2003 (7) TMI 12 - HC - Income Tax

Mistake apparent on record - Whether Tribunal was justified in law in admitting the miscellaneous application when there was no apparent mistake rectifiable under section 254(2) and directing application of net profit rate of eight per cent subject to interest and depreciation? - Tribunal has discussed in detail and taken the view of eight per cent, net profit rate, which cannot be said that there is apparent mistake in the order of the Tribunal, which can be corrected in the miscellaneous application moved under section 254(2) of the Act. Therefore, in our considered view, the Tribunal has committed error in allowing the eight per cent, net profit rate, subject to depreciation and interest. Revenue s appeal allowed

Summary

Issues:
Admission of miscellaneous application under section 254(2) of the Income-tax Act for rectifying apparent mistake in applying net profit rate of eight per cent subject to interest and depreciation.

Analysis:
The case involved an appeal regarding the application of net profit rate for a civil contractor. The assessee initially declared a net profit rate of five percent and seven percent for different assessment years, which was subsequently enhanced by the Assessing Officer to 15 percent. The Commissioner of Income-tax (Appeals) reduced it to 12.5 percent, and the Tribunal further reduced it to eight percent without mentioning interest and depreciation. The Tribunal then allowed a miscellaneous application to apply the eight percent rate subject to interest and depreciation. The key question was whether there was an apparent mistake in the Tribunal's order that could be rectified under section 254(2) of the Income-tax Act.

The Tribunal, in its order, considered the issue of net profit rate in detail and justified the application of an eight percent rate based on section 44AD, even though not directly applicable to the case. The Tribunal's order did not indicate any apparent mistake that could be corrected under section 254(2). The High Court held that the Tribunal erred in allowing the eight percent net profit rate with depreciation and interest in the miscellaneous application. The court concluded that there was no apparent mistake in the appeal order that warranted correction under the Income-tax Act.

In summary, the High Court allowed the appeal, ruling that the Tribunal's decision to apply the eight percent net profit rate with interest and depreciation through a miscellaneous application was incorrect. The Court emphasized that there was no apparent mistake in the original order that could be rectified under section 254(2) of the Income-tax Act.