2004 (3) TMI 337 - AT - Income Tax

Summary

Issues involved:
1. Rectification of mistakes in the application filed under s. 254 of the IT Act.
2. Validity of search challenge based on Third Member case judgment.
3. Binding nature of Three Member decision over Two Member decision.
4. Power of the Tribunal to award interest under s. 158BFA.
5. Assessment under s. 158BC based on material found or estimation basis.

Detailed Analysis:
1. The application filed under s. 254 of the IT Act sought rectification of mistakes in the appeal previously disposed of by the Tribunal. The assessee contended that the challenge to the validity of search was made in the appeal, relying on a Third Member case judgment. The assessee argued that the Tribunal's reliance on a Two Member decision caused prejudice, as the Three Member decision should have been binding. The jurisdictional High Court's judgment emphasized the decisive nature of the Third Member's opinion in such cases, supporting the assessee's contention.

2. The Tribunal addressed the issue of the binding nature of the Three Member decision over the Two Member decision. The Departmental Representative could not clarify if the Three Member judgment had been reversed, leading the Tribunal to observe that the judgment of the Allahabad Bench still held. Consequently, the application for rectification was allowed, and the matter was ordered to be reheard to provide both parties with an opportunity to present their submissions afresh.

3. Another issue raised was the power of the Tribunal to award interest under s. 158BFA. The Departmental Representative argued that the Tribunal, being a fact-finding body, had the authority to levy interest as mandated by the statute. Additionally, the Tribunal clarified that the power to estimate income and frame assessments under s. 158BC should be based on material found during the search, not on estimation basis.

4. Considering the decision of the Three Member Bench and the Delhi High Court judgment, the Tribunal concluded that a mistake had occurred in the previous order. While allowing the application for rehearing, the Tribunal emphasized that the levy of interest under s. 158BFA was statutory and not subject to condonation, provided the conditions in the order were fulfilled. The Tribunal also decided to re-argue the issue of framing assessments on estimation under Chapter XIV-B during the rehearing process. Ultimately, the application filed by the assessee was allowed, and the matter was scheduled for rehearing after notifying the parties.