Gopal Paliwal vs. Principal Commissioner Of

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR BEFORE HON'BLE SHRI JUSTICE SHEEL NAGU & HON’BLE SHRI JUSTICE AMAR NATH (KESHARWANI) ON THE 16th OF AUGUST, 2023 ITA No.220 of 2022 BETWEEN:- GOPAL PALIWAL S/O LATE SHRI HUKUM CHAND, AGED ABOUT 60 YEARS PROP. GOPAL OIL INDUSTRIES PANDHURNA, DISTRICT-CHHINDWARA (M.P.) .....APPELLANT (BY SHRI G.N. PUROHIT, SR. ADVOCATE WITH ESHAN TRIPATHI - ADVOCATE) AND 1. PRINCIPAL

COMMISSIONER

OF INCOME TAX AYAKAR BHAWAN, MISSION CHOWK, JABALPUR (M.P.) 2. ASSISTANT

COMMISSIONER

OF INCOME TAX CIRCLE, CHHINDWARA, DISTRICT-CHHINDWARA (M.P.) .....RESPONDENTS - 2 - (BY SHRI SIDDHARTH SHARMA -

ADVOCATE) ------------------------------------------------------------------------------------------------ This petition coming on for admission this day, Hon’ble Shri Justice SHEEL NAGU passed the following: ORDER The Assessee before this Court invoking Section 260A of Income Tax Act, 1961 (hereinafter referred to as “IT Act”) assailing final order dated 27.05.2022 passed by Income Tax Appellate Tribunal, Jabalpur Bench, Jabalpur (for short “Tribunal”) in M.A. Nos.13 & 14/JAB/2020 arising out of ITA Nos.67 & 69/JAB/2019 as regards Assessment Years 2009-10 and 2010-11, proposes following substantial questions of law: “(i) Whether in the facts and circumstances of the case the Tribunal is correct in law in entertaining a rectification application that does not point out the specific mistake in the order of the tribunal? (ii) Whether the revenue can be permitted to seek rectification of the order on any ground that was not substantiated at the time of original hearing of appeal in rectification proceedings? (iii) Whether the Tribunal is empowered to rely on any document for rectification that was not demonstrated in original hearing of appeal not provided to the appellant and recall the order? (iv) Whether the Tribunal has power to call for the fresh documents during hearing of the rectification application and rely on the same to recall the previous order? - 3 - 2. After hearing learned counsel for the rival parties in considering the fact that issue lies in a narrow compass, this Court deems it appropriate to admit this appeal on the following substantial questions of law: “(i) Whether in the facts and circumstances of the case the Tribunal is correct in law in entertaining a rectification application that does not point out the specific mistake in the order of the tribunal? (ii) Whether the revenue can be permitted to seek rectification of the order on any ground that was not substantiated at the time of original hearing of appeal in rectification proceedings? (iii) Whether the Tribunal is empowered to rely on any document for rectification that was not demonstrated in original hearing of appeal not provided to the appellant and recall the order? (iv) Whether the Tribunal has power to call for the fresh documents during hearing of the rectification application and rely on the same to recall the previous order? 3. Learned counsel for the rival parties are heard at length. 4. The first question to be taken up for consideration is as regards the scope and ambit of power of the Appellate Tribunal vested u/S 254(2) of the IT Act to rectify palpable mistake. The said question is no more res integra in view of Apex Court decision of T.S. Balaram, Income Tax Officer vs. Volkart Brothers, 1971 AIR SC 2204 whereby the Apex Court while explaining the jurisdictional purviews of power of rectification held thus: “4. From what has been said above, it is clear that the question whether s. 17(1) of the Indian IT Act, 1922, was - 4 - applicable to the case of the first respondent is not free from doubt. Therefore, the ITO was not justified in thinking that on that question there can be no two opinions. It was not open to the ITO to go into the true scope of the relevant provisions of the Act in a proceedings under s. 154 of the IT Act, 1961. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by along drawn process of reasoning on points on which there may conceivably be two opinions. As seen earlier, the High Court of Bombay opined that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question. In Satyanarayan Laxminarayan Hedge vs. Mallikarjun Bhavanappa Tirumale (1960) 1 SCR 890, this Court while spelling out the scope of the power of a High Court under Art. 226 of the Constitution ruled that an error which has to be established by a long-drawn process of reasoning on points where there may be conceivably be two opinions cannot be said to be an error apparent on the face of record. A decision on debatable point of law is not a mistake apparent from the record [see Sidhramappa Andannappa Manvi vs. CIT (1952) 21 ITR 333 (Bom)]. The power of the officers mentioned in s. 154 of the IT Act, 1961, to correct “any mistake apparent from the record” is undoubtedly not more than that of the High Court to entertain in a writ petition on the basis of an “error apparent on the face of the record.” In this case it is not necessary for us to spell out the distinction between the expression “error apparent on the face of the record” and “mistake apparent from the record”. But suffice it to say that the ITO was wholly wrong in holding that there was a mistake apparent from the record of the assessments of the first respondent.” Further, the Apex Court in a recent decision rendered in Commissioner of Income Tax vs. Reliance Telecom Ltd., (2022) 440 ITR 1 (SC), especially in parap 3.2, 5 and 6 held thus: “3.2 Having gone through both the orders passed by the Tribunal, we are of the opinion that the order passed by the - 5 - Tribunal dt. 18th Nov., 2016 recalling its earlier order dt. 6th Sept., 2013 is beyond the scope and ambit of the powers under s. 254(2) of the Act. While allowing the application under s. 254(2) of the Act and recalling its earlier order dt. 6th Sept., 2013, it appears that the Tribunal has re-heard the entire appeal on merits as if the Tribunal was deciding the appeal against the order passed by the CIT. In exercise of powers under s. 254(2) of the Act, the Tribunal may amend any order passed by it under sub-s. (1) of s. 254 of the Act with a view to rectifying any mistake apparent from the record only. Therefore, the powers under s.254(2) of the Act are akin to Order XLVII r.1 CPC. While considering the application under s.254(2) of the Act, the Tribunal is not required to re-visit its earlier order and to go into detail on merits. The powers under s.254(2) of the Act are only to rectify/correct any mistake apparent from the record. 5. From the impugned judgement and order passed by the High Court, it appears that the High Court has dismissed the writ petitions by observing that (i) the Revenue itself had in detail gone into merits of the case before the Tribunal and the parties filed detailed submissions based on which the Tribunal passed its order recalling its earlier order; (ii) the Revenue had not contended that the Tribunal had become functus officio after delivering its original order and that if it had to relook/revisit the order, it must be for limited purpose as permitted by s. 254(2) of the Act, and (iii) that the merits might have been decided erroneously but Tribunal had the jurisdiction and within its powers it may pass an erroneous order and that such objections had not been raised before Tribunal. 6. None of the aforesaid grounds are tenable in law. Merely because the Revenue might have in detail gone into the merits of the case before the Tribunal and merely because the parties might have filed detailed submissions, it does not confer jurisdiction upon the Tribunal to pass the order de hors s. 254(2) of the Act. As observed hereinabove, the powers under s. 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that.” - 6 - 4.1 Testing the factual matrix as regards scope of Section 254(2) on the anvil of aforesaid law laid down, it is obvious that only palpable errors which do not require detailed inquiry are amenable to power of rectification. Rectification is a power which is comparatively restrictive than the power of review. 4.2 In the instant case, the stand of Revenue was accepted by the Tribunal by holding that appeal was wrongly dismissed u/S 268A(1) read with Section 268A(4) of IT Act, after holding that palpable error had crept in, inasmuch as Tribunal failing to see that appeals filed could not have been dismissed by Tribunal merely on the ground that financial implication involved is below 50 lacs especially when subject matter fell within the exception Clause 10(c) of CBDT Instruction No.03/2018 dated 11.07.2018 r/w Instruction No.17/2019 dated 08.08.2019, that the audit objection has been accepted. 4.3 The fact, that Tribunal missed seeing this obvious and palpable mistake was certainly a cause giving rise to rectification and; therefore, this Court has no hesitation to hold that the power of rectification exercised by Tribunal u/S 254(2) of the IT Act was well within the bounds of law. 5. Coming to the other substantial question of law that the documentary proof regarding acceptance of audit objection was on record of the Tribunal or not. If not, then it’s effect. - 7 - 6. This Court called the record of the Tribunal in MA Nos.13 & 14/JAB/2020 and ITA Nos.67 & 68/JAB/2019 and perused the same. In both these records in original, this Court did not find any audit objection or its acceptance on record. 6.1 Counsel for the Revenue has drawn the attention of this Court to additional submissions on behalf of respondents filed on 11.08.2023, in particular D-1, D-2, D-3 and D-4. Document D-1 claiming these documents to be the audit objection. D-2 is stated to be letter dated 04.08.2016 revealing the acceptance of aforesaid audit objection in regard to Assessment Year 2009-10. While Annexure D-3 is the audit objection regarding Assessment Year 2010-11 and Document No.4 is said to be acceptance of the said audit objection of 2010-11. 6.2 This Court refrains from going into the facts as to whether the documents marked as D-1 to D-4 are the relevant documents to demonstrate that the audit objection in question in regard to both the Assessment Years was not only made but also accepted, for the reason that this Court deems it appropriate to leave it to the Tribunal to consider the same at its own level since the records produced before this Court did not reveal the relevant document of acceptance of audit objection. 6.3 Tribunal is a judicial body and; therefore, need to adhere to all the principles of natural justice which are codified in the Income Tax Act before deciding a case. In the instant case, it is not clear from the record as to whether the relevant documents being produced by the Revenue - 8 - contains the foundational documents to support the ground that the case fell within the exception Clause 10(c) of CBDT Instruction No.03/2018, dated 11.07.2018 r/w Instruction No.17/2019 dated 08.08.2019. 7. In view of above, this Court has no manner of doubt that the first question as regards jurisdictional purviews of power of rectification is concerned, the same is decided against the Assessee but the other substantial questions of law as aforesaid are decided in favour of the Assessee. 8. This Court deems it appropriate not to dwell upon the other peripheral substantial questions of law after deciding the aforesaid two main ones. 9. Consequently, present appeal of the Assessee stands allowed to the extent as stated below: (i) The impugned order dated 27.05.2022 passed by Income Tax Appellate Tribunal, Jabalpur Bench, Jabalpur (for short “Tribunal”) in M.A. Nos.13 & 14/JAB/2020 arising out of ITA Nos.67 & 69/JAB/2019 as regards Assessment Years 2009-10 and 2010-11, is set aside; (ii) The matter stands remanded to ITAT for reconsideration on the issue as detailed above. - 9 - (iii) Registry is directed to return the records in both the cases to the ITAT. No order as to cost. (SHEEL NAGU) (AMAR NATH KESHARWANI) JUDGE JUDGE YS Digitally signed by YOGESH KUMAR SHIRVASTAVA Date: 2023.08.22 12:50:48 +05'30'