1. A consolidated order in 48 Departmental appeals was passed on 7th April, 2005. The assessee has filed application under Section 254(2) of the IT Act, 1961 pointing out certain mistakes in the order. The mistakes have been classified in three categories, namely, (a) typographical errors, (b) decision of the coordinate Bench of the Tribunal in the case of 5 companies not taken note of, and (c) findings of facts given by the CIT(A) in other cases not recorded.
2. We have heard the parties and perused the record. Before we deal with the alleged mistakes in our order, it would be pertinent to mention that in the course of hearing of the application under Section 254(2), a question was raised as to whether the Tribunal can exercise its powers under Section 254(2) when appeal against the said order has been admitted by the Hon'ble jurisdictional High Court under Section 260A and is pending disposal. Apart from making submissions before the Bench, the learned Counsel for the applicant-assessee has filed written submissions to support the contention that the Bench of the Tribunal does not lose its power under Section 254(2) to rectify any mistake apparent from record merely because the High Court has admitted an appeal in regard to substantial question(s) of law. The learned Departmental Representative was given a copy of the written submissions moved by the assessee's representative and was asked to respond.
However, till date no response has been received. We accordingly proceed to decide the issue on the basis of material on record and the contentions advanced in the course of hearing and also taking into account, the written submissions filed on behalf of the assessee-applicant.
3. On consideration of rival contentions and material on record, we are satisfied that there is no conflict in the jurisdiction of the Tribunal under Section 254(2) and that of the Hon'ble High Court under Section 260A, as the jurisdiction does not overlap. Section 254(2) permits rectification of a mistake apparent from record at the instance of the parties or suo motu by the Bench. On the other hand, Section 260A permits the parties to seek adjudication by the Hon'ble High Court on substantial question(s) of law. Though the entire order of the Tribunal is before the Hon'ble High Court yet the issue to be decided by the Hon'ble High Court is in regard to the substantial question of law, if any, arising out of the order of the Tribunal. We also agree with the contention advanced on behalf of the assessee that Sections 254(2) and 260A can operate simultaneously and there is no conflict between the two sections.
4. As stated by their Lordships of the Supreme Court in the case of Kunhayammed v. State of Kerala , doctrine of merger is neither a doctrine of constitutional law nor a doctrine which is statutorily recognized. It is a common law doctrine founded on the principles of propriety in the hierarchy of justice delivery system.
In the case of CIT v. Amrit Lal Bhogilal and Co. , their Lordships of the Supreme Court held that "it is only when the appellate authority modifies or reverses the decision that the doctrine of merger commences to operate." In the present case, the assessee has merely filed an application under Section 260A and so far the appeal has not been admitted and no substantial question of law has been formulated as informed by the parties in the course of the present applications.
In the case of Electropack v. Dy. CIT (2005) 94 TTJ (Ahd)(TM) 973 : (2005) 94 ITD 227 (Ahd)(TM), it has been held that unless the High Court is satisfied that substantial question of law is involved and formulates the question and admits the hearing, there is no merger between the Tribunal's order and the High Court's order. We agree with the contentions advanced on behalf of the assessee that as when an appeal is filed to the CIT(A), the AO does exercise the power under Section 154 in case any mistake is brought to his notice. Such actions have not been held to be without jurisdiction.
The Special Bench of the Tribunal in the case of Rahul Kumar Bajaj v.TFO (1999) 64 TTJ (Nag)(SB) 200 : (1999) 69 ITD 1 (Nag)(SB), applying the case of S. Nagaraj v. State of Karnataka (1993) Suppl. (4) SCC 595, have observed as under: Justice is a virtue which transcends all barriers. Neither the rules of procedure nor technicalities of law can stand in its way. The order of the Court should not be prejudicial to any one. Rule of stare decisis is adhered for consistency but it is not as inflexible in administrative law as in public law. Even the law bends before justice. Entire concept of writ jurisdiction exercised by the higher Courts is founded on equity and fairness. If the Court finds that the order was passed under a mistake and it would not have exercised the jurisdiction but for the erroneous assumption which in fact did not exist and its perpetration shall result in miscarriage of justice then it cannot on any principle be precluded from rectifying the error. Mistake is accepted as valid reason to recall an order.
Difference lies in the nature of mistake and scope of rectification, depending on if it is of fact or law. But the roof from which the power flows is the anxiety to avoid injustice. It is either statutory or inherent. The latter is available where the mistake is of the Court. In administrative law the scope is still wider.
Technicalities apart if the Court is satisfied of the injustice then it is its constitutional and legal obligation to set it right by recalling its order.
5. Taking the totality of facts and circumstances of this case into consideration, we are of the view that there is no bar for the Tribunal to exercise its jurisdiction under Section 254(2) when the party has approached the Hon'ble High Court under Section 260A against the order of the Tribunal in an appeal on a substantial question of law yet to be admitted. We hold accordingly and proceed to decide the application of the assessee on merits in regard to the aforesaid alleged errors crept in the order.
(i) At p. 1, line 11, in the case of M/s Astral Investment and Trading Co. (P) Ltd. for asst. yr. 1998-99, 68/2003 is substituted in place of 68/2002.
(ii) At p. 2, para 1, first line, the figure 48 is substituted in place of the figure 42.
(iii) At p. 2, para 2, line 5, the word 'trading' is substituted in place of the word 'traders'.
(iv) At p. 27, line 25, in place of the figures 790, 791, 775, 776 and 411', the figures '790 and 791/2002 and 172/2003, 775 and 776/2003 and 411/2003' are substituted, 7. (b) Decisions of Hon'ble co-ordinate Bench of Tribunal in earlier years in the case of five companies following the decision in the case of Vesta Investment and Trading Co. (P) Ltd. not taken note of: In the order passed by the Bench at pp. 25-26, in para 23, it has been observed as under: 23. Now, in the case of Vesta Investment and Trading Co. (P) Ltd., there is a decision of the Tribunal for the asst. yr. 1991-92 wherein it has been held that the initial intention of the assessee was to hold the shares as investments and on the basis of attendant facts and circumstances a conclusion has been arrived at that the investment made by the assessee was on capital account and not with an intention of trading in respect of such shares. A decision has been arrived at by the Tribunal on the basis of appraisal of facts and law. Even if it is presumed that a different conclusion on the same set of facts is possible, it has got to be borne in mind that the co-ordinate Bench of the Tribunal does not sit in judgment on the decision of another Bench of the Tribunal. Keeping that principle in view, we are of the considered view that in the case of Vesta Investment and Trading Co. (P) Ltd., the CIT(A) was justified in treating the sale of shares on capital account being in consonance with the decision of the Tribunal in assessee's own case and there being no change in facts. The Hon'ble Supreme Court in the case of Dalhousie Investment Trust Co. Ltd. (supra), have laid down certain principles for determining the nature of the transaction in shares in the case of an investment company. The decision on the basis of such principles is dependent on the findings of fact recorded by the Tribunal. The Tribunal having recorded a finding of fact in the case of Vesta Investment and Trading Co.JP) Ltd. on the basis of evidence on record, it was not permissible to AO to come to a different conclusion without there being any change in facts or in law. The decision of the CIT(A) in the case of Vesta Investment and Trading Co. (P) Ltd. in ITA Nos. 791/2002 and 172/2003 is also accordingly upheld. These appeals of the Revenue are also dismissed.
The Bench has also recorded at p. 26 para 24 "There is no decision of the Tribunal in the case of other assessees.
It has been brought to our notice that this observation which is crucial, is contrary to the facts on record insofar as in the following cases the Tribunal had decided the issue in favour of the assessee by following its earlier order in the case of Vesta Investment and Trading Co. (P) Ltd.--ITA No. Name of company Asst. yr.
Date of consolidated order536/Chd/1996 Saptrishi Inv. and Tdg.
1992-93 29-5-1998 Co. (P) Ltd.541/Chd/1996 Ranbaxy Managers Welfare Ltd. 1992-93542/Chd/1996 Abhay Investments (P) Ltd. 1991-92543/Chd/1996 Wesrex Investments (P) Ltd. 1991-92544/Chd/1996 Jupiter Investments (P) Ltd. 1991-92 It has been fairly conceded by the learned Counsel for the assessee that the decision of the Tribunal in the abovementioned five cases had not been placed on record before the Tribunal. So, however, it has been claimed that the order of the Tribunal in reference applications in respect of the aforementioned cases had been placed on record in the paper book of the assessee. In the light of the undisputed fact that decision of the Tribunal in the abovementioned five cases had not been placed on record or brought to the notice of the Tribunal, the claim of the assessee that there is a mistake in the order may not appear to fall within the ambit of Section 254(2). So, however, we agree with the contention advanced on behalf of the assessee that the Tribunal has recorded the following finding "That there is no decision of the Tribunal in other assessees" without making any inquiry from the assessee or the Department, The finding that there is no decision of the Tribunal in the case of other assessees is not based on any material on record. We are convinced that there is a mistake in our order in this regard. We should have either made inquiry from the assessee or based our finding on some material on record. We have based the finding on presumption insofar as no reference had been made to any such decision in the course of arguments before us. Since the said finding is based on presumption and is contrary to the facts, we consider it our duty to rectify the mistake by modifying our order suitably to fit in with the facts of the case.
We accordingly substitute paras 23 to 26 in place of paras 23 to 26 of our order dt. 7th April, 2005 as under: 23. Now, in the case of Vesta Investment and Trading Co. (P) Ltd., there is a decision of the Tribunal for the asst. yr. 1991-92 wherein it has been held that the initial intention of the assessee was to hold the shares as investments and on the basis of attendant facts and circumstances a conclusion has been arrived at that the investment made by the assessee was on capital account and not with an intention of trading in respect of such shares. A decision has been arrived at by the Tribunal on the basis of appraisal of facts and law. Even if it is presumed that a different conclusion on the same set of facts is possible, it has got to be borne in mind that the co-ordinate Bench of the Tribunal does not sit in judgment on the decision of another Bench of the Tribunal. Keeping that principle in view, we are of the considered view that in the case of Vesta Investment and Trading Co. (P) Ltd., the CIT(A) was justified in treating the sale of shares on capital account being in consonance with the decision of the Tribunal in assessee's own case and there being no change in facts.
The Hon'ble Supreme Court m the case of Dalhousie Investment Trust Co. Ltd. (supra), have laid down certain principles for determining the nature of the transaction in shares in the case of an investment company. The decision on the basis of such principles is dependent on the findings of fact recorded by the Tribunal. The Tribunal having recorded a finding of fact in the case of Vesta Investment and Trading Co. (P) Ltd. on the basis of evidence on record, it was not permissible to AO in the subsequent year(s) to come to a different conclusion without there being any change in facts or in law. The decision of the CIT(A) in the case of Vesta Investment and Trading Co. (P) Ltd. in ITA Nos. 791/2002 and 172/2003 is also accordingly upheld. These appeals of the Revenue are also dismissed.
The decision of the Tribunal in Vesta Investment and Trading Co.
Ltd. had been followed in the following cases: ITA No. Name of company Asst. yr.
Date of consolidated order536/Chd/1996 Saptrishi Inv. and Tdg.
1992-93 29-5-1998 Co. (P) Ltd.541/Chd/1996 Ranbaxy Managers Welfare Ltd. 1992-93542/Chd/1996 Abhay Investments (P) Ltd. 1991-92543/Chd/1996 Wesrex Investments (P) Ltd. 1991-92544/Chd/1996 Jupiter Investments (P) Ltd. 1991-92 Therefore, for the aforementioned reasons indicated in the case of Vesta Investments and Trading Co. Ltd., we confirm the order of the CIT(A) in the below mentioned cases: (iii) ITA Nos. 778 to 781/2002, 12, 170 and 171/2003, asst. yrs.
1992-93 to 1998-99 (iv) ITA Nos. 795 to 798/2002, 22, 166 and 167/2003, asst. yrs.
1992-93 to 1995-96 and 1996-97, 1997-98, 1998-99 (v) ITA Nos. 782 to 785/2002, 16, 58 and 59/2003, asst. yrs. 1992-93 to 1998-99 M/s Jupiter Investment (P) Ltd., Chandigarh.
24. We now take up the remaining appeals of other assessees. There is no decision of the Tribunal in the case of other assessees.
Though in some cases in earlier years the sale of shares reflected in the books of account under investment portfolio had been accepted by the Revenue on capital account in subsequent years on the basis of the principles laid down by the Hon'ble Supreme Court in the case of Dalhousie Investment Trust Co. Ltd. (supra), it was permissible to the ITO to examine the issue afresh.
During the course of assessment proceedings under Section 143(3), the AO had asked the assessee to establish the initial intention and the basis for treating the shares under investment portfolio. It seems the respondents had been under the impression that the Tribunal having already decided the issue in the case of sister-concern, namely, M/s Vesta Investment and Trading Co. (P) Ltd. in favour of the assessee, no further proof was necessary to establish the initial intention. In our considered view, on the basis of the principles laid down by the Hon'ble Supreme Court in the cases referred to elsewhere in this order, particularly in the case of Dalhousie Investment Trust Co. Ltd. (supra), the mere entries in the books of account, are not sufficient to establish the initial intention of the assessees. Therefore, the AO was justified to make enquiry. We may fairly state that the learned Counsel for the assessees made an attempt to impress upon us the circumstances under which the shares of various companies had been treated as investments and not as stock-in-trade. Our attention was also invited to certain newspaper reports placed before us in the paper book. However, since the Revenue authorities had not the benefit of the explanation of the assessee nor of any evidence, if any, available, we in the interests of justice, consider it appropriate to restore the issue to the file of the AO for the purpose of fresh decision in accordance with law. The assessees shall be given reasonable opportunity to establish the initial intention of holding the shares as investments as against stock-in-trade. Needless to reiterate that the book entries for treating the shares as investments is not sufficient. assessees shall have to give reasons and establish the initial intention for holding the shares as investments. The principles laid down by the Hon'ble Supreme Court in various decisions, including the decision in the case of Dalhousie Investment Trust Co. Ltd. (supra) shall be kept in mind by the AO while deciding the issue afresh in accordance with law. We accordingly set aside the orders of the CIT(A) and those of the AO in regard to this issue in all the appeals of the Revenue but for the appeals in 775/2002 and 776/2002, 790/2002 and 791/2002, 411/2003, 172/2003, 190/2003 and 191/2003, 63/2003 and 155/2003, 778 to 781/2002, 12/2003, 170/2003 and 171/2003, 795 to 798/2002, 22/2003, 166/2003 and 167/2003, 782 to 785/2002, 16/2003, 58/2003 and 59/2003, which are dismissed, and remit the issue to the AO for fresh decision as per our directions and in accordance with law. In the result, appeals of the Revenue are allowed for statistical purposes.
25. We may place on record that in the light of our decision, the additional ground raised by the Revenue has become infructuous and, therefore, it is not necessary for us to deal with the same.
26. In the result, but for the appeals in 775/2002 and 776/2002, 790/2002 and 791/2002, 411/2003, 172/2003, 190/2003 and 191/2003, 63/2003 and 155/2003, 778 to 781/2003, 12/2003, 170/2003 and 171/2003, 795 to 798/2002, 22/2003, 166/2003 and 167/2003, 782 to 785/2002, 16/2003, 58/2003 and 59/2003, which are dismissed, all the remaining appeals of the Revenue are allowed for statistical purpose as indicated above.
8. It may be pertinent to mention here that suo motu action was initiated in these matters by the Bench on the report of the Registry about the following alleged mistake in the order: There is a mistake in the order of the Tribunal passed in 48 Departmental appeals on 7th April, 2005 insofar as ITA Nos. 775 and 776/2002 for asst. yrs. 1991-92 and 1992-93, in the case of M/s Astral Investment and Trading Co. (P) Ltd., Chandigarh, and ITA No. 411/2003 for asst. yr. 1992-93 in the case of M/s Ambresh Investment and Trading Co. Ltd., Chandigarh had been dismissed by the Tribunal.
So, however, in the conclusion in paras 24 and 26, these have been wrongly included. Therefore, rectification is required in the order.
This error has not been pointed out by the assessees in their Misc.
Appln. Nos. 185 to 232/Chd/2005 arising out of the abovementioned appeals. Since the applications are to be disposed of, it is considered necessary to give an opportunity to both the parties before passing the rectification order.
After hearing the parties, we are satisfied that there is no such mistake in the order. Suo motu notice issued to the assessees is accordingly withdrawn.