2018 (10) TMI 502 - AT - Income Tax

Scope of rectification of mistake - Agricultural income as disclosed by the partners in returns and Partners in turn disclosed share in HUF income in their individual returns and claimed the same as exempt u/s 10(2)- Held that - We find that the power of rectification under section 254 can be exercised only when the mistake, which is sought to be rectified, is an obvious patent mistake and apparent from the record and not a mistake, which is required to be established by arguments and long drawn process of reasoning on points, on which there may conceivably be two opinions. We find that the error pointed out by the assessee qua grounds no.1 and 2 are concerned, the Tribunal in the impugned order had detailed discussion from page nos.1 to 5 of the order and came to conclusion to restrict the disallowance to 20% of the purchases made from the partners and relative of the partners. 80% of the purchases made by the assessee have been allowed. Addition on account of suppression in the value of closing stock is concerned, the Tribunal has discussed the issue and noticed well reasoned order of the CIT(A), and thereafter following the judgment of the Hon ble Supreme Court in the case of CIT Vs. Hindustan Zinc Ltd. 2007 (5) TMI 195 - SUPREME COURT came to the conclusion that valuation of closing stock adopted by the assessee was purely adhoc method and without any basis. We find that the scope of sub-section (2) is restricted to rectifying any mistake in the order which is apparent from record and does not extend to reviewing of the earlier order. By pointing out the alleged apparent errors, the assessee is trying to review entire order of the Tribunal, which is not permissible in law. Misc. Application of the assessee is dismissed.

Summary

Issues:
1. Rectification of apparent mistakes in the Tribunal's order related to disallowance of agricultural income and addition on account of suppression in value of closing stock.

Analysis:
The Misc. Application was filed by the assessee to rectify errors in the Tribunal's order regarding grounds 1, 2, and 3 of the appeal. The assessee highlighted various facts that were allegedly overlooked by the Tribunal during the adjudication. These included the disclosure of agricultural income by partners, exemption claimed under section 10(2), absence of excess payments to partners, complete quantity tally, and absence of book result rejection. The assessee argued that a 20% disallowance was sustained without considering these facts. Additionally, concerning ground 3, the Tribunal was criticized for not considering alternative arguments and legal precedents related to the valuation of closing stock.

The Tribunal explained that rectification under section 254 of the Income Tax Act is only permissible for obvious patent mistakes apparent from the record, not for issues requiring extensive reasoning or differing opinions. The Tribunal had extensively discussed and reasoned its decision on the disallowance of 20% of purchases and the addition due to the alleged suppression in the value of closing stock. It referenced the CIT(A)'s order, the Supreme Court's judgment, and concluded that the valuation of closing stock was ad hoc and baseless. The Tribunal emphasized that the scope of rectification does not extend to reviewing the entire order, and the assessee's attempt to challenge the order through the Misc. Application was deemed impermissible. The Tribunal found no merit in the application as the issues raised had already been thoroughly examined and decided upon.

Ultimately, the Tribunal dismissed the Misc. Application of the assessee, stating that the issues raised had been adequately addressed in the original order and did not warrant a fresh review through rectification. The decision was pronounced in court on 8th October 2018 in Ahmedabad.