2018 (10) TMI 1132 - HC - Income Tax

Rectification application u/s 254(2) - mistakes were pointed out, ground -wise and appeal- wise. - estimation of income on account of on- money - Tribunal has upheld 40% of the addition - tribunal rejected the application on the ground that issues were discussed - Revenue contended that the writ petition is nothing but an attempt to postpone the payment of taxes. These taxes are admittedly due and payable. Held that - It is difficult, if not impossible, to reconcile this conflict and contrary conclusions, if the Tribunal admits the additional grounds of appeal and indeed refers to them, then, how these grounds of appeal have been dealt with ought to be clarified in the order itself. The Tribunal is a last fact finding authority. It is obliged to consider the appeal on facts and law. The aggrieved parties before the Tribunal must get an opportunity to demonstrate that the findings of the Assessing Officer even if confirmed by the First Appellate Authority, are indeed erroneous both on facts and law. Such an opportunity ought to be extended and no technicalities should come in the way of a proper and complete adjudication of the contested issues. As the last fact finding authority, the Tribunal was, therefore, not empowered to apply the formula and which was invented by it. If there was a discretionary power to correct that mistake, which it discovered and discerned from its order and it was apparent from it, then, that should have been utilised. The order on the miscellaneous application was passed in a haphazard manner. No useful purpose will be served by now sending the matters back to the Tribunal. The matters, if sent back now, may not necessarily benefit the Revenue. It is only a conjecture and surmise or pure guess work that when sent back, the Revenue will necessarily succeed. There is no such guarantee. In the facts and circumstances peculiar to this case and because there are on- money details which were in issue, but such transactions having been flatly denied much less the quantum derived therefrom, all the additions were in the realm of guess work. They were pure conjectures and surmises. Now, sending back both the parties to the Tribunal serves the interest of none and particularly of public revenue. The sustenance is to the extent of ₹ 4,64,59,769/ . - Assessee directed to deposit a sum of ₹ 3,25,00,000/ - Decided partly in favor of assessee.

Summary

Issues Involved:
1. Challenge to the ITAT order dated 28-9-2007.
2. Rectification of mistakes in ITAT's initial order.
3. Assessment of "on-money" received by the assessee.
4. Reopening of assessments under Sections 147 and 263 of the IT Act.
5. Method of accounting for the project completion.
6. Estimation of profit from on-money.
7. Admission and consideration of additional grounds of appeal.
8. Adequacy of the Tribunal’s adjudication process.

Issue-wise Detailed Analysis:

1. Challenge to the ITAT order dated 28-9-2007:
The petitioner challenged the ITAT's order dated 28-9-2007, which dismissed their miscellaneous applications seeking rectification of mistakes in the initial order dated 29-6-2001. The petitioner argued that the ITAT did not properly consider the quantum of on-money and other grounds of appeal.

2. Rectification of mistakes in ITAT's initial order:
The petitioner filed miscellaneous applications under Section 254(2) of the IT Act, claiming mistakes in the ITAT's initial order. They argued that the estimation of profit at 40% of on-money was without basis and should be corrected. The ITAT initially allowed the application partly but later dismissed subsequent applications, leading to the present writ petition.

3. Assessment of "on-money" received by the assessee:
The core issue was the addition of on-money to the assessee's income. During a search and seizure, the main partner admitted to receiving ?30,00,000 as on-money. The ITAT initially concluded that 40% of on-money should be taken as income, but the petitioner argued this was an apparent mistake and should be reduced.

4. Reopening of assessments under Sections 147 and 263 of the IT Act:
The assessments for various years were reopened due to the search and seizure actions. The petitioner contended that the ITAT did not properly consider the grounds related to the reopening of assessments and the quantum of on-money.

5. Method of accounting for the project completion:
The ITAT rejected the assessee's project completion method of accounting, instead adopting a percentage of work-in-progress. The petitioner argued that the ITAT's approach was inconsistent and not justified.

6. Estimation of profit from on-money:
The ITAT estimated the profit from on-money at 40%, which the petitioner claimed was excessive and arbitrary. They argued that the profit should be calculated based on actual figures, leading to a lower percentage.

7. Admission and consideration of additional grounds of appeal:
The petitioner argued that the ITAT admitted additional grounds of appeal but did not properly consider them in its decision. The inconsistency in the ITAT's findings and conclusions was highlighted, particularly regarding the on-money issue.

8. Adequacy of the Tribunal’s adjudication process:
The petitioner contended that the ITAT's adjudication process was perfunctory and did not meet the requirements of law. They argued that the ITAT failed to provide a clear and consistent decision, leading to the need for a fresh adjudication.

Conclusion:
The Court found merit in the petitioner's arguments, noting inconsistencies in the ITAT's findings and the need for a thorough adjudication. The Court directed that if the petitioner deposits ?3,25,00,000 within two months, the appeals and proceedings would be disposed of, and no further amount would be payable. If the amount is not deposited, the initial order of the ITAT would be upheld, and the Revenue could recover the taxes accordingly. The writ petition was allowed, and the ITAT's order was set aside.