2019 (9) TMI 345 - AT - Income Tax

Rectification u/s 254 - Disallowance by invoking section 40A(3A) - HELD THAT - The tribunal has passed well reasoned common order for ay 2008-09 and 2009-10 where all the contentions of both the litigating parties were dealt with. The tribunal also directed to remove double jeopardy in its order so that the assessee is not prejudiced twice for the same additions. The power of tribunal while dealing with MA u/s 254(2) is very limited to rectifying mistakes apparent from records and we have no power to review our decision. The next contention of the assessee in this MA is that the tribunal did not deal with overriding effect of Section 40A(3) wherein it is now contended that it did not override all the provisions of the 1961 Act but only override provisions of the Act dealing with computation of income under the head Profit and Gains of Business or Profession . We are afraid that this contention of the assessee is also not acceptable as tribunal duly dealt with this issue in detail We hold that the assessee has not made out any case for rectifying any mistake which is apparent from records within limited mandate of Section 254(2) and what assessee is seeking is reviewing of our order dated 04.10.2017 which is not permissible within limited mandate of Section 254(2)

Issues Involved:
1. Rectification of mistakes apparent from the record under Section 254(2) of the Income-tax Act, 1961.
2. Simultaneous disallowance under Section 69C for AY 2008-09 and Sections 40A(3) and 40A(3A) for AY 2009-10.
3. Overriding effect of Section 40A(3) on other provisions of the Income-tax Act, 1961.
4. Double jeopardy due to disallowance of opening balance of creditors.

Issue-wise Detailed Analysis:

1. Rectification of Mistakes Apparent from Record under Section 254(2):
The assessee filed two Miscellaneous Applications (MA Nos. 150-151/Mum/2018) seeking rectification of mistakes apparent from the records in the tribunal's order dated 04.10.2017. The tribunal clarified that its power under Section 254(2) is limited to rectifying mistakes apparent from the record and does not extend to reviewing its own decisions. The tribunal found that the assessee was attempting to split hairs by selectively highlighting portions of the order without considering the detailed reasoning provided. The tribunal reiterated that it had thoroughly considered all contentions and factual matrices before passing the well-reasoned order.

2. Simultaneous Disallowance under Section 69C for AY 2008-09 and Sections 40A(3) and 40A(3A) for AY 2009-10:
The assessee contended that there cannot be simultaneous disallowance under Section 69C for AY 2008-09 and Sections 40A(3) and 40A(3A) for AY 2009-10. The tribunal addressed this issue in detail, explaining that the Assessing Officer (AO) had brought incriminating materials on record after detailed inquiries, justifying the additions. The tribunal upheld the AO's actions, noting that the AO had directed the removal of double jeopardy by not making additions of the opening balance of creditors of ?10.82 crores as on 01.04.2008, which would have otherwise been disallowed twice.

3. Overriding Effect of Section 40A(3):
The assessee argued that Section 40A(3) does not override all provisions of the Income-tax Act but only those related to the computation of income under the head 'Profit and Gains of Business or Profession.' The tribunal rejected this contention, stating that Section 40A(3) has a non obstante clause, giving it an overriding effect. The tribunal cited several judicial pronouncements to support its view that the AO can use incriminating material unearthed during inquiries or investigations even after rejecting the books of accounts. The tribunal emphasized that there is no absolute bar on the AO from using such material to compute income while framing a best judgment assessment.

4. Double Jeopardy Due to Disallowance of Opening Balance of Creditors:
The tribunal noted that the AO had disallowed the entire purchases for AY 2008-09 under Section 69C and then invoked Sections 40A(3) and 40A(3A) for AY 2009-10, leading to double jeopardy for the assessee. The tribunal directed the AO to eliminate this double jeopardy by not making additions of the opening balance of creditors of ?10.82 crores. The tribunal's decision aimed to ensure that the assessee was not prejudiced twice for the same additions.

Conclusion:
The tribunal dismissed the Miscellaneous Applications, stating that the assessee had not made out any case for rectifying mistakes apparent from the records within the limited mandate of Section 254(2). The tribunal emphasized that what the assessee was seeking was a review of the order dated 04.10.2017, which is not permissible under Section 254(2). Consequently, the tribunal upheld the original order and dismissed the appeals for AY 2008-09 and 2009-10.

← Previous Next →