2015 (9) TMI 337 - HC - Income Tax

Unexplained investment in factory building and factory land - rectification of mistake - Held that - As at the time of hearing of the Tax Appeal, the assessee did not point out before this Court that they have already preferred rectification application before the Tribunal which is pending nor even at the time of deciding the rectification application (subsequently) by the Tribunal it was pointed out before the Tribunal that against the judgment and order passed by the learned Tribunal which is sought to be rectified, they preferred appeal, which has been dismissed by the Division Bench on merits. Shri Shah, learned counsel for the petitioner is not in a position to dispute the above. Under the circumstances, now it is not open for the petitioner to contend that despite the dismissal of appeal by this Court, rectification application would be maintainable, on issues / grounds, which came to be earlier considered by the Division Bench while deciding the Tax Appeal under the guise of the rectification, the petitioner-assessee cannot have the second round of litigation on the same ground / issue which earlier came to be considered by the Division Bench of this Court 2015 (9) TMI 330 - GUJARAT HIGH COURT and Division Bench dismissed the appeal on merits. In view of the above, present petition under Article 226 of the Constitution of India is not required to be entertained, more particularly, when on the ground / issue which is sought to be canvassed, more particularly, valuation adopted by the Assessing Officer while making addition of ₹ 22,70,370/, the appeal at the instance of the very petitioner assessee against the order passed by the learned Tribunal passed has been dismissed on merits, this Court is not required to exercise appellate jurisdiction over the order passed by the Division Bench of this Court. Under the circumstances, present petition deserves to be dismissed. - Decided against assessee.

Issues Involved:
1. Maintainability of appeal under Section 260A of the Income Tax Act against the order passed by the Tribunal in a rectification application under Section 254(2).
2. Merits of the Tribunal's decision to reject the rectification application.

Detailed Analysis:

1. Maintainability of Appeal under Section 260A:

The primary issue for consideration was whether an appeal under Section 260A of the Income Tax Act is maintainable against an order passed by the Tribunal rejecting a rectification application under Section 254(2). The court held that such an appeal is not maintainable. The court relied on the precedent set by the Bombay High Court in *Chem Amit vs. Assistant Commissioner of Income Tax* (2005) 272 ITR 397, which clarified that an order passed by the Tribunal on a rectification application is not an order passed in appeal by the Tribunal within the meaning of Section 260A(1) of the Act. The court noted that the language of Section 260A differs significantly from Section 256, which allows for references to the High Court on any question of law arising out of an order passed under Section 254. The court concluded that only orders passed in appeal by the Tribunal are amenable to appeal under Section 260A, not orders on rectification applications.

The court also referenced decisions from other High Courts, including the Rajasthan High Court in *Madhav Marbles & Granites vs. Income Tax Appellate Tribunal* (2012) 22 Taxmann.com 51 and the Madras High Court in *Visvas Promoters (P) Ltd vs. ITAT* (2010) 323 ITR 114, which supported the view that appeals under Section 260A are not maintainable against orders passed under Section 254(2). Instead, the appropriate remedy is to file a Special Civil Application under Articles 226/227 of the Constitution of India.

2. Merits of the Tribunal's Decision to Reject the Rectification Application:

On the merits of the Tribunal's decision to reject the rectification application, the court noted that the petitioner had previously filed a Tax Appeal (No. 653 of 2012) against the Tribunal's order in ITA No. 675 of 2010, which was dismissed on merits by the High Court. The court emphasized that once the High Court dismisses an appeal on merits, the order of the Tribunal merges with the High Court's order, and it is not open for the Tribunal to entertain a rectification application on the same issues.

The court cited the decision in *Nirma Industries Ltd vs. Deputy Commissioner of Income Tax* (2006) 283 ITR 402 (Guj), which held that once the High Court dismisses an appeal, the Tribunal's order merges with the High Court's order, and no rectification application can be entertained thereafter. The court also pointed out that the petitioner had not informed either the High Court or the Tribunal about the pending rectification application during the appeal process, which further weakened their case.

The court rejected the petitioner's arguments on the merits, including the contention that the Tribunal had erred in not considering a valuation report from the Rajkot Nagrik Sahakari Bank Ltd. The court concluded that the issues raised in the rectification application had already been addressed and dismissed by the High Court in the Tax Appeal, and thus, entertaining the petition under Article 226 would amount to a second round of litigation on the same grounds.

Conclusion:

The court dismissed the petition under Article 226 of the Constitution of India, affirming that an appeal under Section 260A is not maintainable against an order passed by the Tribunal in a rectification application under Section 254(2). The court also upheld the Tribunal's decision to reject the rectification application, emphasizing that the issues raised had already been adjudicated and dismissed by the High Court in a prior appeal.

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