2010 (10) TMI 198 - AT - Income Tax

Reopening of assessment - mistake apparent from the record - Rectification of mistake - absence of notice - decisions in M/s. Hotel Blue Moon (2010 -TMI - 35251 - SUPREME COURT OF INDIA) and in Dr. Rajah Sir M. A. Muthiah Chettiar (1998 -TMI - 16149 - MADRAS High Court) - Held that - assessee, in this case, seeks to get recalled the order of the Tribunal for fresh hearing by, challenge about non-service of notice u/s 143(2) in appeal against deletion of penalty imposed by the A.O u/s 271(1)(c) filed by the Department, which is neither mentioned in the grounds of appeal nor it is part of the order, therefore, in our considered view, it could not be the subject-matter of rectification. That apart the assessee has not pointed out nor this Bench has noticed any mistake in the elaborate and detailed order passed while considering each and every aspect of matter in appeal and in case, request of the assessee is accepted, it would amount to review of the order of the Tribunal which is not permissible under the law. Under rectification proceedings, the Tribunal is not empowered to review the order passed earlier and support can be taken from the decision of the Hon ble Calcutta High Court in the case of CIT v. Gokul Chand Agarwal (1992 -TMI - 20893 - CALCUTTA High Court)

Summary

Issues Involved:
1. Reopening of assessment without serving notice under section 143(2).
2. Waiver of the right to notice under section 143(2).
3. Ownership and taxation of capital gains on the property.
4. Validity of sale executed by partners in individual capacity.
5. Rectification under section 254(2) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Reopening of Assessment Without Serving Notice Under Section 143(2):
The assessee contended that the Tribunal erred in confirming the reopening of the assessment without appreciating that notice under section 143(2) was not served after the return was filed in response to notice under section 148. The Tribunal held that the issue of non-service of notice under section 143(2) was not a subject matter of the appeal and thus could not be raised in rectification proceedings. The Tribunal emphasized that a mistake apparent from the record must be patent and obvious, not requiring elaborate arguments or investigations.

2. Waiver of the Right to Notice Under Section 143(2):
The assessee argued that the Tribunal erred in holding that the appellant waived its right to notice under section 143(2). The Tribunal reiterated that there cannot be a concession on the mandatory requirements of statute as there cannot be estoppels against the law. However, the Tribunal found no mistake in its earlier order regarding this issue.

3. Ownership and Taxation of Capital Gains on the Property:
The assessee contended that the Tribunal erred in holding that the property belonged to the firm and hence the capital gains on the transfer of the property were taxable in the hands of the firm. The assessee argued that the property was never owned by the firm and that the sale was executed by the partners in their individual capacity. The Tribunal noted that the assessee had not pointed out any mistake in the order regarding this issue and that the detailed order had considered all aspects of the matter.

4. Validity of Sale Executed by Partners in Individual Capacity:
The assessee argued that the sale consideration was given to the individuals and that assuming the firm was the owner of the property, the execution of the sale by the partners in their individual capacity would be void ab initio. The Tribunal found no apparent mistake in its order concerning this argument and held that the issue could not be revisited under rectification proceedings.

5. Rectification Under Section 254(2) of the Income Tax Act:
The Tribunal discussed the scope of rectification under section 254(2), emphasizing that a mistake must be apparent from the record and not dependent on argument or elaboration. The Tribunal cited various judicial precedents to support its view that rectification does not cover cases where a revision or review of the order is intended. The Tribunal concluded that the assessee's request for rectification amounted to a review of the order, which is not permissible under the law. The Tribunal dismissed the application, stating that no mistake apparent from the record was pointed out by the assessee.

Conclusion:
The Tribunal dismissed the Miscellaneous Petition of the assessee, holding that there was no apparent mistake in its earlier order and that the issues raised by the assessee could not be addressed under rectification proceedings as per section 254(2) of the Income Tax Act. The Tribunal emphasized that rectification is limited to correcting patent and obvious mistakes and does not extend to reviewing or revisiting the merits of the case.