2010 (9) TMI 1269 - AT - Income Tax

Summary

Issues involved:
The issue in this case revolves around the rectification of an order passed by the Appellate Tribunal regarding the computation of business income for a partnership firm engaged in government contracting. The key point of contention is the discrepancy in the profit margin applied to subcontract receipts, specifically in the case of a sub-contract worth Rs. 37 lakhs given to a particular contractor at a profit margin of 1%.

Summary of Judgment:

1. Computation of Business Income:
The applicant, a partnership firm engaged in government contracting, filed a Miscellaneous Application pointing out errors in the Tribunal's order regarding the computation of business income for the assessment year 2001-2002. The Tribunal had directed the Assessing Officer to compute the net profit at 4% on both subcontract and contract receipts, including interest income. The applicant argued that a sub-contract worth Rs. 37 lakhs was given at a profit margin of 1%, contrary to the Tribunal's directive. The applicant sought rectification under section 254(2) of the Act.

2. Arguments and Analysis:
During the hearing, the applicant's representative highlighted the discrepancy in profit margin application, emphasizing that the Tribunal's order lacked reasoning for deviating from the Commissioner of Income Tax (Appeals) decision to consider profit at 1% where applicable. The Revenue's representative contended that the Tribunal's decision was based on past acceptance of 4% profit margin on contract receipts. The Tribunal found merit in the Revenue's argument, emphasizing the conscious view taken based on historical data.

3. Decision and Rationale:
After considering both sides, the Tribunal noted the details of sub-contracts showing varying profit margins. While acknowledging the lack of explicit mention in the order, the Tribunal concluded that the applicant's request amounted to a review rather than rectification under section 254(2). Citing legal precedent, the Tribunal clarified that rectification powers do not extend to reviewing or rewriting orders. As the applicant's submission sought a review of the Tribunal's decision, the Miscellaneous Application was rejected.

In conclusion, the Tribunal upheld its original order, emphasizing the limitations of rectification powers under section 254(2) and the distinction between rectification and review processes. The judgment was pronounced on 30.09.2010 by the Appellate Tribunal ITAT Ahmedabad.