2011 (3) TMI 1735 - AT - Income Tax

Application filed u/s 254(2) - rectification of errors - It is the plea of the revenue that in the present case, the facts necessary for adjudication of the additional ground of appeal are not available on record and therefore the Tribunal ought to have refused to admit the additional ground of appeal. The revenue has prayed that the above mistake in the order of the tribunal should be suitably rectified. HELD THAT - There is no averment in the application that the issue sought to be raised by the AO in the present application was argued when the appeal was heard and the tribunal has failed to consider such argument. We have already extracted the order of the Tribunal on the admissibility of the additional ground of appeal. A perusal of the same would show that the only argument raised by the learned D.R. when the appeal was heard was that a claim not made by way of a revised return of income cannot be entertained and he placed reliance on the decision of the Hon ble Supreme Court in the case of Goetz (India) Ltd. 2006 (3) TMI 75 - SUPREME COURT . The learned counsel for the Assessee relied on the decision of the Hon ble Delhi High Court in the case of Jai Parobolic Springs Ltd. 2008 (4) TMI 3 - DELHI HIGH COURT wherein the Hon ble Delhi High Court after considering the decision of the Hon ble Supreme Court in the case of NTPC 1996 (12) TMI 7 - SUPREME COURT and Goetz (India) held that power of the tribunal to entertain additional ground is not in any way restricted by the ruling of the Hon ble Supreme Court in the case of Goetz (India) Ltd. In these circumstances, it is not open to the revenue to raise by way of an application u/s.254(2), a new argument which was never advanced when the appeal was heard. It is not open to the revenue to urge an argument by way of application u/s.254(2) of the Act, which was never urged when the appeal was heard. On this short ground the application u/s.254(2) is liable to be dismissed. Where the Tribunal has overlooked the relevant material on record, there would be an error apparent from record which can be rectified by setting aside the order for fresh consideration. Where a material fact brought to the notice of the Tribunal has been lost sight of, the Tribunal has the power to rectify the mistake so committed; provided the material fact has an important bearing on the ultimate decision. The mistake pointed out in the application u/s.254(2) by the revenue in the present case cannot be said to fall in either of the above categories. we are of the view that the present application u/s.254(2) of the Act is devoid of merits and deserves to be dismissed and is hereby dismissed.

Issues Involved:
1. Admissibility of additional ground raised by the Assessee.
2. Requirement of facts on record for adjudication of additional ground.
3. Revenue's objection to the Tribunal's decision to admit additional ground.
4. Tribunal's power to admit additional evidence.
5. Whether the Tribunal's decision involved an apparent error.

Detailed Analysis:

1. Admissibility of Additional Ground Raised by the Assessee:
The Assessee raised an additional ground before the Tribunal, claiming that sales tax exemption received under various State Government schemes was a capital receipt and not chargeable to tax. This issue was not raised before the Assessing Officer (AO) or the Commissioner of Income Tax (Appeals) [CIT(A)]. The Tribunal, citing the Supreme Court's decision in NTPC (229 ITR 383), held that the Assessee is entitled to urge a question of law based on facts already available on record. The Tribunal admitted the additional ground and remanded the matter to the AO for examination of the scheme under which the subsidy was received to determine if it was a capital receipt.

2. Requirement of Facts on Record for Adjudication of Additional Ground:
The Revenue contended that the facts necessary for adjudication of the additional ground were not available on record, and therefore, the Tribunal should not have admitted the additional ground. The Tribunal, however, noted that the necessary facts, such as the sales tax subsidy and the relevant schemes, were public documents and their authenticity could not be disputed. The Tribunal emphasized that the purpose of assessment proceedings is to assess the correct tax liability in accordance with law, and technicalities should not prevent the Tribunal from considering questions of law arising in assessment proceedings.

3. Revenue's Objection to the Tribunal's Decision to Admit Additional Ground:
The Revenue argued that the Assessee had not filed a revised return of income making the claim and relied on the Supreme Court's decision in Goetz India Ltd. (284 ITR 323), which held that a claim for deduction cannot be entertained by an AO otherwise than by a revised return. The Tribunal, however, noted that the power of the Tribunal to entertain additional grounds is not restricted by the Goetz India Ltd. decision, as clarified by the Delhi High Court in Jai Parabolic Springs Ltd. (306 ITR 42). The Tribunal held that it has the discretion to admit additional grounds to ensure the correct assessment of tax liability.

4. Tribunal's Power to Admit Additional Evidence:
The Revenue contended that the Assessee had filed additional evidence before the Tribunal, which was not submitted before the lower authorities, and that the Tribunal did not follow Rule 29 of the ITAT Rules, 1963, which governs the production of additional evidence. The Tribunal noted that the additional evidence consisted of public documents and the quantum of sales tax subsidy recorded in the Assessee's books. The Tribunal held that it has the discretion to admit additional evidence if it is necessary to pass orders or for substantial cause. The Tribunal also observed that the AO, in the set-aside proceedings, had already allowed the deduction claimed by the Assessee.

5. Whether the Tribunal's Decision Involved an Apparent Error:
The Revenue argued that the Tribunal's decision to admit the additional ground involved an apparent error, as the necessary facts were not on record. The Tribunal, however, held that the issue raised by the Revenue was highly debatable and involved a long-drawn process of reasoning. The Tribunal emphasized that an application under section 254(2) of the Income Tax Act is not appropriate for resolving such issues. The Tribunal concluded that there was no apparent error in its original order and dismissed the Revenue's application.

Conclusion:
The Tribunal dismissed the Revenue's application under section 254(2) of the Income Tax Act, holding that there was no apparent error in its decision to admit the additional ground raised by the Assessee. The Tribunal emphasized the need to assess tax liability in accordance with law and held that technicalities should not prevent the Tribunal from considering questions of law arising in assessment proceedings. The Tribunal also noted that it has the discretion to admit additional evidence if necessary for passing orders or for substantial cause.

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