9911796707
TMI Blog2000 (9) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue to state their objections, if any, on or before 5-9-2000 in writing and fix the hearing in the proceedings for 5-9-2000 before the Lucknow Bench camp at PIC-UP Bhavan, Gomti Nagar, Lucknow for which a formal notice of hearing was also enclosed. On behalf of the U.P. Forest Corporation a reply to notices including notice dated 30-8-2000 issued by the Appellate Tribunal to amend its order including order dated 9-9-1996 was filed and Shri S.P. Gupta, Ld. Sr. Advocate alongwith Shri Kanchan Kaushal, Authorised Signatory for U.P. Forest Corporation attended the hearing on 6-9-2000 and made oral submission. On behalf of the revenue, Shri B. Dogra, Sr. A.R. attended. Before considering the reply to the notice and the rival submissions, we consider it necessary to state the facts obtainable and issues involved, which in brief are extracted as under:-- 2. The U.P. Forest Corporation was created by the U.P. Forest Corporation Act, 1974. The Corporation filed its return of income as exempt under section 10(20) of the Income-tax Act, 1961 claiming it to be a local Authority. Against initiating the assessment proceedings for the assessment year 1976-77, Corporation moved writ petition a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 1228 & 1229/Alld./1989 against the identical grounds, which are as under: "(i) That the ld. CIT(A) erred in law and on facts of the case in holding that the assessee-Corporation is exempt under section 10(20) and 11 of the Income-tax Act, 1961. (ii) That the Hon'ble High Court's decision referred to by the ld. CIT(A) has not been accepted and a S.L.P. have since been filed before the Hon'ble Supreme Court. Also, that the appellate order dated 29-7-1988 for the assessment year 1984-85 has not been accepted. (iii) That in any case, the ld. CIT(A) should have directed the Assessing Officer to verify if the other conditions for exemption under section 11 are satisfied e.g., registration under section 12A and accumulation of income beyond prescribed limit etc. These conditions were not raised before the Hon'ble High Court and therefore, not considered in their judgment." 4. The Revenue filed miscellaneous application against the above order and the ITAT vide order dated 14-8-1997 in M.A. No. 5(Alld.) of 1997 arising out of ITA Nos. 1228 & 1229/A/1989 for the assessment years 1985-86 & 86-87 recalled the order dated 9-9-1996 in respect of applicability of section 10(20) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 1985-86 & 86-87, which stands rejected. Therefore, the only issue relating to exemption under section 10(20) of the Income-tax Act was before the Tribunal and not the issue relating to exemption under section 11 of the Income-tax Act. The observation in respect of exemption under section 11 of the Income-tax Act constitutes a mistake which is sought to be rectified through the miscellaneous application filed by the assessee-corporation as M.A. Nos. 22 & 23/Alld./2000 respectively against the combined order dated 28-4-1999 for the assessment years 1985-86 & 8687 arising out of the ITA Nos. 1228 & 1229/Alld./ 1989. 7. The Tribunal, vide order-sheet entry dated 7-4-2000, issued a notice under section 254(2) of the Income-tax Act, which partly reads as under:-- "(i) The revenue vide its miscellaneous application for rectification of certain mistakes including a request for clarifying the issue relating to assessee's claim under section 11 of the Income-tax Act, 1961 in para 8 of the miscellaneous application had requested.... 8. In the alternative-claim of the assessee under section 11, it may be clarified that the assessee can be made liable to fulfil the conditions of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 in appeal Nos. 180 to 182 of 1989 has inter alia observed as under: "This court do order that pending the hearing and final disposal of this court of appeal aforementioned, the operation of the impugned judgment and order dated 19-5-1988 of the High Court of Judicature at Allahabad in writ petition Nos. 4424 of 1987, 216 of 1988 and 8215/1987 is hereby suspended but while the assessment proceedings may be taken, no recovery of the tax shall be effected.'" As the matter is still sub-judice and pending before the Hon'ble High Court, we deem it proper to keep the matter alive on behalf of the revenue and refer the above questions to the Hon'ble High Court for opinion." 10. However, in subsequent revenue's reference application dated 15-12-1992 in R.A.No. 211 (All.) of 1992 for the assessment year 1984-85, I.T.A. No. 1154 (All.) of 1988 the reference of Hon'ble Supreme Court decision dated 17-1-1989 suspending the operation of Hon'ble High Court order dated 19-5-1988 has not been made. 11. The Hon'ble Supreme Court has held that the assessee-corporation is not a Local Authority, therefore, its income is not exempt under section 10(20) of the Income-tax Act and in respect of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Supreme Court has already reversed the order of the Hon'ble High Court dated 19-5-1988, the operation of which already stood suspended vide order 17-1-1989 of the Hon'ble Supreme Court, a rectifiable mistake is apparent on the face of record. Therefore, the Tribunal issued notice dated 7-4-2000 to rectify its order dated 14-8-1997 in M.A. No. 5/A/97 arising out of I.T.A.No. 1228/ 1229/A/89 and subsequently issued notice 30-8-2000 to rectify the order of the Tribunal dated 9-9-1996 in I.T.A. Nos. 1228 & 1229 (AU.) of 1989 for the assessment years 1985-86 & 1986-87 because the rectifiable mistake originally occurred in that order which led to departmental M.A. registered as M.A. No. 5/Alld./97. The revenue also filed miscellaneous applications registered as M.A. Nos. 52 & 53/Alld. 2000 respectively for the assessment years 1985-86 & 86-87 raising almost the similar issues requesting the Tribunal to amend its earlier order dated 9-9-1996 as on the issue of exemption under section 11 it stated that it had merely followed its earlier decision based on the order of the Hon'ble Allahabad High Court in writ petition and held that there is no scope for giving any clarification on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .A. Nos. 52 & 53, be disposed of all at one go for which he also made fresh submissions mostly with reference to reply to notices. 16. Looking into the facts and circumstances and after perusal of the appeal folders available before the Tribunal, we consider it apt and necessary to decide the issues involved in notice in respect of Appellate Tribunal's order dated 9-9-1996 In revenue's I.T.A. Nos 1228 & 1229 (All.) 1989 for the assessment years 1985-86 & 86-87, because the M.As. and other issues all arise from the same order and all controversies can be set at rest which will help us in minimising number of proceedings and their consequences. Therefore, we are considering the submissions, replies and arguments relevant in respect of order dated 9-9-1996. Regarding the issue of exemption under section 11(1) of the Income-tax Act, Shri Gupta maintained that them is no rectifiable mistake in the order of Tribunal dated 9-9-1996 in view of Hon'ble High Court's order dated 19-5-1988 and the Tribunal has decided the controversy by rejecting the M.A. No. 5 arising out of the Tribunal's order in I.T.A. Nos. 1228 & 1229 holding that the applicability of section 11 the Income-tax Act, on wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --and in respect of section 11, no issue has been decided by the Hon'ble Supreme Court. It has merely directed the Assessing Officer to examine the applicability of the same in respect of the assessee-corporation after giving opportunity of hearing. Shri Gupta objected seriously that the revenue cannot argue on the points raised by the ITAT in its notice to rectify its order dated 9-9-1996 and reiterated that the decision of the Hon'ble Supreme Court dated 2-3-1998 does not lay down any law. 17. On the other hand the D.R. Shri B. Dogra submitted the decision of the Hon'ble Supreme Court has to be followed by the lower courts including the Hon'ble High Court in view of the provisions of Article 141 of the Constitution of India. A compliance of statutory provisions of the Income-tax Act should be examined by a proper forum i.e. Assessing Officer etc. Therefore, the observation of the Hon'ble Supreme Court has laid down the law and unless the same is followed, it cannot be said to proper on the party of the Hon'ble High Court to hold that the exemption is available under section 11 of the Income-tax Act--to the assessee--Corporation, without examination of claim. Regarding the charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued by the ITAT are misconstrued and M.As. filed for the second time by the Revenue are liable to be rejected. 18. We have considered the rival submissions and have perused the records in respect of ITAT's orders, including orders in R.A. Nos. and M.As., the reference of which has been made in the extracted facts. The basic issue before us is as to whether the Tribunal can rectify its order dated 9-9-1996 in view of Hon'ble Supreme Court's order, especially in the background that the operation of the Hon'ble High Court's order dated 19-5-1988 was suspended by the Hon'ble Supreme Court vide its order dated 17-1-1989 and the judicial note of the same has earlier been taken by the Tribunal in its order dated December 3,1990 in R.A. No. 254/Alld/1990 arising out of ITA No. 1927/Alld./1986 for the assessment year 1983-84. 19. The primary objection of the assessee, as contained in para 2 of its reply is that section 254 of ITAT does not give inherent power to the Tribunal to rectify a mistake. In support of this objection, the assessee has also placed reliance on the decision in CIT v. K.L. Bhatia [1990] 182 ITR 361 (Delhi) and K. Kunhi Mohammad Hajee v. State of Kerala [1974] 93 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on its own motion and in doing the same at the instance of the Commissioner, it is exercising a narrower power than the power conferred upon it by section 35(3)." Thus the legal position is clear that the Tribunal has suo motu power of rectification under section 254 of the Act. Not only this, a duty is cast upon the Tribunal to rectify any mistake which comes to its notice or which is pointed out in its order by any of the parties. In the case of Maharaja Martant Singh Ju Deo, the Hon'ble M.P. High Court also considered the issue relating to the powers available to the Appellate Tribunal under section 254(2) of the Income-tax Act and held that the Tribunal has got power to rectify its mistakes by making necessary amendments. In that case, the assessee claimed exemption under section 54 of the Act on the sale of a house at Bombay. The Tribunal, vide its order dated 8-12-81, hold that the house in question was owned by a group of two owners which constituted an artificial juridical person. Subsequently, the assessee made an application for rectification which was allowed by the Tribunal vide its order dated 2-9-82 and deleted the earlier findings by making substitution to the effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue relating to the power of review and rectification. It was held by the Court that the right of review in the circumstances, as claimed by the petitioner, cannot be assumed unless expressly given by the Statute or by rules having the force of the Statute. In the case of K.L. Bhatia, the assessment was framed in respect of some property against the assessee and his objection was that the property does not belong to him but to his wife. The CIT in appeal accepted this contention. The ITAT on appeal came to the conclusion that the wife of the respondent was only a Benamidar and property in fact belonged to the respondent (assessee). Later on, petition under section 254(2) was filed, in which it was pointed out that some material facts were not correctly noted by the Tribunal in its earlier order. The Tribunal accepted this application and noted that this was an application under section 254 of the Act. It also recalled its order. Being aggrieved, the assessee filed a reference application under section 256(1) which was rejected. There-after reference petition under section 256(2) was filed. In that context, the Hon'ble High Court held that the ITAT can have no power to pass any or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case of Dr. (Mrs.) Krishna Rana, the Hon'ble Patna High Court has held that the Tribunal has no power to review its own orders. The power of rectification is different from that of review. The case of Geep Industrial Syndicate Ltd related to distinguishable facts. In that case, the Income-tax Officer had given effect to the order of ITAT and the issue related to the scope of 154 of ITAT. Thus the authorities cited on behalf of the assessee in support of various objections do not help it. In view of the above, we are of the opinion that the Tribunal has got inherent and suo motu power to rectify its mistakes and in the present case as the mistake is on account of application of incorrect and invalid law, the Tribunal has ample power to rectify such a mistake. 21. In para 3 of the reply, the contention of the assessee is that the power to rectify a mistake can be exercised only on a complaint or application by an aggrieved person. This contention is also not acceptable in view of the authorities cited above. In paras 4,5,8,15,17,18,20 and 21, the objections of the assessee are that the order of the Tribunal dated 9-9-1996 became final and the issue relating to the applicabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue relating to the exemption under section 11 on merits. Since the order of the Hon'ble High Court was suspended vide order of the Hon'ble Supreme Court dated 17-1-1989 and was finally reversed by the Hon'ble Supreme Court vide its decision dated 2nd March, 1998 reported in CIT v. U.P. Forest Corpn. [1998] 230 ITR 945, a relevant portion of which has been reproduced in para 2 of the notice, the judgment of the Hon'ble High Court which was followed by the Tribunal did not remain a valid law and, therefore, by virtue of the decision of the Hon'ble Supreme Court, the situation has arisen for rectification of the orders of Tribunal which are based on invalid law. It is to be pointed out that if a provision of law is retrospectively amended or is declared invalid, or if a decision of the Court is reversed, then the earlier existing legal provision or the decision will have no force and cannot be treated to be a valid law. In the case of K.T.S. Umma Salma, the Hon'ble Madras High Court has held that the effect of retrospective operation of amendment to section 271(1)(a) of the I.T. Act is that it shall be deemed to have been included in the Act as from April 1, 1962. In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification of the order of Tribunal in view of the judgment of the Division Bench Santha S. Shenoy v. Union of India [1982] 135 ITR 39 (Ker.) However, the Tribunal dismissed the petition under section 154 of the Income-tax Act on the ground that the rectification under section 154 of the Income-tax Act must be of a mistake which is a mistake in the eye of law in force at the time when the orders sought to be rectified was passed and at the subsequent decision of the High Court has no retrospective operation as in the case of subsequent legislation or the decision of the Hon'ble Supreme Court. This approach of the Tribunal was not found justifiable. The Hon'ble Court held that when the Division Bench overruled the decision of the Single Bench, the said decision was never the law on the point at all times, which was as stated by the Bench in the subsequent decision and, therefore the original order of the Tribunal discloses a mistake apparent from the record, namely, that the assessee was not entitled to interest on the advance tax paid beyond the due date which should be rectified under section 254(2) read with section 154 of the Income-tax Act. In view of the abovementioned decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , cannot mean and cannot be taken that the department had withdrawn its claim specifically when there was specific ground taken by the department in R.A. as well as in M.A. It is to be pointed out that the Revenue R.A. No. 300(A)/1996 and 301(A)/1996 arising out of ITA No. 1228 and 1229(A)/1989 for the assessment year 1985-86 and 1986-87 respectively relating to these three assessment years are still pending. It is further to be pointed out that in these RAs, question No. 2 sought to be referred relates to the applicability of section 11 of the Income-tax Act. So far as the judgment of the Hon'ble Supreme Court in the case of Surguja Transport Services is concerned, that involved a different issue and was on different facts. In that case, the petitioner had withdrawn the petition without permission to file fresh petition and a subsequent petition was again filed by the petitioner. In the instant case, the department had never withdrawn any petition and has not filed any subsequent petition. It is also to be pointed out that the judgment of the Hon'ble Supreme Court is in relation to the principle underlying Rule 1 of the Order 230 CPC and writ petition under article 226/227 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above facts and observations, we find no force in the objections raised on behalf of the assessee--Corporation against our notice dated 30-8-2000 and, therefore, we reject the same. 26. On the basis of our notice dated 30-8-2000 and the discussions made above, we hold that in view of the order of the Hon'ble Supreme Court of India dated 17-1-1989 and its judgment dated 2-3-1998 there is a mistake apparent on the face of record in the order of the Tribunal dated 9-9-1996 rendered in I.T.A. Nos. 1228 & 1229/A/1989 for the assessment years 1985-86 & 1986-87 in as much as ground Nos. 1, 2 & 3 taken by the revenue before the Tribunal in those appeals relating to the applicability of section 11 of the Income-tax Act have not been decided in accordance with law. We, therefore, order rectification of our order dated 9-9-1996 passed in the said income-tax appeals and recall our order in respect of the applicability of section 11 of the Income-tax Act for decision afresh in accordance with the decision of the Hon'ble Supreme Court of India referred to above and as per law, for which purpose, the matter would come up before us on 9-11-2000. Notices will be sent to the parties by the Regist ..... X X X X Extracts X X X X X X X X Extracts X X X X
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