Judgment:
1. This miscellaneous application has arisen out of the order dt. 28th May, 2001, for the asst. yr. 1995-96 in ITA. No. 177/Jdpr/1998.
2. The appellant has moved an application under Section 254(2) of the IT Act, 1961 for amendment or direction and rectification of mistake apparent on the face of the record. The appellant has requested for amendment or direction issued in para 28 at p. 28 of the order for the asst. yr. 1995-96. Para 28 at p. 28 of the order reads as under: Before we part with this order, we may specify, for the sake of clarity that if the assessed income for any of the years involved in these appeals falls below the returned income after giving effect to this order, the AO is directed to restrict the same to the income returned by the assessee for the year.
3. The brief facts of the case are that the assessee claimed sales-tax deduction as separate deduction from the profit computed from the application of net profit rate. The learned CIT(A) allowed the claim which was disputed by the Department in its appeals and, while dealing with the issue relating to admissibility of claim of sales-tax from the profit estimated by application of net profit rate, the Tribunal in para 14 at pp. 14 to 17 decided the issue by holding as under :- As regards the nature and character of sales-tax levied by the Government of Rajasthan on the civil contractor, we find from the written note furnished by the learned counsel for the assessee that the sales-tax is deducted by the Government authorities while making the payment to contractor, on the total contract value at the rates prescribed by the State Government from time to time. Thereafter the contractor-assessee files return in the prescribed form giving all the required details for the relevant period and the assessment is completed by levying sales-tax on the value of goods procured from mines by the contractor by employing own labour and also on the value of goods purchased from outside the territory of Rajasthan.
After adjusting this sales-tax liability against the sales-tax collected/deducted directly from the contract value, the surplus, if any, is refunded by the Government to the contractor. Prom these features of the sales-tax scheme applicable to the contractor in the State of Rajasthan, it becomes evident that the sales-tax has been in fact levied on certain purchases as mentioned hereinabove and it is not directly related to the contract value although deduction/collection of the same is made from the contract value at the prescribed rates. Secondly it also comes out very clear 'that the said tax is levied on the value of some type of purchases and the same being direct charge on the purchases, forms part of the purchase cost. In these circumstances we are of the opinion that the said sales-tax forming part of the purchase value is a direct expense of the contract account and this being the position, the same cannot be considered separately for allowing the deduction from the income estimated by applying the net profit rate. Thirdly, the liability towards such sales-tax, being levied on certain type of purchases, is limited and restricted and the same alone is an actual expenditure of the assessee relating to the contracting business.
The balance amount collected/deducted in excess of the actual liability by the Government becomes receivable to the assessee and this amount of refund due from the Government can be ascertained to a great precision by the assessee-contractor from his record of purchases for the relevant year and accordingly the actual liability on account of sales-tax, being the expenditure of the relevant year, is deductible against the corresponding income. In the present case, the assessee-firm wrongly debited the entire amount of sales-tax deducted by the Government authorities from contract receipts to the P&L a/c instead of debiting the actual liability and showing the balance amount deducted in excess, of the actual liability as receivable (refund due) from the Government In our opinion, such wrong accounting treatment given by the assessee in its books of account cannot change the fact that the sales-tax to the extent of actual liability alone was the expenditure of the assessee deductible against the income from contracting business of the corresponding year. However, as the book results of the assessee-firm were rejected by the AO and the income was determined by applying a net profit rate, this issue was not examined by the AO independently and resultantly all the expenses actually deductible as per law were treated as allowed. Obvious as it is, what ultimately allowed was the actual liability of the sales-tax and not the entire amount wrongly claimed by the assessee-firm as expenditure. It is observed that the learned CIT(A) has directed the AO to allow separate deduction on account of sales-tax in assessee's case for asst. yr. 1995-96 stating that the Tribunal, Jaipur Bench had been allowing such deductions. We, however, find that the learned CIT(A) has not specifically referred to any such decision of Tribunal, Jaipur Bench, in his impugned order nor the same has been brought to our notice by the learned counsel for the assessee during the proceedings before us. Be that as It may, this issue is purely a factual issue of the present case including the nature and character of the sales-tax and after taking into consideration the entire fact-situation of the case as well as keeping in view the reasons given by us hereinbefore, we are of the considered opinion that no separate deduction in respect of sales-tax can be allowed in the present cases from the income of the contracting business determined by applying the net profit rate. We, therefore, uphold the impugned order of the learned CIT(A) dt. 13th March, 1995 for the asst. yr.
1992-93 and reverse that for the asst. yrs. 1994-95 and 1995-96, dt.
3rd Nov., 1997 and 14th April, 1998, respectively on this issue.
Accordingly ground No. 3 of the assessee's appeal being ITA No. 821/95 is dismissed whereas ground No. 2 (sub part) and ground No. 1 (sub-part) of Revenue's appeal being ITA Nos. 177/1998 and 288/1998, respectively are allowed.
4. In ITA No. 177/Jdpr/1998 for the asst. yr. 1995-96, the assessee disputed the inclusion of amount to sales-tax refunded to the appellant. This deduction was claimed even after inclusion of the same in the return of income before the learned AO as well as before the learned CIT(A) on the ground that the learned AO has not allowed the deduction of sales-tax separately and as such the same cannot be charged to tax for the year under appeal. This issue was decided by the Tribunal in para 21 to 24 at pp. 25 to 27 of the order by holding as under : 21. Issue No. 5 relates to the addition of Rs. 13,30,489 on account of sales-tax refund treating the same as income of the assessee under Section 41(1). This issue is raised by the assessee in ground No. 2 of the ITA No. 177/Jdpr/1998.
22. After considering the rival submissions and perusing the relevant material on record it is observed that the assessee-firm received sales-tax refund of Rs. 13,30,489 related to asst. yr.
1992-93 and 1993-94 in the year under consideration and the same was credited by the assessee-firm in the P&L a/c as income of the relevant year. While finalising the assessment for asst. yr. 1995-96 the AO rejected the book results declared by the assessee and determined the income of the assessee from contracting business by applying net profit rate. He also included the sales-tax refund received by the assessee-firm amounting to Rs. 13,30,489 separately as income of the assessee from business under the deeming provisions of Section 41(1) of the Act considering that the deduction in respect of sales-tax was allowed to the assessee in the relevant years in which the sales-tax amount was debited in the P&L a/c as expenditure by the assessee. For this action, he derived support from the decisions reported in CIT v. Agarpara Co. Ltd. , CIT v. Taj Gas Service and carried before the learned CIT(A) who upheld the action of the AO and confirmed the addition made by him on this count.
23. We have heard both the sides and perused the relevant records.
While considering the issue of allowability of sales-tax separately from the income estimated by applying the net profit rate, we have already discussed in the preceding paras of this order the relevant main features of the scheme framed by the State Government levying sales-tax on the civil contractors. The same being relevant, are reproduced hereunder: (a) Sales-tax is levied on the value of some type of purchases and as such the same forming part of purchase value is the expenditure of the assessee-contractor only to the extent of actual liability.
(b) Although the said sales-tax is collected/deducted from the contract value at the prescribed rate, the surplus of such collection/deduction after adjusting the actual liability is refunded to the contractor in the subsequent period after completion of assessment.
(c) The amount of actual liability towards the sales-tax as well as the refund due from the Government, if any, can be ascertained with a great precision from the record of the assessee for the relevant year.
24. In the light of the aforesaid features of the sales-tax scheme, we have opined that the actual liability towards sales-tax, being the expenditure of the relevant year and even though the assessee-firm wrongly debited the entire amount of sales-tax deducted from contract value of Government authorities, instead of claiming the deduction only to the extent of actual liability and showing the balance amount deducted in excess of actual liability as receivable from the Government, considering the fact that the book results were rejected by the AO and the income was estimated by applying a net profit rate, what ultimately stood allowed was the actual liability towards the sales-tax, being the admissible expenditure of the relevant year and not the entire amount wrongly claimed by the assessee-firm as expenditure. Needless to observe that the surplus amount deducted/collected by the Government authorities towards sales-tax from the payment made to the assessee-firm was neither allowed nor treated to have been allowed as expenditure incurred by the assessee in any year and that being the position, refund of the same in the subsequent year cannot be charged to income tax as the income of that previous year under the deeming provisions of Section 41(1). The case reported in CIT v. Agarpara Co. Ltd. (supra), CIT v. Taj Gas Service (supra) and Travancore Cements Ltd. v. CIT (supra) relied upon by the AO are thus distinguishable on facts in view of the distinct nature and -character of sales-tax refund involved in this case. We, therefore, reverse the impugned order of the learned CIT(A) on the issue and direct the AO to delete the addition made on this amount.
5. The learned Authorised Representative made the following submission : (i) That the perusal of the finding recorded in para 24 at pp. 26 and 27 of the order clearly shows that the Hon'ble Tribunal directed to delete the addition made by the learned AO and confirmed by the learned CIT(A) on account of refund of sales-tax amounting to Rs. 13,30,489 from the total income assessed.
(ii) That in para 28 at p. 28 of the order, the Hon'ble Tribunal issued the following directions to the learned AO to restrict the income to the extent returned by the assessee for the year.
"Before we part with this order, we may specify for the sake of clarity that if the assessed income for any of the years involved in these appeals falls below the returned income after giving effect to this order, the AO is directed to restrict the same to the income returned by the assessee for the year".
6. The direction issued by the Hon'ble Tribunal in para 28 is a mistake apparent from record insofar as it relates to the asst. yr. 1995-96 in ITA No. 177/JDPR/1998 as the sales-tax amount paid was not allowed as deduction to the appellant and the relief allowed by the learned CIT(A) was reversed by the Hon'ble Tribunal and in the light of the above facts the direction issued in para 28 so far as it relates to asst. yr.
1995-96 amounts to the confirmation of the addition which stand deleted by the Hon'ble Tribunal by para 24 at pp. 26 and 27 of the order.
7. The combined order reversing the decision of the learned CIT(A) in allowing sales-tax separately and inclusion of the same even after deletion amounts to double taxation Thus, there is an apparent mistake and contradiction in the finding of the Hon'ble Tribunal for the asst.
yr. 1995-96 in ITA No. 177/Jdpr/1998 and the restriction imposed by para 28 of the order, so far as relates to the asst. yr. 1995-96 required to be deleted as the same is apparent on the face of the record.
8. The learned Authorised Representative submitted that his contention finds support from the following judgements :Rampur Distillery & Chemicals Co. Ltd. v. CIT (1991) 91 CTR (SC) 1 : (1991) 187 ITR 561 (SC) 9. The learned Departmental Representative contended that there was no mistake apparent from record. The decision has been taken on merit.
This Bench of the Tribunal had been taking constant view that the assessed income involved in the year under appeal should not fall below the returned income after allowing necessary relief by the order of this Bench of Tribunal. He also submitted that there was no mistake apparent from record as contemplated in sub-section (2) of Section 254 of the Act.
10. We have considered the rival submissions and perused the order of this Bench, dt. 28th May 2001, in the case of the appellant. In appeal for the asst. yr. 1995-96 in ITA No. 177/Jdpr/1998, the assessee had disputed the inclusion of sales-tax refund in the income of the appellant, Thus, the deduction was claimed even after the inclusion of the same in the return of income. This issue was decided by the Tribunal in paras 21 to 24 at pp. 25 to 27 of the order wherein it was held that the sales-tax refund cannot be charged to tax as deemed income of the appellant under Section 41(1) of the Act. This view was also subsequently confirmed by the Hon'ble jurisdictional High Court through their order, dt. 18th April, 2002 [reported as CIT v. Bhawan Va Path Nirman (Bohia) & Co. (2002) 178 CTR (Raj) 526--Ed.]. This Bench of Tribunal in para 28 had issued the direction that if the assessed income for any of the years involved in the appeals falls below the returned income after giving effect to this order, the . AO was directed to restrict the same to the returned income by the assessee for that year. The learned Authorised Representative submitted that the direction issued by the Tribunal in para 28 is a mistake apparent from record so far as it relates to the asst. yr. 1995-96 in ITA No.177/Jdpr/1998 as the sales-tax refund was not considered as deemed income of the appellant and the relief allowed by the CIT(A) was reversed by the Tribunal when, it issued direction that the relief allowed should not reduce the returned income, 11. The learned Authorised Representative relied upon the judgement of Rampur Distillery & Chemicals Co.. Ltd. (supra). In 'this connection it is pertinent to quote relevant portion from pp. 567 and 568 of the judgement which reads as under : Accordingly, we hold that the High Court committed a clear error in holding that the amount in question is includible in the asst. yr.
1957-58. We have no hesitation to hold that the companies must be deemed to have paid, credited or distributed to its shareholders and the divided income of the assessee fell to be taxed in the asst. yr.
1952-53 and not in the asst. yr. 1957-58.
12. The learned Authorised Representative also relied upon the case of CIT v. Bharat General Reinsurance Co. Ltd. (supra). It is, pertinent to reproduce the relevant portion from pp. 307 to 308 of the judgement: " Merely because the assessee wrongly included the income in its return for a particular year, it cannot confer jurisdiction on the Department to tax income in that year even though legally such income did not pertain to that year. We are, therefore, of the view that the income from the dividend was not assessable during the asst. yr. 1958-59, but it was assessable in the asst. yr. 1953-54.
It cannot, therefore, be taxed in the asst. yr. 1958-59.
13. The learned Authorised Representative also relied upon the case of C.P.A. Yoosuf v. ITO and Anr. (supra) In this case it was held that the agricultural income was not at all taxable. Therefore, the order of the AO may be rectified.
14. In the case of Pt. Sheo Nath Prasad Sharma v. CIT (supra) it was held that when a particular item of income was not assessable the CIT should have excluded the same while passing the revision order. -- - 15. From perusal of the judgement at Sl. Nos. 1 and 2, it is evident that particular item of income was held to be assessable not in the year under appeal, but in another year. In the case at Sl. No. 3, there was a case of agricultural income and the facts were distinguishable.
In the case at Sl. No. 4 it was a case of revision petition before the CIT.16. After perusal of the judgement, we find that in none of these judgements it was held that the assessed income can fall below the returned income after giving appeal effect. Besides, these judgements are not direct on application of Section 254(2) of the Act, (2) The Tribunal may, at any time with four years from the date of order with a view to rectifying any mistake apparent from the record amend any order passed by it under Sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the AO.CIT v. Anamika Builders (P) Ltd. , where the Tribunal having decided that the rental income from unsold flats was assessable as income from property reversed such view and treated it as business income in an order purporting to be an order of rectification under Section 254. The Hon'ble High Court pointed out that where a possible view has been taken in the original order, a miscellaneous petition cannot justify reversal of such view Where the Tribunal had taken the view on the merits that the security deposit received by an assessee is its income, it cannot recall the order and come to a contrary conclusion as was pointed out in CIT v.Ideal Engineers . The power under Section 254(2) is not intended to correct a decision on the merits.
19. We find that this Bench of Tribunal had constantly been holding that if the assessed income falls below the returned income after giving effect to the order of the Tribunal, the AO should restrict the same to the income returned by the assessee. This decision was rendered in the case of ITO v. New Mitharwal Construction Co. (2001) 72 TTJ (Jd) 533. We find that this Bench of the Tribunal has decided this issue on merits and there is no mistake apparent from record as contemplated in Sub-section (2) of Section 254 of the Act.
1. I have gone through the order of learned AM but I am not in a position to agree with the view taken by him.
2. The facts already stand mentioned in the above order. In para-18 of the above order, the learned A.M. has made the relevant discussion by referring to CIT v. Anamika Builders (P) Ltd and CIT v. Ideal Engineers and concluded in para 19 of the above order by referring to a decision of this Bench rendered in ITO v.New Mitharwal Construction Co. (2001) 72 TTJ (Jd) 533 that "this Bench of the Tribunal has decided this issue on merits and there is no mistake apparent from record as contemplated in Sub-section (2) of Section 254 of the Act". The learned AM has accordingly dismissed the petitioner-assessee's miscellaneous application whereby the petitioner has sought this Tribunal to rectify its appellate order dt. 28th May, 2001 for the reason that in Tribunal's aforesaid appellate order the Tribunal has directed the deletion of addition of Rs. 13,30,489 being the amount of sales-tax refund vide para 24 of the said order, whereas the Tribunal has directed the AO to restrict the assessed income to the extent of income returned by the assessee for the year vide para 28 of the order and thus there is a mistake apparent from record in para 28 of the order. It has been the contention of the learned Authorised Representative of assessee-petitioner that in assessee's appeal for asst. yr. 1995-96, being ITA No. 1777 Jdpr/1998, the assessee had disputed the addition of sales-tax refund amount of Rs. 13,30,489 made by way of inclusion in the total income of assessee and the Tribunal, vide para 24 of the order, held "that the surplus amount deducted/collected by the Government authorities towards sales-tax from the payment made to the assessee-firm was neither allowed, nor treated to have been allowed as expenditure incurred by assessee in any year and that being the position, refund of the same in the subsequent year cannot be charged to income-tax as the income of that previous year under the deeming provisions of Section 41(1)." The Tribunal, accordingly, reversed the impugned order of learned CIT(A) and directed the AO "to delete the addition made on this "amount". From the perusal of record, I find that in the assessee's very case for the very same asst. yr. 1995-96, the Hon'ble High Court has, in DB IT Appeal No.2/2002, under Section 260A of IT Act, 1961, against the Tribunal's impugned appellate order, dt. 28th May, 2001, held in the last but one para on p. 12 of their judgment as under: As a result of the aforesaid discussion, we are of the opinion that the basic condition for invoking Section 41(1)(a) of the Act has not been satisfied in the case. The amount of sales-tax refund in the hands of the assessee during the previous year relating to the assessment year, in question, cannot be deemed to be income of that year, merely on the basis of drawing inferences that it might have allowed as deducted in the earlier assessment years.
The Hon'ble High Court accordingly dismissed the Revenue's appeal. In the said appeal of Revenue, the issue was contained in question No. 2, which is as under : 2. Whether on the facts and circumstances of the case, the Tribunal was justified in giving the relief on account of the sales-tax refund which was credited by the assessee-firm itself in his P&L a/c and declared it as the part of its income under Section 41 of the Act.
3. As seen above, it is clear that this Tribunal has decided the issue regarding inclusion of sales-tax refund in total income of assessee, in favour assessee-appellant and against the Revenue after elaborate discussion on merits, and the Hon'ble High Court has upheld the same with the result that the above decision of Tribunal stands merged with the judgment of the Hon'ble High Court whereby the final decisive position that emerges legally settled is that the amount of sales-tax refunded to assessee (which had been collected by' the Government authorities in excess) cannot be included in the total income of assessee-appellant. In this case, a direction of the Tribunal, if there be any, to the contrary, or for that matter, to the effect that a part of the said sales-tax refund amount may be included in the total income of assessee, or to express it with more clarity and in specific, to include such part of the said sales-tax refund amount in assessee's total income as may be needed to bring the assessed income equal to the income returned by assessee, in case otherwise the assessed income, resulting by giving effect to the appellate order of the Tribunal, falls below the returned income, will obviously undeniably offend against the abovementioned legally settled final decisive position that the sales-tax refund amount cannot be included in assessee's total income and that the addition made by AO on account of sales-tax refund amount and sustained by learned CIT(A) stands deleted accordingly.
4. Now I may consider the Tribunal's direction regarding restricting the assessed income to the returned income and not to allow the assessed income to go below returned income if the same tends to so fall down as a result of giving effect to the appellate order of the Tribunal, I may observe, with all the humbleness at my command, that no provision of law has been brought to my knowledge, which mandates that the assessed income cannot fall below the returned income. It may hardly be denied that the obligation of the tax authorities, under law, is to tax the income of assessee correctly, that is to tax correctly the assessee's taxable income. The charging section for income-tax is Section 4 of the Act, which provides that the income-tax shall be charged for any assessment year in accordance with and subject to the provisions of IT Act, 1961 in respect of the total income of the previous year. The term 'total income has been defined in Section 2(45) of the Act as under : total income means the total amount of income referred to in Section 5 computed in the manner laid down in this Act; Computing the total amount of income, referred to in Section 5, in accordance with the provisions of IT Act, 1961, does inhere, by necessary implication, the computation to be made correctly or to make a correct computation of assessee's taxable income so as to charge tax on correctly computed total income of assessee. This being the legal position, it follows as a corollary that if the assessee has, due to ignorance/inadvertence/mistake or otherwise, incorrectly/wrongly computed his income in the return of income filed by him and on the basis of the particulars/details evidently available on record, the AO finds the assessee to be lawfully entitled to some relief, the AO is expected and rather has a duty cast on him, under law, to allow the said relief to the assessee and to charge tax on the correct taxable income of assessee by correctly computing the assessee's taxable income on the basis of the details/particulars available on record, despite a wrong computation of income by assessee, through mistake/ignorance or otherwise. This position, as it applies to an upward/enhancing, by AO, of the income of assessee as declared in the return, will equally apply in the downward/reducing, by AO, of the income of assessee as declared in the return. To take an example, say if the assessee has actually earned an income of Rs. 9 lakhs but the assessee has declared an income of Rs. 10 lakhs in the return, as, by mistake, the assessee has included a particular income, say interest income, of Rs. 1 lakh twice, which has brought the total income of assessee, so computed, to the figure of Rs. 10 lakhs, which the assessee has shown accordingly in the return. All the relevant details/particulars are available on record.
Should, in such an illustrative situation, be said that the assessed income must remain at Rs. 10 lakhs, and it cannot be at Rs. 9 lakhs as in that eventuality the assessed income will fall below the returned income? If it were to be so, proceeding too technically the result will be an obvious mockery/absurdity. Here, relevant as it seems tome, I may refer with advantage to a judgment of Hon'ble Supreme Court in the case of National Thermal Power Co. v. CIT wherein the Hon'ble apex Court of the land has held that the purpose of assessment proceedings is to assess correctly the tax liability in accordance with law. It has been held therein that if a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee be prevented from raising that question before the Tribunal for the first time, so long as relevant facts are on record in respect of the item.
It has also been held therein that there is no reason why the Tribunal should not allow a question to be raised when it is necessary to consider that question to correctly assess tax liability. I may also refer to another judgment of the Hon'ble Supreme Court in the case of Kapoorchanp Shrimal v. CIT , wherein the Hon'ble Court has held that it is well known that an appellate authority has the jurisdiction as well as the duty to correct all the errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred.
5. In ITO v. Estate of Late K.S. Engineer (2001) 70 TTJ (Mumbai) 161, Tribunal, Mumbai has held that "A receipt cannot be taxed merely because the assessee has offered the same for assessment". In CIT v.Bharat General Reinsurance Co. Ltd. , it has also been held that "where the assessee included dividend income in the return, but later challenged the validity of taxing the same in the year in question, it must be taken that the assesses had resiled from the position it has erroneously taken while filing the return. In CIT v.Bakelite Hylam Ltd. , in the summary assessment made under Section 143(1)(a) on 11th June, 1990, the returned income of Rs. 2.32 crores was accepted resulting in a refund of Rs. 1.08 crores.
However, in subsequent regular assessment made under Section 143(3) on 27th March, 1992, the AO determined the taxable income at Rs. 1.76 crores, resulting in a further refund of Rs. 44.82 lakhs. The Revenue was of the view that the income assessed under Section 143(3) could not be assessed at a figure lower than the returned income, nor the loss could be assessed at a figure higher than the returned loss, nor a further refund could be given. The CIT initiated revisional proceedings under Section 263 and rejecting the objections of assessee, passed his revisional order on 17th March, 1993 directing the AO to modify the assessment order in such a way that the income determined would not be less than the returned income and no refund shall arise thereby. In assessee's appeal against the above, Tribunal, Hyderabad, allowed the appeal and set aside the CIT's order dt. 17th March, 1993 passed under Section 263. Against the above order of the Tribunal, Department's reference applications under Section 256(1) and 256(2) were rejected by the Tribunal, and the Hon'ble High Court respectively. In Gujarat Gas Co. v. Jt. CIT the fact-situation was that the CBDT had issued Instruction/Circular No. 549 relevant para 5.12. dt. 31st Oct., 1989 - [(1990; 82 CTR (St) 1 : (1990) 182 ITR (St) 1} directing that in scrutiny assessments the income not be assessed at a figure lower than the returned income, nor the loss to be assessed at a figure higher than the loss, nor further refund to be given except what was due on the basis of returned income. In the circumstances, the Hon'ble Gujarat High Court propounded the legal position that the proceedings before AO are judicial proceedings. It has been held that the AO exercises quasi-judicial functions and a duty is cast upon him to act in a judicial and independent manner, other authorities cannot control or affect his judgment in the matter of assessment. The Hon'ble High Court held that the order of AO, to the extent it stated that the total income should the returned income, was to be set aside, with a direction to the AO to make assessment without keeping in mind the CBDT's circular dt. 31st Oct., 1989. Thus, the Hon'ble High Court directed the AO to ignore even the CBDT's Circular which directed the AOs not to let the assessed income fall below the returned income.
In Smt. Gopi Devi v. ITO (1988) 31 TTJ (Del) 378 : (1989) 28 ITD 50 (Del), Tribunal, Delhi, has held as under : The assessments for the relevant years were framed without allowing the assessee, deduction under Section 80U to which she was entitled: The assessment was, therefore, not in accordance with and subject to the provisions of the Act and was thus erroneous. Accordingly, there was a mistake apparent from the record and that mistake was not only an obvious and patent one but glaring and floating on the surface.
The assessment ought to have been framed after allowing the assessee relief provided under Section 80U. By invoking Section 154, the predecessor ITO had rectified this mistake.
The successor ITO withdrew that relief by invoking Section 154 a second time. In the circumstances, it was held that such a step was a controversial one. It was further held that "The assessee could not suffer for the mistake of the authority, who instead of rectifying its mistake continued to perpetuate illegality and miscarriage of justice".
6. In (2001) 72 TTJ (Jd) 533 (supra) Jodhpur Bench of Tribunal has, no doubt, directed that "if the assessed income falls below the returned income after giving effect to this order, the AO is directed to restrict the same to the income returned by the assessee" but the said direction has been given in view of the concession given/tolerated by assessee as the learned Authorised Representative of assessee expressed the assessee having no objection to the assessed income for the year under consideration, being restricted to the income returned by assessee, as has been specifically mentioned in the Tribunal's above decision in para 3 on pg. 534 of the reporter [(2001) 72 TTJ (Jd) 533 (supra)]; and the said direction has not been given on the basis of any statutory provision, or some other legally settled position, judicially legislated though may have been. Jurisprudentially analyzing the above position, I have no hesitation in holding that a decision/judgment rendered on the basis of a concession extended by a party to the litigation by expressing no objection to a particular/specific direction being given by a judicial body, or for that matter, this Tribunal, will be a decision binding on the parties to that case alone, (and in the matter involved therein) and the same will not partake of the nature of a judicial precedent or a decision having a judicial binding nature in all similar circumstances. The binding nature of such a decision being circumscribed and restricted in the aforesaid manner, such a decision, whether it be a single one, or be in a series, will hardly lay down any general legal proposition so as to be availed of in some other case, for the legal proposition that the assessed income, should, in no case, fall below the returned income.
6.1. Now coming the fact-situation of the instant case, I find that this Tribunal has clearly held that the amount of sales-tax refund is not includible in the assessee's total income and the addition made/sustained on that count stands deleted by the Tribunal's aforesaid appellate order dt. 28th May, 2001, vide its para 28 and the same, by now, stands confirmed by and merged with the judgment of the Hon'ble High Court. The Tribunal's direction for restricting the assessed income to the returned income, in case the assessed income falls below the returned income, on giving effect to the Tribunal's aforesaid appellate order given vide its para 28, obviously offends against the conclusion/decision rendered in its para 24 regarding the amount of sales-tax refund, in as much as, for keeping the assessed income restricted upto the returned income and not letting the same to fall below the returned income, a part of the amount of sales-tax refund will have to be included in assessee's total income and thus a part of the addition made/sustained by the authorities below will stand also sustained thereby, despite the same having been specifically deleted though. Such an obvious contradiction is, in my humble opinion, a mistake apparent from record, and does constitute a rectifiable mistake, and particularly so when the aggrieved party, that is the assessee, is, specifically invoking the Tribunal's rectificational jurisdiction under Section 254(2) by filing miscellaneous application for the purpose. In this regard one need be aware, and consciously aware, that the Tribunal can, by no stretch of logic, supersede or overrule, directly or indirectly, expressly or impliedly, the judicial pronouncement of the Hon'ble Jurisdictional High Court, to which the Tribunal is unquestionably subordinate judicially. In the situation now, when the Tribunal's direction, given in para 28 of its order, has the impact of modifying, by curtailment partly though, the position consequential to the Hon'ble High Court's appellate judgment dt. 18th April, 2002 referred to above, there can hardly be any justifiable denial of the above direction, contained in para 28 of the Tribunal's appellate order, constituting a mistake apparent from record and rectifiable under Section 254(2) of the IT Act, 1961. An otherwise step, I am afraid, may not lead to a legally embarrassing position. I may, for benefit and convenience sake, also observe here that it is a settled position of law that even a subsequent judgment of the Hon'ble Jurisdictional High Court is a valid foundation for rectifying an apparent mistake.
7. In view of my above discussion I am of the humble opinion that the miscellaneous application filed by assessee-appellant, deserves to be accepted for making rectification to the effect that in existing para 28 on existing p. 28 of the order after the end of the last line, containing the words "to the income returned by the assessee for the year", the full stop be replaced by coma and thereafter the following words should be inserted: subject to the condition that this direction shall not apply in respect of the sales-tax refund amount of Rs. 13,30,489.
8. The above insertion will result in appropriate rectification of the apparent mistake and will also obviate the contradiction between the two paras (24 and 28) of the order, and will also cast the order with the mould set by the Hon'ble Jurisdictional High Court vide their appellate judgment dt. 18th April, 2002, referred to above.
9. In the result this miscellaneous application of assessee-petitioner is accepted as indicated above.
1. As there has been a difference of opinion between the two members, being AM and JM, constituting this Bench of Tribunal (Jodhpur) on the point of maintainability/acceptability of the above miscellaneous application of assessee-petitioner, the following point is stated with the request that the Hon'ble President, Tribunal may be pleased to kindly nominate a Third Member for deciding the point/question stated hereby, as required under Section 255(4) of IT. Act, 1961 : Whether, on the facts and in the circumstances of the case, there is a mistake, apparent from record, in the Tribunal's appellate order dt. 28th May, 2001 in giving direction to the effect that if the assessed income for asst. yr. 1995-96 (being one of the years involved in the appeals) falls below the returned income after giving effect to the Tribunal's appellate order, the AO is to restrict the same to the income returned by the assessee for the year, which tends to curtail the relief of deletion of addition of sales-tax refund amount under Section 41(1) of the IT Act, which stands decisively/conclusively accorded to the assessee-petitioner? Whether the Tribunal can rectify its own order on a point decided on merit regarding direction to the AO to restrict the income to the extent of income returned after giving necessary relief as given in para 28 at p. 28 of the order, specially when there was no order of the jurisdictionai High Court on this point and order of the jarisdictional High Court was only regarding non-taxability of sales-tax refund? 1. On account of difference of opinion between the learned Members of Tribunal, this case has been referred to me under Section 255(4) of IT Act, 1961.
2. In the opinion of learned JM, the following question reflects the point of difference : Whether, on the facts and in the circumstances of the case, there is a mistake, apparent from record, in the Tribunal's appellate order dt, 28th May, 2001 in giving direction to the effect that if the assessed income for asst. yr. 1995-96 (being one of the years involved in the appeals) falls below the returned income after giving effect to the Tribunal's appellate order, the AO to restrict the same to the income returned by the assessee for the year, which tends to curtail the relief of deletion of addition of sales-tax refund amount under Section 41(1) of the IT Act, which stands decisively/conclusively accorded to the assessee-petitioner? The learned AM was of the view that difference is reflected in the following question : Whether the Tribunal can rectify its own order on a point decided on merit regarding direction to the AO to restrict the income to the extent of income returned after giving necessary relief as given in para 28 at p. 28 of the order, specially when there was no order of the jurisdictionai High Court on this point and order of the jurisdictionai High Court was only regarding non-taxability of sales-tax refund? 3. After considering facts and circumstances of the case, I am of the view that following question would truly reflect point of difference between the Members : Whether, on facts and in the circumstances- of the case, there is a mistake apparent from record in the order of the Tribunal dt. 28th May, 2001 liable to be rectified under Section 254(2) of IT Act? 4. The facts of the case briefly stated are that assessee in the relevant period carried on business of a contractor and filed return declaring income of Rs. 23,00,776. The AO rejected books of account for various defects and applied net profit rate of 11 per cent to total contract receipts disclosed at Rs. 4,16,34,635 to determine income of assessee from contracts. He also added Rs. 13,30,489 in asst. yr.
1995-96 on account of refund of sales-tax.
5. The assessee challenged above assessment in appeal before CIT(A).
After considering facts and circumstances of the case, the learned CIT(A) upheld rejection of books of account and application of net profit rate of 11 per cent to contract receipts for estimating income from contract business. He also upheld addition of Rs. 13,30,489 on account of sales-tax refund of earlier year in asst. yr. 1995-96.
6. The assessee impugned above addition in. appeal before the Tribunal.
The Tribunal upheld rejection of books of account and application of net profit rate of 11 per cent to estimate assessee's income from contracts. The Tribunal further deleted addition made for refund of sales-tax. But in para 28 of its order, the" following rider was added : Before we part with this order, we may specify, for the sake of clarity that if the assessed income for any of the years involved in these appeals falls below the returned income after giving effect to this order, the AO is directed to restrict the same to the income returned by the assessee for the year.
7. The AO gave appeal effect to the above order of the Tribunal as under: Consequent upon the order of Tribunal, Jodhpur Bench, Jodhpur's order No. 177/Jdpr/1998, dt. 28th May, 2001, the total income in the case of M/s Bhawan Va Path Nirman (Bohra) & Co., Barmer is recomputed as under:Total income assessed under Sections 143(3) and 250, dt: 30-4-1998 27,52,091(To be added as per order given by CIT(A) at this stage) (+) 3,44,879Relief allowed by Tribunal, Jodhpur Bench, Jodhpur'sOrder No. 177/Jdpr/1998 & 288/Jdpr/1998, dt. 28-5-2001(1) In the addition of sales-tax refund : (-) 13,30,489Net taxable income : 17,66,481 But in the Tribunal order No. 177/Jdpr/1998 and 288/Jdpr/1998, dt.
28th May, 2001, it has been mentioned in the para 28 at p. 28 that if the assessed income for any of the year, i.e., 1995-96 concerned year involved in these appeals falls below the returned income after giving of appeal effect of this order, the AO is directed to restrict the same to the income returned by the assessee for the year. Hence in the asst. year 1995-96, the assessee has declared returned income at Rs. 23,00,776, so the taxable income of the assessee for the asst. yr. 1995-96 is hereby restricted to Rs. 23,00,776.
It is evident from above that but for observation of the Tribunal in para 28 of its order, the income of the assessee could have been taken at Rs. 17,66,481. The assessee, therefore, moved a misc. application requesting rectification of order dt. 28th May, 2001 of the Tribunal by pointing out that as per paras 14 to 17 of its order, the Tribunal while deleting addition made on account of sales-tax refund had observed that assessee had wrongly debited entire amount of sales-tax deducted by Government authorities from contract receipt to the P&L a/c instead of debiting the actual liability and showing the balance amount deducted in excess of actual liability as receivable. The Tribunal, accordingly and for the reasons given by it in paras 14 to 17 and paras 21 to 24, deleted addition of sales-tax refund. However, the Tribunal made contradictory observations in para 28 .of its order while directing the AO to restrict assessment of income to the returned income. It has been accordingly contended in the misc. application that there is a contradiction in its order and accordingly para 28 of Tribunal's order for asst. yr. 1995-96 was required to be deleted under Section 254(2) of the IT Act.
8. The misc. application of the assessee was fixed for hearing before the Bench and after hearing both the parties, the learned AM was of the view that there was no mistake apparent from record which could be rectified under Section 254(2) of the IT Act. The reasonings of the AM for taking above view in brief are as under : (i) That sales-tax refund was included by the assessee in the income returned.
(ii) That Bench of the Tribunal had taken a conscious decision in directing the AO to restrict assessed income to the returned income and, therefore, there was no mistake apparent from record liable to be rectified.
(iii) That the decisions cited on behalf of the assessee were distinguishable and not applicable to the facts of the case.
Assessed income cannot fall below the returned income after appeal effect.
(iv) That the Tribunal had taken the view on merit, which was a possible view and, therefore, there was no mistake apparent from record.
The learned JM did not agree with the view taken by the learned AM. He held that there was a mistake apparent from record, which could be rectified under Section 254(2) of the IT Act. His reasonings in brief are as follows : (i) That order of the Tribunal has been upheld by the Hon'ble High Court and "same stands merged with the judgment of the Hon'ble High Court" whereby finally decisive position that emerged legally settled was that the amount of sales-tax refunded to the assessee could not be included in the total income of the assessee-appellant.
Therefore, any direction to the contrary to the above legal position could not stand.
(ii) There is no provision in law that assessed income cannot fall below the returned income. The assessing authorities are obliged to tax income correctly. Total income is required to be computed in the manner laid down in the Act. Therefore, if due to any ignorance/inadvertence/mistake or otherwise, income has been wrongly returned, the AO is expected,. rather has a duty to allow relief to the assessee, by correctly computing his income. In support of this view, the learned AM relied upon decision of Supreme Court in the case of National Thermal Power Co. v. CIT .
(iii) Reliance was also placed on the decision of Hon'ble Gujarat High Court in the case of Gujarat Gas Co. v. Jt. CIT wherein it was held that directions of CBDT not to make scrutiny assessments at a figure lower than the returned one were ultra virus and struck down. The learned JM also referred to decisions of Tribunal in the case of ITO v. Late K.S. Engineer (2001) 70 TTJ (Mumbai) 161, case of Smt. Gopi Devi v. ITO (1988) 31 TTJ (Del) 378 : (1989) 28 ITD 50 (Del) and certain other decisions of the Benches to support his views that there was a mistake in the observations of the Tribunal in para 28 of the order.
6. Now coming to the fact-situation of the instant case, I find that this Tribunal has clearly held that the amount of sales-tax refund is not includible in 'the assessee's total income and the addition made/sustained on that count stands deleted by the Tribunal's aforesaid appellate order dt. 28th May, 200i, vide its para 28 and the same, by now, stands confirmed by and merged with judgment of the Hon'ble High Court. The Tribunal's direction for restricting the assessed income to the returned income, in case the assessed income falls below the returned income, on giving effect to the Tribunal's aforesaid appellate order given vide its para 28, obviously offends against the conclusion/decision rendered in its para 24 regarding the amount of sales-tax refund, inasmuch as, for keeping the assessed income restricted upto the returned income and not letting the same to fall below the returned income, a part of the amount of sales-tax refund will have to be included in assessee's total income and thus a part of the addition made/sustained by the authorities below will stand also sustained thereby, despite the same having been specifically deleted though such an obvious contradiction is, in my humble opinion, a mistake apparent from record, and does constitute a rectifiable mistake, and particularly so when the aggrieved party, that is the assessee, is specifically invoking the Tribunal's rectificational jurisdiction under Section 254(2) by filing miscellaneous application for the purpose. In this regard one need be aware, and consciously aware, that the Tribunal can, by no stretch of logic, supersede or overrule, directly or indirectly, expressly or impliedly, the, judicial pronouncement of the Hon'ble Jurisdictional High Court, to which the Tribunal is unquestionably subordinate judicially. In the situation now, when the Tribunal's direction, given in para 28 of its order, has the impact of modifying, by curtailment partly though, the position consequential to the Hon'ble High Court's appellate judgment dt. 18th April, 2002 referred to above, there can hardly be any justifiable denial of the above direction, contained in para 28 of the Tribunal's appellate order, constituting a mistake apparent from record and rectifiable under Section 254(2) of the IT Act, 1961. An otherwise step, I am afraid, may not lead to a legally embarrassing position. I may, for benefit and convenience sake, also observe here that it is a settled position of law that even a subsequent judgment of the Hon'ble Jurisdictional High Court is a valid foundation for rectifying an apparent mistake.
9. Accordingly, the learned JM directed to modify para 28 of the order to exclude application of above para to sales-tax refund of Rs. 13,30,489 in asst. yr. 1995-96.
10. In the circumstances narrated above, the difference has come before me and I have heard both the parties. Learned counsel for the assessee reiterated that addition of sales-tax refund was specifically directed to be excluded by the Tribunal. However, on account of observations made by the Tribunal in para 28 of the order, the same has been included in the total income. There is thus a contradiction in the order of the Tribunal and a mistake apparent from the record. He further argued that there was no law that income assessed could not be less than income returned. The learned counsel for the assessee supported the impugned order of the learned JM.11. Smt. Swati Joshi, learned Departmental Representative, supported impugned order of AM. She argued that directions in para 28 were specific and conscious directions. The Tribunal had taken a view that income assessed should not be less than income returned. Specific clarification to the above effect was deliberately and consciously issued by the Tribunal, It could not be treated as a mistake apparent from record, particularly in cases where income was determined on estimate basis. Even a wrong view cannot be treated as a mistake apparent from the record for purposes of Section 254(2) of IT Act.
12. I have given careful thought to the rival submissions of the parties. It is an admitted position that appeal against order of the Tribunal was filed and same was dismissed by the Hon'ble High Court.
The learned JM has himself held that decision -of the Tribunal merged with the decision of the Hon'ble High Court. The effect of merger of orders was considered by the Supreme Court in the case of CIT v.Amritlal Bhogilal & Co. as under : If an appeal is provided against an order passed by a Tribunal, the decision of the appellate authority is the operative decision in law. If the appellate authority modifies or reverses the decision of the Tribunal, it is obvious that it is the appellate decision that is effective and can be enforced. In law the position would be just the same even if the appellate decision merely confirms the decision of the Tribunal. As a result of the confirmation-or affirmance of the decision of the Tribunal by the appellate authority the original decision merges in the appellate decision and it is the appellate decision alone which subsists and is operative and capable of enforcement.
It is evident from above that in the light of merger of order of Tribunal with order of Hon'ble High Court, the effective and enforceable order is that of Hon'ble High Court and, therefore, only High Court has power to consider and rectify the mistake, if any, found in the order. It is appellate decision which is operative and which has to be enforced. The Tribunal, therefore, lost jurisdiction to modify its order on account of the fact that its order is n(c) more the effective order.
That even if above technical view of the matter is not taken, there is no scope to rectify the order passed by the Tribunal. It is settled position that under Section 254(2), the Tribunal can go into questions which are hardly debatable. Hotly contested issues on which more than one opinion is possible, are outside the purview of Section 254(2) of the IT Act. In the present case the books of account of the assessee were rejected and, income was taken on estimate basis by applying certain percentage of profit to the gross receipts. The income has been taken on an estimate basis, without going into details of various expenses claimed. While making certain estimates, Tribunal thought it fit and reasonable, to hold that estimated income assessed should not be lower than income returned by the assessee. Directions to the above effect were consciously and deliberately given. It is not possible or permissible to go into different questions as to how and why these directions were given. What was the basis of these directions A debate on above lines cannot be raised in proceedings under Section 254(2) of the IT Act. Further, reference to finally assessed and returned income would show that difference between the assessed and returned figure after excluding sales-tax refund is Rs. 5,34,295 (Rs. 23,00,776 - Rs. 17,66,481 ) only. What is the detail of above amount? Whether the same could be added in the assessment or not All these questions cannot be gone into in proceedings under Section 254(2) of the IT Act.
13. I must hasten to add that assessed income can be less than the returned income in a given case. There is further no dispute that if assessee is entitled to some exemption or deduction which through a mistake or inadvertence is not claimed in the return, the AO is duty-bound to allow the same as income is required to be assessed in accordance with law. The resultant assessed income can be lower than the income returned. However, aforesaid proposition has no application where income is not determined but is taken on estimate basis after rejecting books of account. Assessing authorities may deem it reasonable that income assessed as a best judgment assessment, should not be lower than what assessee had shown as its income in the return.
This is a view which is legally permissible and cannot be taken to be a mistake liable to be rectified under Section 254(2) of the IT Act. When income is estimated by applying flat rate, then expenditure under various heads are not separately taken. It is almost by rule of thumb that income is estimated hedged by the consideration that it should be fair and reasonable. It would, therefore, be a question of hot debate as to what extent expenses under each head were actually taken into consideration. Such debate is not permissible under Section 254(2) of the IT Act.
14. The decisions cited on behalf of the assessee and relied upon by the learned JM are distinguishable. In all those cases, assessee was found to be entitled to certain relief under a statutory provision which was not claimed in the return. Such relief had to be allowed to the assessee notwithstanding that income after relief was found to be below the returned income. Those cases stand on a different footing.
The decision of Hon'ble Gujarat High Court in the case of Gujarat Gas Co. Ltd. (supra) is also distinguishable as in that case their lordship held as ultra virus the. directions of CBDT not to take assessed income at a figure lower than the one returned by the assessee, in scrutiny cases. Their Lordships held that CBDT has no such power and that such directions interfered with independent exercise of power by the AO It cannot be said in the present case that Tribunal while issuing directions contained in para 28 did not exercise its powers independently and that observations made in the above para were based on directions of some superior authority. The decision cited supra has no application. At any rate, as observed earlier, many debatable questions are involved in the present proceedings on which more than one reasonable view is possible. I am, therefore, of the view that it is not a fit case in which Section 254(2) of IT Act could be invoked.
The miscellaneous application filed by the assessee is liable to be dismissed. For the aforesaid reasons, I agree with the view taken by the learned AM.15. Let the matter be now placed before the regular Bench for disposal of appeal in accordance with law.