2021 (4) TMI 388 - AT - Income Tax

Rectifciation of mistake application u/s 254 - Delay in filing present miscellaneous application by 89 days - HELD THAT - In the present case, due date for filing the miscellaneous applications u/s 254(2) being 30.06.2020 that is, within six months from the end of the month in which the order was pronounced on 28.09.2020 and the fact that the miscellaneous application has been filed with the Registry on 28.09.2020, respectfully following the decisions of the Hon ble Supreme Court and the Taxation and other Laws (relaxation of certain provisions) Ordinance, 2020 as notified in the Gazette of India dated 31st March, 2020, the same is hereby admitted as filed within the extended due date in terms of section 254(2) of the Act. Non reference to judicial decisions - Basis for estimation of G.P rate after the rejection of the books of accounts - Glaring and patent mistakes apparent from the face of the record which requires appropriate rectification u/s section 254(2) - rejection of books of accounts and GP estimation - HELD THAT - In the present case, we find that the Coordinate Bench has referred and relied upon the aforesaid two decisions of GUPTA, KN. CONSTRUCTION CO. 2015 (5) TMI 315 - RAJASTHAN HIGH COURT and M/S. CLARITY GOLD PVT. LTD., M/S GEM MART INDIA PVT. LTD. 2018 (8) TMI 1318 - RAJASTHAN HIGH COURT which have not been relied upon or quoted by either of the parties. The ld AR has contended that said decisions doesn t lay a general legal proposition that only past history has to be considered rather it has held that either the past history of the assessee or history of similarly situated other businesses to be considered and we therefore prima facie find that such distinguishing features as pointed out by the ld AR has escaped the attention of the Coordinate Bench and which could have been considered had the said decisions being confronted to both the parties and an opportunity been given to them to file their respective submissions on applicability or distinguishing features of the said decisions. Further, the ld AR has submitted some distinguishing features which has resulted in fall in G.P rate during the year under consideration and non-comparability with the past years which also seems to have escaped the attention of the Coordinate Bench. Thus we deem it appropriate that the order so passed by the Coordinate Bench be recalled and matter be heard afresh for the purposes of adjudication of ground of appeal taken by the Revenue relating to deletion of addition

Summary

Issues Involved:
1. Delay in filing the miscellaneous application.
2. Glaring and patent mistakes apparent from the face of the record.
3. Rejection of books of accounts and estimation of Gross Profit (G.P) rate.
4. Reliance on decisions not cited by either party.
5. Violation of principles of natural justice.

Detailed Analysis:

1. Delay in filing the miscellaneous application:
The assessee filed a miscellaneous application with a delay of 89 days. The delay was justified due to the COVID-19 pandemic and consequent lockdowns. The assessee cited the Supreme Court's decision dated 23.03.2020, which extended the limitation period for all proceedings from 15.03.2020 until further orders. Additionally, the Supreme Court's order dated 22.05.2020 extended the limitation period for 15 days post-lockdown. The Revenue had no objection to the delay, and the Tribunal admitted the application as filed within the extended due date in terms of section 254(2) of the Act.

2. Glaring and patent mistakes apparent from the face of the record:
The assessee argued that the Tribunal's order contained mistakes that required rectification under section 254(2) of the Act. Specifically, the Tribunal's findings contradicted the facts on record, particularly regarding the G.P rate. The Tribunal had held that the CIT(A) did not consider specific facts affecting the business, whereas the CIT(A) had recorded detailed findings on the fall in the G.P rate. The Tribunal's reliance on certain High Court decisions without providing the assessee an opportunity to rebut them was also challenged.

3. Rejection of books of accounts and estimation of Gross Profit (G.P) rate:
The Assessing Officer (AO) rejected the books of accounts under section 145(3) and estimated the income by applying a G.P rate of 3.03%, resulting in a trading addition of ?2,28,55,077/-. The CIT(A) upheld the rejection but applied a G.P rate of 2.65%, sustaining an addition of ?39,74,797/- and deleting ?1,88,80,279/-. The Tribunal dismissed the assessee's cross-objection challenging the rejection of books and sustenance of addition, noting that the issue was not in dispute in the Revenue's appeal.

4. Reliance on decisions not cited by either party:
The Tribunal relied on decisions from the Rajasthan High Court in CIT vs. Gupta K.N. Construction Co. and Clarity Gold Pvt. Ltd vs. Principal CIT, which were not cited by either party during the hearing. The assessee argued that these decisions did not establish a legal proposition that only past history should be considered and that the Tribunal's reliance on these decisions without providing an opportunity to the assessee to rebut them violated the principles of natural justice.

5. Violation of principles of natural justice:
The Tribunal acknowledged that relying on decisions not cited by either party, especially when such reliance influences the outcome, can violate the principles of natural justice. The Tribunal referred to the Bombay High Court's decision in Inventure Growth and Securities Ltd vs. ITAT, which held that parties should be given an opportunity to address decisions that the Tribunal intends to rely upon. The Tribunal found that the distinguishing features in the cited decisions and the specific facts affecting the G.P rate in the assessee's case were not adequately considered.

Conclusion:
In light of these issues, the Tribunal recalled its earlier order and directed that the matter be heard afresh, specifically regarding the deletion of the addition of ?1,88,80,279/-. The Registry was instructed to list the matter in due course and issue notice to both parties. The miscellaneous application filed by the assessee was disposed of with these directions. The order was pronounced in the Open Court on 05/04/2021.