Commissioner Of Income Tax Andanother v. Apex Metchem (P) Ltd. Andothers

// 1 // IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR ORDERIND.B. Civil Special Appeal (Writ) No.552/2011InS.B. Civil Writ petition No.5081/2008 Commissioner of Income Tax andAnother Vs. Apex Metchem (P) Ltd. andOthers Date of Order ::: 11.12.2012 Present Hon'ble Mr. Justice Mohammad RafiqHon'ble Dr. Justice Mrs. Meena V. Gomber Shri J.K. Singhi, Senior Advocate, withShri Anuroop Singhi,Shri O.P. Pareek andShri Ramit Pareek, counsel for petitionerShri Atul Saxena forShri Sanjay Jhanwar, counsel for respondents#### //Reportable// By the Court:- This appeal is directed against judgment oflearned Single Judge dated 08.05.2009 by which writpetition filed by respondent Apex Metchem (P) Limited(hereinafter shall be referred to as 'the respondentassessee') against order of Income Tax AppellateTribunal, Jaipur Bench, Jaipur (for short, 'ITAT,Jaipur')dated31.03.2008passedinMisc.Appl.8/JP/2008 in exercise of powers under Section 254(2) of the Income Tax Act, 1961 (for short, 'the Act of1961') was allowed and consequential order dated20.08.2008 of President ITAT for transferring appeals(ITSSA No.105/JP/04 and 35/JP/05) to Mumbai Bench, wasquashed and set aside. The ITAT vide its order dated31.03.2008 had recalled its earlier order dated29.03.2006 and further directed both the appeals to be // 2 // heard by ITAT Mumbai Bench, Mumbai, in terms of orderdated 04.04.2005 of the President ITAT, Mumbai. TheITAT suo motu issued a notice under Section 254(2) ofthe Act vide order dated 15.12.2007 to the respondentassessee for rectification on the premise thatrespondent assessee while questioning the substantiveassessment under Section 158 BD of the Act filed bythem at Jaipur Bench did not disclose this materialinformation to the Bench that in between on theirapplication for consolidation of appeals for hearing,the President of ITAT allowed the consolidation ofappeals with those filed by Mayur M. Thakkarquestioning protective assessment under Section 158 BCagainst them at Mumbai Bench to be heard at MumbaiBench. The Tribunal held that the order of thePresident of ITAT for consolidation of appeals forhearing at Mumbai Bench has remained to be gone throughby Jaipur Bench of the Tribunal while proceeding forhearing of the appeals by Jaipur Bench, which hasresulted into a mistake apparent from the record asotherwise, appeals pending at Jaipur Bench could nothave been heard and decided by Jaipur Bench. Perusal of impugned judgment of Single Benchreveals that the learned Single Judge has allowed thewrit petition on the premise that the order of thePresident dated 04.04.2005 passed under Rule 4 of theIncome Tax Appellate Tribunal Rules, 1963 sought toconsolidate the appeal filed by the respondent assesseewith an application for intervention against order ofCommissioner of Income-Tax (Appeals), Mumbai, dated30.04.2003 with appeal of Mayur M. Thakkar against same // 3 // order. There was no direction for consolidation of anyof those appeals with that of the appeal filed byrespondent assessee at Jaipur Bench of the ITAT againstorder of the CIT (Appeals) III, Jaipur, dated14.12.2004. It was therefore held that there was nomistake apparent from the record. Perusal of impugned judgment of Single Benchreveals that the learned Single Judge has allowed thewrit petition on the premise that the order of thePresident dated 04.04.2005 passed under Rule 4 of theIncome Tax Appellate Tribunal Rules, 1963 sought toconsolidate the appeal filed by the respondent assesseewith an application for intervention against order ofCommissioner of Income-Tax (Appeals), Mumbai, dated30.04.2003 with appeal of Mayur M. Thakkar against same // 3 // order. There was no direction for consolidation of anyof those appeals with that of the appeal filed byrespondent assessee at Jaipur Bench of the ITAT againstorder of the CIT (Appeals) III, Jaipur, dated14.12.2004. It was therefore held that there was nomistake apparent from the record. Shri Anuroop Singhi, learned counsel forappellants, has argued that the writ petition was notmaintainable for questioning validity of the orderpassed by the ITAT under Section 254(2) of the Act,which inter-alia provides that the Tribunal may, at anytime within four years from the date of the order, witha view to rectifying any mistake apparent from therecord, amend any order passed by it under sub-section(1), and shall make such amendment if the mistake isbrought to its notice by the assessee or the assessingofficer. It is settled law that in making therectification, the ITAT can completely recall itsorder. Reliance in this behalf is made to judgment ofMadras High court in Lakshmi Vilas Bank Limited Vs.–Income Tax Appellate Tribunal and Others (2010) 329ITR 564 (Mad). It was argued that appeal is provided to HighCourt under Section 260A of the Act against the orderpassed under the said Act. Since the appeal was notfiled, the writ petition was not maintainable. Insupport of this argument, learned counsel has relied onjudgment of Karnataka High Court inDeputy Commissionerof Income Tax Vs. H.V. Shantharam– (2003) 179 ITR(Kar) 156. Shri Anuroop Singhi, learned counsel for // 4 // appellant, relying on judgmnet of Karnataka High Courtin L. Sohanraj and Others Vs. Deputy Commissioner of-–Incometax and Another (2003) 260 ITR (Karn.) 147,argued that only appeal would be maintainable agaisntorder of Income-tax Appellate Tribunal refusingrectification of mistakes apparent on the face of therecord and that too on a substantial questin of law. Tothe same effect, reliance has been placed on Judgmentof Madras High Court inLakshmi Vilas Bank Limited Vs.-–Incometax Appelalte Tribunal and Others (2010) 329ITR 564 (Mad). Learned counsel also cited judgmnet ofMadras High Court inDr. S. Panneerselvam Vs.-–Assistant Commissioner of Incoemtax and Another(2009) 319 ITR 135 (Mad) on the proposition of lawthat an order passed under Section 254(2) of theIncome-tax Act, 1961 either allowing amendment orrefusing to amend gets merged with the original orderpassed and thereafter the same continues to be an orderunder Section 254(1) of the Act of 1961. Successiveapplications for rectification of original order cannotbe maintained. To the same effect, learned counsel hasrelied on judgmnet of Karnataka High Court in DeputyCommissioner of Income-tax Vs. H.V. Shantharam-(2003) 260 ITR (Karn.) 156and Division Bench judgmentof Karnataka High Court inL. Sohanraj and Others Vs.--Deputy Commissioner of Incometax and Another (2003)260 ITR (Karn.) 155. On merits, learned counsel has argued that factabout consolidation of appeals ordered by President ofthe ITAT in order dated 04.04.2005 was fully known tothe respondent assessee. In order to take undue On merits, learned counsel has argued that factabout consolidation of appeals ordered by President ofthe ITAT in order dated 04.04.2005 was fully known tothe respondent assessee. In order to take undue advantage of the situation, the respondent assessee didnot disclose this fact to the ITAT. The Director ofM/s. Apex Metchem (P) Limited, Jaipur, himself madeapplication to the Vice President, ITAT, Mumbai, forconsolidation of their appeal with Application ITSAANo.553/M/2003, which was filed by Mayur M. Thakkar.Having procured favourable order from the ITAT, JaipurBench, by making this concealment, the respondentassessee later on withdrew the appeal filed before theMumbai Bench of the ITAT by submitting applicationdated 13.08.2007. Had this fact been brought to thenotice of Jaipur Bench, then possibly the appeals filedby the respondent assessee would have been transferredto Mumbai Bench of ITAT to be heard along-with othertwo appeals or would have been kept pending to awaitdecision of the Mumbai Bench. The learned Single Judgehas failed to appreciate this aspect of the matter,therefore this appeal be allowed and writ petition bedismissed. Per contra, Shri Atul Saxena, learned counselfor the respondent assessee opposed the appeal andsubmitted that the appeal was preferred by respondentassessee at Jaipur against the order of CIT (Appeals)Jaipur dated 14.12.2004 thereby questioning tentativeassessment order dated 23.07.2004 under Section 158BD,being Appeals No.105/JP/2004 and 25/JP/2005. Whereasthe appeal was preferred by Shri Mayur M. Thakkarquestioning the protective assessment under Section 158BC against them at Mumbai Bench against order of CIT(Appeals) Mumbai dated 30.06.2003, whereby originalassessment order dated 31.03.2001 was upheld. The // 6 // respondent herein submitted an application forintervention and also an appeal against aforesaid orderdated 30.06.2003 feeling aggrieved by certainobservations/findings recorded therein against them.Their this appeal at Mumbai was registered as AppealNo.97/Uai/04. Application dated 28.11.2004 was made forconsolidation of this appeal with appeal of M/s. ApexMetchem (P) Limited because they were both directedagainst common order of CIT (Appeals) Mumbai, dated30.04.2003. This fact is proved from the order of thePresident, ITAT, Mumbai, dated 04.04.2005, which is onrecord. On the question of maintainability, learnedcounsel for respondent assessee argued that appeal isprovided under Section 260A against an order passed inappeal and order of rectification under Section 254(2)cannot be held to be passed in appeal, rather suchorder is passed in rectification proceedings. Insupport of this argument, learned counsel has relied onthe Division Bench judgment of Bombay High Court inChem Amit Vs. ACIT– (2005) 272 ITR 397 (Bom),judgment of Calcutta High Court inShaw Wallance & Com.–Ltd. Vs. ITAT & Others (1999) 240 ITR 279 (Cal.),Division Bench judgment of Orissa High Court inCIT Vs.–ITAT & Others (1992) 196 ITR 683, judgment of MadrasHigh Court inVisvas Promoters (P) Limited Vs. ITAT &–Others (2010) 323 ITR 114 (Madras), Division Benchjudgment of Andhra Pradesh High Court inCIT & Others–Vs. ITAT & Others (1994) 118 CTR (AP) 187, judgmentof this court in Madhav Marbles & Granites Vs. ITAT–and Others (2012) 246 CTR (Raj.) 243, Full Bench // 7 // judgment of Karnataka High Court in The Commissioner––Bubli Darwad Municipal Corp Vs. Shrishail & Others AIR 2004 Karnataka 75 and Constitution Bench judgmentof the Supreme Court in M/s Ganpat Rai Hiralal and–Another Vs. The Agarwal Chambers of Commerce Limited AIR 1952 SC 409. // 7 // judgment of Karnataka High Court in The Commissioner––Bubli Darwad Municipal Corp Vs. Shrishail & Others AIR 2004 Karnataka 75 and Constitution Bench judgmentof the Supreme Court in M/s Ganpat Rai Hiralal and–Another Vs. The Agarwal Chambers of Commerce Limited AIR 1952 SC 409. Learned counsel for respondent assessee arguedthat the ITAT in any case could not have recalled theentire order in the scope of rectification proceedingsas it amounted to review and recall of the judgment.Section 254(2) of the Act does not empower the ITAT toreview and recall its own order under the garb ofrectification. In support of this argument, learnedcounsel has relied on the judgment of this court inIncome Tax Officer Vs. Income Tax Appellate Tribunal–and Others (1987) 168 ITR 809 (Raj.)and DivisionBench judgment of Gujarat High Court inCommissioner of–Income Tax Vs. Prahlad Rai Todi (2001) 251 ITR 833(Gau.). Learned counsel argued that the ITAT hasjurisdiction to rectify the mistake apparent from therecord. Scope of Section 254(2) is restricted torectification of mistake. Recalling the entire orderwould tantamount to passing a fresh order, which is notthe legislative intent. Reliance in this behalf hasbeen placed on the Division Bench judgment of OrissaHigh Court inCommissioner of Income Tax & Another Vs.–Income Tax Appellate Tribunal & Another (1992) 196ITR 640 (Ori.) and Division Bench judgment of the DelhiHigh Court in Commissioner of Income Tax Vs. Income–Tax Appellate Tribunal & Others (2007) 293 ITR 118(Del.). To the same effect, learned counsel has also // 8 // relied on judgment of Calcutta High Court inNiranjan &Co. Ltd. Vs. ITAT– (1980) 122 ITR 519 (Cal.),Division Bench judgment of the Delhi High Court inCommissioner of Income Tax Vs. Vichtra Construction-(P) Ltd. (2004) 269 ITR 371, judgment of Delhi HighCourt in Ms. Deeksha Suri & Others Vs. Income TaxAppellate Tribunal– (1998) 232 ITR 395 (Del.)andjudgment of Patna High Court inIncome Tax officer Vs.–Income Tax Appellate Tribunal & Another (1998) 229ITR 651 (Pat.). It is therefore prayed that the appealbe dismissed. We have given our anxious consideration torival submissions and perused the material on record. We shall first of all deal with the objectionas to maintainability of the writ petition urged on thepremises that since the appeal lay against the order ofrectification, the writ petition ought not to have beenentertained. Section 260A of the Act provides that anappeal shall lie to the High Court from every orderpassed in the appeal by the Appellate Tribunal, if theHigh Court is satisfied that the case involves asubstantial question of law. The appeal is thereforeprovided to the High Court against “every order passedin appeal by the Appellate Tribunal”. The order ofrectification passed by the ITAT cannot be held to bean order passed in appeal because order in appeal ispassed in the scope of sub-section (1) of Section 254of the Act, whereas rectification order is passed undersub-section (2) of Section 254. Two are distinct andseparate provisions. The other judgments relied on bythe learned counsel of different High Courts including // 9 // that of this court are from Single Benches. We are inrespectful agreement with the law on this questionenunciated by the Division Bench of the Bombay HighCourt in Para 6 of the report, which is as follows:- // 9 // that of this court are from Single Benches. We are inrespectful agreement with the law on this questionenunciated by the Division Bench of the Bombay HighCourt in Para 6 of the report, which is as follows:- “6. In Durga Engineering and Foundry Works[2000] 245 ITR 272, the Supreme Court heldthat the reference under Section 256 of theIncome-tax Act, 1961, could be made from theorder of the Appellate Tribunal passed on theapplication for rectification under Section254(2). That was so held by the Supreme Courtin the light of the language of Section 256which empowered the assessee and the Revenueto "require the Appellate Tribunal to referto the High Court any question of law arisingout of an order passed under Section 254".Section 254 comprises two sub-sections. Sub-section (1) of Section 254 provides that theAppellate Tribunal may pass such order on anappeal as it thinks fit after giving both theparties to the appeal an opportunity of beingheard. Sub-section (2) of Section 254 permitsthe Tribunal to rectify any mistake apparentfrom the record and amend any order passedunder Sub-section (1) within four years fromthe date of the order. The expressionemployed in Section 260A that provides for anappeal to the High Court is materiallydifferent from the expression used in Section256 that empowers the assessee and theRevenue to require the Appellate Tribunal torefer to the High Court any question of law.As already noticed above, in Section 256 theexpression used is, "require the AppellateTribunal to refer to the High Court anyquestion of law arising out of an orderpassed under Section 254". However, inSection 260A, the Legislature has notprovided an appeal to the High Court fromevery order passed under Section 254 but hasconfined it to the order passed in appeal bythe Appellate Tribunal. This is made clear bythe use of the expression, "an appeal shalllie to the High Court from every order passedin appeal by the Appellate Tribunal". If theLegislature intended to provide an appeal tothe High Court from the order passed by theAppellate Tribunal on the application forrectification under Section 254(2), theLegislature would not have used theexpression in Section 260A that an appealshall lie to the High Court from every orderpassed in appeal by the Appellate Tribunal,but instead used the expression as is used inSection 256 that an appeal shall lie to theHigh Court from every order passed underSection 254. The expression, "an appeal shall lie to the High Court from every order passedin appeal by the Appellate Tribunal" inSection 260A cannot be equated with theexpression, "an appeal shall lie to the HighCourt from every order passed under Section254". In Durga Engineering and Foundry Works[2000] 245 ITR 272, also the Supreme Courtobserved that "Section 256 contemplates thereference of the question of law arising outof an order passed under Section 254; that isto say, an order passed both under Section254(4) and Section 254(2)". We have alreadyhighlighted the departure of the language inSection 260A from the language occurring inSection 256.” Coming now to the question whether the Tribunal lie to the High Court from every order passedin appeal by the Appellate Tribunal" inSection 260A cannot be equated with theexpression, "an appeal shall lie to the HighCourt from every order passed under Section254". In Durga Engineering and Foundry Works[2000] 245 ITR 272, also the Supreme Courtobserved that "Section 256 contemplates thereference of the question of law arising outof an order passed under Section 254; that isto say, an order passed both under Section254(4) and Section 254(2)". We have alreadyhighlighted the departure of the language inSection 260A from the language occurring inSection 256.” Coming now to the question whether the Tribunal in the scope of Section 254(2) of the Act cancompletely recall the order in the scope ofrectification of mistake apparent from the record underSection 254(2) of the Act, learned counsel has reliedon the judgments of the High Courts in the cited casesbut those judgments should be taken to have beenimpliedly overruled by a recent judgment of the SupremeCourt inCommissioner, Income Tax, Rajkot V.Saurashtra Kutch Stock Exchange Ltd (2008) 14 SCC 171,wherein it has been held by the Supreme Court that sub-section (2) of Section 254 of the Act enacts that theTribunal may at any time within four years from thedate of the order rectify any mistake apparent from therecord suo motu. The Tribunal shall rectify suchmistake if it is brought to notice of the Tribunal bythe assessee or the Assessing Officer. Sub-section (2)thus covers two distinct situations; (i) it enables theTribunal at any time within four years from the date ofthe order to amend any order passed under sub-section(1) with a view to rectify any mistake apparent fromthe record; and (ii) it requires the Tribunal to makesuch amendment if the mistake is brought to its notice by the assessee or the Assessing Officer. In that case before the Supreme Court, certaindecision was rendered in appeal by the Income TaxAppellate Tribunal, Rajkot. Miscellaneous Applicationcame to be filed by the assessee under sub- section (2)of Section 254 of the Act stating therein that adecision of the 'Jurisdictional Court', i.e. the HighCourt of Gujarat in Hiralal Bhagwati v. Commissionerof Income Tax, (2000) 246 ITR 188, was not brought tothe notice of the Tribunal and thus there was a'mistake apparent from record'; which requiredrectification. Core issue, therefore, was whether non-consideration of a decision of Jurisdictional Court orof the Supreme Court, can be said to be a 'mistakeapparent from the record?' The High Court held that theTribunal was right in holding that such a mistake canbe said to be a “mistake apparent from the record”;which could be rectified under Section 254(2). Similarargument, as has been made before us on behalf of theassessee, was also raised before the Supreme Court thatrecalling the order in the name of rectification wouldtantamount to reviewing the order, which is notpermissible in the scope of sub-section (2) of Section254 of the Act. The argument was rejected by theSupreme Court holding that the core issue would bewhether non-consideration of the decision of thejurisdictional court i.e. the Gujarat High Court or ofthe Supreme Court, can be said to be a mistake apparenton the face of the record. It was held that both theTribunal as well as High Court were right in holdingthat such a mistake can be said to be a mistake // 12 // apparent on the face of the record, which could berectified under Section 254(2). It was held thatrectification of an order stems from the fundamentalprinciple that justice is above all. It is exercised toremove the error and to disturb the finality. It washeld that the Tribunal did not commit any error of lawor of jurisdiction exercising its power under sub-section (2) of Section 254 of the Act in rectifying themistake apparent from the record by completelyrecalling the order. // 12 // apparent on the face of the record, which could berectified under Section 254(2). It was held thatrectification of an order stems from the fundamentalprinciple that justice is above all. It is exercised toremove the error and to disturb the finality. It washeld that the Tribunal did not commit any error of lawor of jurisdiction exercising its power under sub-section (2) of Section 254 of the Act in rectifying themistake apparent from the record by completelyrecalling the order. Number of decisions to the contrary cited bythe learned counsel for the respondent assessee cannotbe said to hold good now in view of the recent judgmentof the Supreme Court. It cannot be accepted a law ofgeneral proposition that in every situation, an orderof recall would involve review and therefore would bebarred in the scope of Section 254(2) of the Act. Itwould depend on the facts situation of the given casewhether recall of an order would amount torectification of the mistake apparent on the face ofrecord or otherwise. A patent, manifest and self-evident error which does not require elaboratediscussion of evidence or argument to establish it, canbe said to be an error apparent on the face of therecord and can be corrected while exercising certiorarijurisdiction. What would be the “mistake apparent fromrecord”, was spelt out by the Supreme Court in Para 30of the report in aforementioned case of Commissioner,Income Tax, Rajkot V. Saurashtra Kutch Stock ExchangeLtd., as under:- “30. The main question, therefore, is: What is a `mistake apparent from the record'? Now, asimilar expression `error apparent on the faceof the record' came up for considerationbefore courts while exercising certiorarijurisdiction under Articles 32 and 226 of theConstitution. In T.S. Balaram v. VolkartBrothers, Bombay, (1971) 2 SCC 526, this Courtheld that “any mistake apparent from therecord” is undoubtedly not more than that ofthe High Court to entertain a writ petition onthe basis of an “error apparent on the face ofthe record”. It was, however, conceded in allleading cases that it is very difficult todefine an “error apparent on the face of therecord” precisely, scientifically and withcertainty.” Having held so, that even order of recall wouldbe permissible in a given situation in the scope ofrectification power of the Tribunal under Section 254(2) of the Act, we have to analyze whether in the factsof the present case the Tribunal was justified inrecalling the order. At this stage, we are informed bythe learned counsel for the respondent assessee thatappeal filed by his client being Appeal No.97/Jai/04,which was against order of CIT (Appeal) Bombay, dated30.04.2003, which was to be heard along-with AppealNo.35/JP/05 filed by Mayur M. Thakkar, has already beenwithdrawn by the respondent assessee. The appealNo.35/JP/05 filed by Mayur M. Thakkar has since beendecided by the ITAT Mumbai Bench on merits. Now withthe decision of those two appeals, one by way ofwithdrawal and another on merits, which was the reasonof recall of the order, we find that no purpose wouldnow be served in upholding the recall order. It wouldbe therefore needless to go into the merits of the casewhether or not recall was justified. Nevertheless, itmust be observed that reasoning given by the learnedSingle Judge is that the order of the President, ITAT, // 14 // // 14 // dated 20.08.2008 passed under Rule 4 of the Income TaxAppellate Tribunal Rules, 1963 sought to consolidatethose two appeals, namely, the appeals filed byrespondent assessee and Mayur M. Thakkar against commonorder of CIT (Appeals) dated 30.04.2003 and was not toconsolidate those appeals with the appeal filed by therespondent assessee against the order of the CIT(Appeal) Jaipur dated 14.02.2004. Therefore, the actualpremise on which the ITAT, Jaipur, recalled its earlierorder dated 29.03.2006 was not available. The orderdated 29.03.2006 has already been challenged by theRevenue in separate Appeals under Section 260A of theAct, before the court. We therefore only leave thematter at that by observing that it would be open tothe Revenue to demonstrate before this court in itsaforesaid appeal by raising all aforesaid facts whetherany undue benefit has been derived by the assesseethereby, which has resulted in escapement of tax orotherwise. With that liberty, present special appeal isdisposed of. (Dr. Meena V. Gomber) J. (Mohammad Rafiq) J.