Commissioner Of Income Tax-12 Mumbaivs.ronak Parikh (Huf v. Oral Judgment

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONWRIT PETITION NO.1813 OF 2009 Commissioner of Income Tax-12 MumbaiVs.Ronak Parikh (HUF) …Petitioner…Respondent Mr. P. C. Chhotaray for Petitioner.Mr. B. V. Jhaveri for Respondent. CORAM : UJJAL BHUYAN,MILIND N. JADHAV, JJ.DATE :MARCH 02, 2020 ORAL JUDGMENT: Heard Mr. Chhotaray, learned standing counsel Revenue for thepetitioner and Mr. Jhaveri, learned counsel for the respondent / assessee. 2.By filing this petition under Article 226 of the Constitution ofIndia, petitioner seeks quashing of order dated 05.01.2009 passed by theIncome Tax Appellate Tribunal, 'G' Bench, Mumbai (hereinafter referredto as the ‘Tribunal’) in M.A.No.420/Mum/2008 recalling its order dated30.04.2008 passed in ITA No.2148/M/2004 for the assessment year1999-2000 and directing hearing of the said appeal afresh. 3.Brief recital of the facts is considered necessary. 4.Respondent is HUF and an assessee under the Income Tax Act,1961 (briefly 'the Act' hereinafter). It appears that search and seizureoperation under Section 132 of the Act was carried out on 16.06.1998 inthe residence-cum-office premises of Shri. Y. J. Chokshi and hisassociates - Shri. Rajendra C. Shah and Shri. Jayantilal M. Shah. In thecourse of the search proceeding, it was found that respondent / assesseehad issued certain cheques after depositing cash received from the said persons. Assessee admitted and explained that he was a Hawala operatorand accepted cash deposits in bank account while issuing cheques for thesaid amount to the party; in the process, he earned commission forcarrying out such Hawala business. 5.Pursuant to the search operations, block assessment for the period01.04.1988 to 16.06.1998 was carried out by the assessing authorityunder Section 158BD of the Act. At the same time, for the assessmentyear 1999-2000, respondent - assessee filed return of income declaringtotal income of Rs.1,94,857.00. The return was processed under Section143(3) of the Act. Following the assessment proceedings, assessingofficer passed assessment order dated 26.03.2002 under Section 143(3)of the Act adding an amount of Rs.72,89,385.00 to the income of therespondent /assessee as income from undisclosed sources. 6.Respondent assailed the said assessment order before theCommissioner of Income Tax (Appeals) - V, Mumbai, referred tohereinafter as the ‘first appellate authority’. In the appellate proceedings,the first appellate authority agreed with the explanations given by therespondent / assessee and by the appellate order dated 16.01.2004 heldthat he was not convinced with the reasons given by the assessing officerwhile making the addition and therefore, directed deletion of the saidaddition. 7.Aggrieved by the said order passed by the first appellate authority,Revenue carried the matter in appeal before the Tribunal. By the orderdated 30.04.2008, Tribunal held that the first appellate authority hadaccepted the explanation given by the respondent / assessee withoutsubjecting them to thorough verification. First appellate authority haderred in accepting the explanation of the respondent / assessee withoutany supporting evidence or document. However, Tribunal took the viewthat in the interest of justice, the matter should be restored back to theassessing officer to examine the issue afresh. Respondent / assessee was directed to furnish necessary evidence to prove the genuineness of cashcredit to the satisfaction of the assessing officer. Consequently, order ofthe first appellate authority was set aside and the matter was restored tothe file of the assessing officer for fresh consideration. directed to furnish necessary evidence to prove the genuineness of cashcredit to the satisfaction of the assessing officer. Consequently, order ofthe first appellate authority was set aside and the matter was restored tothe file of the assessing officer for fresh consideration. 8.However, respondent - assessee filed an application dated12.06.2008 before the Tribunal for recall of the order dated 30.04.2008.In the said application, it was contended that the addition made by theassessing officer in the block assessment was deleted by the firstappellate authority which was affirmed by the Tribunal in further appealby the Revenue. This order of the Co-ordinate Bench of the Tribunal wasnot considered by the Tribunal while passing the order dated 30.04.2008.Hence, prayer was made for recall of the said order. 9.The said miscellaneous application was registered as M.A.No.420/Mumbai/2008. By order dated 05.01.2009, Tribunal allowed themiscellaneous application by recalling the order dated 30.04.2008 andfor hearing the appeal afresh. 10.This order has been impugned by the Revenue in the present writproceeding. 11.Mr. Chhotaray, learned standing counsel Revenue has referred toSection 254(2) of the Act and submits that under the said provision,Tribunal can only rectify a mistake which is apparent from the record.Tribunal has no power to recall its order in entirety. Recalling of anorder in entirety is only provided under Rule 24 of the Income Tax(Appellate Tribunal) Rules, 1963 which deals with a situation of ex-parte hearing for default of the appellant. In support of his contention,he has placed reliance on a Division Bench decision of the Delhi HighCourt in C.I.T. Vs. Income Tax Appellate Tribunal, 293 ITR 118 and aDivision Bench decision of the Allahabad High Court in C.I.T. Vs.Kamal Bhai Ismailji, 288 ITR 297. His further contention is that no prejudice has been caused to the respondent / assessee by the orderpassed by the Tribunal in the quantum appeal in as much as Tribunal hadonly remanded the matter back to the assessing officer for a freshdecision giving liberty to the respondent / assessee to adduce evidence aswell as to make submissions. 12.Per contra, learned counsel for the respondent at the outsetsubmits that the Division Bench decision of the Delhi High Court inC.I.T. Vs. Income Tax Appellate Tribunal (supra) has been overruledby the Full Bench of the same High Court in Lachman Dass BhatiaHingwala (P.) Ltd. Vs. Asst. CIT (Delhi), 330 ITR 243. In the saidjudgment, the Full Bench of the Delhi High Court has held that viewtaken in C.I.T. Vs. Income Tax Appellate Tribunal (supra) that underno circumstances a Tribunal can recall its order in entirety does not laydown the correct statement of law. 12.1. That apart, learned counsel has placed reliance on the decision ofthe Supreme Court in Honda Siel Power Products Ltd. Vs. C.I.T., 295ITR 466 to contend that power of rectification under Section 254(2) ofthe Act is not to be confused with the power of review. This is a powervested with the Tribunal to ensure that no prejudice is caused to either ofthe parties appearing before the Tribunal by its decision passed on amistake apparent from the record. 12.2. He has also referred to the decision of the Supreme Court in ACITVs. Saurashtra Kutch Stock Exchange Ltd., 305 ITR 227 to contend thatin an appropriate case it is open to the Tribunal to recall its order inentirety in exercise of its power under Section 254(2) of the Act.Referring to the Full Bench decision of the Delhi High Court, he submitsthat after an exhaustive analysis of the entire spectrum of the law on thisaspect, the Full Bench had culled out 5 principles which clearlystipulates that decision of the Supreme Court in Honda Siel PowerProducts Ltd. (supra) is an authority for the proposition that Tribunal can recall its own order under certain circumstances and that there is noabsolute prohibition to such recalling of order in entirety. 12.2. He has also referred to the decision of the Supreme Court in ACITVs. Saurashtra Kutch Stock Exchange Ltd., 305 ITR 227 to contend thatin an appropriate case it is open to the Tribunal to recall its order inentirety in exercise of its power under Section 254(2) of the Act.Referring to the Full Bench decision of the Delhi High Court, he submitsthat after an exhaustive analysis of the entire spectrum of the law on thisaspect, the Full Bench had culled out 5 principles which clearlystipulates that decision of the Supreme Court in Honda Siel PowerProducts Ltd. (supra) is an authority for the proposition that Tribunal can recall its own order under certain circumstances and that there is noabsolute prohibition to such recalling of order in entirety. 13.At this stage, we may also mention that learned counsel for therespondent had raised an issue of belated filing of the writ petition whichhe projected as a preliminary objection. 14.Submissions made by learned counsel for the parties have beenconsidered. We have also perused the materials on record and appliedour mind to the decisions cited at the Bar. 15.At the outset we may advert to the objection raised by learnedcounsel for the respondent - assessee about the alleged delay in filing ofthe writ petition. 15.1. We find that the impugned order was passed by the Tribunal on05.01.2009. Writ petition came to be filed on 20.08.2009. It is trite thatthe law of limitation is not applicable to writ proceedings thoughlimitation prescribed thereunder can in certain cases act as a guide to thewrit Court. In the instant case, the writ petition has been filed withineight months of passing of the impugned order. In the facts andcircumstances of the case, filing of the writ petition within eight monthsof the impugned order cannot be construed to be a belated filing. Thatapart, we find that by order dated 17.11.2009, this Court had admittedthe writ petition for hearing by issuing Rule. Once a writ petition isadmitted for hearing, it necessarily implies that the Court is satisfiedabout the timely filing of the writ petition and in such circumstances, thewrit petition is required to be heard and decided on merit. 16.Having answered the preliminary objection as above, we maynow deal with the issue in substance. Since Section 254(2) is central tothe debate, the same is referred to and extracted hereunder for readyreference: “254(2) The Appellate Tribunal may, at any time within six months from the end of the month in which the order waspassed, with a view to rectifying any mistake apparent fromthe record, amend any order passed by it under sub-section (1),and shall make such amendment if the mistake is brought to itsnotice by the assessee or the Assessing Officer.” 17.Before dealing with the provision contained in sub-section (2) asextracted above, we may note that under sub-section (1), Tribunal isvested with the authority of passing such order on appeal filed before itafter giving both the parties to the appeal an opportunity of being heard.Thus, order passed under sub-section (1) is the substantive order of theTribunal. 18.If any of the parties to the appeal brings it to the notice of theTribunal within the period prescribed in sub-section (2) that there was amistake in the order passed by the Tribunal which is apparent from therecord then the Tribunal may amend any order passed by it under sub-section (1) by making such amendment with a view to rectifying amistake apparent from the record. The key expressions in sub-section (2)are ‘rectifying any mistake apparent from the record’ and ‘amend anyorder passed by it’. 18.1. In so far the expression ‘any mistake apparent from the record’ isconcerned, it has been judicially held that for a mistake to be a mistakeapparent from the record, no long-drawn hearing or argument isrequired. It is a mistake which is apparent from the face of the record. 18.If any of the parties to the appeal brings it to the notice of theTribunal within the period prescribed in sub-section (2) that there was amistake in the order passed by the Tribunal which is apparent from therecord then the Tribunal may amend any order passed by it under sub-section (1) by making such amendment with a view to rectifying amistake apparent from the record. The key expressions in sub-section (2)are ‘rectifying any mistake apparent from the record’ and ‘amend anyorder passed by it’. 18.1. In so far the expression ‘any mistake apparent from the record’ isconcerned, it has been judicially held that for a mistake to be a mistakeapparent from the record, no long-drawn hearing or argument isrequired. It is a mistake which is apparent from the face of the record. 18.2. A similar expression i.e., ‘error apparent on the face of the record’appears in Order XLVII, Rule 1 of the Civil Procedure Code, 1908dealing with application for review of judgment. This expression ‘errorapparent on the face of the record’ has received considerable judicialattention. It has been held that an error apparent on the face of the recordmust be such as can be seen by one who runs and reads, that is, anobvious and patent mistake which does not need a long drawn process ofreasoning to discover; an error apparent on the face of the record must be such an error which must strike one on mere looking at the record andwould not require any long drawn process of reasoning on points wherethere may conceivably be two opinions. 18.3. This provision was considered by the Supreme Court in LilyThomas Vs. Union of India, (2000) 6 SCC 224. Referring to earlierdecisions of the Supreme Court, it was held that error apparent on theface of the proceedings is an error which is based on clear ignorance ordisregard of the provisions of law. Such error is an error which is apatent error and not a mere wrong decision. It should be something morethan a mere error; it must be one which must be manifest on the face ofthe record. 18.4. Regarding the second expression i.e., ‘amend any order passed byit’, we may refer to the decision of the Supreme Court in Honda SielPower Products Ltd. (supra). In that case, Supreme Court examinedthe scope of the power of rectification under Section 254(2) of the Act.Supreme Court observed that the purpose behind enactment of Section254(2) is based on the fundamental principle that no party appearingbefore the Tribunal, be it the assessee or the Revenue, should suffer onaccount of any mistake committed by the Tribunal. Clarifying the matter,Supreme Court held that this fundamental principle has nothing to dowith the inherent power of the Tribunal or the power of review. Thispower is vested with the Tribunal to see that no prejudice is caused toeither of the parties appearing before the Tribunal by its decision basedon a mistake apparent from the record. In the facts and circumstances ofthat case, Supreme Court held that the Tribunal was justified inexercising its power under Section 254(2) in recalling its order and theHigh Court had erred in interfering with such decision of the Tribunal. 19.This position has also been reiterated by the Supreme Court in thelater decision in Saurashtra Kutch Stock Exchange Ltd. (supra). 20.Before adverting to the Full Bench decision of the Delhi HighCourt, we may briefly glance at the provisions of Rule 24 of the IncomeTax (Appellate Tribunal) Rules, 1963. As per Rule 24, if the appellantdoes not appear before the Tribunal on the date of hearing, Tribunal maydispose of the appeal on merit after hearing the respondent. However, asper the the proviso, if the appellant appears afterwards and satisfies theTribunal that there was sufficient cause for non-appearance when theappeal was called for hearing, the Tribunal may set aside the ex-parteorder and restore the appeal for hearing afresh. 19.This position has also been reiterated by the Supreme Court in thelater decision in Saurashtra Kutch Stock Exchange Ltd. (supra). 20.Before adverting to the Full Bench decision of the Delhi HighCourt, we may briefly glance at the provisions of Rule 24 of the IncomeTax (Appellate Tribunal) Rules, 1963. As per Rule 24, if the appellantdoes not appear before the Tribunal on the date of hearing, Tribunal maydispose of the appeal on merit after hearing the respondent. However, asper the the proviso, if the appellant appears afterwards and satisfies theTribunal that there was sufficient cause for non-appearance when theappeal was called for hearing, the Tribunal may set aside the ex-parteorder and restore the appeal for hearing afresh. 21.The provisions contained in Rule 24 as discussed above and thatin Section 254(2) which we have also discussed inextensio operate indifferent fields. While Rule 24 makes a provision for setting aside of anex-parte order and for rehearing of the appeal, it is not so under Section254(2) which only deals with a situation for rectification of a mistakewhich is apparent from the record. 22.In Kamal Bhai Ismailji (supra), Allahabad High Court took theview that even though the Tribunal has inherent power to recall an ex-parte order on sufficient cause being shown, it has no power to reviewits order; it is well settled that Tribunal has no inherent power to review.Power of review has to be expressly conferred by the statute. Only apower to rectify a mistake apparent from the record has been conferredon the Tribunal under Section 254(2) of the Act. 23.The Division Bench decision of the Delhi High Court in C.I.T.Vs. Income Tax Appellate Tribunal (supra) having been overruled bythe Full Bench, we may consider only the Full Bench decision of theDelhi High Court in Lachman Dass Bhatia Hingwala (P.) Ltd. (supra).After a thorough examination of various aspects, Full Bench of the DelhiHigh Court culled out the following propositions: “(A) The decision rendered in Honda Siel Power Products Ltd.(supra) by the Apex Court is an authority for the propositionthat the Income-tax Appellate Tribunal under certain circumstances can recall its own order and there is no absoluteprohibition. (B) In view of the law laid down in Honda Siel Power ProductsLtd., (supra) by the Apex Court, the decisions rendered by thisCourt in K.L. Bhatia [1990] 182 ITR 361 (Delhi), Deeksha Suri[1998] 232 ITR 395, Karan and Co. [2002] 253 ITR 131(Delhi), J.N. Sahni [2002] 257 ITR 16 (Delhi) and Smt. BaljeetJolly [2001] 250 ITR 113 (Delhi) which lay down the principlethat the tribunal under no circumstances can recall its order inentirety do not lay down the correct statement of law. (C) Any other decision or authority which has been rendered bypressing reliance on K. L. Bhatia (supra) and the said line ofdecisions are also to be treated as not laying down the correctproposition of law that the tribunal has no power to recall anorder passed by it in exercise of power under Section 254(2) ofthe Act. (D) The tribunal, while exercising the power of rectificationunder Section 254(2) of the Act, can recall its order in entiretyif it is satisfied that prejudice has resulted to the party which isattributable to the tribunal’s mistake, error or omission andwhich error is a manifest error and it has nothing to do with thedoctrine or concept of inherent power of review. (E) When the justification of an order passed by the tribunalrecalling its own order is assailed in a writ petition, it isrequired to be tested on the anvil of law laid down by the ApexCourt in Honda Siel Power Products Ltd., (supra) andSaurashtra Kutch Stock Exchange Ltd. (supra).” (D) The tribunal, while exercising the power of rectificationunder Section 254(2) of the Act, can recall its order in entiretyif it is satisfied that prejudice has resulted to the party which isattributable to the tribunal’s mistake, error or omission andwhich error is a manifest error and it has nothing to do with thedoctrine or concept of inherent power of review. (E) When the justification of an order passed by the tribunalrecalling its own order is assailed in a writ petition, it isrequired to be tested on the anvil of law laid down by the ApexCourt in Honda Siel Power Products Ltd., (supra) andSaurashtra Kutch Stock Exchange Ltd. (supra).” 24.If we carefully look at the conclusions culled out by the DelhiHigh Court, we find that the view taken by the Delhi High Court is thatthere is no absolute bar on the Tribunal for recalling its order in entirety.Tribunal while exercising power of rectification under Section 254(2) ofthe Act can recall its order in entirety if it is satisfied that prejudice hasresulted to the parties by its order passed under Section 254(1) which isattributable to the Tribunal’s mistake, error or omission and which erroris a manifest error and it has nothing to do with the doctrine or conceptof inherent power of review. 25.Having noticed the legal provisions as above, we may now revertback to the relevant facts of the present case. 26.Referring to the order passed by the Tribunal dated 30.04.2008,we find that while the Tribunal had set aside the order passed by the firstappellate authority, Tribunal restored the matter back to the assessingofficer to examine the issue afresh. Respondent / assessee has beendirected to furnish evidence to prove genuineness of cash credit to thesatisfaction of the assessing officer. Paragraph 9 of the order reads asunder: “9.In view of these findings of the ACIT in the remandreport it is not possible to understand how the CIT(A) hasaccepted the genuineness of the transactions. The burden lieson the assessee to prove that the deposits in the bank accountsare from real people and these transactions are genuine. As theprimary responsibility is not discharged completely and as seenfrom the statements given in the paper book even the completeaddresses were not furnished and as there is no one-to-oneexplanation with reference to the money receipts and cashdeposits in the bank accounts, we are of the view that theCIT(A) has accepted the explanation given by the assesseewithout subjecting them to thorough verification. Even theAssessing Officer’s remand report also indicates that theassessee has not furnished the sources of deposits nor details ofthe source of deposits with any documentary proof. In view ofthis we are of the view that the CIT(A) has erred in acceptingthe explanation of the assessee without any supportingevidence or documents and on this matter, in the interest ofjustice, we restore the matter back to the Assessing Officer toexamine the issue afresh. The assessee is directed to furnish thenecessary evidences to prove the genuineness of cash credit tothe satisfaction of the Assessing Officer. Order of the CIT(A) isset aside and the matter is restored to the Assessing Officer forfresh consideration.” 27.Careful reading of the order passed by the Tribunal, as extractedabove, would go to show that the initial assessment order dated26.03.2002 passed by the assessing officer has not attained finality. Nodoubt the order of the first appellate authority interfering with the orderof assessment has been set aside, but the matter has been remanded backto the assessing officer for fresh consideration. It is open to such furtherorder that the assessing officer may pass on the matter being restoredback to him and after hearing the respondent / assessee, who has theliberty to make fresh submissions before the assessing officer. 27.Careful reading of the order passed by the Tribunal, as extractedabove, would go to show that the initial assessment order dated26.03.2002 passed by the assessing officer has not attained finality. Nodoubt the order of the first appellate authority interfering with the orderof assessment has been set aside, but the matter has been remanded backto the assessing officer for fresh consideration. It is open to such furtherorder that the assessing officer may pass on the matter being restoredback to him and after hearing the respondent / assessee, who has theliberty to make fresh submissions before the assessing officer. 28.We have carefully perused the miscellaneous application filed bythe respondent / assessee before the Tribunal for recall of its order dated30.04.2008. On minute scrutiny, we find that there was no reference toany provision of law under which it was filed. Be that as it may, we treatit to be an application under Section 254(2) of the Act and not anapplication under Rule 24 of the Income Tax (Appellate Tribunal) Rules,1963 since admittedly the order dated 30.04.2008 was not an ex-parteone. 28.1. That apart, we find that though the respondent / assessee hasreferred to the order passed by the first appellate authority as well as bythe Tribunal in the block assessment, there is no specific averment thatthe said orders were brought to the notice of the Tribunal or arguedbefore the Tribunal and that the Tribunal did not consider such argumentof the respondent / assessee. All that is stated in the application is thatthe Tribunal did not refer to the order of its Co-ordinate Bench regardingthe block assessment. 28.2. Moreover, we find that in paragraph 13 of the application,respondent / assessee had merely stated that a mistake had crept in theorder of the Tribunal for not considering its own order passed by the Co-ordinate Bench. It was not the case of the respondent - assessee that itwas a mistake apparent from the record which was required to berectified. As discussed above, all mistakes cannot be rectified underSection 254(2) of the Act. Only a mistake which is apparent from therecord can be rectified under the said provision. 29.We may now refer to the impugned order dated 05.01.2009 passedby the Tribunal, relevant portion of which is extracted hereunder: 4.We have heard both the counsel of assessee and Revenueand considered the issue. It is true that the findings of theCoordinate Bench decision were not specifically discussed in the order. However, it is observed that the assessee’s blockassessment was upto 16[th] June 1998 whereas the assessmentinvolved is up to 31.03.1999 i.e., beyond the block period. Itmay be true that some of the findings given in the blockassessment may be applicable to the facts in this case.However, the Bench was considering the order of the CIT (A)vis-a-vis the remand report and specifically enquired about thedetails stated in para 7, 8 & 9 of the order. Even though we areof the opinion that the decision was given correctly on the setof facts before considering the issue, since the CoordinateBench decision was not mentioned or discussed in the order, inthe interest of justice we are of the opinion that the order can berecalled and appeal may be restored so as to give a freshopportunity to the assessee to explain the facts in detail.Miscellaneous Application is allowed and the Registry isdirected to fix the appeals for hearing in the regular course.” 30.From the above, it is evident that even according to the Tribunal,the decision given by it in the appeal was correct but because the Co-ordinate Bench decision was not mentioned or discussed, the entire orderwas recalled and the appeal was directed to be heard afresh. When on theone hand the Tribunal says that its decision was correct, we fail tounderstand why and how the Tribunal had recalled the said correct order.Firstly, if the order was correct, there was no reason or necessity forrecalling such correct order. Secondly, we find that the Tribunal hadcome to the conclusion that non-consideration of the Co-ordinate Benchdecision was a mistake apparent from the record. As already pointed outabove, there was no averment in the miscellaneous application by therespondent / assessee that it had pointed out or argued the Co-ordinateBench decision relating to the block assessment during hearing of theappeal and that the Tribunal did not consider the same. Thirdly, we areof the view that having regard to the order passed by the Tribunal in thequantum appeal, no prejudice has been caused to the respondent /assessee. All that the Tribunal had done was to restore the matter to thefile of the assessing officer for a fresh decision in accordance with law inwhich the respondent / assessee would have ample opportunity to placeall the materials at its command before the assessing officer forconsideration. 31.In the light of the discussions made above, we are of the view thatthe Tribunal was not justified in passing the impugned order dated05.01.2009. Accordingly, the said order is hereby set aside and quashed.Rule is made absolute. 32.Writ petition is disposed of. No costs. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.) Minal Parab