Commissioner Of Income Tax, Jaipur-Ii, Jaipur v. M/S Jyoti Prakash Meel & Party

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 129 / 2011 COMMISSIONER OF INCOME TAX, JAIPUR-II, JAIPUR. ----Appellant Versus M/S JYOTI PRAKASH MEEL & PARTY, 82, PRITHVI RAJ ROAD, C-SCHEME, JAIPUR. ----Respondent Connected With D.B. Income Tax Appeal No. 350 / 2011 Jyoti Prakash Meel & Party 82, Prithviraj Road, C-Scheme, Jaipur Through Its Member, Surjamal Meel S/o Danaram Aged 55 Years. ----Appellant Versus Dy. Assistant Commissioner of Income Tax, Circle, 6, Jaipur. ----Respondent D.B. Income Tax Appeal No. 351 / 2011 Jyoti Prakash Meel & Party 82, Prithviraj Road, C-Scheme, Jaipur Through Its Member, Surjamal Meel S/o Late Sh. Danaram Meel Aged 55 Years. ----Appellant Versus Dy. Assistant Commissioner of Income Tax,, Circle, 6, Jaipur. ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.D. Mathur on behalf of Mr. R.B. Mathurrespondent in appeal Nos.350/11 & 351/2011 respondent in appeal Nos.350/11 & 351/2011 For Respondent(s) : Mr. Sanjay Jhanwar with Ms. Archana appellant in appeal Nos.350/2011 & 351/2011appellant in appeal Nos.350/2011 & 351/2011 _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR Per Hon’ble Jhaveri, J. 26/05/2017 Judgment 1.By way of these appeals, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasallowed the misc. application filed by the assessee. 2.This Court while admitting the appeal No.129/2011 on30.04.2012 has framed the following substantial question of law: “Whether in the facts and circumstances ofthe case the ITAT has not acted perverselyin allowing the Misc. application forrectification u/ 254(2) and recalling theorder which was passed in detail and onmerits?” 2.1This Court while admitting the appeal No.350/2011 on 30.04.2012 has framed the following substantial question of law: “(i)in view of the settled principle thatcomparison can be only between equals andshould not be with un-equals, whetherlearned tribunal was justified in estimatingthe profits of the appellant on the basis ofthe cases which were not similarly situatedin terms as assessment years as well asexcise policy? (ii) where the contracts are awarded on thebasis of open tenders and the contract isawarded to the person keeping lowest profitmargin whether the comparison of profitsshould be made on the basis of net profitearned by them or gross profit earned bythe appellant?” 2.2This Court while admitting the appeal No.351/2011 on 30.04.2012 has framed the following substantial question of law: “(i)in view of the settled principle thatcomparison can be only between equals andshould not be with un-equals, whetherlearned tribunal was justified in estimatingthe profits of the appellant on the basis ofthe cases which were not similarly situatedin terms as assessment years as well asexcise policy? (ii) where the contracts are awarded on thebasis of open tenders and the contract isawarded to the person keeping lowest profitmargin whether the comparison of profitsshould be made on the basis of net profitearned by them or gross profit earned bythe appellant?” Income Tax Appeal No.129/2011 3.Counsel for the department has contended that the issue issquarely covered by the decision of this Court in the case of TheIncome Tax Officer vs. M/s Gehna & Anr in DB Civil WritPetition No.26/2011 and other connected matter decided on10.05.2017 which reads as under: “1. In all these cases, common questionof law and facts are involved and they aredecided by the common judgment of thetribunal, therefore they are decided by thiscommon judgment. (ii) where the contracts are awarded on thebasis of open tenders and the contract isawarded to the person keeping lowest profitmargin whether the comparison of profitsshould be made on the basis of net profitearned by them or gross profit earned bythe appellant?” Income Tax Appeal No.129/2011 3.Counsel for the department has contended that the issue issquarely covered by the decision of this Court in the case of TheIncome Tax Officer vs. M/s Gehna & Anr in DB Civil WritPetition No.26/2011 and other connected matter decided on10.05.2017 which reads as under: “1. In all these cases, common questionof law and facts are involved and they aredecided by the common judgment of thetribunal, therefore they are decided by thiscommon judgment. 2.By way of writ petitions, thedepartment has challenged the judgmentand order of the Tribunal whereby MApreferred by the assessee was allowed andjudgment delivered by the tribunal wasrecalled. 3.Counsel for the petitioner hascontended that tribunal has committedserious error in allowing MA and recallingthe judgment to decide the matter afresh.Therefore, he contended that provisions ofsection 254 are required to be interpretedand only in case an error is apparent on theface of record the same should beconsidered. 4.In that view of the matter, Mr. Mehtacontended that view taken by the tribunal isrequired to be reversed and MA is liable tobe dismissed as there is no error apparenton the face of record. 5. Counsel for the respondent Mr. Jhanwarcontended that tribunal in para no.25, 26,27 & 29 has observed as under:- “25. After going through all the records ofthe appeal files and records ofMiscellaneous Application files, it is seenthat during the appellate proceedingsbefore the Tribunal at the time of hearing ofappeals of the department and assessee, adetailed written submissions were filedbefore the Tribunal in support of the orderof ld. CIT(A). Copy of the same is availablein the record. Though the submissions ofthe ld. Counsel of the assessee have beenstated in the order of the Tribunal dated31.05.2007. however it is seen that whiletaking a view against the finding of ld. CIT(A), the finding of ld. CIT(A) has not beentaken into consideration by the Tribunal asTribunal in operative paras of its order hasmentioned about the order of AO only. Theassessment in this case was completed bythe AO by rejecting the books of account inview of provisions of section 145(3) andthereafter the profit has been estimated onthe basis of past history of the case. The ld.CIT(A) decided the appeal of the assesseeand the ground against rejection of booksof account and applying the g.p. rate on thebasis of past history were allowed in favourof the assessee. While allowing the groundof the assessee, the ld. CIT(A) has given hisfindings in paras 5 to para 5.19 at pages 15to 22. The brief facts of the case andsubmissions of the assessee and objectionof AO have been considered by ld. CIT(A) atpages 2 to 15 of his order. The ld. CIT(A)has discussed the issue in detail that AOissued only notice under section 143(2) andno notice was issued under section 142(1)for calling upon the books of account.Provisions of section 142 and 143(2) havebeen discussed in detail by ld. CIT(A) andthen by placing reliance on various caselaws i.e. in case of P.S. SubramaniamChettiar vs. JCTO 18 STC 357, in case of Abdul Kayum and Co. vs. CIT 1 ITR 375, incase of Jyotram Shersing vs. CIT 2 ITR 129(All.) and in case of Gunda Subbayya vs.CIT. 7 ITR 21 (Mad.) (Full Bench) held thatAO has not followedb the proper procedurebefore invoking provisions of section 145(3)for the purpose of rejection of books ofaccount. Therefore, it was held that the AOwas not justified in rejecting the books ofaccount and making the assessment on thebasis of past history. Thereafter the Board’scircular no. 387 dated 6.7.1984 was alsotaken into consideration whereby it hasbeen guided that in wake of the fact thatthe books of account were not in existenceon the date of framing the assessment, theTAR (Tax Audit Report) assumes greaterimportance and rather becomes pivotaldocument and therefore, the tax auditreport as guided by the CBDT Circular hasto be taken into consideration. 26. Thereafter reliance has been placed onthe decision of Hon’ble Delhi High Court inthe case of Addl. CIT vs. Jay EngineeringWorks Ltd. 113 ITR 389 wherein it has beenheld that- “Where the books of account are examinedand audited under statutory provisions andaudit report is submitted thereabouts,reliance could be placed by the Income-taxAuthorities on such a report treating thesame as a material in case the books ofaccount of the assessee were destroyed byfire,etc.” The ld. CIT(A) has also taken intoconsideration that the auditors have taken anote that there was no manufacturingduring the yeard under consideration andno expenses have been claimed in the profit& Loss account on account of manufacturingof the jewellery Remand report was alsosought from the AO and thereafter only theld. CIT(A) had given a finding that rejectionof books of account was not justified.Tribunal while rejecting the appeal of theassessee has not considered the detailedreasoning and submissions of the assessee.The Tribunal has mentioned in its order thatthe AO was right, correct etc. andthereafter the observations/view of the AOin rejecting the books of account have been upheld. Neither the finding given by ld.CIT(A) that where books of accounts arerejected then for making assessmentprocedures laid down under provisions ofsection 144 has to be followed. The detailedwritten submissions were filed beforeTribunal in support of the findings of the ld.CIT(A). Reliance was placed on various caselaws i.e. ion case of EMC(Works) Pvt. Ltd.49 ITR 650 in the case of Addl. CIT vs. JayEngineering Works Ltd., 113 IR 389 and inthe case of Godavari Devi Sarraf, 113 ITR589 (Bombay). The binding circular of CBDTand the decision of the Tribunal on identicalfacts i.e. in case of ITO vs. Girish & Mehta.99 TTJ 394 and the decision in the case ofPushpanjali Dying and Printing Mills (P) Ltd.vs. JCTT, 72 TTJ(Ahd.) 886 were reliedupon. upheld. Neither the finding given by ld.CIT(A) that where books of accounts arerejected then for making assessmentprocedures laid down under provisions ofsection 144 has to be followed. The detailedwritten submissions were filed beforeTribunal in support of the findings of the ld.CIT(A). Reliance was placed on various caselaws i.e. ion case of EMC(Works) Pvt. Ltd.49 ITR 650 in the case of Addl. CIT vs. JayEngineering Works Ltd., 113 IR 389 and inthe case of Godavari Devi Sarraf, 113 ITR589 (Bombay). The binding circular of CBDTand the decision of the Tribunal on identicalfacts i.e. in case of ITO vs. Girish & Mehta.99 TTJ 394 and the decision in the case ofPushpanjali Dying and Printing Mills (P) Ltd.vs. JCTT, 72 TTJ(Ahd.) 886 were reliedupon. 27. After going through the order ofTribunal, we noticed that there is even nowhisper in respect to these decisions reliedupon by ld. Counsel of the assessee duringthe hearing of the appeal before theTribunal. The statement of Shri A.K.Khandelwal, the auditor of the assesseewas recorded by ld. CIT (A) under section131. The AO was allowed crossexamination. However, there is no whisperin the order of the Tribunal about thesefacts. The most vital facts which in ourconsidered view remained to beunconsidered is that it was specificallymentioned before Tribunal in para 5 at page9 of the written submission that the laterdevelopment has to be considered by theBench. Which is that on identical facts theassessment for assessment year 1999-2000was completed by the AO under section143(3). For this year also no books ofaccount were produced as they were alsodestroyed in fire and the declared profit at0.894% on the turnover of Rs. 15.70 croresor so was accepted. No comments havebeen given by the Tribunal in this respect.It is also a vital fact that during the yearunder consideration various parties soldtheir jewellery declared under VDIS Scheme1997 and the same was seldom traded,therefore, there was no comparison of thecases for earlier year as no such purchaseswere made in earlier year. In earlier year there was only small turnover whereas inthe year under consideration turnover ofthe assessee was increased by many folds.This aspect is also not taken intoconsideration by the Tribunal whileaccepting the grounds of the department. Itis further seen that for comparable casesand for applying g.p. rate the reliance wasplaced on the decisions i.e. in case of CITvs. Eastern Enterprises, 210 ITR 103 (Cal.)and in case of UOI vs. Chiranji Estate Pvt.Ltd. 251 ITR 7(SC) and also in the case ofR.B. Jassa Ram Fateh Sugar Department vs.CIT 75 ITR 33(Bom.) and in the case ofC.M. Franss & Co. vs. CIT 77 ITR 449(Ker.). However, there is no discussionabout these cases in the order of Tribunal.29. It means the order before the Tribunalwas order of ld. CIT(A) and not the order ofAO. As mentioned above, the Tribunal hasnot given any finding in respect to thefinding of ld. CIT(A) which was given aftertaking into consideration various case laws.The order of ld. CIT(A) may be correct andorder of the AO may be correct but whilereversing the order of ld. CIT(A), in ourconsidered view it is the duty of theTribunal to controvert the finding of theauthorities against which the appeal hasbeen filed before it. We have gone through the order of Tribunalminutely and found no where the commentsin respect to detailed finding given by ld.CIT(A). At one or two points the Tribunalhas observed that ld. CIT(A) was notcorrect in holding that provisions of section145(3) are not applicable. How the ld.CIT(A) is not correct, no finding has beengiven by the Tribunal. Regarding the g.p.rate also, the Tribunal has observed thatorder of the AO seems to be correct.However, regarding the finding of ld.CIT(A), the only observation that “the ld.CIT(A), in our considered view, was notjustified in accepting the trading resultdeclared by the assessee” How the tradingresult accepted by the ld. CIT(A) are notcorrect, no finding or discussion has beenmade by the Tribunal.” 6.In view of the above, he hasspecifically contended that on this ground the order of the tribunal is not required tobe recalled. 7.Counsel for the respondent Mr.Jhanwar has relied upon the decision ofSupreme Court in Honda Siel PowerProducts Ltd. vs. Commissioner of IncomeTax (2007) 295 ITR 466 (SC) and AssistantCommissioner,IncomeTax,RajkotVs. :Saurashtra Kutch Stock Exchange Ltd.reported in 2008 (14) SCC 171 whereinSupreme Court held as under:- “13. "Rule of precedent" is an importantaspect of legal certainty in rule of law. ThatprincipleisnotobliteratedbySection 254(2)of the Income Tax Act,1961. When prejudice results from an orderattributable to the Tribunals mistake, erroror omission, then it is the duty of theTribunal to set it right. Atonement to thewronged party by the court or Tribunal forthe wrong committed by it has nothing todo with the concept of inherent power toreview. In the present case, the Tribunalwas justified in exercising its powers underSection 254(2)when it was pointed out tothe Tribunal that the judgment of the co-ordinate Bench was placed before theTribunal when the original order came to bepassed but it had committed a mistake innot considering the material, which wasalready on record. The Tribunal hasacknowledged its mistake; it hasaccordingly rectified its order. In our view,the High Court was not justified ininterfering with the said order. We are notgoing by the doctrine or concept of inherentpower. We are Simply proceeding on thebasis that if prejudice had resulted to theparty, which prejudice is attributable to theTribunal's mistake, error or omission andwhich error is a manifest error then theTribunal would be justified in rectifying itsmistake, which had been done in thepresent case.” 8.He has relied upon the judgment ofPrincipal Set at Jodhpur in Commissioner ofIncome Tax vs. Ramesh Chand Modi (2001)249 ITR 323 (Raj.) and other decision ofthis court in Champa Lal Chopra vs. State ofRaj. (2002) 257 ITR 74 (Raj.) wherein ithas been held as under:- A reading of Sub-section (2) ofSection 254of the Act makes it clear thatits scope and ambit is limited. It restricts torectify the mistakes apparent from therecord. Thus, in the normal course, thepower of rectification cannot be extendedfor recalling the entire order, obviously itwould mean passing of a fresh order. Thatdoes not appear to be the legislative intent.However, in agiven case where the factualmistake is so apparent that it becomesnecessaryto correct the same, the Tribunalwould be justified in not only correctingthesaid mistake by way of rectification but ifthe judgment has proceeded on thebasis ofthat fact, it would be justified in recallingsuch order and posting forhearing. 8. A Division Bench of the Madhya PradeshHigh Court in CIT v. Mithalal Ashok KumarMANU/MP/0063/1984: 8. A Division Bench of the Madhya PradeshHigh Court in CIT v. Mithalal Ashok KumarMANU/MP/0063/1984: [1986]158ITR755(MP) , the Tribunal foundapparent mistake from the record in itsorder while deciding the question as towhether the firm was genuine or not,accordingly the rectification was granted.On a challenge by the Revenue, the DivisionBench held that while considering theapplication for rectification, the provisionsof Order 47, Rule 1 of the Civil ProcedureCode, can be strictly applied. The judgmentof the Madhya Pradesh High Court is basedon the decisions of the apex court in K.M.Shanmugam v. S. R. V.S. (P.) Ltd.MANU/SC/0182/1963: [1964]1SCR809 andNagendra Nath Bora v. Commissioner ofHillsDivisionMANU/SC/0101/1958 :[1958]1SCR1240 . The Division Benchconfirmed the order of the Tribunal grantingrectification, there being manifest error onthe face of the proceedings. In a recentdecision the Allahabad High Court in CITv. U.P.ShoeIndustriesMANU/UP/0517/1997: [1999]235ITR663(All) has taken the viewthat where there is apparent mistake fromthe record, the Tribunal has jurisdiction torectify the mistake by recalling the entireorder and posting for rehearing. Once the conclusion is reached that theTribunal had power to rectify mistakes onthe face of the record and that there existed mistakes on the face of the recordthat the Tribunal has not dealt with theimportant issue arising in the case whichgoes to the root of the matter, the onlyconsequential order of rectification thatcould be passed was to recall the earlierorder and make a fresh order deciding theissue which was left undecided after hearingthe parties on that issue. That undecidedissue could not have been decided in favouror against any party without hearing themin that regard. The contention of learnedcounsel that there is no power to recall andsubstitute another order as a result ofrectification because it amounts to review isnot well founded. Once a mistake on theface of the record is established what ordershould follow to correct that mistake shallalways depend on the facts andcircumstances requiring to rectify themistake. If the mistake is one whichrequires determination of some undecidedissue because it has not been decidedthough raised, the procedure that wouldfollow the discovery of such mistakes is torecall the order, and decide the case afreshor to decide that issue after affording anopportunity of hearing the partiesconcerned and pass a fresh order in thelight of finding on such issue. The orderunder Section 254(2)is not confined toarithmetical or clerical mistake, nor only tocorrect substantive mistakes but also procedural mistakes. 8. The whole contention of learned counselfor the appellant is founded on the premisethat recalling of the order for making afresh order amounts to review and notrectification. While it is true that the powerof rectification of an order is far narrowerthan the power to review gene-Tally, themethodology of rectifying the order whenmistake apparent from the record is found,may to correct a mistake in the substantiveaspect of the order as well as mistake in theprocedural aspect of making order. Recallingof an order for correcting an apparentmistake in the procedural aspect cannot beequated with review. For illustrationpurposes, if from the record it appears thatone of the parties has not at all been heardand the order has been made in breach of procedural mistakes. 8. The whole contention of learned counselfor the appellant is founded on the premisethat recalling of the order for making afresh order amounts to review and notrectification. While it is true that the powerof rectification of an order is far narrowerthan the power to review gene-Tally, themethodology of rectifying the order whenmistake apparent from the record is found,may to correct a mistake in the substantiveaspect of the order as well as mistake in theprocedural aspect of making order. Recallingof an order for correcting an apparentmistake in the procedural aspect cannot beequated with review. For illustrationpurposes, if from the record it appears thatone of the parties has not at all been heardand the order has been made in breach of the principles of natural justice going toroot of the matter. The only appropriatemethod of correcting such mistake is torecall the order and make a fresh orderafter affording an opportunity of hearing tosuch party. So also when an order is madeex parte when a party absents himself onany date of hearing, if the party showssufficient cause for his absence the courthas power to make a fresh order afterrecalling the earlier order by affording ahearing to such party. Similarly, in thepresent case, where the Tribunal fails todecide some of the questions raised beforeit inadvertently or by oversight, adopting asimilar course is the requirement ofcorrecting such mistake. In all such cases,ordinarily the court or the Tribunal acts exdebito justitiae to prevent abuse of process,even in the absence of specific provision. 9.Taking into consideration, in ourconsidered opinion, the grounds which aretaken by the tribunal as reproduced hereinabove, the view taken by the tribunal is justand proper. 10.The writ petitions deserve to bedismissed and the same are dismissed. 11.In view of the decision of two writpetitions, the three appeals 27/2008,26/2008 & 232/2011 have becomeacademic. 12.The appeals stands disposed of.” 4.In that view of the matter, the issue is answered in favour ofthe assessee and against the department. The Tribunal will hearthe matter afresh on merits in accordance with law. Income Tax Appeal Nos.350/2011 & 351/2011 5.In view of the order passed above in appeal No.129/2011,both these appeals have become of academic nature. 6.The appeals stand disposed of with liberty to the parties torevive in case of difficulty. 7.A copy of this judgment be placed in each file. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. Asheesh Kr. Yadav/82-84