised by Revenue. aforesaid view taken by Tribunal may have been erroneous view as contended by assessee but error if any in order of Tribunal could be corrected in appeal before High Court and not on application under section 254(2) of Act which is confined to only rectify mistakes apparent from record. As matter of fact, we find that in impugned order dated January 16, 2004 of Tribunal on application filed by assessee under section 254(2) of Act that Tribunal has relied on decisions of Madras High Court in CIT v. D. P. F. Textiles Ltd. [2000] 241 ITR 548 of Bombay High Court in Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351 (Bom) [FB] of Allahabad High Court in Gauri Sahai Ghisa Ram v. CIT [1979] 120 ITR 338 and of Punjab and Haryana High Court in Chhat Mull Aggarwal v. CIT [1979] 116 ITR 694 to come to conclusion that assessee would have right to appeal even if additions were made on concessions made by assessee. We also find that in impugned order, Tribunal has relied on decision of Supreme Court in Dr. Mrs. Renuka Datla v. CIT [2003] 259 ITR 258 in which it has been held that if appeal is pending, it is not for designated authority to question possible outcome of appeal, etc., nor for High Court to hold that appeal was sham, ineffective or infructuous. Hence, it appears to us that in impugned order on application under section 254(2) of Act, Tribunal has reconsidered contentions of learned counsel for parties raised at time of hearing of appeal and has reversed its earlier finding in appellate order dated November 26, 2001, that appeal was not competent and was void ab initio and that fact that assessee had obtained certificate under Kar Vivad Samadhan Scheme would not bar obtained certificate under Kar Vivad Samadhan Scheme would not bar Tribunal to analyse and adjudicate preliminary objections of Department that appeal was not competent and void ab initio. Tribunal has thus reheard appeal before it and has taken different view on merits of contentions of parties in impugned order dated January 16, 2004, which was outside scope and purview of section 254(2) of Act. Hence, both substantial questions of law are answered in negative and in favour of Department and against assessee. In result, appeal is allowed and impugned order of Tribunal dated January 16, 2004, passed in M. A. No. 8/IND/2003 is set aside. *** COMMISSIONER OF INCOME TAX v. MALWA TEXTURISING (P) LTD.
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