KESORAM INDUSTRIES LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The appellant had submitted its return for the years 1981-82, 1982-83 which was assessed under sections 143(3)/144B. Subsequently, in respect of those two assessment years, the assessee/ appellant submitted a return under the Amnesty Scheme and offered the gratuity liability on the basis of actuarial certification for taxation. The assessments were completed under sections 143(3)/231/147 and interest was charged under sections 139(8) and 215 of the Income Tax Act, 1961. This was subjected to certain proceedings and ultimately by an order dated 17th March 1989, the CIT(A) held that no interest can be charged either under section 139(8) or under section 215 in a reassessment made under section 147. 1.1. While giving effect to this order dated 17th March. 1989 instead of waiving interest since held not chargeable under section 139(8) and under section 215 by an order dated 1st May, 1989 the Assessing Officer fully waived interest under section 139(8) for the year 1981-82 and partially for the assessment year 1982-83; and the interest under section 215 was partially waived for both the years. Subsequently, by an order dated 22nd May, 1989, in terms of order dated 17th March, 1989 of the CIT(A), the AO had held that the interest under section 139(8) for the assessment year 1981-82 was fully waived and the other interest was partially waived, therefore no further step need be taken. 1.2. Against this order an appeal was preferred, CIT(A) by its order dated 14th June, 1991 directed the assessee to file a rectification application under section 154 before the Assessing Officer. By an order dated 26th June, 1992 passed on the application for rectification so filed, the Assessing Officer held that the interest had already been waived to the extent attributable to the income disclosed in the Amnesty returns and there was no scope for further waiver. 1.3. On appeal the CIT(A) by an order dated 19th August, 1993 deleted the entire interest charged under sections 139(8) and 215 for the assessment years 1981-82 and 1982-83 in view of the earlier order dated 17th March, 1989 which had become final. On appeal by the Revenue, the Learned Tribunal by its order dated 9th April, 1989 reversed the order of the CIT(A). It may be noted that ITAT in its order had also dealt with the appeals for the years 1977-78, 1978-79 and 1979-80 but the two years 1981-82 and 1982-83 were omitted to be mentioned at the penultimate paragraph of the decision. 1.4. On 16th June, 1999, an application for rectification of the order dated 9th April, 1999 was filed in respect of the assessment years 1981- 1982 and 1982-83 with regard to the omission to mention the said two assessment years in the decision and its omission to consider the question regarding finality of the appellate order dated 17th March, 1989. By its order dated 30th March, 2000 the learned Tribunal incorporated the two assessment year 1981-82 and 1982-83 in the order dated 9th April, 1989 but rejected the contention of the assessee in respect of the other point viz. the finality of the order dated 17th March, 1989. Against this order the present appeal has since been preferred. Appellant's contention:

(2.) Mr. J.P. Khaitan, learned counsel for the appellant, submitted that the scope of rectification is confined only to the error apparent on the face of the record. It cannot stretch to the extent of review of the order sought to be rectified. According to him, the finality of the order dated 17th March 1989 was completely overlooked and omitted to be considered. The finality of the order dated 17th March 1989 was staring on the face of the Tribunal and on the strength of this finality the Tribunal could not have reopened the issue and decided the question sitting on appeal against the order dated 17th March 1989. Therefore, this is amenable to rectification under section 254(2) of the Income Tax Act, 1961. 2.1. In support of his contention, Mr. Khaitan had relied on the decision in Neeta S. Shah & Ors. v. Commissioner of Income Tax. 191 ITR 77 (Karnt) to contend that when an earlier order of the Appellate Tribunal is founded on a mistaken assumption and the error is discovered, the power of rectification under section 254(2) of the Income Tax Act, 1961 can be invoked because the very basis of the earlier order requires rectification. He also relied on a decision in Bata India Ltd. v. Deputy Commissioner of Income Tax & Ors., 217 ITR 871 to support his contention that when the breach resulting from an order is attributable to the Tribunal's mistake, error or omission, it is the bounden duty of the Tribunal to set it right. 2.2. Mr. Khaitan then relied upon a decision in CIT v. Ballabh Prasad Agarwalla, 233 ITR 354 (Calcutta) and contended that the Tribunal has no inherent power to review neither it can re-examination or give a second view but section 254(2) expressly confers power upon the Tribunal to correct any mistake apparent from the record and power to amend any order passed under sub-section (1) of section 254. Elaborating, he contended that it must be left to the Tribunal to reopen an appeal if it finds that it has omitted to deal with an important ground urged by the party. Failure to deal with a preliminary objection amounts to a mistake apparent from the record. The primary aim of legal policy following from section 254(2) is to do justice. The Parliament did not intend to do injustice or to allow a wrong thing to continue contrary to law or public policy. Therefore, it has incorporated the provision for rectification of a mistake apparent on the record. 2.3. He then relied on the decision in Union of India v. Food Specialities Ltd., 1998 (97) ELT 420 (SC) to contend that once a decision has become final and the question of the consequential order comes before the authority, the same cannot be challenged by the department since the order reaching finality is no longer open to be interfered with. Reliance was placed by Mr. Khaitan in K. Govindan And Sons v. Commissioner of Income Tax, 247 ITR 192 (SC) to contend the meaning of regular assessment defined in section 2(40) which did not include an assessment under section 147. In order to remove the anomaly Explanation 2 was added to sub-section (8) of section 139 and sub- section (6) added to section 215 clarifying that the first assessment made under section 147 is a regular assessment. In this case, the assessment under section 147 was a reassessment since the first assessment was made under sections 143(3)/144(B). Therefore, no interest was chargeable as was rightly held by the CIT(A) by its order dated 17th March 1989 against which no appeal was taken by the department and the order had become final. This is supported from the ratio decided in K.Gobindan (supra) on the basis whereof one other appeal involving similar question of chargeability of interest under section 139(8) and section 215 in respect of a reassessment in CIT v. M/s. Keshoran Industries Ltd., ITR No. 184 of 1993 was disposed of on 7th April 2004 by Hon'ble Mr. Justice M.H.S. Ansari and Hon'ble Mr. Justice Soumitra Pal holding inter alia that the said question is now concluded in view of the decision in K. Govindan (supra). 2.4. He distinguished the decision cited by Mr. Mullick and contended that this was a case fit for rectification. That the order dated 17th March 1989 has reached finality is not dependent on any long drawn argument nor any two opinions could be formed in respect of the finality of the said decision. It is only the question whether this finality was overlooked or omitted to be considered or whether while dealing with the matter the Tribunal had disturbed the finality and interfered with the matter, which has since attained finality. In case it had purported to interfere with an order attaining finality, it is definitely an error apparent on the face of the record rectifiable under section 254(2). Therefore, the appeal should be allowed. Respondent's contention:

(3.) Mr. Mullick, learned counsel for the department, on the other hand, contended drawing our attention to the respective orders and materials available before us on record that the learned Tribunal had noted the fact with regard to the order dated 17th March 1989 and its impact and had noted the contention on behalf of the assessee. After having considered the question the Tribunal had given its decision. This decision may be wrong but then it would be a wrong decision or wrong judgment, it cannot be an error apparent rectifiable under section 254(2). According to him, in order to assert that there was an error apparent on the face of the record a long drawn argument is necessary and there is scope of forming two opinions with regard thereto. 3.1. He relied on the decision in CIT v. Gokul Chand Agarwal. 202 ITR 14 (Calcutta) in support of his contention wherein it was held that it is only a mistake which can be corrected, it cannot re-evaluate the total effect of the fact found by it nor can it review its order. He also relied upon a decision in CITv. Ramesh Electric and Trading Co., 203 ITR 497 (Bombay) to contend that the Tribunal has no power to review its order. This decision has considered the decision in Laxmi Electronic Corporation Ltd. v. CIT, (1991) 188 ITR 398 wherein it was held by the Allahabad High Court that if the Tribunal fails or omits to deal with an important contention affecting the maintainability or merits of an appeal, it must be deemed to be a mistake apparent from the record which can be rectified by the Tribunal. But following the decision in the case of Balaram v. Volkart Brothers, (1971) 82 ITR 50, the Bombay High Court had taken a view that this decision (Volkart Brothers) was not brought to the notice of the Allahabad High Court. 3.2. In Volkart Brothers (supra), it was held that the application under section 254(2) can be exercised only when the mistake is obvious and a patent mistake apparent from the record and not a mistake which requires to be established by argument and long drawn process of reasoning on points on which there may conceivably be two opinions. Failure by the Tribunal to consider the argument advanced by either party for arriving at a conclusion is not an error apparent on the record although it may be an error of judgment. He then relied on a decision in Vijay Mallya v. Assistant Commissioner of Income Tax, 263 ITR 41 (Cal) to support his contention where all these decisions were considered and it was held that the mistake contemplated must be a mistake apparent on the face of the record; it must be obvious, clear and patent; it must not be a mistake to establish which a long and elaborate reasoning and argument is required on points on which there may conceivably be two opinions; it must not be a debatable point of law. Appellant's reply: