2018 (9) TMI 1701 - HC - Income Tax

Rectification of mistake - assessment of income - Held that - Tribunal s previous order in the tax appeals of Shri M. N. Patel and the company it can be seen that the Tribunal was acutely conscious about three aspects of the matter. (i) Firstly, whether the entire amount of ₹ 2.27 lacs could be stated to be the income of Shri M. N. Patel and could be taxed in his hands. (ii) Having held that only 6.25% of such amount which came to ₹ 13.53 lacs could be taxed in the hands of Shri M. N. Patel as part of his share out of the company s profit, what would happen to the rest of the amount and (iii) whether the remaining sum of ₹ 2.16 crores could be taxed in the hands of the company. The Tribunal gave findings on all three aspects. Even after recording that Shri M. N. Patel can be taxed to the tune of ₹ 13.53 lacs of income the Tribunal gave reasons for holding that the remaining amount could not be taxed in hands of the company. Whether this conclusions are correct or incorrect surely the High Court will decide in the Revenue's tax appeal which is already admitted. However, this is not a case where the Tribunal failed to decide an important issue arising in the appeals or that the consideration of the Tribunal suffered from an error apparent on the record. As is well settled the jurisdiction of the Tribunal to rectify its own order is quite narrow and cannot be equated with the power of review which the Tribunal does not possess.

Issues Involved:
1. Validity of the Miscellaneous Application for rectification filed by the Department.
2. Whether the Tribunal had the authority to rectify its order while the High Court was seized of the matter.
3. Merits of the Tribunal’s decision to rectify its previous order.

Issue-wise Detailed Analysis:

1. Validity of the Miscellaneous Application for rectification filed by the Department:
The petitioner contended that the Miscellaneous Application for rectification filed by the Department was confined to the case of Shri M. N. Patel and did not request correction concerning the petitioner company. However, the court found that the application covered both appeals related to Shri M. N. Patel and the company. The application referenced both IT No.24 of 2003 and IT No.51 of 2003, indicating it was not confined solely to Shri M. N. Patel. The court rejected the petitioner’s contention, noting that the Revenue’s application clearly aimed to address the taxability of the remaining 93.75% of the unaccounted income, which the Tribunal had failed to decide upon substantively.

2. Whether the Tribunal had the authority to rectify its order while the High Court was seized of the matter:
The petitioner argued that the Tribunal should not have exercised its rectification powers since the High Court had already admitted the Revenue’s tax appeal. The court examined the case of Commissioner of IncometaxIII vs. Munni Seva Ashram and noted that the facts were similar but the order was set aside on a concession by the respondent’s counsel. The court also considered the judgment of the Bombay High Court in R. W. Promotions P. Ltd., which held that statutory provisions do not prevent the Tribunal from exercising rectification jurisdiction merely because a tax appeal is pending before the High Court. The court found no legal requirement preventing the Tribunal from rectifying its order in such circumstances.

3. Merits of the Tribunal’s decision to rectify its previous order:
The petitioner’s final contention was on the merits of the Tribunal’s rectification order. The court reviewed the Tribunal’s original order concerning the taxability of the ?2.27 crores reflected in the loose papers seized from Shri M. N. Patel’s residence. The Tribunal had concluded that only ?13.53 lakhs, representing 6.25% of the profit, could be taxed in the hands of Shri M. N. Patel, leaving the remaining amount unaccounted for. The Tribunal had also deleted the protective assessment in the hands of the company, citing a lack of evidence and investigation by the Assessing Officer. The court emphasized that the Tribunal had thoroughly examined the relevant aspects and reached definite conclusions. It held that the Tribunal’s jurisdiction to rectify its order is narrow and does not include the power of review. Citing the Supreme Court’s decision in RDC Concrete (India) Private Limited, the court reiterated that a “mistake apparent from the record” cannot involve reappreciation of evidence or long-drawn reasoning.

Conclusion:
The court allowed the petition, setting aside the Tribunal’s rectification order. It clarified that this decision would not prejudice the Revenue in pursuing its pending Tax Appeal No.42 of 2012 before the High Court.

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