2008 (7) TMI 480 - AT - Income Tax

Summary

Issues Involved:
1. Apparent mistake in the written order versus oral pronouncement.
2. Non-consideration of substantive arguments and material evidence.
3. Legal validity of oral pronouncement versus written judgment.
4. Rectification under Section 254(2) of the IT Act.

Detailed Analysis:

1. Apparent Mistake in the Written Order versus Oral Pronouncement:
The Revenue raised a preliminary objection that the Tribunal's written order dated 28th September 2007 was contrary to the oral pronouncement made immediately after the hearing on 4th June 2007. The Revenue contended that the oral pronouncement dismissed the appeal, whereas the written order allowed it, constituting an apparent mistake rectifiable under Section 254(2) of the IT Act.

From the respondent's side, it was argued that the oral pronouncement was not a formal order but a prima facie intention. The respondent relied on the Supreme Court's decision in Vinod Kumar Singh vs. Banaras Hindu University & Ors., which held that an oral pronouncement is not a judgment or order until it is written and signed by the Members.

2. Non-consideration of Substantive Arguments and Material Evidence:
The Revenue argued that certain fundamental aspects were not considered in the appellate order, specifically:
- Admission by Shri Omkarmal under Section 132(4) regarding taking loans from M/s Rajshree Enterprise and M/s Maheswari Financiers.
- The AO's failure to apply the law regarding 'admission' and material gathered during the search.
- Information from the search at M/s Rajshree Enterprises/Maheswari Financiers, including irregular bookkeeping, was not considered.

The respondent countered that the written order dated 28th September 2007 was the final judgment, and the oral pronouncement was merely an expression of a preliminary view.

3. Legal Validity of Oral Pronouncement versus Written Judgment:
The Tribunal examined whether the oral pronouncement constituted a "judgment" or "order" under Section 254 of the IT Act. It was concluded that a Judge's declaration of intention is not an order until it is crystallized into a formal written judgment, signed, and communicated to the parties. The Tribunal cited several precedents, including the Supreme Court's decision in ITAT Through President vs. V.K. Agarwal & Anr., which emphasized that an order must be in writing and signed by the Members.

The Tribunal also referred to the Delhi High Court's decision in CIT vs. Sudhir Choudhrie, which held that the reasoning is the soul of the judgment, and a non-speaking order violates natural justice principles.

4. Rectification under Section 254(2) of the IT Act:
The Tribunal addressed whether the written judgment had an apparent mistake rectifiable under Section 254(2). It was noted that the written judgment dated 28th September 2007 differed from the oral pronouncement, and the Revenue's substantive arguments were not considered. The Tribunal referred to the Supreme Court's decision in Honda Siel Power Products Ltd. vs. CIT, which held that the Tribunal must rectify any mistake, error, or omission resulting in prejudice to either party.

The Tribunal concluded that the written judgment had a flaw in the nature of an apparent mistake, as it did not address the Revenue's arguments regarding material gathered during the search and the legal question of whether a statement made at the time of the search could be used for quantifying undisclosed income. Therefore, the order was recalled for rehearing.

Conclusion:
1. The oral pronouncement on 4th June 2007 was not a formal order.
2. The written judgment dated 28th September 2007 was the final order.
3. The written judgment contained apparent mistakes, including non-consideration of substantive arguments, making it rectifiable under Section 254(2) of the IT Act.
4. The Tribunal allowed the Revenue's miscellaneous application partly, recalling the order for rehearing.