2009 (12) TMI 614 - AT - Income Tax

Power of review - Rectification of mistakes - Whether an order which is pronounced in the Court but not yet passed in writing can be recalled under s. 254(2) of the Act to rectify a mistake apparent on record - It was argued that if a judgment which was not cited during the course of hearing, though applicable, and hence not applied, was not a mistake apparent on record - On the issue whether the order of the CIT(A) should be confirmed or should the matter be remanded to the AO, it was submitted that all the documents were placed before the AO and the only grievance was that only five days were left for the assessment gelling barred by limitation - It is evident that the decision which is so pronounced or intimated must be a declaration of the mind of the Court as it is at the time of pronouncement - Supreme Court, that is, Vinod Kumar Singh vs. Banaras Hindu University AIR 1988 SC 371 wherein it was held that there is no material at al1 to show as to what led the Division Bench which had pronounced the judgment in open Court not to authenticate the same by signing it - it is clear that when a judgment is pronounced at the conclusion of the hearing, it is an expression of the mind of the Court at the time of delivery - in the present case, the learned JM kept the matter pending with him without either agreeing with the order pronounced in the Court or without passing any dissenting order - Decided in favor of the assessee

Summary

Issues Involved:

1. Whether the Tribunal had the authority to rehear the appeals after pronouncing the order in open court.
2. Whether the CIT(A) erred in holding that the investment and income belonged to the wife of the assessee.
3. Whether the CIT(A) erred in converting protective assessments into substantive assessments without complying with Rule 46A of the IT Rules.
4. Whether the sworn statements recorded during the survey under Section 133A of the IT Act could be used as conclusive evidence for making additions.

Issue-wise Detailed Analysis:

1. Authority to Rehear Appeals:
The Tribunal initially heard the appeals on 18th Sept., 2008, and pronounced the order in open court, which was signed by both Members. The learned Judicial Member (JM) later proposed to reopen the case, citing a mistake apparent from the record based on the non-consideration of the jurisdictional High Court decision in H. Shahul Hameed vs. Asstt. CIT. The learned Accountant Member (AM) disagreed, arguing that the Tribunal became functus officio after pronouncing the order. The Third Member concluded that an order pronounced in open court is final and not tentative, and cannot be recalled merely because a judgment not cited during the hearing was not considered. The Third Member emphasized that reopening the case would amount to a review, which is beyond the scope of Section 254(2) of the IT Act.

2. Investment and Income Belonging to the Wife:
The CIT(A) held that the investment and income belonged to the wife, Smt. B. Meenakshi, who had independent sources of income. The AO made the addition based on sworn statements obtained during the survey, which suggested that the income and investment in the wife's name actually belonged to the assessee. The Tribunal upheld the CIT(A)'s order, relying on the jurisdictional High Court decision in CIT vs. S. Khader Khan Son, which held that materials collected and statements recorded during a survey under Section 133A are not conclusive evidence. The Tribunal also referred to the principle that there is no presumption in law that properties owned by the wife must be deemed to be owned by the husband.

3. Compliance with Rule 46A:
The Department contended that the CIT(A) admitted additional evidence without adhering to Rule 46A, which requires the AO to be given an opportunity to examine such evidence. The CIT(A) accepted affidavits and confirmation letters from the assessee's brothers and other documents without seeking a remand report from the AO. The Third Member noted that the CIT(A) violated Rule 46A by not providing the AO with a reasonable opportunity to examine the additional evidence. However, the Third Member concluded that setting aside the matter for this reason would amount to a review of the order pronounced in open court, which is not permissible under Section 254(2).

4. Sworn Statements as Evidence:
The AO based the additions on sworn statements recorded during the survey under Section 133A, where the assessee and his wife admitted that the investments were made by the assessee. The Tribunal, following the jurisdictional High Court decision in CIT vs. S. Khader Khan Son, held that statements recorded during a survey do not constitute conclusive evidence and cannot be the sole basis for making additions. The Tribunal emphasized that the evidentiary value of statements under Section 133A is limited and cannot override the substantive evidence presented by the assessee.

Conclusion:
The Third Member's decision aligned with the AM's view that the appeals should not be reheard and that the CIT(A)'s orders should be confirmed. The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s findings that the investments and income belonged to the wife and that the additional evidence admitted by the CIT(A) did not warrant setting aside the order. The Tribunal emphasized the importance of adhering to procedural rules and the limited scope of Section 254(2) for rectifying mistakes apparent from the record.