THE COMMISSIONER OF IT vs. M/S BHANU IRON & STEEL CO LTD

ITA No.381 of 2005 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.381 of 2005 Date of decision: 23.7.2012 The Commissioner of Income Tax, Panchkula -----Appellant Vs. M/s Bhanu Iron and Steel Co. Limited Delhi road, Hisar ----Respondent CORAM:- HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON'BLE MR. JUSTICE GURMEET SINGH SANDHAWALIA Present:- Mr. Yogesh Putney, Advocate for the appellant. Mr. Sapan Dhir, Advocate for the respondent. Ajay Kumar Mittal,J. 1. The revenue has preferred this appeal under section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 13.3.2000, Annexure A.7 passed by the Income Tax Appellate Tribunal, Delhi Bench 'D' Delhi (for brevity, “the Tribunal”) in ITA No.5302/DEL/1997, for the assessment year 1995-96, claiming following substantial questions of law:- 1. Whether on the facts and in the circumstances of the case, the ITAT is right in law in admitting a second Misc. Application for recalling the original order when the first Misc. Application has been rejected by holding that there was no mistake apparent from the records which required action under section 254(2) of the Income tax Act? 2. Whether, on the facts and in the circumstances of the case, the ITAT is right in law in holding that the disallowance of the claim of interest of Rs.3,23,29,399/- by way of prima-facie adjustment

ITA No.381 of 2005 2 under section 143(1)(a) and further rejection of the assessee's claim under section 154 for rectification of the same by the AO was wrong and consequently the charging of additional tax of Rs.29,74,305/- under section 143(1) (a) of the Income tax Act was unjustified and wrong? 3. Whether, on the facts and in the circumstances of the case, the ITAT is right in law in holding that there was similarity between the deferred payment of interest and the deferred payment of sales tax considered as allowable under section 43B of the Act as per CBDT circulars? 2. Briefly, the facts as narrated in the appeal may be noticed. Income tax return for the assessment year 1995-96 was filed by the assessee on 29.11.1995 declaring a loss of ` 7,97,32,350/-. While processing the return under section 143(1) (a) of the Act, disallowance of ` 3,23,29,399/- was made on account of interest shown as due to the financial institutions as on 31.3.1995. This amount of interest had been debited to profit and loss account and also shown as liability in the balance sheet but not paid during the previous year and even upto the date of filing of the return. Additional tax under section 143(1A) of the Act amounting to ` 29,74,305/- was duly charged. Application under Section 154 of the Act was filed on 4.11.1996 to rectify the intimation to delete the addition of `3,23,29,399/- made on account of interest payable and also for deleting the additional tax amounting to ` 29,74,305/-. It was pleaded that the assessee had borrowed term loan from leading bank IDBI and its other participant financial institutions. It had to pay interest of `3,23,29,399/- as on 31.3.1995. Due to financial crisis the assessee-company was not in position to pay

ITA No.381 of 2005 3 interest. It requested the IDBI to re-schedule the interest payment by converting the same to term loan. Its request was accepted and interest due was converted into term loan deferred interest account. The assessee company relying upon circulars dated 25.9.1987 and 29.12.1993 prayed that the statutory liability be treated as discharged for the purpose of Section 43B of the Act. The Assessing Officer rejected the Application for rectification under section 154 of the Act. Aggrieved by the order, the assessee-company filed an appeal before the CIT(A), which was dismissed vide order dated 4.8.1997, Annexure A-4. Aggrieved by the order, the assessee filed appeal before the Tribunal. Vide order dated 14.8.1998, Annexure A-5, the Tribunal upheld the order of CIT(A). An application filed by the assessee for recalling order dated 14.8.1998 was dismissed by the Tribunal on 30.9.1999. The assessee filed another application before the Tribunal praying that in view of errors of omissions and commissions in the Tribunal's order dated 14.8.1998, the same be recalled and the appeal be re-fixed for de novo hearing. The Tribunal disposed of the application vide order dated 13.3.2000, Annexure A.7 and recalled its earlier order for deciding the appeal afresh. Hence this appeal. 3. Learned counsel for the revenue did not address any arguments on Questions No.2 and 3 as the Tribunal had not decided these issues on merits vide the impugned order dated 13.3.2000. However, learned counsel for the revenue with regard to Question No.1 submitted that the Tribunal had dismissed the appeal of the assessee vide order dated 14.8.1998, Annexure A-5, rejecting the contentions on merit. The assessee had filed an application for rectification, disputing

ITA No.381 of 2005 4 the disallowance of ` 3,23,29,399/- under section 43B of the Act and charging of additional tax of ` 29,74,305/- under section 143(1A) of the Act. The said misc. application was also dismissed by the Tribunal on 30.9.1999. Yet again, the assessee moved another application under section 254(2) of the Act seeking rectification of the order dated 14.8.1998 on the ground that there were numerous errors which existed in the order and the same was required to be recalled and appeal refixed for de novo hearing. The said application has been illegally allowed on 13.3.2000 vide order impugned herein. 4. Learned counsel for the revenue argued that the order passed by the Tribunal allowing the misc. application under section 254 (2) of the Act amounted to review of the order and the same was barred in view of Division Bench judgment of this Court in the Commissioner of Income tax, Ludhiana v. M/s Pearl Woolen Mills, Ludhiana, (2011) 330 ITR 164. 5. Learned counsel for the assessee on the other hand supported the order passed by the Tribunal. It was further contended that the application which was finally allowed by the Tribunal was on different grounds whereas earlier application which had been rejected on 30.9.1999 was on different grounds. 6. After hearing learned counsel for the a parties, we find merit in the contentions of learned counsel for the revenue. 7. The matter is no longer res integra. The Division Bench of this Court in M/s Pearl Woolen Mills, Ludhiana's case (supra) held as under:- “11. It is well settled that a statutory authority cannot exercise power of review unless such power is expressly

ITA No.381 of 2005 5 conferred. Reference may be made to judgment of the Hon’ble Supreme Court in Patel Narshi Thakershi and others v. Shri Pradyuman Singhji Arjunsinghji, (1971) 3 SCC 844, wherein it was observed as under:- “4……It is well settled that the power to review is not an inherent power. It must be conferred by law either specifically or by necessary implication….” 12. The above view has been reiterated in Kapra Mazdoor Ekta Union v. Birla Cotton Spinning and Weaving Mills Limited, (2005) 13 SCC 777. 13. There is no express power of review conferred on the Tribunal. Even otherwise, scope of review does not extend to rehearing of a case on merits. (Tuleshwar Sharma v. Aibam Pishak Sharma, (1979) 4 SCC 389, Meera Bhanja v. Nirmala Kumari Chaudhary, (1995) 1 SCC 170). Finality of order of Tribunal cannot be disturbed by a different bench beyond the statutory power available to it. The Tribunal has referred to principle of inherent power and incidental power and also the principle that act of Court cannot prejudice anyone. Scope of the principle “Actus curiae neminem gravabit” i.e. nobody will be prejudiced by act of court, extends to correcting an error from an accidental slip or omission. Such power is available under section 254 (2) of the Act, which is akin to Section 152 CPC. In Niyamat Ali Molla v. Sonargon Housing Coop. Society Ltd.,(2007) 13 SCC 421, after referring to earlier judgments, the scope of such power was considered and it was observed that the said power was neither akin to power of review nor could clothe the court to modify judgment on merits. Scope of power of rectification has been repeatedly considered, inter-alia, in Volkart Brothers, Deva Metal, Saurashtra Kutch (supra) and

ITA No.381 of 2005 6 such power is limited to correcting an error apparent on the face of record and not to an error to be discovered by long drawn process of reasoning. Thus, neither by invoking inherent power nor the principle of mistake of court not prejudicing a litigant nor by involving doctrine of incidental power, the Tribunal could reverse a decision on merits. Power available to a court of record, ex debito justitiae, or power to be invoked where an order may be nullity, on account of having passed without service of a party, stand on a different footing.” 8. It has been further held by the Division Bench in M/s Pearl Woollen Mills, Ludhiana's case (supra) that a statutory authority cannot exercise power of review unless such power is expressly conferred on it. In the present case, the Tribunal has sought to review its earlier order dated 14.8.1998 without there being any specific power of review vested with it. Further, an application under Section 254(2) of the Act had already been rejected on earlier occasion on 30.9.1999. In such a situation, the order impugned herein dated 13.3.2000 cannot be legally sustained and, is, thus, set aside. The appeal stands decided accordingly. 9. Before parting, it may be noticed that vide order dated 13.3.2000, the Tribunal had also adjudicated RA No.593/Del/98 filed by the assessee against its order dated 14.8.1998 arising in ITA No.5302/Del/97 claiming three substantial questions of law for opinion of this Court. The said application was dismissed as infructuous in view of the acceptance of the plea for rectification of the order dated 14.9.1998 by the Tribunal. Since we have set aside the order dated 13.3.2000, it would thus be appropriate and in the interest of justice, that the said observation of the Tribunal is also set aside and the

ITA No.381 of 2005 7 Tribunal is directed to re-decide the reference application afresh in accordance with law. Ordered accordingly. Appeal stands disposed of.

(Ajay Kumar Mittal) Judge July 23, 2012 (Gurmeet Singh Sandhawalia) 'gs' Judge