2016 (10) TMI 361 - HC - Income Tax

Rectification of mistake - prayer for leave to withdraw the appeal - Applicability of Income Tax Rule-8 in assessing fringe benefit tax - Held that - The following facts in the case before us are not disputed nor are they disputable - (a) The prayer for not pressing the appeal was made on 30th November, 2015 in ignorance of the judgement passed by the jurisdictional High Court in the case of Apeejay Tea Ltd. v. CIT reported in (2014 (7) TMI 1118 - CALCUTTA HIGH COURT )wherein held that the amount of expenditure incurred by the assessee-employer in extending fringe benefits to its employees was not solely for the purpose of business. The expenditure incurred was both for the purpose of business and for the purpose of agriculture. The submission that the expenditure on account of fringe benefits had already been taken into account was not correct. The net profit and loss of the business had to be arrived at after deducting all the expenses. Once that was done 40 per cent. of the net profit and loss had to be worked out which shall be chargeable to tax. Once this was done the expenditure on account of fringe benefits would automatically stand reduced to 40 per cent. (b) The prayer for leave to withdraw the appeal was, made, based on the earlier views taken by the Tribunal holding that Income Tax Rule-8 had no applicability in the matter of fringe benefit tax. (c) It does not appear that the learned Tribunal was alive of the fact that the jurisdictional High Court had already taken a different view. There is, as such, no doubt that the order was prayed for and passed under a mistaken belief that Income Tax Rule-8 had no applicability to the fringe benefit tax. We already have demonstrated that the mistake is apparent. True, it is that it might not have been a mistake on the part of the Tribunal but the Tribunal obviously was not aware of the judgement of the jurisdictional High Court passed on 3rd July, 2014. Had it been aware of the judgement, it would have, in fairness we believe, brought this fact to the notice of the assessee. The assessee obviously was not aware. Therefore, the prayer for leave to withdraw the appeal and the order allowing the prayer were both based on a mistake. Section 254(2) does not provide that it has to be a mistake solely on the part of the learned Tribunal. We are, as such, of the opinion that the case was covered by sub-section 2 of Section 254. In summing up, we may indicate the question which falls for consideration - whether the power under section 254(2) can be exercised in the case of a mistake apparent on the part of the litigant or his advisors? For the reasons discussed above, we answer the question in the affirmative

Summary

Issues:
Challenge to refusal of jurisdiction under section 254(2) of the Income Tax Act by the Income Tax Appellate Tribunal.

Analysis:
The case involved a challenge to the refusal of jurisdiction under section 254(2) of the Income Tax Act by the Income Tax Appellate Tribunal. The appellant had applied under section 254(2) to rectify an error apparent on the face of the record after the appeal was dismissed based on the appellant's letter expressing a lack of desire to press the appeal. The appellant contended that the dismissal was based on a mistake as they were unaware of a judgment by the jurisdictional High Court that changed the view on the applicability of Income Tax Rule-8 to fringe benefit tax. The High Court considered whether the power under section 254(2) could be exercised in the case of a mistake apparent on the part of the litigant or their advisors.

The Court noted that the mistake in this case was not solely on the part of the Tribunal but also on the part of the appellant and their advisors. The Tribunal was unaware of the judgment that changed the legal position, which led to the mistaken dismissal of the appeal. The Court held that the case fell within the purview of section 254(2) as it allows for rectification of mistakes apparent from the record, even if not solely committed by the Tribunal. Citing a precedent, the Court emphasized that justice should not be denied due to mistakes made under legal advice.

The Court, therefore, set aside the order under challenge and directed the Tribunal to hear the appeal on merits. Acknowledging the prolonged duration of the case, the Tribunal was instructed to prioritize the matter for resolution. The judgment highlighted the importance of rectifying mistakes that may have led to unjust outcomes and ensuring that litigants have the opportunity for a fair hearing based on the correct legal position.

In conclusion, the High Court's decision focused on the application of section 254(2) in cases where mistakes are made by litigants or their advisors, emphasizing the need for fairness and rectification of errors to uphold the principles of justice in legal proceedings.