Case Law Details
By Section 254(4) of the IT Act, an order which has been passed by the Tribunal reaches finality the moment the same is passed: it cannot be touched thereafter. By section 254(2) of the act, the Tribunal, however, has been authorized to rectify mistakes in its orders, which are apparent on the face of the records. The expression “mistake apparent on the record” means a mistake either clerical or grammatical or arithmetical or of like nature, which can be detected without there being any necessity to re-argue the matter or to reappraise the facts as appearing from the records.
1. The assessee has filed this M.A. seeking rectification of mistake crept into the order of the Tribunal passed in ITA No. 839/Hyd/2016 dated 24/08/2016.
2. In the M.A., the assessee stated as follows:
1. The Hon’ble ITAT vide its order cited above, at Para 12.1 sustained the addition made in the sum of Rs.15,79,809/- being transfer of machinery by the Individual to his HUF appellant, allegedly assessable under section 56 (2) of the Act.
2. The Hon’ble ITAT adumbrated the arguments placed on behalf of the appellant, tracing the history of the legislations seeking to tax transfers between non-relatives under section 56(2)(vii) and verbatim reproduced, inter-alia, the most salient proviso to the said section at page 6, Para 5 as under:-
Provided further that this clause shall not apply to sum of money or any Property received- (emphasis mine)
(a) From any relative,
3. The Hon’ble ITAT at page 5, Para 10.1 concluded the arguments made on behalf of the appellant as under –
In any event, the transaction is exempt as transfer to a “relative” as the HUF received the same from a member thereof (Individual).
However, the Hon’ble ITAT vide Para 12.1 of its order attempted to interpret the narrow compass of the definition of “property” under explanation to section 56(2)(vii) pro-tanto being aligned with definition of “capital assets” u/s 2(14) and held that in the absence of specific clause stating that “Machinery” being included as part of the definition, the transfer of machinery to the assessee by the individual is to be taxed u/s 56(2)(vii) of the Act.
The conclusion arrived at aforesaid is based on misunderstanding the purport of the arguments placed for canvassing the case of the appellant, without understanding the larger picture in the grounds of appeal canvassed vide ground No.3, that the transfer between assessee and the Individual are per-se exempt by virtue of the definition of “relative” under sub-clause (ii) of clause (e) of explanation to section 56(2)(vii) and that the transfer by an Individual to an HUF, being a member thereunder is covered by that section itself.
Moreover, the Hon’ble ITAT having reproduced verbatim the clause which excludes transfer between relatives at page 6 Para 5, failed to take into consideration the legal effect of the said clause (a) while sustaining the additions on account of receipt of machinery by the assessee from the ‘Individual’ status.
4. The Hon’ble ITAT also failed to consider the argument raised by the appellant that, despite the misunderstanding of the provisions of section 56(2) by the CIT (A), relating to movable V s immovable properties, the transaction is still exempt under section 56(2)(vii), as it was still not assessable by virtue of transactions between relatives (Please see Para 10.1 at last 3 lines of IT AT order beginning with the words “In any event.. “).
5. In addition the Hon ‘ble IT AT omitted to adumbrate on the argument advanced by the appellant, that in the absence of the term “machinery” under the definition of property, there is no mandate to tax the same in terms of section 56 (2) (vii) – (please see Para 10.1, line nos. 5 to 10).
6. The Hon’ble ITAT has omitted to consider and give a finding in respect of Ground no 3 raised in the appeal as under:
The ld. CIT(A) failed to construe the term relative in explanation to section 56(vii)(c) under sub-clause (ii) to explanation (e) thereunder which states that the member of a HUF is a relative to whom, gifts made are exempt.
7. In view of the above, there is a patent mistake in the order of the Hon’ble IT AT with regard to sustaining the addition on account of transfer of machinery to the appellant by the Individual, since the applicability of section 56 (2) (vii) in itself is an error by virtue of the nature of transfer inter-se between related persons.
8. The Hon’ble ITAT may kindly recall its order in ITA No.839/Hyd/2015 to be argue de-novo on the issues raised in the appeal but not considered in proper perspective by the Hon’ble ITAT.
3. Referring to the above factual background, the ld. AR requested the Bench to recall the said order to argue de-novo on the issues raised in the appeal but not considered in proper perspective by the Hon’ble ITAT.
4. The Ld. DR, on the other hand submitted that there is no need to recall the order passed by the ITAT.
5. Considered the rival submissions and perused the material facts on record. Considering the submissions of the ld. AR, we are of the opinion that it leads to review of our order, which is not permitted u/s 254(2) of the Act. We have already considered the issue on merits and adjudicated. There is no mistake apparent on the record. The Hon’ble Calcutta High Court in the case of CIT Vs. Suman Tea and Plywood Industries (P) Ltd., 226 ITR 34 held that “by section 254(4) of the IT Act, an order which has been passed by the Tribunal reaches finality the moment the same is passed: it cannot be touched thereafter. By section 254(2) of the act, the Tribunal, however, has been authorized to rectify mistakes in its orders, which are apparent on the face of the records. The expression “mistake apparent on the record” means a mistake either clerical or grammatical or arithmetical or of like nature, which can be detected without there being any necessity to re-argue the matter or to reappraise the facts as appearing from the records.”
5.1 From the above decision, it is clear that section 254(2) cannot be applied to seek review of the ITAT order. Once it is pronounced, it becomes final and can rectify only the mistakes apparent on the record. Hence, the M.A. filed by the assessee is dismissed.
6. In the result, M.A. filed by the assessee is dismissed.
