2015 (7) TMI 1082 - HC - Income Tax

Scope of rectification of mistake - Held that - From a reading of the Circular No. 68, dated November 17, 1971 issued by the Board relating to rectification of mistakes relied on by the assessee, it would be evident that the above circular would be relevant in a proceeding under section 154 only in relation to such issues, which have already been considered in the order and have subsequently been put to rest by the decision of the Supreme Court and, thereafter, it can be a ground for rectification. If, in the original order, there is no such issue, a new plea, based on a decision of the Supreme Court, cannot be raised in an application under section 154. In so far as the issue of surcharge is concerned, the same also was not a contentious issue raised by the assessee in the original order. Even otherwise, we are constrained to hold that though the assessee raised many issues before the High Court in the first round of appeal but restricted itself to only three substantial issues, which were decided against the assessee, which was subsequently affirmed by the Supreme Court. Further, an application under section 154 was also pursued simultaneously, which we find is akin to riding two horses at the same time. Unfortunately, the assessee having abandoned the plea before the High Court, the plea, which was raised in the section 154 application would clearly show that it is a new plea, which they want to pursue in terms of the provisions of section 154. Yet another factor, which goes against the assessee in the original order itself relates to the plea of income from lease equipment, which was treated as income from financial transaction. Even at the initial point of time, it was well within the appellant-assessee s knowledge that the said income, though not treated as an income from lease, was treated as income from finance transaction in respect of the same party. Therefore, the new plea taken by the appellant that consequent to disallowance of depreciation, the income should also be deleted, has no legs to stand. That fact was not the issue in the first round of appeal. At best it may be treated as a finding of the Assessing Officer, accepted by the assessee and abandoned in the course of appeal proceedings but it cannot be said that it is a mistake apparent on record warranting invocation of rectification proceedings under section 154 of the Act. For the reasons abovesaid, this court holds that the provisions of section 154(1A) does not provide for rectification in the manner, which the appellant now pleads before this court. The case of the appellant-assessee does not fall within the scope of section 154(1A) warranting rectification as envisaged in the said provision. Accordingly, the substantial questions of law raised in TCA No. 536 of 2005 are answered against the appellant-assessee and in favour of the Department-respondent. It is trite law that a person is estopped in pursuing parallel proceedings before two authorities for the same relief. Therefore, the Tribunal was correct in declining to interfere with its earlier order and dismissing the application, as there was no scope for rectifying any mistake, since there was no mistake apparent from the record, as envisaged under section 154(1A), in view of the findings rendered earlier. For the reasons aforesaid, the substantial question of law is answered in favour of the respondent-Revenue and against the appellant-assessee.

Issues Involved:
1. Interpretation and applicability of Section 154(1A) of the Income-tax Act.
2. Entitlement to seek rectification under Section 154 despite previous judicial decisions.
3. Validity of lease transactions and the resulting depreciation and income claims.
4. Inclusion of lease rental income in total income despite disallowance of depreciation.
5. Levy of surcharge in block assessment under Chapter XIV-B.
6. Procedural issues regarding the approval of block assessment orders.
7. Principles of natural justice and denial of opportunity to cross-examine witnesses.

Issue-Wise Detailed Analysis:

1. Interpretation and Applicability of Section 154(1A):
The court analyzed Section 154(1A), which allows rectification of any matter other than those considered and decided in appeal or revision. The court emphasized that rectification is intended to correct mistakes apparent on the face of the record, not to introduce new issues or reargue settled matters. The court concluded that the appellant's plea to delete lease income was not permissible under Section 154(1A) since it was a new issue not previously considered.

2. Entitlement to Seek Rectification Under Section 154 Despite Previous Judicial Decisions:
The appellant argued that despite adverse decisions from the Tribunal, High Court, and Supreme Court, they could still seek rectification under Section 154. The court rejected this argument, stating that the scope of rectification is limited to correcting obvious and patent mistakes, not to re-litigate issues already decided by higher judicial authorities.

3. Validity of Lease Transactions and Resulting Depreciation and Income Claims:
The appellant's lease transactions were found to be fictitious, leading to the disallowance of depreciation claims. The court upheld this finding, relying on the statement of the managing director and other evidence. The Tribunal and High Court had previously confirmed that the transactions were bogus and the depreciation claims were rightly disallowed.

4. Inclusion of Lease Rental Income in Total Income Despite Disallowance of Depreciation:
The appellant contended that if the lease transactions were deemed fictitious, the lease rental income should also be excluded from the total income. The court held that this issue was not raised in the original appeal and could not be introduced through a rectification application. The court noted that the income from the lease was treated as income from financial transactions, which the appellant had accepted.

5. Levy of Surcharge in Block Assessment Under Chapter XIV-B:
The appellant challenged the levy of surcharge in the block assessment. The court found that this issue was not raised in the original appeal and could not be introduced in a rectification application. The court also noted that the appellant had pursued this issue in parallel proceedings, which is not permissible.

6. Procedural Issues Regarding Approval of Block Assessment Orders:
The appellant argued that the block assessment order was issued without the required approval from the Commissioner of Income-tax. The court found that the Tribunal had verified the records and confirmed that the approval was obtained as required. This procedural issue was thus resolved against the appellant.

7. Principles of Natural Justice and Denial of Opportunity to Cross-Examine Witnesses:
The appellant claimed a violation of natural justice, arguing they were not given an opportunity to cross-examine witnesses or access certain documents. The court rejected this claim, noting that the Tribunal had found no such violation. The court emphasized that the appellant had the opportunity to raise these issues in the original appeal but failed to do so.

Conclusion:
The court dismissed the appeals, holding that the appellant could not use Section 154 to introduce new issues or reargue settled matters. The court affirmed that the issues of fictitious lease transactions, disallowance of depreciation, and inclusion of lease rental income were correctly decided in the original proceedings. The court also upheld the procedural correctness of the block assessment and the levy of surcharge. The appeals were dismissed with no order as to costs.

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