2015 (6) TMI 1197 - AT - Income Tax

Rectification u/s 254 - disallowance u/s. 14A r.w.r. 8D - HELD THAT - Hon ble Gujarat High Court in Assessee s own case is A.Y. 2006-07 while deciding the Special Civil Application has held that provisions of Rule 8D are applicable from A.Y. 2008-09 and is not retrospective. Considering the aforesaid fact, we are of the view that there is an apparent mistake in the order of Tribunal and therefore recall the order for a limited purpose to decide the issue with respect to disallowance u/s. 14A of the Act. The Registry is directed to fix the hearing the appeal in due course. Disallowance u/s. 36(1)(iii) - HELD THAT - It is also well settled/established law that the Tribunal is not bound to discuss each and every argument made at the time of hearing of the appeal and the conclusion arrived by the Tribunal may be an error of judgment but cannot be considered to be an error apparent on record rectifiable u/s. 254(2) of the Act. The powers of the Tribunal u/s 254(2) is very limited and the Tribunal has limited jurisdiction of rectification in its order if an error is crept therein which is apparent from the face of the record. Reappreciation of the evidence placed before the Tribunal during the course of hearing is not permissible to re-adjudicate the issue afresh under the garb of rectification. The power to review is not available to the Tribunal. If we accept this petition, then this may tantamount to review of an order of the Tribunal and the law is settled that we have no such power. Further, we also find support to our aforesaid view by the decision in the case of Perfetti Van Melle India (P) Ltd. vs. CIT 2007 (5) TMI 214 - DELHI HIGH COURT wherein the Hon'ble High Court has concluded that Assessee cannot be allowed to reopen and reargue the whole matter in the garb of rectification under section 254(2). We are of the view that since the assessee has failed to point out any mistake apparent from record in the order, we are not inclined to recall the order of the Co-ordinate Bench in M.A. with respect to disallowance u/s. 36(1)(iii).

Summary

Issues:
1. Disallowance under section 14A of the Income Tax Act for A.Y. 2007-08.
2. Disallowance under section 36(1)(iii) of the Income Tax Act.

Issue 1: Disallowance under section 14A of the Income Tax Act for A.Y. 2007-08:
The Assessee filed Miscellaneous Applications (M.As.) against the Tribunal's order in ITA No. 2369 & 2452/Ahd/2010 for A.Y. 2007-08. The disallowance under section 14A was made by applying Rule 8D, which the Assessee argued was not applicable for the year under appeal. The Assessee cited a decision of the Hon'ble High Court in their own case for A.Y. 06-07, stating that Rule 8D is effective from A.Y. 08-09 and has no retrospective effect. The Tribunal acknowledged the mistake in its order and decided to recall the order in ITA No. 2369/Ahd/2010 to reexamine the disallowance u/s. 14A. The Tribunal directed the Registry to schedule a new hearing for the appeal.

Issue 2: Disallowance under section 36(1)(iii) of the Income Tax Act:
Regarding the disallowance made under section 36(1)(iii) while deciding the appeal in ITA No. 2452/Ahd/2010, the Assessee contended that there were factual errors overlooked by the Tribunal. However, the Tribunal held that its powers of rectification under section 254(2) are limited and do not extend to reevaluating evidence or re-adjudicating issues. Citing the decision of the Hon'ble Delhi High Court in a similar case, the Tribunal emphasized that rectification cannot be used to reopen or reargue the entire matter. As the Assessee failed to demonstrate any mistake apparent from the record in the Tribunal's order, the Miscellaneous Application related to disallowance u/s. 36(1)(iii) was dismissed.

In conclusion, the Tribunal allowed M.A. No. 104/Ahd/2014 related to disallowance under section 14A and dismissed M.A. No. 105/Ahd/2014 concerning disallowance under section 36(1)(iii). The judgment highlighted the limited scope of rectification under section 254(2) and the inability to review an order based on new arguments or overlooked facts. The decision was pronounced in Open Court on 10-06-2015.