1998 (8) TMI 107 - AT - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal's order dated 18-11-1996 should be rectified.
2. Whether the income derived from the nursery business is agricultural income.
3. Whether the Tribunal ignored important documents and evidence, including the survey report under section 133A.
4. Whether the Tribunal has the power to recall its own order under section 254(2).

Issue-wise Detailed Analysis:

1. Whether the Tribunal's order dated 18-11-1996 should be rectified:
The assessee argued that the Tribunal's order should be rectified due to errors in the observation that the CIT (A) did not hear the appeals for the assessment years 1978-79 and 1990-91. The assessee claimed that the CIT (A) did not follow the appellate order for the assessment year 1986-87, which was in favor of the assessee, and did not provide an opportunity to the assessee's counsel to explain. This was argued as a violation of the principle of natural justice. The Tribunal was requested to rectify the order in favor of the assessee.

2. Whether the income derived from the nursery business is agricultural income:
The Tribunal initially held that the income from the nursery business was not agricultural income as defined under section 2(1A) of the Income-tax Act, 1961, and hence not exempt under section 10(1) of the Act. The assessee contended that the income was agricultural, supported by a survey report under section 133A, which indicated that the income derived from the nursery was agricultural. The Tribunal's decision was based on judicial precedents, including the Supreme Court's decision in CIT vs. Raja Benoy Kumar Sahas Roy, and the Allahabad High Court's decision in H. H. Maharaja Vibhuti Narain Singh vs. State of Uttar Pradesh, which held that the income from nursery business was not agricultural.

3. Whether the Tribunal ignored important documents and evidence, including the survey report under section 133A:
The assessee argued that the Tribunal ignored crucial evidence, including the survey report under section 133A, which stated that the income was derived from agricultural processes. The Tribunal acknowledged that it had not considered the survey reports and the opinion of the Assessing Officer regarding the nature of the income. The Tribunal decided to recall the order to give proper justice to the arguments and evidence presented.

4. Whether the Tribunal has the power to recall its own order under section 254(2):
There were conflicting judicial decisions regarding the Tribunal's power to recall its own order. The Orissa High Court held that the Tribunal has no power to recall an order under section 254(1), while the Allahabad High Court opined that the Tribunal could rectify a mistake apparent from the record. The Tribunal decided to adopt the view in favor of the taxpayer, as per the Supreme Court's principle in CIT vs. Vegetable Products Ltd. The Tribunal concluded that ignoring evidence obtained at its behest constituted a mistake apparent from the record, warranting a recall of the order.

Separate Judgments Delivered by the Judges:

Majority Opinion:
The majority opinion, delivered by the Vice President and supported by the Third Member, held that the Tribunal should recall its order to consider the overlooked evidence, including the survey report under section 133A. The majority emphasized that the Tribunal must consider evidence obtained at its own direction and that failing to do so would be an unceremonious disposal of the appeal.

Dissenting Opinion:
The dissenting opinion, delivered by the Accountant Member, held that the Tribunal's order should not be recalled. The dissent argued that the Tribunal had thoroughly considered the arguments and judicial precedents, and any review of the order would amount to an impermissible review rather than a rectification under section 254(2). The dissent also noted that the Tribunal had not directed any Departmental Representatives to visit the site, and the so-called report was extraneous evidence not required to be considered.

Conclusion:
The majority opinion prevailed, and the Tribunal decided to recall its order to ensure proper justice by considering the overlooked evidence. The miscellaneous applications filed by the assessee were allowed, and the case was directed to be fixed within a month for further proceedings.