2006 (7) TMI 168 - HC - Income Tax

Appellate Tribunal allowed the application made u/s 254 - Whether any ground was made out for entertaining the application made u/s 254 and if so whether these grounds satisfy the requirement of section 254 entitling the Tribunal to rectify their main order passed in appeal? - HELD THAT - In the present case we find from the records that a contention was raised on behalf of the assessee before the Tribunal at the time of hearing of the appeal that preliminary objections raised by the Department to the appeal filed by the assessee are only academic as the appeal stood withdrawn in the month of April 1999 when the assessee obtained a certificate of settlement under the Kar Vivad Samadhan Scheme but such a contenion raised by the assessee was turned down by the Tribunal As a matter of fact we find that in the impugned order of the Tribunal on the application filed by the assessee u/s 254(2) of the Act that the Tribunal has relied on the decisions of CIT v. D.P.F. Textiles Ltd. 1999 (7) TMI 37 - MADRAS HIGH COURT Ahmedabad Electricity Co. Ltd. v. CIT 1992 (4) TMI 29 - BOMBAY HIGH COURT Gauri Sahai Ghisa Ram v. CIT 1979 (2) TMI 53 - ALLAHABAD HIGH COURT and Chhat Mull Aggarwal v. CIT 1978 (11) TMI 58 - PUNJAB AND HARYANA HIGH COURT to come to the conclusion that the assessee would have a right to appeal even if additions were made on the concessions made by the assessee. We also find that in the impugned order the Tribunal has relied on the decision of the Supreme Court in Dr. Mrs. Renuka Datla v. CIT 2002 (12) TMI 6 - SUPREME COURT in which it has been held that if an appeal is pending it is not for the designated authority to question the possible outcome of the appeal etc. nor for the High Court to hold that the appeal was sham ineffective or infructuous. Hence it appears to us that in the impugned order on the application u/s 254(2) of the Act the Tribunal has reconsidered the contentions of learned counsel for the parties raised at the time of hearing of the appeal and has reversed its earlier finding in the appellate order dated November 26 2001 that the appeal was not competent and was void ab initio and that the fact that the assessee had obtained a certificate under the Kar Vivad Samadhan Scheme would not bar the Tribunal to analyse and adjudicate the preliminary objections of the Department that the appeal was not competent and void ab initio. The Tribunal has thus reheard the appeal before it and has taken a different view on the merits of the contentions of the parties in the impugned order which was outside the scope and purview of section 254(2) of the Act. Hence both the substantial questions of law are answered in the negative and in favour of the Department and against the assessee. In the result the appeal is allowed and the impugned order of the Tribunal passed is set aside.

Summary

Issues:
1. Appeal against Tribunal's order.
2. Application under Section 254(2) of the Act for correction of the Tribunal's order.
3. Interpretation of Section 254(2) of the Act.

Analysis:

1. The appeal was filed against the Tribunal's order dated 16th Jan., 2004, where the Tribunal allowed an application under Section 254(2) of the Act. The Tribunal had substituted certain paras of its appellate order from 26th Nov., 2001, holding that since the assessee opted for Kar Vivad Samadhan Scheme, 1998 (KVSS) and paid the taxes settled thereunder, the appeal had to be treated as dismissed. The Department contended that the Tribunal exceeded its jurisdiction by passing the impugned order, as it reconsidered the contentions of the parties and reversed its earlier findings. The Court formulated substantial questions of law for decision regarding the Tribunal's actions in allowing the application and rectifying its main order.

2. The assessee filed an application under Section 254(2) of the Act, arguing that the appeal should have been treated as withdrawn when the designated authority issued the settlement certificate under the KVSS. The Tribunal allowed the application, relying on various High Court and Supreme Court decisions. However, the Court held that the Tribunal's actions in rehearing the appeal and reversing its earlier findings were beyond the scope of Section 254(2) of the Act. The Tribunal had reconsidered the contentions of the parties and taken a different view on the merits, which was not permissible under the said section.

3. Section 254(2) of the Act allows the Tribunal to rectify any mistake apparent from the record. The Court emphasized that rectification under this section is limited to correcting palpable mistakes on the face of the record and not to rehear an appeal or reverse findings based on arguments raised during the hearing. The Tribunal's duty is to rectify only mistakes that are evident from the record. In this case, the Tribunal's reconsideration of the appeal and reversal of its earlier decision went beyond the mandate of Section 254(2) of the Act. The Court ultimately allowed the appeal and set aside the impugned order of the Tribunal.

This detailed analysis highlights the issues involved in the legal judgment and provides a comprehensive understanding of the Court's decision regarding the Tribunal's actions and the interpretation of the relevant legal provisions.