2012 (10) TMI 708 - AT - Income Tax

Rectification u/s 254(2) - Rectification of mistake apparent from the record - Assessee wanted the Tribunal to review its earlier order, that even if there was mistake of judgment by the earlier bench, subsequent bench of the Tribunal was not empowered to rectify it Held that - Even if argument of the assessee for so called five errors/mistakes considered, it will be only an error of judgment or non-consideration of arguments, but it cannot be termed a mistake apparent form record. In our opinion in such situation filing an appeal u/s. 260A with High Court is the only remedy. Appeal decides in favour of revenue

Issues Involved:
1. Findings that the valuation report is an afterthought.
2. Contradiction while following the ITAT Order for AY 2003-04.
3. No depreciation is allowable if no claim is made/allowed in preceding years.
4. Rejection of buyer's right to allocate purchase price as per the valuation report to various assets acquired under slump sale.
5. Erroneous reliance on the disclaimer clause.

Issue-wise Detailed Analysis:

1. Findings that the valuation report is an afterthought:
The Tribunal noted that the valuation report dated 23-03-2009 by M/s. Ernst & Young Pvt. Ltd. was prepared nearly eight years after the original valuation and only after the assessee lost the claim before the higher appellate authority. The Tribunal observed that the exercise of breaking up and valuing the goodwill appeared to be an afterthought to defeat the revenue. The Tribunal upheld the AO's finding that the fresh valuation was done to salvage the situation after losing the claim at the first appellate stage.

2. Contradiction while following the ITAT Order for AY 2003-04:
The Tribunal's earlier order for AY 2003-04 had admitted additional evidence and remitted the matter back to the AO for fresh adjudication. The Tribunal clarified that the order admitting additional evidence was not a final order and did not act as a precedent. The final order passed by the Tribunal after considering additional evidence decides the issue and works as a precedent. The Tribunal held that the decision for AY 2006-07 was taken after considering all material and was an informed decision, not a mistake apparent from the record.

3. No depreciation is allowable if no claim is made/allowed in preceding years:
The Tribunal upheld the AO's view that depreciation can be claimed on assets appearing in the balance sheet on which depreciation was allowed in the past. Since no depreciation was claimed or allowed on intangible assets in the preceding years, the Tribunal concluded that the assessee could not claim depreciation on intangible assets in the impugned assessment year. The Tribunal found that the assessee's claim of bifurcation of goodwill into intangible assets was an afterthought.

4. Rejection of buyer's right to allocate purchase price as per the valuation report to various assets acquired under slump sale:
The Tribunal noted that the assessee had valued various assets, including goodwill, at Rs. 73.74 crores as on 01-04-2002. The Tribunal observed that the contracts for acquiring various assets were available to the assessee at the time of making the original valuation. The Tribunal upheld the AO's finding that the valuation report dated 23-03-2009 could not be accepted as it was prepared at the instance of the assessee without independent verification.

5. Erroneous reliance on the disclaimer clause:
The Tribunal highlighted the disclaimer in the valuation report, which stated that the valuer relied on information provided by the assessee without independent verification. The Tribunal found that the valuation done by the valuers was at the instance of the assessee company with no obligation and responsibility on their part. The Tribunal upheld the AO's view that the valuation report was an afterthought and could not be accepted.

Conclusion:
The Tribunal dismissed the application filed by the assessee under section 254(2) of the I.T. Act, 1961, stating that the issues raised did not constitute mistakes apparent from the record. The Tribunal emphasized that the scope for rectification under section 254(2) is limited and does not allow for re-arguing the entire matter or reviewing the order. The Tribunal concluded that the assessee's remedy lies in filing an appeal under section 260A of the Act.

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