Brief of the Case
ITAT Mumbai held In the case of Shakti Cable Industries vs. ITO that it is clear that the words mistake apparent from record, as appearing in the section 254(2) has a special meaning and definite connotation. A patent, manifest and self-evident error which does not require elaborate discussion of evidence or arguments to establish it, can be said to be an error apparent on the face of the record and only such a mistake can be corrected while applying provisions of section 254(2). It is also a settled legal proposition that the scope of the said section is very limited and circumscribed. Besides, provisions of section 254(2) do not confer power on the Tribunal to review its earlier order or re-appreciate or re-evaluate evidence. In the given case, mistakes pointed out by the assessee are neither patent nor manifest nor self-evident and they require elaborate discussion of evidence or arguments to establish, hence not permissible u/s 254(2).
Facts of the Case
During the second round of litigation before the Tribunal, the matter was not represented by earlier ld counsel of the assessee who had appeared before it for arguing the Stay application as well as the regular appeal. It has been argued, by the present AR, that concession given by the earlier AR, with regard to re-opening of the assessment, were not binding on the assessee. She made other arguments and the Tribunal decided the appeal on 15.06.2012.
In these miscellaneous Applications, the assessee has contended that the order of the Tribunal, dated 15.06.2012, contained certain mistakes apparent from the record that same have to be rectified, as per the provisions of the section 254(2). The assessee had filed a writ petition before the high Court in which the Court vide its order, dated 8.2.2013 directed the assessee to avail alternate appellate remedy u/s. 260A. The assessee had filed an appeal before the high court and while hearing the appeal the court had passed an order on 19.8.2015 expressing an opinion that it would be appropriate for the assessee to prefer a miscellaneous application before the Tribunal.
History of the case
Assessee firm is engaged in the business of manufacturing electric wires. It filed the return of income on 31.10.1994, declaring total income of Rs.17,361/-.A revised return was filed on 25.11.1994, declaring loss of Rs.1,87,253/-.The original assessment was completed on 09.12. 1996 u/s 143(3) computing the total loss at Rs.1.87 lacs. The AO reopened the assessment invoking the provisions of section 147.In response to the notice issued u/s. 148; the assessee stated that return filed earlier might be treated as fresh return.
The AO mentioned that while finalizing the assessment of the year 1997-98, the assessee did not file loan confirmation in respect of unsecured loans for that AY., that the amount in question was added to the total income of the assessee as unexplained cash credits u/s.68, that the assessee had taken unsecured loan from similar parties for the year under consideration, the assessment was re-opened by issue of notice u/s. 148, that the assessee did not furnish any confirmation, that it only filed a statement of loans and interest, that it had raised loans of Rs.68.18 lacs during the year, that he had no alternative but to treat the amount of unsecured loan raised during the AY under consideration as unexplained capital, that the assessee had paid interest of Rs.13.08 lacs during the year, He completed the assessment, on 26.03.2002 u/s.143(3) r.w.s.147 of the Act, determining its income at Rs.79.38 lacs after making addition of Rs.81,26,031/-(Rs.68.18 lacs +Rs. 13.08 lacs) on account of unsecured loans and interest. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA).Before him, the assessee challenged the reassessment proceedings initiated u/s.147 for the AY. under appeal. While deciding the appeal, on 11.6. 2002, the FAA observed that the assessee had not filed loan confirmations in any of the above mentioned three AY.s, that the names of the creditors were appearing on Schedule E of the balance sheet, that their addresses and confirmations were never filed, that it had not filed any confirmation even during the regular assessment proceedings for the AY.1999-2000,that there was no illegality in issuance of notice u/s. 148.
The assessee filed an application, before the Tribunal, for stay of demand (SA.No.273/M/ 2005,dated 23.8.2005).Sh. Arvind Shonde,AR ,appeared on behalf the assessee. The Tribunal did not grant stay, but the matter was taken up for hearing under the category of ‘Early Hearing Case’.
In the regular appeal, while challenging the order of the FAA of 11.6.2002, before the Tribunal, the assessee raised nine grounds. Out of the nine grounds, first two grounds were about re-opening of assessment by issue of notice u/s.148 of the Act. The then AR Sh. Shonde did not press the grounds related with re-opening. The Tribunal, in its order dated 29.9. 2005, held that before the lower authorities, the assessee could not file the evidence due to reason stated in the application of the assessee. On perusal of the confirmation letters, we find some force in the contention of the assessee as we, therefore, set aside the order of the CIT(A) with regard to the additions made under section 68 of the I.T. Act and restore it to the file of the Assessing Officer for its re-adjudication in the light of confirmation letters filed before us by the assessee, after admitting it to be an additional evidence. On the matter of reopening of assessment, as the ld counsel of the assessee had not opted to press the grounds, this grounds decided against the assessee.
While completing the assessment u/s.143 (3) r.w.s. 254, in pursuance of the above order of the Tribunal, the AO held that the assessee had failed to produce the loan confirmation letters with regard to Rs.65.33 lacs. So, he made the addition of the said amount to the income of the assessee. Against the said order of the AO, the assessee filed following grounds of appeal before the FAA. After considering the remand reports and the submissions of the assessee, the FAA held that the assessee was given a period of almost one year to produce the documentary evidences and to prove the genuineness of loans, that time was allowed after admitting additional evidences, that in pursuance of the direction of the Tribunal the AO had given number of opportunities to the assessee to produce the confirmation along with the copies of bank statement and copies of income tax return, but assessee not provided the same. He further held that the assessee had failed to discharge the prime responsibility to establish the identity and credit worthiness of the creditors and genuineness of the transactions, that merely filing of an affidavit of a broker with the names of the lenders could not be called a confirmation. Finally, he held that in the remand report the AO had admitted that assessee had proved genuineness of the loans to the tune of Rs.2.85 lacs, that interest paid to 8 parties amounting to Rs.24,450/- had to be allowed, therefore, he upheld the addition of Rs.12.83 lacs out of Rs.13.08 lacs ( 13,08,010 – 24,450).
During the second round of litigation before the Tribunal, the matter was not represented by Sh. Shonde who had appeared before it for arguing the Stay application as well as the regular appeal. It has been argued, by the present AR, that concession given by the earlier AR, with regard to re-opening of the assessment, were not binding on the assessee. She made other arguments and the Tribunal decided the appeal on 15.06.2012.
Held by ITAT
In our opinion, the scope of section 254 (2) is very limited and specific. It is said that if a mistake is so glaring that on the face of it same cannot be allowed to continue, then only the provisions of section 254(2) can be invoked. The foundation for exercising the jurisdiction is ‘with a view to rectify any mistake apparent on the record’ and the object is to be achieved by ‘amending any order passed by it’. In other words the Tribunal can amend its order, but it cannot ‘review’ its own order while dealing with the miscellaneous application. The section is limited to mistake apparent from record like arithmetical errors, typographical mistakes, non-adjudication of ground of appeal or non-consideration of a judgment of Hon’ble Supreme Court or jurisdictional High Court having direct bearing on the case.
In case Geofin Investment (P.)Ltd.(348 ITR 118), the Tribunal, in its order, had referred to the controversy in question relating to disallowance made on account of short-term capital loss and long-term capital loss and after examining the matter in detail and had allowed the appeal filed by the Revenue. The assessee filed an application under section 254(2) and same was dismissed by the Tribunal. The Hon’ble Karnataka High Court had also an occasion to deal with the same subject in the matter of Mcdowell and Company Ltd. (310 ITR 215). In that case Tribunal had decided the appeal of the assessee after considering the rival submissions. Later on, an application was moved by it u/s.254 for rectifying the mistake. The Tribunal allowed the MA filed by the assessee and granted it relief. Reversing the order of the Tribunal, the Hon’ble court held that “Application of the principles laid down by the superior courts to the facts of the case before the Tribunal on erroneous understanding of such principles, recording of an erroneous finding by it based on the facts on record, arriving at a conclusion on erroneous application of provisions of law to the facts of the case, etc. cannot be held to be “a mistake apparent from the record” warranting any rectification by the Tribunal in exercise of its power under section 254(2).”
We would also like to refer to the decision of Hon’ble Delhi High Court delivered in the matter of Smt. Baljeet Jolly (250 ITR113). In that matter, in the application filed u/s.254 (2), the assessee contended that the Tribunal’s conclusion was not in accordance with the facts on record. The Tribunal, after considering her stand came to the conclusion that a case for rectification under section 254(2) was not made out. Deciding the matter, the Hon’ble Court held that where an error was far from self evident, it ceased to be an apparent error that the so called inaccuracies or wrong recording of facts as alleged were not patent mistakes which constituted the sine qua non for exercise of power u/s.254 (2).
From the above discussion, it is clear that the words mistake apparent from record, as appearing in the section 254(2) has a special meaning and definite connotation. A patent, manifest and self-evident error which does not require elaborate discussion of evidence or arguments to establish it, can be said to be an error apparent on the face of the record and only such a mistake can be corrected while applying provisions of section 254(2). It is also a settled legal proposition that the scope of the said section is very limited and circumscribed. For exercising jurisdiction under the section, if the applicant has to advance long arguments, it will not fall under the category of apparent mistake. Besides, provisions of section 254(2) do not confer power on the Tribunal to review its earlier order or re-appreciate or re-evaluate evidence.
The Hon’ble Calcutta High Court in the matter of Shew Paper Exchange (93 ITR 186) has held that the normal rule is that the remedy of review is a creature of a statute and if the statute does not contain powers for review, then the power cannot be exercised. Review proceedings of this kind are those where a party as of right can apply for reconsideration of the matter already decided upon after a fresh hearing on the merits of the controversy between the parties. Such a remedy must be provided by the statute. The inherent power to rectify a wrong committed by itself, by a court or a Tribunal, is not, really speaking, a power to review. The two powers operate in different fields and are different in essential quality or nature. In short, the scope of section 254(2) is very limited and specific. In our humble opinion, there are no mistakes in the order dtd. 15.06.2012 of the Tribunal that could be rectified u/s. 254(2).
Accordingly, miscellaneous application filed by assessee dismissed.