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TMI Blog2024 (12) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... well as losses , both were undisclosed, as seized material, however, the assessing officer has taken into account to tax the undisclosed income and ignored the undisclosed losses, which is not acceptable. It is a common knowledge that seized material must be read as a whole, that is, every part of the seized material must be constructed within the four corners of the Act. When the undisclosed income has been taken from seized material, then why not the undisclosed losses should not be taken from the seized material. Apple to Apple comparison is needed, which is required, as per the principle of equity and justice. No any seized material should be interpreted in isolation, if the assessing officer, takes the undisclosed income from seized material, then he has to take into account the undisclosed losses from the same seized material, and benefit of set-off of losses, should be given to the assessee, on account of undisclosed losses, which the assessing officer has failed to do so. We are of the view that every part of the seized material, must be analyzed, within the four corners of the Act, when the undisclosed income is considered by the assessing officer, based on the seized mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act, 1961 (hereinafter referred to as the Act ) has crept in the order of Tribunal, dated 12.06.2024, vide order of Tribunal in IT(SS)A Nos. 6 7/Rjt/2022, for assessment years 2016- 17 and 2017-18. 2. Since the subject matter and contents of both the Miscellaneous Applications are identical and similar, therefore, we have clubbed these two Miscellaneous Applications and heard together and a consolidated order is being passed for the sake of convenience and brevity. The facts as well as contention raised in Miscellaneous Application No.22/Rjt/2024, for assessment year (AY).2016-17, have been taken into consideration for deciding these two Miscellaneous Applications en masse. 3. The contention raised by the assessee, in the sample Miscellaneous Application,( lead case ) in MA No. 22/Rjt/2024, for assessment year (AY) 2016-17, are reproduced below: The applicant (being an appellant in the above matters) most respectfully begs to submit the following for the kind and sympathetic consideration of the Honourable Members: 1.0 The applicant had filed appeals in ITA No. 06/Rjt/2022 against the order passed by the Ld. Commissioner of Income Tax (Appeals)-11, Ahmedabad. 2.0 The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kot in IT(SS)A Nos. 6 7/RJT/2022 for assessment years (AYs).2016-17 2017-18, (along with stay petition No.01 and 02/RJT/2023), dated 12.06.2024. In the said order of the Tribunal, there is a mistake apparent from record in not considering the judgment of the Hon ble Supreme Court. The Ld. Counsel submitted that during the search and seizure, the documents were seized by the Department and as per the assessing officer, the documents so seized, by the Department, state that there is undisclosed loss in the hands of the assessee and there is undisclosed income in the hands of the assessee. In the return of income filed by the assessee, in response to notice under section 153A of the Act, the assessee, has neither shown and undisclosed income nor and undisclosed loss. That is, undisclosed income, as per seized material, and undisclosed loss, as per seized material, both were not shown by the assessee, in the return of income, filed by the assessee, in response to notice under section 153A of the Act. The assessee, was in the view that if the Revenue, takes undisclosed income, and tax the undiscovered income, as per seized material, then the Revenue should also take into consideration t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority of law. The ld.Counsel stated that above judgement of Hon`ble Supreme Court has not been followed by the Tribunal, for giving the benefit to the assessee, to set- off, of undisclosed losses, against undisclosed income. The findings of the Hon ble Supreme Court are reproduced below: 28. Having considered the authorities on the subject we find ourselves in agreement with the view of the Gujarat High Court in Saurashtra Cement Chemical Industries Ltd.'s case (supra ). The question that falls for our consideration in these appeals is whether on the failure or inability of the authorities to frame a regular assessment after the earlier assessment is set aside or nullified, the tax deposited by an assessee by way of advance tax or self-assessment tax, or tax deducted at source is liable to be refunded to the assessee, since its retention by the revenue would result in breach of Article 265 of the Constitution which prohibits the levy or collection of any tax except by authority of law. The revenue does not dispute the position that if an assessment is framed, which is later nullified in appeal or revision or other proceedings any amount paid by way of income-tax pursuant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Finance Act and the Income-tax Act. Both the quantum of tax payable and its mode of recovery are authorized by law. The liability to pay income-tax chargeable under section 4(1) of the Act thus, does not depend on the assessment being made. As soon as the Finance Act prescribes the rate or rates for any assessment year, the liability to pay the tax arises. The assessee is himself required to compute his total income and pay the income-tax thereon which involves a process of self-assessment. Since all this is done under authority of law, there is no scope for contending that Article 265 is violated. 30. What then is the effect of the failure to make an order of assessment after the earlier assessment made is set aside or nullified in appropriate proceedings? If the assessing authority cannot make a fresh assessment in accordance with the provisions of the Act it amounts to deemed acceptance of the return of income furnished by the assessee. In such a case the assessing authority is denuded of its authority to verify the correctness and completeness of the return, which authority it has while framing a regular assessment. It must accept the return as furnished and shall n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 237 of the Act. The concerned authority, for the limited purpose of calculating the amount to be refunded under section 240 of the Act, may take all such facts into consideration and calculate the amount to be refunded. So viewed an assessee will not be placed in a more disadvantages position than what he would have been, had an assessment been made in accordance with law. 32. It was contended before us that proviso to section 240 was inserted by an amendment which came into effect from April, 1 1989. Proviso (b) is applicable to the facts of the case under consideration. Section 240 reads as under: 240. Refund on appeal, etc. Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf: Provided that where, by the order of aforesaid, (a) an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment; (b) the assessment is annulled, the refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Learned counsel for the respondents then relied upon the Circular No. 551, dated 23-1-1990 issued by the Central Board of Direct Taxes - (See Taxmann's Direct Taxes Circulars Vol. 4 2000 edn., page 2.1353). The relevant part of Circular contained in paragraph 13.2 thereof is as follows: 13.2. Further, where the assessment had been annulled in appeal, say for want of jurisdiction or for any other technical reason, and such annulment became final, the judicial pronouncement did not permit retention of even the tax due on the basis of the returned income. Several High Courts had held that in such a case even the tax paid by way of tax deducted at source or advance tax and the tax which was due on the basis of the returned income had to be refunded to the assessee. Equity demanded that even where an assessment was annulled for any reason, the liability of the assessee, at least to the extent of tax payable on the basis of the income declared in the return, should remain. To overcome this difficulty and to make the position clear, the proviso to section 240, inserted by the Amending Act, 1987, provides that where the assessment is annulled, the refund shall become due only in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of the Act. The relevant part of the judgment, are reproduced below: 38. Though the learned counsel for the assessee submitted that the phrase to rectify any mistake apparent from the record used in section 254(2) (as also in section 154) is wider in its content than the expression mistake or error apparent on the face of the record occurring in Rule 1 of Order 47 of the Code of Civil Procedure, 1908 [vide Kil Kotagiri Tea Coffee Estates Co. Ltd. v. ITAT [1988] 174 ITR 579 (Ker.)], it is not necessary for us to enter into the said question in the present case. 39. As stated earlier, the decision was rendered in appeal by the Income-tax Appellate Tribunal, Rajkot. Miscellaneous Application came to be filed by the assessee under sub-section (2) of section 254 of the Act stating therein that a decision of the 'Jurisdictional Court', i.e., the High Court of Gujarat in Hiralal Bhagwati's case (supra) was not brought to the notice of the Tribunal and thus there was a mistake apparent from record which required rectification. 40. The core issue, therefore, is whether non-consideration of a decision of Jurisdictional Court (in this case a decision of the High Court of Gujara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent. 45. Rectification of an order stems from the fundamental principle that justice is above all. It is exercised to remove the error and to disturb the finality. 46. In S. Nagaraj v. State of Karnataka 1993 Supp. (4) SCC 595, Sahai, J. stated : 15. Justice is a virtue which transcends all barriers. Neither the rules of procedure nor technicalities of law can stand in its way. The order of the Court should not be prejudicial to anyone. Rule of stare decisis is adhered for consistency but it is not as inflexible in Administrative Law as in Public Law. Even the law bends before justice. Entire concept of writ jurisdiction exercised by the higher courts is founded on equity and fairness. If the Court finds that the order was passed under a mistake and it would not have exercised the jurisdiction but for the erroneous assumption which in fact did not exist and its perpetration shall result in miscarriage of justice then it cannot on any principle be precluded from rectifying the error. Mistake is accepted as valid reason to recall an order. Difference lies in the nature of mistake and scope of rectification, depending on if it is of fact or law. But the root from which the power flow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder, Ld. Counsel for the assessee submitted that assessee has not filed any appeal, till date, that is, up to the present time, before the High Court against the order of Tribunal in assessee s case in IT(SS)A Nos.6 7/RJT/2022, order dated 12.06.2024(supra). 12. The Ld. CIT-DR for the Revenue, in a rejoinder, again stated that on merit, the miscellaneous application, should not be allowed and for that he relied on the order of Co-ordinate Bench of ITAT, Rajkot in case of ACIT vs. Rajeshkumar Govindlal Patel, in MA Nos.20 49/Rjt/2023, dated 20.03.2024 and contended that Tribunal has passed a speaking order, hence there is no mistake apparent on record, therefore, both the miscellaneous applications filed by the assessee, may be dismissed. 13. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. For the sake of clarity and also being pertinent, we reproduce the relevant para No.69 of the order of the Tribunal in IT(SS)A Nos.6 7/RJT/2022, order dated 12.06.2024, which is the disputed issue in these two miscellaneous applications. The para No.69 of the order of the Tribunal, reads as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of carry forward and set off of the losses. If the proposition canvassed by the Ld.Counsel for the assessee is accepted then losses discovered during search, not otherwise disclosed in returns filed are to be allowed benefit of carry forward and set off. In short, an unscrupulous assesses whose undisclosed economic activities are discovered during search will be in a beneficial position with regards to set off and carry forward of losses as opposed to an honest assessee. This surely cannot be the intention of law. The decision of the ITAT Delhi Bench in the case of HBN Dairies (supra) does not help the case of the assessee since in the said case losses claimed to be set off against profits were disclosed in the return filed u/s 153A of the Act. As for the other decisions relied upon by the ld.counsel for the assessee, they only lay down the proposition that the claim of set off of losses is to be examined in the year in which the set off is claimed. How these decisions are of any assistance to the assessee s claim in the impugned year, we fail to understand, considering the fact that even as per the provision of law, the assessee is not eligible to claim the set off of loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses, both were not shown by the assessee, in the return of income, filed by the assessee, in response to notice under section 153A of the Act, therefore, either the assessing officer should ignore both the items or should consider both the items, to compute the tax liability of the assessee, as per seized material. The Income as well as losses , both were undisclosed, as seized material, however, the assessing officer has taken into account to tax the undisclosed income and ignored the undisclosed losses, which is not acceptable. It is a common knowledge that seized material must be read as a whole, that is, every part of the seized material must be constructed within the four corners of the Act. When the undisclosed income has been taken from seized material, then why not the undisclosed losses should not be taken from the seized material. Apple to Apple comparison is needed, which is required, as per the principle of equity and justice. No any seized material should be interpreted in isolation, if the assessing officer, takes the undisclosed income from seized material, then he has to take into account the undisclosed losses from the same seized material, and benefit of set-off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessee on whom it is imposed by law, officers should (a) Draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) Freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. 4. Public Relation Officers have been appointed at important centres, but by the very nature of their duties, their field of activity is bound to be limited. 19. The Hon'ble Justice Khanna in the case of Simon Carves (105 ITR 12) (SC) has held that tax authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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