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TMI Blog2004 (7) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... d committed a mistake in both facts and law. It was pointed out that the Tribunal had given the findings in para 14 which is extracted hereunder: "14. In these two cases the assessee-company has claimed for damages as a deduction in computing its income as soon as the delay in the supply is noticed and the case of under-performance remained at the end of the respective previous years with a large contour of provisional liability. The delay has not been discussed and settled between the parties and under-performance has not been evaluated between the parties. Discussions and negotiations have not been completed. The final amount of breach and the final amount of damages have not been ascertained. Before finalising all the above procedures, it is very premature to jump into a conclusion that the assessee-company has incurred a liability for the payment of liquidated damages as exactly provided for in the respective contract agreements." After recording the findings, the Tribunal proceeded to disallow the claim of the assessee which resulted in an error, which was apparent on record and miscarriage of justice. Seeking rectification of the mistake, the assessee on 11th June, 2003, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as erred in not considering the method of accounting regularly followed by the assessee and thereby overlooked the mandatory nature of direction given under s. 145 of the Act. The Tribunal has erred in not considering the impact of accounting standard 7 and accounting standard 9 of the ICAI in deciding the issue. The Tribunal completely overlooked the fact that in the case of under-performance the income itself would not accrue to the assessee on the concept of real income, thereby the Tribunal ignored its own decision rendered in Kaveri Engg. Industries Ltd. vs. Dy. CIT (1992) 43 ITD 527 (Mad), 35 ITD 18 (Hyderabad Special Bench [sic-this should be K.C.P. Ltd. vs. ITO (1990) 34 ITD 50 (Hyd)(SB)-Ed.] and also in 110 ITR 435 (sic). It has been held by the Supreme Court in CIT vs. Indo Nippon Chemicals Co. Ltd. (2003) 182 CTR (SC) 291 : (2003) 261 ITR 275 (SC) that "...However, if he comes to the conclusion that the method of accounting employed by the assessee makes it impossible to correctly compute the income, then the AO is entitled to adopt any other suitable accounting method. We may add that whatever method the AO adopts, the method has to be consistent with the accepted princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in some instances the customers had accepted the plea, wholly or in part, does not have the effect of postponing the accrual of the liability of the assessee to pay liquidated damages to the point of time when its plea was accepted, wholly or in part by its customers. The finding given in para (d) of the aforesaid decision fully applied to the issue on hand. In the present case the Tribunal having noticed these findings ought to have relied on these decisions and should have consequently held the issue in favour of the assessee. The distinction drawn by the Tribunal that present issue is not covered by the aforesaid decision is apparently wrong and is a mistake to be rectified. 4. He further submitted that the Tribunal erred in not rectifying its decision to bring it in conformity with the decisions of the Supreme Court in (1959) 37 ITR 1 (SC) and (2000) 162 CTR (SC) 325 : (2000) 248 ITR 428 (SC), and accordingly the decision of the Tribunal is clearly an error which should be rectified. It is the expectation of the assessee that the Tribunal will decide the appeal in conformity with the decisions of the Hon'ble apex Court and in this (case) on applying the decision of the apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting the amount could be debited before it was actually disbursed. The difficulty in the estimation thereof again would not convert the accrued liability into a conditional one, because it is always open to IT authorities concerned to arrive at a proper estimate thereof having regard to all the circumstances of the case." 6. Further, in the case of Bharat Earth Movers Ltd. vs. CIT, the Hon'ble Court has held that: "The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain.-Metal Box Co. of India Ltd. vs. Their Workmen (1969) 73 ITR 53 (SC) and Calcutta Co. Ltd. vs. CIT (1959) 37 ITR 1 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been allowed. 9. Shri K.R. Pradeep submitted that when an order of the Tribunal is not in conformity with the decision of the Hon'ble Supreme Court, it should be rectified under s. 254(2) of the Act as held in 233 ITR 415. He further brought to our attention the recent decision of the Delhi 'D' Third Member Bench in the case of Mohan Meakins Ltd. vs. ITO (2004) 84 TTJ (Del)(TM) 1 : (2004) 89 ITD 179 (Del)(TM), wherein the Tribunal has rectified its earlier order after holding at p. 186 as under: "According to judicial discipline, the cases of Special Bench are binding on all Benches unless contrary view is expressed by the jurisdictional High Court or Supreme Court." On these arguments, it was submitted that the mistake apparent in the order of the Tribunal dt. 12th Dec., 2002, read with order dt. 24th Sept., 2003, should be rectified in the interests of justice. 10. In reply, Shri Janardhanan, the learned Departmental Representative, submitted that the order of the Tribunal is final and is not open for reconsideration. The question of law involved in this case has already been settled by the decisions of Hon'ble apex Court and jurisdictional High Court relied on by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariance with what is found in para 46(d) of the decision of the Tribunal in (1992) 43 ITD 527 (Mad). And is also at variance with the other decisions. When the Supreme Court has held that the liability arising out of contract should be allowed as and when it arises and should not be postponed to a later date, it is necessary for the Tribunal to render decision in conformity with the ratio laid down by the Hon'ble apex Court and not against or contrary to it. In this case the order of the Tribunal is contrary to the existing position of law as outlined above. Hence, there is a mistake by the Tribunal which is apparent from the record. Under s. 254(2) of the Act it is mandatory for the Tribunal to rectify all mistakes which are apparent on record. The Tribunal has sufficient jurisdiction to rectify such mistakes as held in (1999) 152 CTR (HP) 146 : (1998) 233 ITR 450 (HP) Mrs. K.T.M.S. Umma Salma vs. CIT as well as the decision of the Delhi 'D' Bench reported in (2004) 84 TTJ (Del)(TM) 1 : (2004) 89 ITD 179 (Del)(TM). Accordingly, to render the decision of the Tribunal in conformity with the aforesaid legal position, we rectify the order of this Tribunal dt. 12th Dec., 2002, by delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd thus would have caused serious miscarriage of justice to the assessee. When such a mistake is noticed it is incumbent for the Tribunal to rectify the same. In rectification of the order we are also guided by the noble principle laid down by the Hon'ble apex Court in the case of Shivdeo Singh vs. State of Punjab 1963 AIR SC 1909 relied on by the Hon'ble Allahabad High Court in ITO vs. S.B. Singar Singh & Sons & Anr. (1970) 75 ITR 646 (All) at p. 650 wherein it was held that: "...We now come to consider the second submission of Mr. Gopal Behari that a Tribunal has no inherent power even to rectify an error which it has inadvertently made to the prejudice of a party. Learned counsel contends on the basis of certain decided cases that it is only regular Courts of law which are vested with such powers and not a Tribunal. On the basis of the legal maxim that no party shall suffer prejudice by an act of a Court of a Tribunal, it has been held on occasions that the Court or a Tribunal has inherent jurisdiction to set aside an order which it has made by committing an error itself and which has caused prejudice to a party." "It is true that the normal rule is that the remedy of review ..... X X X X Extracts X X X X X X X X Extracts X X X X
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