2012 (7) TMI 762 - AT - Income Tax

Addition made on account of unaccounted investments - Held that - Losses incurred by the respondent company by the sales of certain shares in two companies belonging to the same group were trading losses, the Appellate Tribunal treated the respondent company as a dealer in shares for the relevant year as in the earlier years it had been so treated by the Department, found that there was nothing on record which would suggest that the acquisition and sale of those shares was for anything other than commercial purposes, considered that the mere circumstance that those shares were shown by the respondent as investments in its balance-sheet was not conclusive, pointed out that there was nothing to show that the purchase of the shares had anything to do with the control of the companies concerned, and relied upon the circumstance that the sales were at market rates or at going rates - Misc. Application filed by the assessee seeking recalling of the order of the Tribunal for rectification u/s 254(2) does not have any merit.

Issues Involved:
1. Consideration of affidavit and synopsis of submissions.
2. Addition based on octroi payment and stock verification.
3. Invocation of Section 69 and related case laws.
4. Alternative submissions and stock turnover ratio.
5. Non-consideration of relevant decisions and contentions.
6. Gross profit addition and unaccounted sales.
7. Tribunal's power to rectify versus review its order.

Detailed Analysis:

1. Consideration of Affidavit and Synopsis of Submissions:
The assessee's representative argued that the Tribunal did not consider the affidavit executed on 26-07-2008, which stated that octroi receipts were not seized from the assessee's premises. Additionally, the synopsis of submissions, which included eight material factual aspects, was also overlooked. The Tribunal failed to acknowledge these documents, which detailed that the addition of Rs. 45,75,000/- was based on incorrect assumptions and that the octroi receipts did not pertain to unaccounted transactions.

2. Addition Based on Octroi Payment and Stock Verification:
The addition was made based on octroi payment of Rs. 1,01,000/- on 20/07/1999, following a spot inspection by the Octroi Department. The assessee contended that the stock was inventoried and reconciled with the book stock, and no unaccounted stock was found. The octroi payment related to regular transactions recorded in the books before the search date, thus not falling under undisclosed income. The Tribunal did not consider these reconciliations and the nature of octroi payments, which were explained as compounding costs rather than penalties.

3. Invocation of Section 69 and Related Case Laws:
The Tribunal invoked Section 69 for assessment under Section 158BC, relying on decisions from Karnataka, Rajasthan, and Madras High Courts, which were not cited during the hearing, denying the assessee an opportunity to respond. The Tribunal did not consider the assessee's contentions that the onus was discharged by explaining the nature of octroi payments and the lack of discrepancies in stock inventories.

4. Alternative Submissions and Stock Turnover Ratio:
The Tribunal mentioned an alternative submission about the impossibility of making all purchases on one day and inferred a turnover and recycling of purchases and sales. However, the assessee clarified that no such alternative submissions were made. The Tribunal's calculation of stock turnover ratio and estimation of investment value were not discussed during the hearing.

5. Non-Consideration of Relevant Decisions and Contentions:
The Tribunal did not consider several relevant decisions and contentions presented by the assessee, including orders from CIT(A), decisions of the Gujarat High Court, and specific cases related to octroi recovery and unaccounted investments. These omissions were argued to be apparent mistakes.

6. Gross Profit Addition and Unaccounted Sales:
The Tribunal upheld the gross profit addition of Rs. 1,37,250/- and unaccounted sales of Rs. 79,266/-, based on the findings of CIT(A). However, the assessee argued that these findings were not adequately considered, and the Tribunal did not address the contentions that the transactions were duly recorded in the books before the search.

7. Tribunal's Power to Rectify Versus Review Its Order:
The Tribunal emphasized that it could only rectify mistakes apparent on record, not review its earlier order. The expression "mistake apparent on record" refers to clerical, grammatical, or arithmetical errors detectable without reargument or reappraisal of facts. The Tribunal cited the decision in CIT Vs Karam Chand Thappar and Bros. Pvt. Ltd., asserting that it could not interfere with its earlier findings unless there was a failure to consider relevant material or a perverse conclusion.

Conclusion:
The Tribunal concluded that the assessee's Misc. Application sought a review rather than rectification of the order, which is beyond the Tribunal's power under Section 254(2) of the IT Act. Consequently, the Misc. Application was dismissed, and the Tribunal's original findings were upheld. The order was pronounced in open court on 25-05-2012.

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