2009 (11) TMI 15 - HC - Income Tax

Business loss - business of potatoes - sale by one purchase by another - bogus in one hand and genuine in another hand - rectification of mistake under section 254(2) - held that - it is clear that in respect of all the three points the Tribunal has considered and discussed all the contentions raised and argued by both the parties and ultimately recorded a finding - The order of the Tribunal may be an erroneous order with which we are not expressing any opinion which can only be rectified or modified or set aside in the procedure known to law but not in a petition under section 254(2) - we are of the view that the Tribunal fell in error in invoking the jurisdiction of Section 254(2) of the Act to re-write the judgment while reviewing the issue already decided which bears no apparent mistake on the face of the record so as to invoke the jurisdiction. Hence the writ petition is allowed and the rule is made absolute.

Issues Involved:
1. Loss in potato business.
2. Loss in shares and securities.
3. Loss in scrap dealings.
4. Jurisdiction of the Tribunal under Section 254(2) of the Income-tax Act, 1961.

Detailed Analysis:

Loss in Potato Business:

The petitioner/assessee claimed a loss of Rs. 74,65,519/- in the potato business, which was rejected by both the Assessing Officer and the Commissioner of Income-tax (Appeals). The Tribunal considered the issue extensively, analyzing the facts, evidence, and arguments presented by both parties. The Tribunal noted that the Department did not question the loans obtained by the assessee and found no discrepancies in the documents produced. It concluded that the loss claimed was genuine and allowable as a business loss. The Tribunal's detailed analysis and findings were based on the evidence and submissions, indicating a thorough consideration of the matter.

Loss in Shares and Securities:

The Tribunal examined the issue of loss in shares and securities, considering the assessment order, the petitioner's statement of facts, and the arguments from both sides. It found that the transactions were conducted through bank channels, and the genuineness of the loans raised for purchasing shares was not doubted by the Department. The Tribunal concluded that the loss suffered by the assessee in trading activities of purchase and sale of shares was genuine and could not be disallowed. The Tribunal's decision was based on a comprehensive analysis of the facts and evidence presented.

Loss in Scrap Dealings:

Regarding the loss in scrap dealings, the Tribunal reviewed the assessment order, the Commissioner of Income-tax (Appeals)'s reasoning, and the arguments from both parties. It found that the relevant documents were produced and examined, and the transactions were confirmed by the traders involved. The Tribunal concluded that the loss in scrap dealings was genuine and allowable as part of normal business activities. The Tribunal's decision was based on the material available on record and the supporting documents.

Jurisdiction of the Tribunal under Section 254(2):

The petitioner contended that the Tribunal, under the guise of rectification, re-heard and reviewed its original order, which is beyond the scope of Section 254(2) of the Income-tax Act, 1961. The Tribunal's power under Section 254(2) is limited to rectifying mistakes apparent on the face of the record and does not extend to reviewing its own decisions. The Tribunal's detailed and lengthy original order indicated that it had applied its mind to the issues, and such an order could not be re-called under Section 254(2). The Tribunal's action of re-writing its judgment in the rectification petition was deemed impermissible and against legislative intent.

Conclusion:

The Tribunal's original order on the issues of losses in potato business, shares and securities, and scrap dealings was based on a thorough consideration of the facts, evidence, and arguments. The Tribunal's attempt to rectify its original order under Section 254(2) was found to be beyond its jurisdiction, as it amounted to a review rather than a rectification of mistakes apparent on the face of the record. The writ petition was allowed, and the Tribunal's rectification order was quashed.

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