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TMI Blog2023 (5) TMI 1208X X X X Extracts X X X X X X X X Extracts X X X X ..... merit, AO has rightly dismissed the rectification application filed by the assessee as the AO was duty bound to implement the order passed by the Tribunal. After approval of the order without modification by the superior authority, the order of the lower authority ceases to exist. The order of the Tribunal/superior authority passed by it can only be modified, set aside and annulled by process known to law. Admittedly, the Tribunal has neither recalled its order nor an appeal has been preferred against the order passed by the Tribunal before the hon ble High Court. Order passed by the Tribunal has attained finality and is required to be executed / enforced by the Assessing Officer. We cannot subscribe the view of the ld. AR that by rectification, the alleged jurisdictional issue can be looked into by the Assessing Officer or ld.CIT(A) thereby annulling the entire assessment proceedings, more particularly, when the assessment proceedings have already attained finality by virtue of the order of the Tribunal. There cannot be two contradictory orders of the Tribunal one by upholding the assessment and other quashing the assessment based on the jurisdictional error. A mistake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e orders made in pursuance of search and seizure are orders made U/s153A of I.T. Act. Hence the order of the AO. in framing the order under section 153A is in order. 5. The learned CIT(A) erred in concluding that even issuance of notice U/s153C to the HUF would not arise since no document, much less incriminating document, was found or seized in the course of search. 6. The learned CIT(A) ought to have appreciated that the incriminating material pertaining to the assessee was seized during the course of search operations in the group cases. 7. The learned CIT(A) ought to have appreciated that non-mentioning of section 153C either in notice or in the order would not vitiate the order passed under section 153A as the assessment has to be made, in the case of person searched and also in cases of other persons as mentioned in section 153C, under section 153A of the I.T. Act. 8. The learned CIT{A) ought to have followed the decision of Hon'ble Madras High Court in the case of CIT vs K.M. Ganesham reported in 333 ITR 562 where in it was held that notice issued under section 158BC is only in accordance with the provisions of section 158BD. 9. The learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore him was whether jurisdiction issue can be raised Under section 154 after the assessment has become final? 21. Any other ground that may be urged at the time of hearing. 3. CO.No.68/Hyd/2014 (Grounds of appeal) 1 (a) The learned CIT(A) erred in stating that the provisions of section 154 did not apply to the request of the appellant in relation 'to adoption of S.R.O. value' as per section 5OC of the Income Tax Act, 1961. (b) The learned CIT(A) incorrectly inferred that the issue relating to adoption of the value as per section 50C was considered in the assessment whereas it was neither raised nor considered in the assessment order. 2 (a) The learned CIT(A) erred in holding that the claim of deduction u/s 54F is merely academic in nature without realizing that he ought to have adjudicated on the ground raised. (b) The learned CIT(A) erred in not adjudicating the ground of appeal No. 2(i) before him relating to restriction of capital gains to the land (i.e., 64% of Ac.11.34 guntas) allegedly transferred as per the development agreement. 3. The learned CIT(A) erred in not adjudicating the ground No. 3(1) raised by the appellant before him re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the tribunal. In the light of the above the order passed by the tribunal had attained finality and was enforceable and executable against the assessee. 5.4. Thereafter the assessee filed three separate applications u/s 154 requesting the Assessing Officer to rectify the assessment orders. Assessing Officer had disposed of all those three applications filed u/s 154 by passing a combined order dt.31.03.2014 holding that the scope of section 154 was limited and that the power u/s 154 could not be used to review an order. 6. Feeling aggrieved with the order passed by the Assessing Officer dismissing the applications of the assessee, the assessee carried the matter before the ld.CIT(A) and the ld.CIT(A) had granted partial relief to the assessee by holding as under : 7.5 I have carefully examined the appellants contention and the written and oral submissions made by the appellants AR in support of the plea of cancellation of annulment of the order. This is a legal issue and it is settled law that a legal issue can be raised at any time. The judgments of the Supreme Court relied upon by the AR specifically support his contention that an issue relating to jurisdiction c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng at the stage of recovery (execution of decree). The appellant s AR specifically invited my attention to the decision of the Bombay High court in blue Star Engineering co. (Bombay) Ltd. v. CIT (1969) 73 ITR 283 (bom) where the question of jurisdiction came up for decision u/s. 154 after the matter had been decided on merits in the appellate for a by then. The High Court held that the issue of jurisdiction was covered u/s. 154 and if the rectification resulted in annulment of the assessment in toto, that too was permissible. 7.5.3 I have carefully gone through the judgment and find that it indeed is squarely applicable to the case of the appellant. I also find that there is no judgment to the contrary. Therefore, I respectfully follow the decision of the Bombay High Court cited above. 7.5.3 In view of the above, I hold that assessment made u/s. 153A in pursuance of notice u/s. 153A issued to the appellant-HUF was not searched u/s. 132 is bad in law. Accordingly, the assessment order cannot survive. It is hereby annulled as ab initio void. 7. Feeling aggrieved with the order of ld.CIT(A), the Revenue and assessee are now in appeal before us on the grounds mentioned he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle of mistake of court not prejudicing a litigant nor by involving doctrine of incidental power, could the Tribunal reverse a decision on the merits. The Tribunal was not justified in recalling its previous finding restoring the addition, more so when an application for the same relief had been earlier dismissed. 8. The scope and ambit of application of section 254(2) is very limited. The same is restricted to rectification of mistakes apparent from the record. We shall first deal with the question of the power of the Tribunal to recall an order in its entirety. Recalling the entire order obviously would mean passing of a fresh order. That does not appear to be the legislative intent. The order passed by the Tribunal under s. 254(1) is the effective order so far as the appeal is concerned. Any order passed under s. 254(2) either allowing the amendment or refusing to amend gets merged with the original order passed. The order as amended or remaining un-amended is the effective order for all practical purposes. An order under s. 254(2) does not have existence de hors the order under s. 254(1). Recalling of the order is not permissible under s. 254(2). Recalling of an ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which prejudice is attributable to the Tribunal s mistake/error or omission, and which an error is a manifest error, then the Tribunal would be justified in rectifying its mistake. The rule of precedent is an important aspect of legal certainty in the rule of law and that principle is not obliterated by s. 254(2) of the Act and non-consideration of precedent by the Tribunal causes a prejudice to the assessee. (c) Thirdly, power to rectify a mistake is not equivalent to a power to review or recall the order sought to be rectified. (d) Fourthly, under s. 254(2) an oversight of a fact cannot constitute an apparent mistake rectifiable under the section. (e) Fifthly, failure on the part of the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on record, although it may be an error of judgement. (f) Sixthly, even if on the basis of a wrong conclusion the Tribunal has not allowed a claim of the party it will not be a ground for moving an application under s. 254(2) of the Act. (g) Lastly, in the garb of an application for rectification under s. 254(2) the assessee cannot be permitted to reopen and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to be amended stands concluded as the same has been upheld by the highest fact finding authority i.e. ITAT as the appeal filed by the assessee against the order of CIT(A) and Mise. Petition filed against the Tribunal order were dismissed. Hence, the A.O. has no powers to rectify the order. g) the same can not be raised at this juncture as the assessment made has become final for the afore said reasons in (f) above. Hence, it is beyond the scope of rectification. Further, various courts have held that order made under section 153A in the cases mentioned in Section 153C is a valid order. h) The assessee also raised fresh claim under section 54 F for the first time in his application filed now. The same is rejected as no claim of deduction/exemption can be With regard to issue raised by the assessee questioning the validity of issue of notice, made only by filing revised returns as held by Hon ble Supreme Court. i) Section 154 only confers power of rectification if there is a mistake apparent on the face of the record, Limit of rectification can be stretched only to the field where the mistake is glaring, obvious, patent and apparent on the face of the record. Glari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done only by filing revised return as held by Hon'ble Supreme court. View points of the Assessing Officer: 1. The CIT(A) ought to have followed the decision of Hon'ble Madras High Court in the case of CIT vs. K.M.Ganesham reported in 333 ITR 562 wherein it was held that notice issued under section 158BC is only in accordance with the provisions of section 158BD. 2. The CIT(A) erred in holding that the AO erred in observing that the assessee sought to review / recall the concluded issues in his application u/s.154 and without appreciating the fact that the provisions of section 154 restricts the power of the AO to only issues which are not debatable. In this issue the following cases laws have to be examined: 1. The CIT(A) erred in relying upon the decision of Blue star engineering company (Bombay) Ltd Vs. CIT reported in 73 ITR 283 (Bombay High court) 2. The CIT(A) ought to have appreciated the principle laid down by the Apex court in Mepco Industries Ltd ( 219 ITR 208) that Order u/s. 154 is not possible in this case. 3. The CIT(A) ought to have appreciated the principle laid down by the Apex court in Volkarts Brothers ( 82 ITR 50 ) that the mistak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties. 16. The aforesaid principle was reiterated by the Supreme Court in Superintendent of Taxes v. Onkarmal Nathmal Trust AIR 1975 SC 2065 and Dasa Muni Reddy v. Appa Rao AIR 1974 SC 2089. In the first of these decisions it was pointed out that revenue statutes protect the public on the one hand and confer power upon the State on the other, and the fetter on the jurisdiction is one meant to protect the public on the broader ground of public policy and, therefore, jurisdiction to assess or reassess a person can never be waived or created by consent. This decision shows that the basic principle recognized in Kiran Singh (supra) is applicable even to revenue statutes such as the Income Tax Act. Dasa Muni Reddy (supra) is a judgment where the principle of coram non-judice was applied to rent control law. It was held that neither the rule of estoppel nor the princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassessment to be bad on the further ground that in the original assessment proceedings themselves the assessee had explained the investments and, therefore, the reopening of the assessment was the result of a mere change of opinion. Thus, on both the grounds he annulled the reassessment order. Against the order of the AAC the Revenue went in appeal before the Tribunal and specifically raised the plea that the question of jurisdiction to reopen the assessment having been expressly given up by the assessee in the appeal against the reassessment order in the first round, the assessee was debarred from raising that point again before the AAC and the AAC was equally wrong in permitting the assessee to raise that point which had become final in the first round and in adjudicating upon the same. The plea of the Revenue impressed the Tribunal which took the view that after its earlier order in the first round of proceedings the matter attained finality with regard to the point of jurisdiction which was given up before the AAC and not agitated further and that in the remand proceedings what was open before the Assessing Officer was only the question whether the addition was justified on me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition in the hands of the assessee. It was submitted that addition made by the Assessing Officer and confirmed by the Tribunal were rightly annulled by the ld.CIT(A) in 154 proceedings and therefore, the appeal of the Revenue is required to be dismissed. 14.1 Ld. AR had submitted Para-wise comments to the arguments of ld.DR, which is to the following effect : The opening sentence of the synopsis of the arguments furnished by the learned DR states that the search warrant was in the name of the karta of the HUF. This is factually incorrect, devious, misleading and mischievous in intent. It gives an impression that the search was initiated against the HUF. The fact is that the search was carried out against the individual. The warrant, as borne out by the panchanama, was in the name of the individual and not the HUF. The second sentence states that the search was conducted against the three Sons of the assessee as well. This also is factually incorrect. The assessee and the other three are related but not of the kind mentioned by the learned DR. Sri Krishna Kumar Shah is the uncle of the other three. The addresses too of Sri Krishna Kumar Shah and the other three are diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54. He has relied upon the decisions in T. S. Balram, ITO v. Volkart Brothers reported in 82 ITR 50 (SC), CIT v. Hero Cycles (Pvt.) Ltd. [1997] 228 ITR 463 (SC) and many others to say that a matter which is debatable cannot be covered within the scope of section 154. The decisions cited by the learned DR in fact support the assessee's plea because an issue relating to assumption of jurisdiction strikes at the very root of any decision and the settled Law is that it can be raised at me. In fact, in paragraph 4.3, the learned DR states that an order can be rectified u/s 154 by taking cognizance of the settled legal position. In the case on hand, the settled law supports the assessee's application u/s 154 and therefore the order of the CIT(A) that the assessment order made on assumption of wrong i8iiction is a nullity is unassailable. 5. In paragraph 5, the learned DR admitted that the ratio of the judgement in Blue Star Engineering Co. (Bombay) [1969] 73 ITR 283 (Born) (P) Ltd. v. CIT may be applicable but since there is no decision of the supreme Court or the jurisdictional High Court on the issue, the issue has to be treated as debatable. It is submitted that the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icro Labs Ltd. [2012] 348 ITR 75 (Kam). (3) The department has raised a ground that there is no difference between notices u/s 153A and u/s 153C. The department has relied on the decision in the case of CIT v. K. M. Ganesan [2011] 333 ITR 562 (Madras) in support of this view. It is submitted that this decision is not an authority on the proposition that issue of notice u/s 153A in law would tantamount to issue of notice u/s 153C. In the case of Manish Maheswari v. ACIT [2007] 289 ITR 341 (SC), the Apex Court has held that satisfaction that money, bullion, etc. belong to the party other than the searched person is a precondition to initiate proceedings u/s 1 58BD. That satisfaction is sine qua non for initiating action u/s 158BD has been emphasised by the Apex Court in CIT v. Calcutta Knitwears [2014] 362 ITR 673 (SC). Thus, the revenue's reliance on the decision in the case of K. M. Ganesan (supra) is misplaced. It may kindly be noted that in the case of the assessee, the AD could not have assumed jurisdiction either u/s 153A or u/s 153C because the search was not conducted against the assessee nor was any document related to the assessee was found in the premises of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 dated 3-8-2012 relied on the decision of the Supreme Court in Superintendent of Taxes v. Onkarmal Nathumal Trust (AIR 1975 SC 20 ) to state that the decision in Kiran Singh (supra) is applicable to the Income Tax Act (Paragraphs 15 16). The Court also referred to the decision of the Gujarat High Court in P. V. Doshi v. CIT [1978] 113 ITR 22 wherein it has been held that the finality or conclusiveness could only arise in respect of -orders which are competent orders with jurisdiction and if the proceedings of reassessment are not validly initiated at all, the order would be a void order as per the settled legal position which could never have any finality or conclusiveness. If the original order is without jurisdiction it would be only a nullity confirmed in further appeals. (paragraph 16). Therefore, the decision of the CIT(A) is correct and unassailable. Significantly, the DR did not offer any comments on the above quoted decisions of the Hon'ble Supreme Court and of the Hon'ble Delhi High Court and Hon'ble Gujarat High Court. Paragraphs 7 to 7.6 of the DR's Synopsis: They cover the issues on merits raised in the cross objections by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was confirmed by the ld.CIT(A). The assessee had preferred the appeal before the Tribunal and the Tribunal had also confirmed the additions against the assessee. Thereafter, the assessee had filed M.A. before the Tribunal and the Tribunal had also dismissed the said M.A. filed by the assessee vide order dt.26.07.2013. 15.1 As a matter of fact, before the Assessing Officer, ld.CIT(A) or before the Tribunal or in the rectification application, the grounds of jurisdiction were never raised by the assessee. Having failed at all forums, the assessee filed M.A. before the Assessing Officer and the details of which are mentioned hereinabove. The Assessing Officer has dismissed rectification application of the assessee vide reasoned order which are reproduced hereinabove. 16. The moot question before us is whether after finalization of the assessment proceedings up to the level of the Tribunal and after dismissing the M.A. can assessee file an application under section 154 of Income Tax Act 1961 before the Assessing Officer on the same issue For the above said purposes, it is necessary to point out the mistakes pointed by the assessee which were captured by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see or the deductor or the collector, the Assessing Officer shall make any refund which may be due to such assessee or the deductor or the collector. (6) Where any such amendment has the effect of enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee or the deductor or the collector, the Assessing Officer shall serve on the assessee or the deductor or the collector, as the case may be a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under section 156 and the provisions of this Act shall apply accordingly. (7) Save as otherwise provided in section 155 or sub-section (4) of section 186 no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed. (8) Without prejudice to the provisions of sub-section (7), where an application for amendment under this section is made by the assessee or by the deductor or by the collector on or after the 1st day of June, 2001 to an income-tax authority referred to in sub-section (1), the authority shall p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority. Unless a firm can be considered as a person , section 17(1) cannot govern the assessment of the first respondent. In the Income-tax Act, 1961 (section 2(31)), the expression person is defined differently. That definition reads : 'Person' includes (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (iv) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. It is a matter for consideration whether the definition contained in section 2(31) of the Income-tax Act, 1961, is an amendment of the law or is merely declaratory of the law that was in force earlier. To pronounce upon this question, it may be necessary to examine various provisions in the Act as well as its scheme. Section 113 of the Income-tax Act, 1961, corresponded to section 17(1) of the Indian Income-tax Act, 1922, but that section has now been omitted with effect from April 1, 1965, as a result of the Finance Act, 1965. From what has been said above, it is clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pparent from the record. A mistake can be said to be apparent on the record when it is a palpable and glaring one and not something which can be established by a long drawn process of reasoning on which may conceivably yield two opinions. A debatable point of law is not a mistake apparent on the face of the record. Only when such patent and obvious mistake is apparent from the record, the Assessing Officer is permitted to rectify or amend the Assessment Order, vide T.S. Balaram Income Tax Officer v. Volkart Brothers [1971] 82 ITR 50 (SC) 6. Mrs. M. Kiranmayee, learned standing counsel contends that the Assessing Officer in palpable contradiction to the ratio in KNR Constructions (supra), allowed deduction on the ground of depreciation after gross income was estimated at 12.5% on the main contractual receipts upon rejection of the books of accounts. Reliance is also placed on Indwell Constructions (supra) and it is argued in the event books of accounts are rejected, the same cannot be used to allow deduction on gross income. On the other hand, on behalf of the assessee, referring to the decision in Y. Ramachandra Reddy (supra) it is contended that depreciation is permissible ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue is not a palpable mistake on record but involves interpretation of the ratio laid down in KNR Constructions in the light of the law declared in Y. Ramachandra Reddy (supra), we are of the opinion that the invocation of jurisdiction under section 154 of the Act was not justified. Hence, no case to admit the appeal on the proposed questions of law or otherwise is made out. 10. The appeal is, accordingly, dismissed. No order as to costs. 11. Miscellaneous petitions, if any pending in this appeal, shall stand closed. 20. The word any under the income tax authority is defined u/s 116 of the Act which includes the Assessing Officer and ld.CIT(A) and etc. However, the question which is required to be examined is whether the income tax authorities mentioned under section 116 of the Act can rectify any mistake in its order which is though not apparent but will have any effect of setting aside the order passed by the superior authorities. There cannot be any doubt that the income tax authority can rectify any apparent mistake in its order however, when the order of the Assessing Officer, has been upheld by the ld.CIT(A) and thereafter by the Tribunal, in that event ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e collateral proceedings were pending before the Assessing Officer and therefore, the Assessing Officer was right in not entertaining the application for rectification filed by the assessee and had rightly dismiss the same. Further, a mistake which can be rectified is required to be apparent and should be known to the Assessing Officer without any in-depth analysis. The Hon'ble Supreme Court in the case of Volkart Brothers (supra) had elaborately discussed the scope of section 154 , hence the mistake pointed by the assessee can not be said to be apparent in nature . Examining the issue either from the prospective of finality of the first order or from the scope of section 154, we allow the appeal of Revenue and accordingly, the appeal of the Revenue is allowed. 25. In the result, the appeal of revenue in ITA No.1605/Hyd/2014 is allowed. 26. Now, we will take C.O.No.68/Hyd/2014 filed by the assessee. 27. So far as the grounds raised by the assessee in the cross objections are concerned, the same are in support of the order of the ld.CIT(A). Since, we have allowed the appeal filed by the Revenue, therefore, the cross objection of the assessee is dismissed. 28. Since t ..... 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