Case Law Details

Case Name : The Income Tax Officer Vs. Sri P. Prasen Kumar (ITAT Hyderabad)
Appeal Number : M.A. No. 35/HYD/2017
Date of Judgement/Order : 22/12/2017
Related Assessment Year : 2009- 10
Courts : All ITAT (5019) ITAT Hyderabad (294)

ITO Vs. Sri P. Prasen Kumar (ITAT Hyderabad)

It was noted that the tax effect of Rs. 90,000/- and education cess of Rs. 29,700/- do not form part of income tax. Vide para 6 of the order, this Bench has considered the definition of tax and relied on Co-ordinate Bench decisions particularly in the case of DCIT Vs. Dome Bell Electronics in ITA No. 2480/Mum/2012 date 22-07-2016 to conclude that surcharge and education cess should not be included, while calculating the tax effect. Since the tax thereon was Rs. 9 Lakhs only, which is less than Rs. 10 Lakhs limit prescribed, the Bench was of the opinion that there was no merit in the Miscellaneous Application filed by the Revenue.

Even otherwise on merits, if one were to consider that surcharge is part of tax effect [in fact the entire discussion on the earlier Miscellaneous Application order date 07-12-2016 is on this issue alone], then the amount of surcharge is only Rs. 90,000/- still the tax effect is less than Rs. 10 Lakhs. As far as inclusion of education cess is concerned, the same cannot be considered as part of tax, in view of the Hon jurisdictional High Court decision in the case of Srikakollu Subba Rao & Co., Vs. Union of India & Ors. [173 ITR 708], wherein the Hon’ble jurisdictional High Court held that market cess was not a tax and that the provisions of Section 43B had no application to market cess. This principle will also apply to the education cess levied, which is specifically considered by the Hon’ble Delhi High Court in the case of Dalmia Cement (Bharat) Ltd., Vs. CIT [357 ITR 419] (Delhi), the principle of which was relied in the original order dismissing the appeal date 22-12-2015. Both on facts and on law, there is no merit in the second Miscellaneous Application preferred by the Revenue. Revenue should have gone in appeal to Hon’ble High Court, if it is aggrieved on the order u/s. 254(1) or on the first Miscellaneous Application passed u/s. 254(2). We are not sure why AO repeatedly files miscellaneous applications stated to be with approval of the CIT. We advise the Revenue to be careful in future, otherwise there will be costs attracted for this un-necessary and infructuous petitions. Since an advise is given in this order, we are not considering levy of costs in this case. Any further infructuous petitions in this case or any other case will call for levy of costs, which the officers of Revenue should keep in mind herein after.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

This is a Miscellaneous Application, preferred on another Miscellaneous Application No. 63/Hyd/2016, wherein Revenue’s Miscellaneous Application stating that the tax effect exceeds Rs. 10 Lakhs by including surcharge and education cess was not accepted, when the appeal in ITA No. 418/Hyd/2014 was dismissed on tax effect vide order date 22-12-2015.

2. Revenue has preferred an appeal in assessee’s case in ITA No. 418/Hyd/2014, which was dismissed consequent to CBDT Circular No. 21/2015 date 10-12-2015, as mandatory limit for preferring appeal of Rs. 10 Lakhs was not fulfilled in this case. Vide miscellaneous application filed by the Revenue in MA No. 63/Hyd/2016 filed on 05-10-2016 that the mandatory limit exceeds Rs. 10 Lakhs prescribed, this Bench vide the impugned order date 07-12-2016 had dismissed the Miscellaneous Application. It was noted that the tax effect of Rs. 90,000/- and education cess of Rs. 29,700/- do not form part of income tax. Vide para 6 of the order, this Bench has considered the definition of tax and relied on Co-ordinate Bench decisions particularly in the case of DCIT Vs. Dome Bell Electronics in ITA No. 2480/Mum/2012 date 22-07-2016 to conclude that surcharge and education cess should not be included, while calculating the tax effect. Since the tax thereon was Rs. 9 Lakhs only, which is less than Rs. 10 Lakhs limit prescribed, the Bench was of the opinion that there was no merit in the Miscellaneous Application filed by the Revenue.

3. On this order, the Revenue again preferred the present miscellaneous application in which there is a reference to the Hon’ble Supreme Court judgement in the case of CIT Vs. Srinivasan [83 ITR 346 (S)] to contend that surcharge and education cess should also be included while calculating the tax effect.

4. After hearing the Ld.DR and Ld.AR, we are of the opinion that the second miscellaneous application preferred by the Revenue is not maintainable. It is true that sub-section (2) of Section 254 can be invoked only in a situation, if there is a mistake in the order passed by the Tribunal under sub-section (1) of Section 254. In the impugned Miscellaneous Application filed by the Revenue, it is against the order passed on 07-12-20 16 which is an order passed u/s. 254(2) of the Act itself. Therefore, principally, application filed by the Revenue has to be rejected on this ground alone and for this purpose, reliance can be placed on the following decisions:

(i) CIT v. President, ITAT[1992] 196 ITR 838/63 Taxman 338 (Ori.) wherein it has been held that to attract applicability of section 254(2), a mistake which is sought to be rectified must be apparent from record and the same must be in any order passed under sub-section (1) of section 254. The order referred to in section 254(1) is one relating to an appeal filed either by the assessee or by the Revenue. The “appeal” referred to in the provision is one filed under section 253. Therefore, the order which can be rectified must be one which has been passed by the Tribunal in an appeal filed under section 253. An order rejecting an application for rectification under section 2 54(2) cannot be rectified under section 254(2). The same may relate to an appeal but is not an order passed by the Tribunal under sub-section (1) of section 254 and thus, it was held that subsequent application filed by the assessee was rightly rejected by the Tribunal.

(ii) In the case of Mentha & Allied products Co. (P.) Ltd v. ITAT[2000] 244 ITR 470/[2001] 116 Taxman 180 (Delhi), after referring to the provisions of section 2 54(1) and (2), it was held as under:

“7. The relevant provisions of section 254 read as under:

“254. Orders of Appellate Tribunal. – (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.

(2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer;

The aforenoted provisions of law are clear and unambiguous. A bare reading whereof leaves no doubt in our mind that the Tribunal is competent to rectify a mistake apparent from the record and amend any order which has been passed under sub-section (1). Admittedly, by the impugned order, the Tribunal has sought to rectify the order passed by it under section 256(1) of the Act and not an order passed under section 254(1). We have no hesitation in holding that the Tribunal is not clothed with an inherent power to rectify / recall an order passed under section 256(1) of the Act by taking recourse to section 2 54(2) of the Act and, therefore, the impugned order is illegal and invalid. The view taken by us finds support from a decision of this Court in CIT v. Kabir Das Investment Ltd [1995] 124 CTR (Delhi) 259: (1994) 210 ITR 898 (Delhi): TC 55R.777.”

(iii) In the case of CIT v. Aiswarya Trading Co. [2010] 192 Taxman 385 (Ker.), it was held that the Tribunal was justified in refusing to entertain an application filed by the Revenue under section 254(2) to rectify the order issued by the Tribunal in an earlier rectification application filed by the assessee, second application on the very same issue is not maintainable before the Tribunal.

(iv) In the case of Dr. S. Panneerselvam v. Asstt. CIT[2009] 319 ITR 135 (Mad.) it was held that the Tribunal having allowed first rectification petition, second petition was not maintainable; remedy by way of appeal was the only course open.

(v) In the case of Shri Padam Prakash (HUF) Vs. ITO [131 ITD 121] (Delhi) (SB), it was held that the relief which is being sought by assessee by way of impugned rectification application was not legally tenable for the reason that the Tribunal has no power to adjudicate upon consequent application filed u/s. 254(2). In view of the above discussion, we find no force in the Miscellaneous Application filed against another Miscellaneous Application by the Revenue and accordingly, the same is rejected.

5. Even otherwise on merits, if one were to consider that surcharge is part of tax effect [in fact the entire discussion on the earlier Miscellaneous Application order date 07-12-2016 is on this issue alone], then the amount of surcharge is only Rs. 90,000/- still the tax effect is less than Rs. 10 Lakhs. As far as inclusion of education cess is concerned, the same cannot be considered as part of tax, in view of the Hon jurisdictional High Court decision in the case of Srikakollu Subba Rao & Co., Vs. Union of India & Ors. [173 ITR 708], wherein the Hon’ble jurisdictional High Court held that market cess was not a tax and that the provisions of Section 43B had no application to market cess. This principle will also apply to the education cess levied, which is specifically considered by the Hon’ble Delhi High Court in the case of Dalmia Cement (Bharat) Ltd., Vs. CIT [357 ITR 419] (Delhi), the principle of which was relied in the original order dismissing the appeal date 22-12-2015. Both on facts and on law, there is no merit in the second Miscellaneous Application preferred by the Revenue. Revenue should have gone in appeal to Hon’ble High Court, if it is aggrieved on the order u/s. 254(1) or on the first Miscellaneous Application passed u/s. 254(2). We are not sure why AO repeatedly files miscellaneous applications stated to be with approval of the CIT. We advise the Revenue to be careful in future, otherwise there will be costs attracted for this un-necessary and infructuous petitions. Since an advise is given in this order, we are not considering levy of costs in this case. Any further infructuous petitions in this case or any other case will call for levy of costs, which the officers of Revenue should keep in mind herein after.

6. In the result, Miscellaneous Application is dismissed.

Order pronounced in the open court on 22nd December, 2017

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