2014 (5) TMI 885 - AT - Income Tax

Recall of order Rectification of mistake apparent on record u/s 254(2) of the Act Various disallowances made Held that - The assessee had claimed payment of remuneration including incentive to Mr. Ajay Sukhwani under the head Incentive to directors assessee contended that only a sum of Rs.3,60,000/- was paid to Mr. Ajay Sukhwani on account of consultation charges and the Tribunal has committed an error while observing that a sum of Rs.7,20,000 was paid - even if the plea of the assessee is to be admitted that no consultation charges were paid to Mr. Ajay Sukhwani, then the deduction claimed by the assessee in this respect will be required to be deleted and accordingly the incentive claim as allowed to the other two directors of the company at the rate of Rs.3,60,000/- is to be allowed to Mr. Ajay Sukhwani - The net tax effect of any such disallowance/deduction will be nil in that event also - The assessee even did not point out the double benefit claimed and allowed to the assessee during the argument on merits in the main appeal before the Tribunal - when definite factual observations were made by the Tribunal that an amount of Rs.7,20,000/- had already been paid to Mr. Ajay Sukhwani and no further incentive was justified then the assessee has come up with the stand that the earlier deduction was wrongly claimed by the assessee. The assessee through this application has attempted to dissect the order of the Tribunal into pieces then to vent out his dissatisfaction regarding the finding arrived at by the Tribunal on the factual matrix of the case in the garb of application u/s 254(2) alleging mistakes apparent on the record - The mistakes pointed out by the assessee do not fall in any manner even in the definition of mistakes, what to say of any mistake apparent on the record - If the assessee had not been satisfied with the order of the Tribunal, the proper course for him was to file an appeal before the higher Appellate Authority - even the scope of provisions of section 254(2) is very limited and the Tribunal has got no authority to recall or review its entire order passed on merits of the case Decided against Assessee.

Issues Involved:
1. Alleged factual inaccuracies regarding payments to Mr. Ajay Sukhwani.
2. Non-consideration of the decision in CIT v. Indo-Saudi Services (Travels) P. Ltd.
3. Non-consideration of Board's Circular No.6-P dated 6th July, 1968.
4. Tribunal's conclusion about directors not working full-time.
5. Tribunal's findings on extra services for incentive payment.
6. Tribunal's observation on remuneration to directors.
7. Reasonableness of remuneration to Mr. Assan Sukhwani and Mr. Sushil Sukhwani.

Detailed Analysis:

1. Alleged factual inaccuracies regarding payments to Mr. Ajay Sukhwani:
The assessee claimed that the Tribunal incorrectly noted that Mr. Ajay Sukhwani received Rs.3,60,000 as salary and Rs.3,60,000 as consultation charges, totaling Rs.7,20,000. The assessee argued that only Rs.3,60,000 was paid as consultation charges, which was offered under the head 'income from Business and Profession' after reducing expenses. The Tribunal reviewed the record and found that the assessee had indeed claimed Rs.13,60,000 as remuneration and incentive, including Rs.3,60,000 as salary and Rs.3,60,000 as consultation charges. The Tribunal concluded that the assessee's current claim contradicted its previous submissions and the facts on record.

2. Non-consideration of the decision in CIT v. Indo-Saudi Services (Travels) P. Ltd.:
The assessee argued that the Tribunal failed to consider the Bombay High Court's decision, which held that payments to relatives or sister concerns cannot be disallowed if there is no tax evasion. The Tribunal noted that the decision on a debatable point of law or fact cannot be corrected by rectification. The Tribunal also found that the company tried to avoid additional tax by paying the amount as incentives instead of dividends, thus attempting to evade tax. Therefore, the Tribunal held that the cited decision was not applicable and its non-discussion did not constitute a mistake apparent on the record.

3. Non-consideration of Board's Circular No.6-P dated 6th July, 1968:
The assessee relied on the circular to argue that section 40A(2)(b) is not applicable if there is no tax evasion. The Tribunal reiterated that the case involved tax evasion by avoiding the provisions of section 115.O. Hence, this contention was also found to be incorrect and not a mistake apparent on the record.

4. Tribunal's conclusion about directors not working full-time:
The assessee contested the Tribunal's finding that the directors were not working full-time due to their salaries from other companies or business profits. The Tribunal maintained that its detailed analysis of the facts and records, including income tax returns, supported its conclusion. The Tribunal emphasized that it was necessary to assess whether the incentive payments were justified, and this finding could not be considered a mistake apparent on the record.

5. Tribunal's findings on extra services for incentive payment:
The assessee argued that the Tribunal erred in not appreciating that incentive payments are not based on extra services rendered. The Tribunal found that the assessee's contentions were raised on the merits of the case and did not point out any mistake apparent on the record.

6. Tribunal's observation on remuneration to directors:
The assessee claimed that the Tribunal's observation that directors are not barred from receiving reasonable remuneration contradicted its finding on the lack of justification for the extra incentive. The Tribunal found no mistake apparent on the record in this observation, as it was consistent with the overall findings.

7. Reasonableness of remuneration to Mr. Assan Sukhwani and Mr. Sushil Sukhwani:
The assessee argued that the Tribunal erred in limiting the reasonable remuneration to Rs.30,000 per month. The Tribunal found that this contention did not point out any mistake apparent on the record and was an attempt to contest the merits of the case.

Conclusion:
The Tribunal dismissed the assessee's application, stating that the alleged mistakes did not fall within the definition of mistakes apparent on the record. The Tribunal emphasized that the proper recourse for the assessee, if dissatisfied with the order, was to file an appeal before a higher appellate authority. The Tribunal also noted that the scope of section 254(2) is limited and does not allow for recalling or reviewing the entire order. The practice of re-contesting the matter on merits under the guise of rectification was strongly deprecated. The application was dismissed without imposing exemplary costs.

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