Another v. Ita829/09

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN FRIDAY, THE 19TH MARCH 2010 / 28TH PHALGUNA 1931 ITA.No. 829 of 2009() ------------------------------- MP.42/COCH/2003 of INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH .................... APPELLANT/ APPELLANT/REVENUE ---------------------- THE COMMISSIONER OF INCOME TAX, KOTTAYAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): RESPONDENT/ASSESSEE -------------------------- M/S.AISWARYA TRADING CO.,KUTTANAD, ALAPPUZHA. BY ADV. SRI.A.KUMAR THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 19/03/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: “CR” C.N.Ramachandran Nair & P.S.Gopinathan, JJ. ==================================================I.T.A.829 of 2009 ================================================== Dated this the 19[th] day of March, 2010. JUDGMENT Ramachandran Nair, J. 1.This appeal is filed against the order issued bytheTribunalrefusingtoentertainarectification application filed by the Revenueunder Section 254(2) of the Income Tax Act torectify the order issued by the Tribunal in anearlier rectification application filed by theassessee to rectify the very same appellateorder. 2.We have heard standing counsel appearing for theappellant and Adv.Sri.A.Kumar appearing for therespondent assessee. 3.The respondent assessee contested its income taxassessment for the year 1994-95, in appeal beforethe Commissioner of Income Tax (Appeals) andlater before the Tribunal, which remanded thematter to the assessing officer for re-consideration mainly on estimation of income fromarrack business. The assessing officer issuedrevised order, which was again taken up in appealon second round before the C.I.T (Appeals), whoenhanced the assessment, after notice to theassessee. On second appeal filed by the assessee. On second appeal filed by theassessee, the Tribunal refixed the net incomefrom arrack at Rs.10 per litre. However, whiledeciding the appeal, the Tribunal did notconsider one of the grounds raised by theassessee pertaining to the levy of interest underSection 220(2) of the Act in the revisedassessment after the first round. Therefore, the assessee filed rectification application, M.P.30of 2001 before the Tribunal to rectify theappellate order, which was allowed by theTribunal. The Tribunal allowed the assessee'srectification application by holding thatinterest could not be levied under Section 220(2)on the demand of tax pursuant to first round ofremand order by the Tribunal. The Departmentthereafter filed a rectification applicationM.P.42/2003 for rectifying the order issued bythe Tribunal in assessee's rectificationapplication, M.P.30/2001. The Tribunal, however,held that Department's rectification applicationis on the very same issue agitated by theassessee in their rectification application andallowed by the Tribunal and therefore it is notmaintainable under Section 254(2) of the I.T.Act.The Tribunal relied on the decision of the OrissaHigh Court in Commissioner of Income Tax and another v. Income tax Appellate Tribunal andothers(196 I.T.R. 838) against which this appealis filed. The standing counsel relied on anotherdecision of the very same Bench of the OrissaHigh Court reported at page 640 of the very samevolume of the I.T.R. and contended that, byvirtue of the merger of the rectification orderin the appellate order, the application filedunder Section 254(2) by the Revenue is stillmaintainable. According to the standing counsel,the rectification order issued under Section 254(2) merges with the original appellate orderissued under Section 254(1) and so much so afurther application under Section 254(2) ismaintainable. Counsel appearing for the assesseecontended that, since the very same issueagitated by the Revenue in their rectificationapplication is the one decided by the Tribunal,in the application filed by the assessee it is not maintainable. 4.After hearing both sides and after going throughthe appellate order, we are of the view that thesecond application on the very same issue is notmaintainable before the Tribunal. In fact,merger applies only on issues decided inrectification proceedings and the Tribunal'sorder issued under Section 254(1) will remainunaffected on all matters other than thosecovered by the rectification order issued underSection 254(2). In other words, even after theTribunal rectifies the appellate order underSection 254(2) on any issue raised, still theoriginal order can be rectified on any otherissue decided by the Tribunal. However, if therectification application filed by one of theparties is allowed or rejected by the Tribunal,the very same issue cannot be agitated in another rectification application by the opposite party.If this is done and allowed to be entertained bythe Tribunal, then what happens is that theTribunal gets an opportunity to review its ownorder for which it has no powers under thestatute. Therefore, once the rectificationapplication filed by one of the parties isconsidered and decided by the Tribunal rightly orwrongly, another rectification application onsame issue is not maintainable against the orderissued by the Tribunal under Section 254(2) ofthe Act. In this case, the question of liabilityfor interest payable by the assessee underSection 220(2) rightly or wrongly was decided bythe Tribunal in the rectification applicationfiled by the assessee in their favour and so muchso, the Department cannot seek to rectify thevery same order again under Section 254(2) byfiling another application. As already held, the second rectification application by either partyis maintainable only on issues not decided by theTribunal in any other rectification applicationfiled by either of the parties. We, therefore,clarify that the appellate order issued underSection 254(1) gets merged in rectificationorders only on the issues raised in therectification application and on all other issuesdecided by the Tribunal in the appeal, theappellate order under Section 254(1) survives andis available for rectification again on any otherissue on an application filed by either of theparties. Consequently, we uphold the order ofthe Tribunal and dismiss the Department appeal. C.N.Ramachandran Nair, Judge. P.S.Gopinathan, Judge.