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2014 (2) TMI 850 - HC - Income TaxScope and power of rectification u/s 154 of the Act Held that - The decision in Honda Siel Power Products Limited Vs. Commissioner of Income-tax 2007 (11) TMI 8 - Supreme Court of India followed the fundamental principle has nothing to do with the inherent powers of the Tribunal/authority - the important reason for giving power of rectification is to see that no prejudice is caused to either of the parties appearing before it by its decision based on a mistake apparent from the record - the first appellate authority rightly entertained the application under Section 154 and rectified the error solely on the ground that as per the law, which holds the land, at the relevant point of time, no penalty was imposable when a loss has been incurred by the assessee - the term income in Section 271(1)(c) was interpreted to mean prospective income - the assessment order disclose loss to be carried forward thus, the Commissioner was justified in entertaining the application and rectifying the mistake thus, the order of the Tribunal set aside. Levy of Penalty u/s 271(1)(c) of the Act Held that - The Tribunal had allowed the Department s appeal only on the question of jurisdiction under Section 154 of the Income-tax Act thus, it would be proper to remit back the matter for decision on the question of levy of penalty The appeal allowed only on the aspect of jurisdiction of the CIT(A)Decided partly in favour of Assessee.
Issues Involved:
1. Justification of the Tribunal in cancelling the penalty levied under Section 271(1)(c). 2. Existence of a mistake in the original order of the Commissioner (Appeals) that could be rectified under Section 154. 3. Whether rectifying the order following the Supreme Court's decision amounts to a review of the order. Detailed Analysis: 1. Justification of the Tribunal in Cancelling the Penalty Levied under Section 271(1)(c): The assessee engaged in leasing and hire purchase finance entered into a lease transaction with BSAL for steel rollers, claiming depreciation. The Department found the lease transactions bogus, leading to the assessee filing revised returns, which were held invalid. The Assessing Officer initiated proceedings under Section 147 to disallow depreciation and imposed a penalty of Rs.5,00,000/- under Section 271(1)(c) for concealment of income and furnishing inaccurate particulars. The first appellate authority confirmed the penalty. However, the assessee filed a miscellaneous petition citing the Supreme Court's decision in CIT v. Prithipal Singh, which held that if there was no taxable income or tax assessed, the question of evasion and penalty does not arise. The first appellate authority agreed and deleted the penalty, but the Tribunal later upheld the penalty, stating the assessee was guilty of fraudulently claiming 100% depreciation. 2. Existence of a Mistake in the Original Order of the Commissioner (Appeals) Apparent from Record to be Rectified under Section 154: The Tribunal held that the decision of the Supreme Court in Prithipal Singh was available at the time of the original order, and thus, there was no mistake apparent from the record to be rectified under Section 154. The assessee argued that failure to apply the Supreme Court's decision constituted a rectifiable mistake. The Court referred to the Supreme Court's decision in Honda Siel Power Products Limited, which emphasized that rectification is warranted to prevent prejudice due to a tribunal's mistake. The Court agreed that the first appellate authority was justified in rectifying the order based on the Supreme Court's decision. 3. Whether Rectifying the Order Following the Supreme Court's Decision Amounts to a Review of the Order: The Tribunal's decision to uphold the penalty was based on the view that rectifying the order would amount to a review, which is not permissible under Section 154. However, the Court clarified that rectification to correct a mistake, especially when it involves applying a Supreme Court decision, does not equate to a review. The Court emphasized that the purpose of Section 154 is to correct apparent mistakes to prevent prejudice, which aligns with the Supreme Court's stance in Honda Siel Power Products Limited. Conclusion: The Court set aside the Tribunal's order on the aspect of jurisdiction of the Commissioner of Income-tax (Appeals) to rectify the order under Section 154. The case was remanded to the Tribunal to decide on the merits of the penalty levy, allowing the assessee to present arguments on the merits of the penalty under Section 271(1)(c). The Tax Case was allowed only on the jurisdictional aspect, directing the Tribunal to expedite the hearing on the merits of the penalty.
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