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Judgment
R.B. Misra, J.—The present appeal has been preferred u/s 260A of the Income Tax Act, 1961 (in short ''Income Tax Act'') against the judgment and order dated 6.4.2004 of the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh ( in short ''ITAT'') passed in Miscellaneous Application 91/Chandi/03 preferred in ITA No. 219/CHD/2002 pertaining to the assessment year 1997-98 thereby reviewing its earlier order.
The present appeal, in question, has been admitted for consideration on the following substantial questions of law:
(A) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in modifying its earlier order.
(B) Whether on the facts and in the circumstances of the case the findings of the Income Tax Appellate Tribunal in accepting the ''Miscellaneous Petition for rectification'' of the department are wrong and perverse.
(C) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that there is a mistake apparent from the record committed in its earlier order and thus liable for rectification.
(D) Whether on the facts and in the circumstances of the case, the action of Income Tax Appellate Tribunal amounts to review of its earlier order passed after due deliberations to the past history, legal provisions, judicial pronouncements and due application of mind, and thus impermissible under the provisions of the Income Tax Act, 1961.
(E) Whether on the facts and in the circumstances of the case, once the ITAT had granted a relief vide order passed u/s 254(1) of the Income Tax Act, 1961 to the Appellant which he was entitled as per law, was it justified in imposing unlawful taxes on Appellant by way of rectification on the technical ground that it cannot grant such relief, when there is no dispute as such to the legality, genuineness and correctness of the tax treatment to the receipts under dispute.
(F) Whether on the facts and in the circumstances of the case the order of Income Tax Appellate Tribunal was self contradictory vis-�-vis paras 11, 17 and 16 thereof, justifying the alleged review / rectification.
In order to adjudicate the above substantial questions of law, it is necessary to give brief history of the case. The Appellant is running various Resorts at various places and is offering the occupation of the various huts / flats / suites to the public on ''time sharing basis'' for different time period, against the payment of different quantum of charges, called fee, payable in lump-sum and once for all. Against such allotment of time sharing the Appellant retains the liability to provide the agreed type of accommodation and other services / facilities, as per the written agreement arrived at the time of allotment of such time sharing occupation for whole of the period of the scheme called lease period. During the period relevant to the assessment year under appeal the Appellant had received a total fee on account of sale of such time sharing periods of Rs. 1,27,81,072/- from 459 members, out of whom only 249 members had paid full amount of the time share amounting to Rs. 54,68,088/-. During the course of assessment proceedings the Assessing Officer (in short ''AO''), after referring to the assessment of another Assessee, namely, M/S. Sterling Resorts, carrying the same business like the Appellant, came to the conclusion that 45% of the total receipts were attributable to Appellant''s liability to provide stay to the members and, therefore, was attributable to the fixed assets such as building and other infrastructure which the Appellant had permanently acquired and consequently considered that 45% part of the receipts as capital receipts liable to be adjusted against the cost of such permanent assets. The Appellant agreed to this conclusion of the ''AO'' and consequently 45% of the receipts were considered as capital receipts and were adjusted against the building cost. The balance 55% was considered as revenue receipt, attributable to the Appellant''s liability for whole of the period of lease i.e. for 99 years; and, therefore, only 1/99th part of 55% of the receipts was considered as revenue receipt for the assessment year under appeal.
The order for the assessment year 1997-98 was passed on 29.2.2000 (Annexure A-2), however, the Appellant was served with a notice (Annexure A-3) dated 18.3.2002 u/s 263 of the ''Income Tax Act'' by the Commissioner of Income Tax (Central) (for short ''CIT'') who after considering the objections of the Appellant vide its order dated 28.3.2000 (Annexure A-4) set aside the assessment order, treating the whole of the receipt taxable in the year when the membership fee was received, thereby treating the verdict of ''AO'' erroneous and prejudicial to the interest of the revenue and giving direction to ''AO'' to make it de novo. Being aggrieved, Appellant preferred an appeal i.e. ITA No. 219/Chandi/2002, which too was disposed of by ''ITAT'' vide its order dated 11.3.2003 with directions and observations.
The Respondent / revenue, being aggrieved, filed an appeal before this Court, namely, ITA No. 40 of 2003 which is pending adjudication. The Respondent / CIT (Central) preferred a miscellaneous petition u/s 254(2) of ''Income Tax Act'' before ''ITAT'' for rectification of its earlier order dated 11.3.2003. The said application of Commissioner / revenue was allowed by ''ITAT'' vide impugned order dated 6.4.2004, reviewing / rectifying its earlier order.
The ''CIT'' in Para-3 of his notice dated 18.3.2002 / (Annexure A-3) has mentioned as below:-
Even otherwise the non-refundable fees received from the member is constituted of 2 parts - one is towards the free stay in the hotel and the other is for other facilities agreed to be provided. As regards the stay, the infrastructure is already in existence and on which the Assessee is claiming depreciation. The fee towards this, which of course is to be estimated and in this case has been estimated at 45% has accrued for good and against which there is no recurring liability. As regards the second part, which again is a revenue receipt but is fasten with a recurring liability the same can be regarded as belonging to the entire period.
The ''CIT'' in its order dated 28.3.2002 / (Annexure A-4) discussed in brief about the treatment of 45% of the receipts treated by ''AO'' to be of capital in nature and held the same to be of revenue in nature (as originally treated by Assessee in his return) but in addition thereto held that the same should be treated as taxable fully in the year of receipt. While concluding his order, the ''CIT'' considered the whole receipt as taxable in the year of receipt and directed the ''AO'' accordingly. As such, ''CIT'' has not only travelled against his own notice rather contradicted his opinion as indicated in his notice regarding rest of 55% receipt which he in his notice agreed to be fastened with a recurring liability and pertaining to whole period of membership.
''ITAT'' in its order dated 11.3.2003 / (Annexure A-6) dealt with all the issues. The relevant extract is given as below:
(A) Regarding 45% share: (''AO'' treated such share as capital receipt and reduced the same from ''Block of Assets'' but ''CIT'' treated it as revenue taxable wholly in the year of receipt).
(i) ''ITAT'' has analyzed the issue in Paragraph-10 of its order and observed in Paragraph-11 as below: -"11. After having considered the rival submission and the facts and circumstances of the case and various decisions, we are of the opinion that so far as ''AO''s reliance on the assessment order of M/S. Sterling Resorts for attributing 45% of the receipts towards fixed assets and considering the sum as of capital nature is concerned, the assessment order of M/S. Sterling Resorts is really silent on this point. We have no option but to accept the submission of Ld. Departmental Representative that the actions of ''AO'' considering 45% of the receipts as of capital nature by relying on assessment order in case of M/S. Sterling Resorts was misplaced and had rendered the assessment order to that extent erroneous in nature. Further, this erroneousness having resulted in loss to the revenue, the assessment to that extent was erroneous so as to be prejudicial to the interest of the revenue. We, therefore, uphold the validity of order u/s 263 to that extent, though subject to our further findings on the issue.
(Emphasis by Appellant)
(ii) In Paragraph-16 of its order, ''ITAT'' further indicated in continuation to his observations made in Paragraph-11 (above). The contents of Paragraph-16 read as under:
Coming to the 45% part of the receipts, which has been considered by the Commissioner not only as revenue nature but also as income in the current year alone, we, so far as the revenue nature is concerned, have already upheld the order of Commissioner (Para 10), but so far as the period to which the receipts relate is concerned, we are, in view of the revenue''s own stand in Assessee''s own case for assessment year 1996-97 and the fact that there is no provision of law to support the Commissioner''s stand that 45% of the receipts were relatable to ''stay part'' of the agreement and Assessee has no recurring liability on that account nor such a presumption of the Commissioner is sustainable on facts because even if it is made relatable to the ''stay part'' of the agreement then also the Assessee is bound to have recurring liability in future such as repair, maintenance, renovation, replacement and safety of the infrastructure for 99 years, are of the opinion that there is no justification for segregating the receipts being relatable and part of a composite agreement applicable to the whole of the period of lease and Assessee''s liability being to fulfill the terms and conditions of the agreement throughout the period of lease, such an opinion of the Commissioner which is otherwise also is not supported by facts or in law cannot be sustained.
(iii) In Paragraph-17 of its order, ''ITAT'' has observed as under:
In view of the above discussion, we are unable to uphold the view expressed by Commissioner on this point and therefore, we modify his directions to the effect that the 45% of the receipts are relatable to the whole of the period of lease which may be 33 years or 49 years or 99 years as the case may be and therefore the 45% part of the whole receipts may also be dealt with in the same manner (taxed) by the ''AO'' as the balance 55% of the receipts has been dealt with (taxed).
(B) Regarding 55% share: To appreciate the tax treatment given to balance 55% of the receipts, following aspects need attention:
(a) ''A.O.'' in his order has accepted the treatment of spreading the receipts over the years of membership tenure.
(b) ''CIT'' sought to tax it fully in the year of receipt.
(c) ''ITAT'', in Para-13 of its order set aside the order of
''CIT'' and has observed in Paragraph-13.2 as under:
Following the decision of the Hon''ble High Court, we are of the opinion that Commissioner''s decision to consider the 55% portion of the receipts as income of the current year, instead of considering the same as for 99 years is contrary to his intention with which he initiated the proceedings u/s 263 of the Act and therefore, the same is bad in law and liable to be struck down. Respectfully following the decision of the Hon''ble High Court of Punjab & Haryana and in the facts and circumstances of the case we strike that portion of the order u/ s 263 of the Act, i.e. the findings of the Commissioner, relating to consideration of 55% of the receipts as income for current year are set aside / deleted.
The modification / rectification sought by revenue in the order dated 11.3.2003 (Annexure A-6) of ''ITAT'' by way of MA No. 91/Chandi/03 (Annexure A-5) are mainly on the grounds given as follows:
(i) The order of ''ITAT'' is self contradictory:
As in Para-11 of its order ''ITAT'' is contradictory to Para-17, whereas, in Para-11, ''ITAT'' has confirmed the order of ''CIT'' in treating the 45% portion as revenue but in Para-17 it has directed that the same should not be taxed fully in the year of receipt as contended by Commissioner but be taxable proportionately over the period of lease / agreement.
(ii) ''ITAT'' cannot grant relief more than that claimed for:
As the Appellant during assessment had agreed to treat 45% portion of receipts from time sharing scheme as capital and deductible from Block of Assets, but ''ITAT'' in its initial order held that the same should be treated as taxable proportionately over the years of lease / agreement, by which means the Appellant got more relief than that agreed to in assessment.
(iii) ''ITAT'' cannot comment on years not under appeal:
In Para-19, ''ITAT'' has given its opinion even for the tax treatment of future years which is not in its domain.
In order to appreciate the true controversy, it is necessary to give the extract of the provisions of relevant Sections of ''Income Tax Act'':
Section 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:
Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the Assessee, shall not be made under this Sub-section unless the Appellate Tribunal has given notice to the Assessee of its intention to do so and has allowed the Assessee a reasonable opportunity of being heard:
Provided further that any application filed by the Assessee in this Sub-section on or after the 1st day of October, 1998, shall be accompanied by a fee of fifty rupees.
(2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under Sub-section (1) of Section 253.
Provided that the Appellate Tribunal may, after considering the merits of the application made by the Assessee, pass an order of stay in any proceedings relating to an appeal filed under Sub-section (1) of Section 253, for a period not exceeding one hundred and eighty days from the date of such order and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order:
Provided further that where such appeal is not so disposed of within the said period of stay as specified in the order of stay, the Appellate Tribunal may, on an application made in this behalf by the Assessee and on being satisfied that the delay in disposing of the appeal is not attributable to the Assessee, extend the period of stay, or pass an order of stay for a further period or periods as it thinks fit; so, however, that the aggregate of the period originally allowed and the period or periods so extended or allowed shall not, in any case, exceed three hundred and sixty five days and the Appellate Tribunal shall dispose of the appeal within the period or periods of stay so extended or allowed: Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceed three hundred and sixty five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the Assessee.
(2B) The cost of any appeal to the Appellate Tribunal shall be at the discretion of that Tribunal.
(3) The Appellate Tribunal shall send a copy of any orders passed under this section to the Assessee and to the Commissioner.
(4) Save as provided in Section 256 or Section 260A, orders passed by the Appellate Tribunal on appeal shall be final.
Section 260A of the ''Income Tax Act'' reads as below:
(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law.
(2) The Chief Commissioner or the Commissioner or an Assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub - section shall be -(a) filed within one hundred and twenty days from the date on which the order appealed against is received by the Assessee or the Chief Commissioner or Commissioner.
(b) xxxx
(c) In the form of a memorandum of appeal precisely stating therein the substantial question of law involved.
(2A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in Clause (a) of Sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.
(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.
(4) The appeal shall be heard only on the question so formulated, and the Respondents shall at the hearing of the appeal, be allowed to argue that the case does not involve such question:
Provided that nothing in this Sub-section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.
(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.
(6) The High Court may determine any issue which -
(a) Has not been determined by the Appellate Tribunal: or
(b) Has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in Sub-section (1)
(7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.
Section 263 of the ''Income Tax Act'' reads as below:
(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the Assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.
Explanation: For the removal of doubts, it is hereby declared that, for the purposes of this Sub-section, -
(a) An order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include -
(i) An order of assessment made by the Assistant Commissioner or Joint Commissioner or the income tax Officer on the basis of the directions issued by the Deputy Commissioner u/s 144A;
(ii) An order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorised by the Board in this behalf u/s 120;
(b) "Record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner;
(c) Where any order referred to in this Sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this Sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.
(2) No order shall be made under Sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.
(3) Notwithstanding anything contained in Sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in
consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court.
Explanation: In computing the period of limitation for the purposes of Sub-section (2), the time taken in giving an opportunity to the Assessee to be reheard under the proviso of Section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.
The following submissions have been made on behalf of the Appellant:
(i) ''ITAT'' has erred in reviewing / rectifying in its order in the garb of error apparent on the record, moreso, when earlier order was passed by ''ITAT'' after due deliberation and elaboration over the subject matter;
(ii) ''ITAT'' has erred in carrying out rectification in its order on the misconception regarding its power to comment upon ''future tax implications'' of the ''receipts of year under appeal'', confusing it with the power to comment upon ''tax implications'' of the ''receipts of future years'', meaning thereby the revenue receipt of 55% was to be spread over as income as per the scheme/agreement with each customer i.e. 33, 49 or 99 years as the case may be, so much so, it was imperative to mention that the remaining part of 55% pertaining to future years would be taxed proportionately in such future years. Whereas, there was no recommendation about the taxability of the receipts of subsequent years and same was wrongly understood by the revenue, and thus to this extent the filing of Miscellaneous Petition was misconceived as such the orders passed in pursuance thereof is erroneous;
(iii) ''ITAT'' has passed its initial order after a long discussion and thorough analysis of the subject matter and thus has erred in carrying out review of a debatable issue in the garb of rectification, which is impermissible as per observations of Hon''ble Supreme Court made in T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay,
In support of the above contentions, following submissions have also been advanced:-
(A) In respect of issue that order of ''ITAT'' is self contradictory, it has been submitted that in Para-11 of the order, ''ITAT'' has only partly accepted the order of ''CIT'' u/s 263, i.e. to the limited extent of determining the nature of the receipt to be Revenue rather than capital as treated so by the ''A.O.'' while the Appellant had originally treated the same as revenue spread proportionately over the years of lease / agreement.
The last line of Para-11 reads as under:
We therefore uphold the validity of the order u/s 263 to that extent, though, subject to our further findings on the issue
According to the Appellant, there is no ambiguity / contradiction as the ''ITAT'' has observed that this finding is subject to further findings in the said order. Whereas, in Para-16 it has given its further findings on the subject matter, which if read with the contents of Paragraph-17, would indicate that though 45% of receipt is of revenue nature, but it has to be taxed proportionately over the years of agreement / lease, moreso, when such observation was never challenged either by the revenue or by the Appellant.
(B) In respect of issue that ''ITAT'' had granted relief to the Appellant which it was not legally entitled; following submissions have been advanced for and on behalf of the Appellant:-
(i) The Appellant / Assessee had filed its return treating the whole receipts including impugned 45% portion as revenue income accordingly spreading proportionately over several years of lease / agreement.
(ii) ''ITAT'' has restored the position as per the return filed by the Appellant and in so deciding the ''ITAT'' has in its earlier order taken into consideration the following aspects:-
(a) The department has followed/accepted ''proportionate Tax Treatment'' for the A.Y 1996-97 in scrutiny assessment (as held in para 15 of the original order / (Annexure A-6) of ''ITAT'';
(b) The Appellant since beginning has been pleading that the taxability should be over the years of agreement.
(c) There is no reason to segregate the gross receipts as it belongs to one composite agreement.
(d) Even in case of ''stay part of agreement'' the Appellant has a recurring liability for repair & maintenance of the premises, and
(e) The Appellant is bound under the agreement to fulfill the terms and conditions of the agreement over all the years to which the agreement runs so the receipt relating to the same should be proportionately taxed in those years.
(C) It has also been submitted on behalf of the Appellant that ''ITAT'' can grant any relief. In support of such proposition, following submissions have also been made:-
(i) In National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax, Hon''ble Supreme Court has observed on the Powers of ''ITAT'' as under:
u/s 254 of the ''Income Tax Act'' the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an Assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a nontaxable item is taxed or a permissible deduction denied, we do not see any reason why the Assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal u/s 254 only to decide the grounds which arise from the order of the CIT (A). Both the Assessee as well as the Department have a right to file an appeal / cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.
(ii) As observed in CIT v. P.B. Corporation reported in 187 CTR 212 (GUJ) ''ITAT'' can grant relief more than what could be given by AAC even if the appeal is filed by revenue. The High Court (Gujarat) has observed as below:
Once the Tribunal found that there was no warrant for assessing the income at the particular amounts mentioned herein above, it was but natural that the entire matter was required to be kept at large and to permit the parties to lead evidence. In this set of circumstances the Assessee could not have been tied down to the amounts assessed by the AAC and the Tribunal therefore could rightly set aside the orders passed by AAC as well. Apart from the fact that the provisions of Section 254(1) confer very wide powers on the appellate Tribunal, there is nothing in the provisions of Income Tax Act, 1961, which would have the effect of nullifying the provisions of order 41 Rue 33 of Code of Civil Procedure, or the underlying principle that the appellate court may pass such order or decree as the case may require and this would also include orders in favour of any of the Respondents although such a Respondent may not have filed appeal or objection.
(iii) Gujarat High Court has also observed in Commissioner of Income Tax, Gujarat III Vs. Mankeklal Harilal Spg. and Mfg. Co. Ltd., that even if the particular point regarding which the reassessment proceedings were initiated has to be decided in favour of the Assessee, reassessment proceedings once initiated will not come to an end automatically.
(iv) In Kella Appalaswamy and Sons Vs. Commissioner of Income Tax, it was observed that procedure is the hand maid and not a mistress of law, intended to sub-serve and facilitate the course of justice and not to govern or obstruct it.
(D) In Commissioner of Income Tax, Gujarat-I Vs. Ahmedabad Keiser-e-hind Mills Co. Ltd., it has been observed that "Officers of the department must not take advantage of the ignorance of an Assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officer should take the initiative in guiding a tax payer where proceedings or other particulars before them indicate that some refund or relief is due to him.
(E) It has been submitted for and on behalf of the Appellant that ''ITAT'' has not actually given its opinion even for tax treatment of future years which is not in its domain. The contents of relevant Paragraph-19 of order of ''ITAT'' are given as below:
In view of above discussion, the order of the commissioner is modified as per observations / conclusions / findings / directions in the foregoing part of this order and the ''Assessing Officer'' is directed to consider only the proportionate part of total receipts keeping in view the period of lease, in this assessment year and similarly in subsequent assessment years.
(F) Learned Counsel for the Appellant has submitted that reference to ''subsequent years'' in the original order was basically in the context that the receipts of the year under appeal would be partly taxed in the year under appeal and balance proportionately in next years over the tenure of the scheme, i.e. balance of 33, 49, 99 years, which has altogether been misunderstood by the Revenue Department as being a comment on the tax treatment of similar receipts accruing in the subsequent years and sought rectification on that mistaken belief. ''ITAT'' instead of elaborating the spirit of its order in MA No. 91/2003 has again travelled beyond the main points and modified the earlier order in the garb of rectification.
(G) So far as the concession before ''ITAT'' made by the learned Counsel for the Appellant is concerned; he, in fact, agreed that the tax treatment of ''receipts of subsequent years'' cannot be commented upon by ''ITAT'', but Tax treatment in subsequent years of ''receipts pertaining to the year under appeal'' was correctly decided by the ''ITAT'', however, this concession has been misconceived by ''ITAT'' in the impugned order dated 6.4.2004.
(H) Further once it is held that 55% receipts is in a revenue receipt subject to proportionate taxability over the years of the scheme, then it is but obvious that it is to be taken as 1/33 years irrespective of any finding by ''ITAT'' regarding subsequent years.
It has also consistently been held that a wrong concession by a counsel on question of law does not bind the client or any person as there can be no estopple against the Statute. Dr. H.S. Rikhy and Others Vs. The New Delhi Municipal Committee, ; Bank of Bihar Ltd. Vs. Mahabir Lal and Others, ; Union of India and another Vs. K.S. Subramanian, ; Dr. Ashok Kumar Maheshwari Vs. State of U.P. and Another, ; Uptron India Limited Vs. Shammi Bhan and Another, ; B.S. Bajwa and Another Vs. State of Punjab and Others, ; M.I. Builders Pvt. Ltd. Vs. Radhey Shyam Sahu and Others, ; Jagdish Lal Vs. Parma Nand, ; Smt. Laxmibai Vs. Karnataka State Road Transport Corporation, Bangalore, ; Union of India (UOI) and Others Vs. Mohanlal Likumal Punjabi and Others, ; and Union of India and Anr. v. S.C. Parashar (2006) SCC 167).
Even otherwise a wrong concession by an advocate regarding law or facts are not binding either on Appellant or on any Court and thus can be challenged / rebutted in higher forums. The Central Council for Research in Ayurveda and Siddha and Another Vs. Dr. K. Santhakumari, (Paragraph-12). In view of the foregoing submissions, learned Counsel for the Appellant has also vehemently submitted as below:-
(a) The order dated 11.3.2003 of ''ITAT'' is not self contradictory, if Paragraphs 11, 16 and 17 are read jointly and harmoniously;
(b) ''ITAT'' has granted only that much relief as the Appellant herein was entitled to as per law and as per his income tax return;
(c) ''ITAT'' can even grant more relief than that claimed in the Income Tax Return in view of the decisions in National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax, ; Commissioner of Income Tax, Gujarat-I Vs. Ahmedabad Keiser-e-hind Mills Co. Ltd., .
(d) The rectification regarding comment on ''subsequent years'' is totally misconceived.
(e) ''ITAT'' has wrongly reviewed and thereby reversed its order in the garb of rectification.
When primary facts necessary for assessment were fully disclosed by the Appellant, in such situation ''AO'' was not entitled on change of opinion to commence proceedings for reassessment as observed by Hon''ble Supreme Court in Commissioner of Income Tax, Gujarat Vs. Bhanji Lavji, Porbandar, and in (The Commissioner of Income Tax, West Bengal II Vs. Dinesh Chandra H. Shah and Others, . Such similar view has also been taken by High Court of Calcutta (DB) in Income Tax Settlement Commission and Others Vs. Netaji Chandra Rarhi and Co. and Others, Brindaban Chandra Das and Satya Narayan Das, wherein it was observed that Section 154 of the Income Tax Act, 1961, only confers power of rectification if there is a mistake apparent on the face of the record. Glaring, obvious, patent and apparent mistakes are those for which no investigation into facts or determination of law or discussion of debatable points are involved and to establish long drawn argument would not be necessary and in respect of which no two opinions are possible. When the statute specifically provides that Section 154 is applicable only in a limited sphere, then on the face of the provisions contained in Section 245-I, such power cannot be exercised by the Settlement Commission unless it is necessary in extreme cases.
The only glaring mistake of fact apparent from the record could be rectified and no rectification is possible if the question is debatable in view of the decision of Supreme Court in M/s. Madras Industrial Investment Corporation Ltd. Vs. The Commissioner of Income Tax, Tamil Nadu-I, Madras, and in Commissioner of Income Tax (CNTL), Ludhiana Vs. Hero Cycles Pvt. Ltd., Ludhiana, The relevant paragraph reads as under:
The Income Tax Officer thereafter entertained the Assessee''s prayer for rectification of the order and allowed the Assessee''s claim in respect of matters like coloured albums, export staff travelling expenses, export sales commission, E.C. G.C., foreign dealers visiting expenses. Rectification u/s 154 can only be made when a glaring mistake of fact or law committed by the officer passing the order becomes apparent from the record. Rectification is not possible if the question is debatable. Moreover, the point which was not examined on fact or in law cannot be dealt with as a mistake apparent on the record.
In Commissioner of Income Tax Vs. Income Tax Appellate Tribunal and Another, High Court of Allahabad (DB) observed as below:
A bare perusal of Section 254 of the Act reveals that sub-section (1) of Section 254 confers ample powers on the Tribunal to pass such orders in any appeal filed before it as it thinks fit. Sub-section (2) of Section 254 postulates that the Tribunal may amend any order passed by it under Sub-section (1) of Section 254 with a view to rectify any mistake apparent from the record. Thus, the power exercisable under Sub-section (2) of Section 254 is subject to two limitations. Firstly, it has to be confined to rectify any mistake apparent from the record and secondly it has to be confined to an order passed under Sub-section (1) of Section 254. Accordingly, it is apparent that the power exercisable under Sub-section (2) of Section 254 is not available to be exercised for amending any order passed by it under any section other than Sub-section (1) of Section 254. In other words, the power of the Tribunal conferred by Sub-section (2) of Section 254 for rectifying any mistake apparent from the record cannot be exercised by the Tribunal to recall any order passed by it u/s 256 of the Act.
In MALABAR INDUSTRIAL CO. LTD. Vs. COMMISSIONER OF INCOME TAX, following observations are made:-
A bare reading of Section 263 of the Income Tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to Section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase "prejudicial to the interests of the Revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income Tax Officer is unsustainable in law.
In respect of review it is relevant to mention that in Northern India Caterers (India) Ltd. Vs. Lt. Governor of Delhi, it was held by the Supreme Court that the review is not for the purpose of a re-hearing or for making a fresh decision. The normal principle is that the judgment pronounced by the Court is final. The Supreme Court has observed in Para-8 which reads as below:-
It is well settled that a party is not entitled to seek a review of a judgment delivered by this Court merely for the purpose of a rehearing and a fresh decision of the case. The normal principle is that a judgment pronounced by the Court is final, and departure from that principle is justified only when circumstances of a substantial and compelling character make it necessary to do so. Sajjan Singh Vs. State of Rajasthan, For instance, if the attention of the Court is not drawn to a material statutory provision during the original hearing, the Court will revise its judgment Girdhari Lal Gupta Vs. D.H. Mehta and Another, . The Court may also reopen its judgment if a manifest wrong has been done and it is necessary to pass an order to do full and effective justice. O.N. Mohindroo Vs. The District Judge, Delhi and Another, . Power to review its judgments has been conferred on the Supreme Court by Article 137 of the Constitution, and that power is subject to the provisions of any law made by Parliament or the rules made under Article 145. In a civil proceeding, an application for review is entertained only on a ground mentioned in O. XLVII, Rule 1 of the CPC and in a criminal proceeding on the ground of an error apparent on the face of the record. (Order XL, Rule 1, Supreme Court Rules, 1966). But whatever the nature of the proceeding, it is beyond dispute that a review proceeding cannot be equated with the original hearing of the case, and the finality of the judgment delivered by the Court will not be reconsidered except ''where a glaring omission or patent mistake or like grave error has crept in earlier by judicial fallibility''. Sow Chandra Kante and Another Vs. Sheikh Habib, .
In Sow Chandra Kante and Another Vs. Sheikh Habib, the Supreme Court has held that the review cannot be equated with the original hearing of the case, and it could be exercised only where a glaring omission or patent mistake has occurred in the order.
In Smt. Meera Bhanja Vs. Smt. Nirmala Kumari Choudhury, it was held that the review is to be made when there is error apparent on the face of the record.
In this case, the Supreme Court has observed in Para-8, which reads below:
It is well settled that the review proceedings are not by way of an appeal and have to be strictly confined to the scope and ambit of Order 47, Rule 1, CPC In connection with the limitation of the powers of the Court under Order 47, Rule 1, while dealing with similar jurisdiction available to the High Court while seeking to review the orders under Article 226 of the Constitution of India, this Court, in the case of Aribam Tuleshwar Sharma Vs. Aribam Pishak Sharma and Others, speaking through Chinnappa Reddy, J., has made the following pertinent observations (SCC p.390, para-3).
It is true as observed by this Court in Shivdeo Singh and Others Vs. State of Punjab and Others, there is nothing in Article 226 of the Constitution to preclude the High Court from exercising the power of review which inheres in every Court of Plenary jurisdiction to prevent miscarriage of justice or to correct grave and palpable errors committed by it. But, there are definitive limits to the exercise of the power of review. The power of review may be exercised on the discovery of new and important matter or evidence which, after the exercise of due diligence was not within the knowledge of the person seeking the review or could not be produced by him at the time when the order was made; it may be exercised where some mistake or error apparent on the face of the record is found; it may also be exercised on any analogous ground. But, it may not be exercised on the ground that the decision was erroneous on merits. That would be the province of a Court of Appeal. A power of review is not to be confused with appellate power which may enable an Appellate Court to correct all manner of errors committed by the Subordinate Court,
The Supreme Court has observed in the case of Satyanarayan Laxminarayan Hegde and Others Vs. Millikarjun Bhavanappa Tirumale, wherein K.C. Das Gupta, J., speaking for the Supreme Court has made the following observations in connection with an error apparent on the face of the record:
An error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions can hardly be said to be an error apparent on the face of the record. Where an alleged error is far from selfevident and if it can be established, it has to be established, by lengthy and complicated arguments, such an error cannot be cured by a writ of certiorari according to the rule governing the powers of the superior Court to issue such a writ.
Relying on the above judgments the Supreme Court in Meera Bhanja (supra), has held as below:-
The review proceedings are not by way of an appeal and have to be strictly confined to the scope and ambit of Order 47, Rule 1, CPC The review petition has to be entertained only on the ground of error apparent on the face of the record and not on any other ground. An error apparent on the face of record must be such an error which must strike one on mere looking at the record and would not require any long drawn process of reasoning on points where there may conceivably be two opinions. The limitation of powers of court under order 47 Rule 1, CPC is similar to the jurisdiction available to the High Court while seeking review of the orders under Article 226.
In Parsion Devi and Others Vs. Sumitri Devi and Others, the Supreme Court has indicated that the error which is self evident and not to be detected by process of reasoning can hardly be a matter of review. In this case, the Supreme Court has observed in Para-7, which reads as below:
Review proceedings have to be strictly confined to the ambit and scope of Order 47 Rule 1 Code of Civil Procedure. In Thungabhadra Industries Ltd. Vs. The Government of Andhra Pradesh, the Supreme Court opined:
What, however, we are now concerned with is whether the statement in the order of September 1959 that the case did not involve any substantial question of law is an ''error apparent on the face of the record). The fact that on the earlier occasion the court held on an identical state of facts that a substantial question of law arose would not perse be conclusive, for the earlier order itself might be erroneous. Similarly, even if the statement was wrong, it would not follow that it was an ''error apparent on the face of the record'', for there is a distinction which is real, though it might not always be capable of exposition, between a mere erroneous decision and a decision which could be characterized as vitiated by ''error apparent''. A review is by no means an appeal in disguise whereby an erroneous decision is reheard and corrected, but lies only for patent error.
In Lily Thomas, Etc. v. Union of India and Ors. AIR 2000 SC 1650, the Supreme Court has held that mistake apparent on the face of the record cannot mean error which has to be fished out and searched. The words "any other sufficient reasons" has been elaborated and it means that "a reason sufficient on grounds at least analogous to those specified in the rule" and it was observed in para 52, para 55 and Para-57 which reads as below:-
The dictionary meaning of the word "review" is "the act of looking, offer something again with a view to correction or improvement. It cannot be denied that the review is the creation of a statute. This Court in Patel Narshi Thakershi and Others Vs. Shri Pradyumansinghji Arjunsinghji, held that the power of review is not an inherent power. It must be conferred by law either specifically or by necessary implication. The review is also not an appeal in disguise. It cannot be denied that justice is a virtue which transcends all barriers and the rules or procedures or technicalities of law cannot stand in the way of administration of justice. Law has to bend before justice. If the Court finds that the error pointed out in the review petition was under a mistake and the earlier judgment would not have been passed but for erroneous assumption which in fact did not exist and its perpetration shall result in miscarriage of justice nothing would preclude the Court from rectifying the error. This Court in S. Nagaraj and Others Vs. State of Karnataka and Another, held:
Review literally and even judicially means re-examination or re-consideration. Basic philosophy inherent in it is the universal acceptance of human fallibility. Yet in the realm of law the Courts and even the statutes lean strongly in favour of finality of decision legally and properly made. Exceptions both statutorily and judicially have been carved out to correct accidental mistakes or miscarriage of justice. Even when there was no statutory provision and no rules were framed by the highest Court indicating the circumstances in which it could rectify its order the Courts culled out such power to avoid abuse of process or miscarriage of justice. In AIR 1941 1 (Federal Court) the Court observed that even though no rules had been framed permitting the highest Court to review its order yet it was available on the limited and narrow ground developed by the Privy Council and the House of Lords. The Court approved the principle laid down by the Privy Council in Rajunder Narain Rae v. Bijai Govind Singh (1836) 1 Moo PC 117 that an order made by the Court has final and could not be altered.
.... nevertheless, if by misprision in embodying the judgments, by errors have been introduced, these Courts possess, by Common Law, the same power which the Courts of record and statute have of rectifying the mistakes which have crept in.... The House of Lords exercises a similar power of rectifying mistakes made in drawing up its own judgments, and this Court must possess the same authority. The Lords have however gone a step further, and have corrected mistakes introduced through inadvertence in the details of judgments; or have supplied manifest defects in order to enable the decrees to be enforced, or have added explanatory matter, or have reconciled inconsistencies.'' Basis for exercise of the power was stated in the same decision as under:
''It is impossible to doubt that the indulgence extended in such cases is mainly owing to the natural desire prevailing to prevent irremediable injustice being done by a Court of last resort, where by some accident, without any blame, the party has not been heard and an order has been inadvertently made as if the party had been heard.''
''Rectification of an order thus stems from the fundamental principle that justice is above all. It is exercised to remove the error and not for disturbing finality. When the Constitution was framed the substantive power to rectify or recall the order passed by this Court was specifically provided by Article 137 of the Constitution. Our Constitution makers who had the practical wisdom to visualise the efficacy of such provision expressly conferred the substantive power to review any judgment or order by Article 137 of the Constitution. and Clause (c) of Article 145 permitted this Court to frame rules as to the conditions subject to which any judgment or order may be reviewed. In exercise of this power Order 40 had been framed empowering this Court to review an order in civil proceedings on grounds analogous to Order 47 Rule 1 of the Code of Civil Procedure. The expression, ''for any other sufficient reason'' in the clause has been given an expanded meaning and a decree or order passed under misapprehension of true state of circumstances has been held to be sufficient ground to exercise the power. Apart from Order 40, Rule 1 of the Supreme Court Rules this Court has the inherent power to make such orders as may be necessary in the interest in justice or to prevent the abuse of process of Court. The Court is thus not precluded from recalling or reviewing its own order if it is satisfied that it is necessary to do so for sake of justice.
The mere fact that two views on the same subject are possible is no ground to review the earlier judgment passed by a Bench of the same strength.
It follows, therefore, that the power of review can be exercised for correction of a mistake and not to substitute a view. Such powers can be exercised within the limits of the statute dealing with the exercise of power. The review cannot be treated an appeal in disguise. The mere possibility of two views on the subject is not a ground for review. Once a review petition is dismissed no further petition of review can be entertained. The rule of law of following the practice of the binding nature of the larger Benches and not taking different views by the Benches of co-ordinated jurisdiction of equal strength has to be followed and practised. However, this Court in exercise of its powers under Article 136 or Article 32 of the Constitution and upon satisfaction that the earlier judgments have resulted in deprivation of fundamental rights of a citizen or rights created under any other statute, can take a different view notwithstanding the earlier judgment.
Otherwise also no ground as envisaged under Order 40 of the Supreme Court Rules read with Order 47 of the CPC has been pleaded in the review petition or canvassed before us during the arguments for the purposes of reviewing the judgment in Smt. Sarla Mudgal, President, Kalyani and others Vs. Union of India and others, It is not the case of the Petitioners that they have discovered any new and important matter which after the exercise of due diligence was not within their knowledge or could not be brought to the notice of the Court at the time of passing of the judgment. All pleas raised before us were in fact addressed for and on behalf of the Petitioners before the Bench which, after considering those pleas, passed the judgment in Sarla Mudgal''s case. We have also not found any mistake or error apparent on the face of the record requiring a review. Error contemplated under the rule must be such which is apparent on the face of the record and not an error which is to be fished out and searched. It must be an error of inadvertence. No such error has been pointed out by the learned Counsel appearing for the parties seeking review of the judgment. The only arguments advanced were that the judgment interpreting Section 494 amounted violation of some of the fundamental rights. No other sufficient cause has been shown for reviewing the judgment. The words "any other sufficient reason appearing in Order 47, Rule 1, Code of Civil Procedure" must mean "a reason sufficient on grounds at least analogous to those specified in the rule," as was held in Chhajju Ram v. Neki Ram AIR 1922 PC 112 and approved by this Court in Moran Mar Bassellos Catholics v. Most Rev. Mar Poulose Athanasius AIR 1954 SC 526 . Error apparent on the face of the proceedings is an error which is based on clear ignorance or disregard of the provisions of law. In T.C. Basappa Vs. T. Nagappa and Another, this Court held that such error is an error which is a patent error and not a mere wrong decision. In Hari Vishnu Kamath Vs. Syed Ahmad Ishaque and Others,
.... it is essential that it should be something more than a mere error; it must be one which must be manifest on the face of the record. The real difficulty with reference to this matter, however, is not so much in the statement of the principle as in its application to the facts of a particular case. When does an error cease to be mere error, and become an error apparent on the face of the record Learned Counsel on either side were unable to suggest any clear cut rule by which the boundary between the two classes of errors could be demarcated. Mr. Pathak for the first Respondent contended on the strength of certain observations of Chagla, C.J. in - Batuk K. Vyas Vs. Surat Borough Municipality and Others, that no error could be said to be apparent on the face of the record if it was not self-evident and if it required an examination or argument to establish it. This test might afford a satisfactory basis for decision in the majority of cases. But there must be cases in which even this test might break down, because judicial opinions also differ, and an error that might be considered by one-Judge as self-evident might not be so considered by another. The fact is that what is an error apparent on the face of the record cannot be defined precisely or exhaustively, there being an element of indefiniteness inherent in its very nature, and it must be left to be determined judicially on the facts of each case.
In view of the decision of Hon''ble Supreme Court of India in Dharam Deo Narayan Singh v. The State of Jharkhand and Anr. 15 2009 (6) SCALE 718, the rejection of review petition on the ground that there was no error apparent on the face of record, was held justified.
In K.A. Ansari and Another Vs. Indian Airlines Ltd., Hon''ble Supreme Court has observed that in exercise of inherent power u/s 151 of Code of Civil Procedure, it is not open to court to reopen the proceedings in any miscellaneous application by way of clarification/ implementation, which provides fresh cause of action, however, there is no bar against seeking clarification if the order is not clear and the other party is trying to take undue advantage of the ambiguity.
Hon''ble Supreme Court in Dinkar Sridhar Tamhankar Vs. Bhalchandra Sadashiv Kavadi, has held rejection of review application justifiable when there was no error apparent on the face of record in reference to Order 47 Rule 1 Code of Civil Procedure.
Hon''ble Supreme Court in Inderchand Jain (D) Through L.Rs. v. Motilal (D) through L.Rs. 2009 (9) SCALE 777, has elaborated the scope of review petition under order 47 Rule 1 CPC and Section 114 of CPC and has held that the review court does not sit in appeal over its own order. A re-hearing of the matter is impermissible in law. It constitutes an exception to the general rule that once a judgment is signed or pronounced, it should not be altered. It is also trite that exercise of inherent jurisdiction is not invoked for reviewing any order as the review is not appeal in disguise.
In our considered view, there was no error or mistake evident which could be rectified. The error, which is not self-evident or to be detected by process of reasoning on the face of the record shall not provide scope of indulgence by the ''ITAT'' to exercise its jurisdiction u/s 254(2) of the ''Income Tax Act''. Mere possibility of two views on the subject is also not a ground for review or rectification of an order. Hon''ble Supreme Court in S. Thilagavathy Vs. State of Tamil Nadu and Others, has given liberty for review in reference to error apparent on the face of the record.
In view of the aforesaid analysis, it appears that the ''ITAT'' vide impugned order dated 6.4.2004 has reviewed its earlier order dated 11.3.2003 / (Annexure A-6) which was passed on detailed discussion and elaboration. By impugned order, ''ITAT'' has erroneously rectified / modified its earlier order in the garb of rectifying the mistake apparent from the record, whereas, there was no mistake apparent on the record, instead debatable issues were persisting, as such, amendment / rectification / modification in question vide impugned order dated 6.4.2004 was not legally justifiable. ''ITAT'' has, in fact, passed the impugned order only on change of opinion and by way of re-assessment which was not within the scope of Section 254(2) of ''Income Tax Act''. The order dated 11.3.2003 of ''ITAT'' (Annexure A-6) was reasoned order and was not self-contradictory and, as such, the Miscellaneous Application, in the garb of rectifying mistake apparent on the record, could not have been allowed by ''ITAT''.
''ITAT'', as such, firstly would be justified in rectifying only the mistake apparent from the record; secondly, it would confine itself to the order passed under Sub-section (1) of Section 254 of the ''Income Tax Act''. The issues, which are debatable and mistakes not apparent from the record, could not have been the subject matter of rectification / modification.
In our considered view, ''ITAT'' was not justified to modify its earlier order, as such, the substantial questions of law in the present appeal, are answered in favour of the Appellant and against the ''CIT'' / Revenue. Consequently, the impugned order of ''ITAT'' dated 6.4.2004 in question, is set aside and the present appeal is accordingly allowed.