Rai Bahadur Shreeram Durgaprasad Vs. Income-tax Officer - Court Judgment

Excerpt:
1. this miscellaneous application has been filed by the assessee applicant with the following prayer : (a) the hon'ble tribunal may be pleased to set aside its order of 24-3-1982 ; (b) that the hon'ble tribunal be pleased to modify its order of 4-3-1978 in the manner prayed for in this petition as well as in the petition under section 254(2) of the income-tax act, 1961, dated 3-12-1980 and allow the appeals of the petitioner ; (c) that in the alternative the hon'ble tribunal be pleased to recall its earlier order of 4-3-1978 and hear the matter de novo on merits ; (d) the hon'ble tribunal may pass such other and further orders which may in the interest of justice be deemed necessary.2. brief facts may be mentioned so as to make the narration complete.the assessee is a partnership firm carrying on business at tumsar, tehsil and district bhandara (maharashtra). the assessee-firm was reassessed under section 147 read with section 144 of the income-tax act, 1961 ('the act') for the assessment years 1950-51 to 1958-59 by the ito. for these assessment years penalties were also levied under section 271(1 )(c) of the act. the penalty appeals filed by the assessee in it appeal nos. 304 and 306 to 312 (nag.) of 1974-75 were disposed of by the tribunal on 4-3-1978 whereby the levy of penalty was confirmed. there was a corrigendum issued by the tribunal on 11-12-1979 to the order confirming the penalty. the first miscellaneous application no. 4 (nag.) of 1981 was filed by the assessee on 31-12-1980 and the second miscellaneous application no. 24 (delhi) of 1982 was filed by the assessee on 16-1-1982. they were rejected by the tribunal vide its consolidated order dated 24-3-1982. the present application is the third miscellaneous application which has been filed on 23-12-1982. the assessee applicant submitted in that application that the conclusion of the tribunal in the order dated 24-3-1982 that there were no mistakes apparent from the record in the order dated 4-3-1978 as well as the conclusion of the tribunal in the order dated 4-3-1978 that the assessee was guilty of concealment of particulars of income was vitiated by errors of facts and law apparent from the record on the following grounds : 1. that incorrect principles of law have been applied on the basis of which the aforementioned conclusions have been arrived at; 2. that certain vital pleas have been wrongly disregarded and/or totally misunderstood ; 3. that material evidence on record has been ignored and disregarded and/or totally misconstrued ; and 4. that the entire matter has been approached from an incorrect angle.3. a preliminary objection was raised on behalf of the department against the maintainability of the present miscellaneous application and shri wazir singh the learned counsel for the department argued that there could be only one rectification application on the same point ; that the present application moved on 23-12-1982 could not seek to rectify the original order dated 4-3-1978 passed more than 4 years earlier and that the application could not also lie against the order dated 24-3-1982 because that was an order passed by the tribunal under section 254(2) of the act. he argued that rectification could be made only of the original order in appeal. he also submitted that the tribunal being statutory, it had no inherent powers and that the right to review an order was not a part of any inherent powers. reliance was placed by him on the following decisions : western coal fields ltd. v. sto [1986] 62 stc 104 (mp), khushal chand b. daga v. t.k. surendran, fourth ito [1972] 85 itr 48 (bom), ahmedabad sarangpur mills co. ltd. v. a.s. manohar, ito [1976] 102 itr 712 (guj.), ito v. s.b. singar singh & sons [1976] 105 itr 570 (sc), bengal assam steamship co. ltd. v. cit [1978] 114 itr 327 (cal.), cit v. n.j. dadabai[197s] 115 itr 317 (ap) and popular engg. co. v. cit [1983] 140 itr 398 (mp).on the other hand, shri harish salve, the learned counsel for the assessee, however, stated that the assessee was not asking for a review and that the assessee was only asking for the correction of manifest errors. he submitted that the order which was passed by the tribunal on 24-3-1982 was in fact an order passed under section 254(1) though section 254(2) regulates the exercise of that power. he referred to the decision of the hon'ble allahabad high court in ito v. s.b. singar singh & sons [1970] 75 itr 646 and submitted that the tribunal has inherent power to review its order in order to correct a wrong done to a party. he also referred to the decision of the hon'ble bombay high court in the case of khushal-chand b. daga (supra) and argued that that decision supported the assessee and should be followed as it had been given by the jurisdictional high court. alternatively shri salve submitted that even the order under section 254(2) could be corrected by the tribunal in exercise of its inherent powers. according to him there was no statutory bar to the same.4. we have considered the rival submissions as also the decisions referred to above on the preliminary objection. we had not heard the parties on merits. section 254(2) provides that the tribunal may, at any time within 4 years from the date of the order, with a view to rectify 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 ito. it is, therefore, quite clear that the power of rectification of mistakes apparent from the record has been conferred by section 254(2) only in respect of orders passed under section 254(1). it appears to us that further propositions, which follow from sub-sections (1) and (2) of section 254, are that the limitation for the rectification is to be reckoned from the date of passing of the order under section 254(1) and that in respect of one mistake there can only be one application under section 254(2). in other words, successive applications for the rectification of the same mistake cannot be moved under section 254(2). this is for the reason that there is no power of review conferred under section 254(2) or for that matter under any other provisions of the act. so far as the inherent power of the court is concerned, the inherent power is exercised ex debito justitiae, i.e., when it is necessary for the ends of justice and in order to prevent an abuse of the process of the court. it is a power inherent in the court by virtue of its duty to do justice between the parties before it. but there are certain well recognized restrictions on the exercise of such a power. these restrictions are : 1. it cannot be exercised to do that which is prohibited by the act, nor in regard to matters which are excluded from its cognizance ; 2. if the act contains a specific provision which would meet the necessities of the case in question, such a power cannot be exercised ; 3. it is only when there is no clear provision in the act that inherent jurisdiction can be invoked ; 4. the provisions of the law of limitation cannot be ignored nor can the period of limitation be extended on any grounds of equity or justice ; and 5. the inherent power cannot be exercised to reconsider or review an order.it was not disputed before us that the errors sought to be pointed out on behalf of the assessee in its successive miscellaneous applications were the same. if the present miscellaneous application is treated as directed against the order dated 4-3-1978 in the penalty appeal, the application would be clearly barred by time being beyond the period of 4 years specified under section 254(2). in case the instant miscellaneous application is treated as directed against the earlier order dated 24-3-1982 under section 254(2), such an application would not be maintainable in terms of section 254(2) since the application could be directed only against an order under section 254(1). as already pointed out above, no power of review has been conferred under the act on the tribunal. so far as the question of exercise of inherent powers is concerned, if the considerations mentioned above in regard to the inherent powers are to be kept in view, it would be clear that the tribunal cannot be said to have any inherent powers to entertain the assessee applicant's application having regard to the restrictions on the exercise of inherent powers as extracted above. it is, however, necessary to deal with the decisions on which reliance has been placed on behalf of the assessee in support of its contentions. the case of s.b. singar singh & sons (supra) was under the excess profits tax act, 1940. section 21 of that act enumerated the provisions of the indian income-tax act, 1922 which were made applicable. however, section 35 of the indian income-tax act (dealing with the rectification of errors apparent from the record) was not included in section 21 of the excess profits tax act. the question which arose before the hon'ble allahabad high court was whether the tribunal had jurisdiction to rehear the matter in regard to the adjustment of standard profits as the same had not been gone into by the tribunal. the hon'ble high court held that the tribunal did have such a power notwithstanding the non-mention of section 35 of the indian income-tax act, in section 21 of the excess profits tax act. in coming to that conclusion the hon'ble high court noticed that section 19(2) of the excess profits tax act also used the following words : ... 'that tribunal shall have all such powers in disposing of the appeal as it has in respect of appeals preferred to it under the indian income-tax act, 1922' . . . .(p. 649) therefore, though at first sight, this decision appears to support the assessee, it is of no avail if we look into the peculiar facts which obtained in that case. here it may be pertinent to point out that this matter had gone up to the supreme court in s.b. singar singh & sons' case (supra). the supreme court reversed the decision of the hon'ble allahabad high court holding that the high court had wrongly assumed that the ground relating to the adjustment of profits based on variation of average capital had been urged before the tribunal and that the tribunal had arbitrarily refused to consider it. it was held that it was not a fit case for the exercise by the high court of its special jurisdiction under article 226 of the constitution. it was also held that the question whether the omission to record a finding on the ground relating to adjustment of profits by the tribunal was due to the failure of the assessee to urge that ground or due to a lapse on the part of the tribunal deserving rectification was a matter entirely for the authorities under the taxation statutes. however, the supreme court did not find it necessary to decide the question whether the tribunal had power under the excess profits tax act or inherent power to review and rectify mistakes in its orders. in the case of khushalchand b. daga (supra) the tribunal had dismissed the appeal of the assessee for the assessee's default. in february 1969 the supreme court decided that rule 24 of the income-tax (appellate tribunal) rules, 1963, insofar as it enabled the dismissal of appeals for default of appearance, was invalid. thereafter the assessee filed an application for restoration of its appeal. the tribunal dismissed the application on the ground that its original order dismissing the appeal was not a nullity but a mistake apparent from the record and that the application for rectifying the mistake was barred by time. the assessee thereupon filed a writ petition before the bombay high court. it was held by the hon'ble bombay high court that the assessee could move the tribunal for rehearing the appeal on the ground that rule 24 was invalid only after february 1969 when the supreme court delivered its judgment setting at rest the conflict of opinion on the validity of rule 24. it was held that as the petition was filed in june 1969 it was not inordinately delayed. the hon'ble high court held that the decision of the tribunal rendered in 1961 became a nullity and the supreme court delivered its judgment in 1969 and the tribunal was wrong in holding that this decision in 1961 was only a mistake apparent on the face of the record requiring rectification. it was also held that even if the decision of the tribunal rendered in 1961 was not a nullity but only an erroneous order, after the decision of the supreme court, the tribunal should have set aside its previous order in exercise of its inherent powers and reheard the parties on merits without going into the question whether the subsequent application was made within time or not, as the tribunal should not allow the party to suffer for its own mistake. this decision also, although on its face it may appear to be in favour of the assessee applicant, does not assist it. the decision was rendered with reference to the facts mentioned above. in the present case the appeal was not dismissed ex parte nor did the decision of the tribunal become a nullity as in the above case. therefore, this decision can also not be taken advantage of by the assessee. we are, therefore, of the considered view that the preliminary objection taken on behalf of the department is correct and so the present miscellaneous application is not maintainable.5. accordingly, the application of the assessee applicant fails and is rejected.

Judgment:
1. This miscellaneous application has been filed by the assessee applicant with the following prayer : (a) The Hon'ble Tribunal may be pleased to set aside its order of 24-3-1982 ; (b) that the Hon'ble Tribunal be pleased to modify its order of 4-3-1978 in the manner prayed for in this petition as well as in the petition under Section 254(2) of the Income-tax Act, 1961, dated 3-12-1980 and allow the appeals of the petitioner ; (c) that in the alternative the Hon'ble Tribunal be pleased to recall its earlier order of 4-3-1978 and hear the matter de novo on merits ; (d) the Hon'ble Tribunal may pass such other and further orders which may in the interest of justice be deemed necessary.

2. Brief facts may be mentioned so as to make the narration complete.

The assessee is a partnership firm carrying on business at Tumsar, Tehsil and district Bhandara (Maharashtra). The assessee-firm was reassessed under Section 147 read with Section 144 of the Income-tax Act, 1961 ('the Act') for the assessment years 1950-51 to 1958-59 by the ITO. For these assessment years penalties were also levied under Section 271(1 )(c) of the Act. The penalty appeals filed by the assessee in IT Appeal Nos. 304 and 306 to 312 (Nag.) of 1974-75 were disposed of by the Tribunal on 4-3-1978 whereby the levy of penalty was confirmed. There was a corrigendum issued by the Tribunal on 11-12-1979 to the order confirming the penalty. The first miscellaneous application No. 4 (Nag.) of 1981 was filed by the assessee on 31-12-1980 and the second miscellaneous application No. 24 (Delhi) of 1982 was filed by the assessee on 16-1-1982. They were rejected by the Tribunal vide its consolidated order dated 24-3-1982. The present application is the third miscellaneous application which has been filed on 23-12-1982. The assessee applicant submitted in that application that the conclusion of the Tribunal in the order dated 24-3-1982 that there were no mistakes apparent from the record in the order dated 4-3-1978 as well as the conclusion of the Tribunal in the order dated 4-3-1978 that the assessee was guilty of concealment of particulars of income was vitiated by errors of facts and law apparent from the record on the following grounds : 1. That incorrect principles of law have been applied on the basis of which the aforementioned conclusions have been arrived at; 2. that certain vital pleas have been wrongly disregarded and/or totally misunderstood ; 3. that material evidence on record has been ignored and disregarded and/or totally misconstrued ; and 4. that the entire matter has been approached from an incorrect angle.

3. A preliminary objection was raised on behalf of the department against the maintainability of the present miscellaneous application and Shri Wazir Singh the learned counsel for the department argued that there could be only one rectification application on the same point ; that the present application moved on 23-12-1982 could not seek to rectify the original order dated 4-3-1978 passed more than 4 years earlier and that the application could not also lie against the order dated 24-3-1982 because that was an order passed by the Tribunal under Section 254(2) of the Act. He argued that rectification could be made only of the original order in appeal. He also submitted that the Tribunal being statutory, it had no inherent powers and that the right to review an order was not a part of any inherent powers. Reliance was placed by him on the following decisions : Western Coal Fields Ltd. v. STO [1986] 62 STC 104 (MP), Khushal chand B. Daga v. T.K. Surendran, Fourth ITO [1972] 85 ITR 48 (Bom), Ahmedabad Sarangpur Mills Co. Ltd. v. A.S. Manohar, ITO [1976] 102 ITR 712 (Guj.), ITO v. S.B. Singar Singh & Sons [1976] 105 ITR 570 (SC), Bengal Assam Steamship Co. Ltd. v. CIT [1978] 114 ITR 327 (Cal.), CIT v. N.J. Dadabai[197S] 115 ITR 317 (AP) and Popular Engg.

Co. v. CIT [1983] 140 ITR 398 (MP).

On the other hand, Shri Harish Salve, the learned counsel for the assessee, however, stated that the assessee was not asking for a review and that the assessee was only asking for the correction of manifest errors. He submitted that the order which was passed by the Tribunal on 24-3-1982 was in fact an order passed under Section 254(1) though Section 254(2) regulates the exercise of that power. He referred to the decision of the Hon'ble Allahabad High Court in ITO v. S.B. Singar Singh & Sons [1970] 75 ITR 646 and submitted that the Tribunal has inherent power to review its order in order to correct a wrong done to a party. He also referred to the decision of the Hon'ble Bombay High Court in the case of Khushal-chand B. Daga (supra) and argued that that decision supported the assessee and should be followed as it had been given by the jurisdictional High Court. Alternatively Shri Salve submitted that even the order under Section 254(2) could be corrected by the Tribunal in exercise of its inherent powers. According to him there was no statutory bar to the same.

4. We have considered the rival submissions as also the decisions referred to above on the preliminary objection. We had not heard the parties on merits. Section 254(2) provides that the Tribunal may, at any time within 4 years from the date of the order, with a view to rectify 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 ITO. It is, therefore, quite clear that the power of rectification of mistakes apparent from the record has been conferred by Section 254(2) only in respect of orders passed under Section 254(1). It appears to us that further propositions, which follow from Sub-sections (1) and (2) of Section 254, are that the limitation for the rectification is to be reckoned from the date of passing of the order under Section 254(1) and that in respect of one mistake there can only be one application under Section 254(2). In other words, successive applications for the rectification of the same mistake cannot be moved under Section 254(2). This is for the reason that there is no power of review conferred under Section 254(2) or for that matter under any other provisions of the Act. So far as the inherent power of the Court is concerned, the inherent power is exercised ex debito justitiae, i.e., when it is necessary for the ends of justice and in order to prevent an abuse of the process of the Court. It is a power inherent in the Court by virtue of its duty to do justice between the parties before it. But there are certain well recognized restrictions on the exercise of such a power. These restrictions are : 1. It cannot be exercised to do that which is prohibited by the Act, nor in regard to matters which are excluded from its cognizance ; 2. If the Act contains a specific provision which would meet the necessities of the case in question, such a power cannot be exercised ; 3. It is only when there is no clear provision in the Act that inherent jurisdiction can be invoked ; 4. The provisions of the law of limitation cannot be ignored nor can the period of limitation be extended on any grounds of equity or justice ; and 5. The inherent power cannot be exercised to reconsider or review an order.

It was not disputed before us that the errors sought to be pointed out on behalf of the assessee in its successive miscellaneous applications were the same. If the present miscellaneous application is treated as directed against the order dated 4-3-1978 in the penalty appeal, the application would be clearly barred by time being beyond the period of 4 years specified under Section 254(2). In case the instant miscellaneous application is treated as directed against the earlier order dated 24-3-1982 under Section 254(2), such an application would not be maintainable in terms of Section 254(2) since the application could be directed only against an order under Section 254(1). As already pointed out above, no power of review has been conferred under the Act on the Tribunal. So far as the question of exercise of inherent powers is concerned, if the considerations mentioned above in regard to the inherent powers are to be kept in view, it would be clear that the Tribunal cannot be said to have any inherent powers to entertain the assessee applicant's application having regard to the restrictions on the exercise of inherent powers as extracted above. It is, however, necessary to deal with the decisions on which reliance has been placed on behalf of the assessee in support of its contentions. The case of S.B. Singar Singh & Sons (supra) was under the Excess Profits Tax Act, 1940. Section 21 of that Act enumerated the provisions of the Indian Income-tax Act, 1922 which were made applicable. However, Section 35 of the Indian Income-tax Act (dealing with the rectification of errors apparent from the record) was not included in Section 21 of the Excess Profits Tax Act. The question which arose before the Hon'ble Allahabad High Court was whether the Tribunal had jurisdiction to rehear the matter in regard to the adjustment of standard profits as the same had not been gone into by the Tribunal. The Hon'ble High Court held that the Tribunal did have such a power notwithstanding the non-mention of Section 35 of the Indian Income-tax Act, in Section 21 of the Excess Profits Tax Act. In coming to that conclusion the Hon'ble High Court noticed that Section 19(2) of the Excess Profits Tax Act also used the following words : ... 'that Tribunal shall have all such powers in disposing of the appeal as it has in respect of appeals preferred to it under the Indian Income-tax Act, 1922' . . . .(p. 649) Therefore, though at first sight, this decision appears to support the assessee, it is of no avail if we look into the peculiar facts which obtained in that case. Here it may be pertinent to point out that this matter had gone up to the Supreme Court in S.B. Singar Singh & Sons' case (supra). The Supreme Court reversed the decision of the Hon'ble Allahabad High Court holding that the High Court had wrongly assumed that the ground relating to the adjustment of profits based on variation of average capital had been urged before the Tribunal and that the Tribunal had arbitrarily refused to consider it. It was held that it was not a fit case for the exercise by the High Court of its special jurisdiction under article 226 of the Constitution. It was also held that the question whether the omission to record a finding on the ground relating to adjustment of profits by the Tribunal was due to the failure of the assessee to urge that ground or due to a lapse on the part of the Tribunal deserving rectification was a matter entirely for the authorities under the taxation statutes. However, the Supreme Court did not find it necessary to decide the question whether the Tribunal had power under the Excess Profits Tax Act or inherent power to review and rectify mistakes in its orders. In the case of Khushalchand B. Daga (supra) the Tribunal had dismissed the appeal of the assessee for the assessee's default. In February 1969 the Supreme Court decided that Rule 24 of the Income-tax (Appellate Tribunal) Rules, 1963, insofar as it enabled the dismissal of appeals for default of appearance, was invalid. Thereafter the assessee filed an application for restoration of its appeal. The Tribunal dismissed the application on the ground that its original order dismissing the appeal was not a nullity but a mistake apparent from the record and that the application for rectifying the mistake was barred by time. The assessee thereupon filed a writ petition before the Bombay High Court. It was held by the Hon'ble Bombay High Court that the assessee could move the Tribunal for rehearing the appeal on the ground that Rule 24 was invalid only after February 1969 when the Supreme Court delivered its judgment setting at rest the conflict of opinion on the validity of Rule 24. It was held that as the petition was filed in June 1969 it was not inordinately delayed. The Hon'ble High Court held that the decision of the Tribunal rendered in 1961 became a nullity and the Supreme Court delivered its judgment in 1969 and the Tribunal was wrong in holding that this decision in 1961 was only a mistake apparent on the face of the record requiring rectification. It was also held that even if the decision of the Tribunal rendered in 1961 was not a nullity but only an erroneous order, after the decision of the Supreme Court, the Tribunal should have set aside its previous order in exercise of its inherent powers and reheard the parties on merits without going into the question whether the subsequent application was made within time or not, as the Tribunal should not allow the party to suffer for its own mistake. This decision also, although on its face it may appear to be in favour of the assessee applicant, does not assist it. The decision was rendered with reference to the facts mentioned above. In the present case the appeal was not dismissed ex parte nor did the decision of the Tribunal become a nullity as in the above case. Therefore, this decision can also not be taken advantage of by the assessee. We are, therefore, of the considered view that the preliminary objection taken on behalf of the department is correct and so the present miscellaneous application is not maintainable.

5. Accordingly, the application of the assessee applicant fails and is rejected.