DESAI INVESTMENTS PVT.LTD., MUMBAI V. THE INCOME TAX OFFICER 2(1)(2), MUMBAI

ITA 6447/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7429 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 02-03-2010
• Assessment Year: 1998-1999
• Appeal Filed On: 06-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R N JHA
• Section: 12AA; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 6447/MUM/2008 (ASSESSMENT YEAR: 1998-99) M/S. DESAI INVESTMENT PVT. LTD. INCOME TAX OFFICER 2(1)(2) 24/126, CAMA BUILDING, 1ST FLOOR MUMBAI DALAL STREET, FORT VS. MUMBAI 400023 PAN - AAACD 1356 M APPELLANT RESPONDENT APPELLANT BY: SHRI VIJAY MEHTA RESPONDENT BY: SHRI R.N. JHA O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- II, MUMBAI UNDER SECTION 154 DISMISSING ASSESSEES PETI TION FOR MODIFICATION OF THE ORDER UNDER SECTION 250 BY THE CIT(A) IN NO. C T(A-II/R-2(1)/IT.04/00- 01 FOR A.Y. 1998-99 WHICH WAS PASSED ON 11.04.2002 DISPOSING OF VARIOUS ISSUES. 2. THE ASSESSEE HAS FILED PETITION UNDER SECTION 154, WHICH WAS ACKNOWLEDGED BY THE CIT(A) IN THE ORDER, ON 30.03.2 006 AND CONSEQUENT TO THE POSTING NOTICE RECEIVED, ANOTHER SUBMISSION DT 12.09.2008 WAS FILED. THE CIT(A) IN THE BRIEF ORDER UNDER SECTION 154 HAS DISMISSED ASSESSEES PETITION AS UNDER: - THE APPELLANT HAS FILED 53 PAGES AS EXHIBITS A, B, C, D, E, F, G. H, I, J, K, L, M, N AND O IN VOLUMINOUS BUNCHES ON 30.3.2006 & 12.09.2008. SHRI PRADIP SHROFF, C.A. AP PEARED AND SUBMITTED THAT HERE LIES A RECTIFICATION TO THE ORD ER PASSED BY THE CIT(A) DT. 11.04.2002. THE CIT(A) HIMSELF HAS PASSED A SPE AKING ORDER CONSISTING OF 7 PAGES. THE A.R. OF THE APPELLANT HA S NOT PAID ANY APPEAL FEES, HAS NOT FILED ANY APPEAL MEMO AND BY ATTACHIN G VARIOUS CASE LAWS DETAILS, COPY OF C.I.T(A)S ORDER, COPY OF ASSESSME NT ORDER ETC HAS LABOURED HARD TO SHOW THAT THERE EXIST RECTIFIABLE MISTAKE. BUT AFTER DISCUSSION WITH THE A.R. OF THE APPELLANT AND EXAMI NATION OF THE PAPERS ITA NO. 6447/MUM/2008 M/S. DESAI INVESTMENT PVT. LTD. 2 FILED BEFORE ME I AM OF THE OPINION THAT NO APPAREN T MISTAKE LIES IN THE INSTANT CASE AND ACCORDINGLY THE APPEAL IS NOT ENTE RTAINABLE AS IT HAS NOT BEEN FILED IN ANY PROPER FORMAT, APPEAL FEES HAS NO T BEEN PAID AND THE SO CALLED RECTIFICATION DOES NOT EXIST SINCE THE CI T(A) HIMSELF HAS PASSED A LENGTHY ORDER MAKING IT IS OBVIOUS THAT HE HAS TA KEN INTO CONSIDERATION ALL THE MATERIAL FACTS NECESSARY FOR PASSING HIS JU DGEMENT. MOREOVER THE LETTER WAS RECEIVED BY HIS OFFICE AGAINST THE ORDER OF THE CIT(A) ON 30 TH MARCH, 12006, WHICH IS LONG AFTER PASSING OF ORDER U/S. 246 PASSED BY CIT(A) DT. 11.04.2002. IN SUCH VIEW OF THE MATTER I AM OF THE OPINION SINCE THERE HAS BEEN APPLICATION OF MIND BY CIT(A) IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF VOLKART BRO THERS NO RECTIFICATION LIES IN THIS CASE. ACCORDINGLY THE LETTER FILED BY THE APPELLANT STANDS DISMISSED. 3. ASSESSEE HAS RAISED GROUNDS FROM (A) TO (G) ORIGINA LLY AND ALSO FILED ADDITIONAL GROUNDS OF APPEAL VIDE LETTER DATED 01.0 9.2009. SUBSEQUENTLY VIDE LETTER DATED 29.12.2009 ASSESSEE HAS CONSOLIDA TED AND RAISED THE MODIFIED ADDITIONAL GROUNDS AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN PASSING THE ORDER U/S. 154 OF THE ACT ON 17.09.2008 WHICH IS NOT IN ACCORDANCE WITH THE RELE VANT PROVISIONS OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A) PASSED U/S. 154 OF THE ACT ON 17.09.2008 IS TIME BARRED, INVALID AND BAD IN LAW. 3. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS SINCE THE TIME LIMIT TO PASS ORDER ON RECTIFICATION APPLICATION HAS ALREADY EXPI RED AND, THEREFORE, THE HON'BLE TRIBUNAL MAY BE PLEASED TO H OLD THE APPLICATION FILED U/S. 154 OF THE ACT AS DEEMED TO HAVE BEEN ALLOWED. 4. THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE HAS FILED THE APPLICATION UNDER SECTION 154 ON 30.03.2006 AND THE CIT(A) SHOULD HAVE PASSED THE ORDER DISPOSING OF THE PETITION ON OR BE FORE 31.03.2007 UNDER THE PROVISIONS OF SECTION 154(7) OR 30.09.2006 UNDER TH E PROVISIONS OF SECTION 154(8) AND SO, THE ORDER PASSED ON 17.09.2008 WAS B AD IN LAW. IN VIEW OF THE WORDING OF PROVISIONS OF SECTION 154(8), IT WAS HIS PROPOSITION THAT SINCE THE CIT(A) HAS NOT PASSED THE ORDER WITHIN THE TIME LIMITS ALLOWED THE ASSESSEES PETITION IS DEEMED TO HAVE BEEN ALLOWED. REFERRING TO THE PROVISIONS OF SECTION 154(8), IT WAS SUBMITTED THE ACT PRESCRIBED THAT AUTHORITY SHALL PASS AN ORDER MEANS THAT THE AUTHORITY SHOULD PASS THE ITA NO. 6447/MUM/2008 M/S. DESAI INVESTMENT PVT. LTD. 3 ORDER WITHIN A PERIOD OF 6 MONTHS FROM THE END OF T HE MONTH EITHER MAKING THE AMENDMENT OR REFUSING TO ALLOW THE CLAIM. IN TH E ABSENCE OF THE SAME THE ASSESSEES PETITION IS DEEMED TO HAVE BEEN ALLO WED. HE REFERRED TO THE PROVISIONS OF SECTION 12AA(2) WHERE IDENTICAL PHRAS EOLOGY WAS USED FOR THE PURPOSE OF REGISTRATION AND THE ORDERS OF VARIOUS I TAT COORDINATE BENCHES, IT WAS SUBMITTED THAT THE ASSESSEES PETITION SHOUL D BE ALLOWED. HE RELIED ON THE FOLLOWING ORDERS FOR THE PROPOSITION: (I) BHAGWAT SWAROOP SHRI SHRI DEVRAHA BABA MEMORIAL SHR IHARI PARMARTH DHAM TRUST VS. CIT 111TTJ (DEL) (SB) 424 (II) KARNATAKA GOLD ASSOCIATION VS. DIT 91 ITD 2 (BANG) (III) SOCIETY FOR THE PROMOTION OF EDUCATION, ADVENTURE S PORTS AND CONSERVATION OF ENVIRONMENT VS. CIT 261 CTR 167 (AL L) 5. COMING TO THE MERITS OF THE APPLICATION, IT WAS SUB MITTED THAT THE ISSUES RAISED BEFORE THE CIT(A) WAS WITH REFERENCE TO LOSS OF RS.76,39,884/- ARISING OUT OF VALUATION OF STOCK IN TRADE AT COST AND MARKET PRICE, WHICH WAS LOWER AND AFTER ALLOCATION OF EXPENSES PERTAINI NG TO SPECULATION BUSINESS. REFERRING TO THE DETAILED PETITION FILED BEFORE THE CIT(A), IT WAS HIS SUBMISSION THAT THE ASSESSEE IS NOT PRESSING FOR TH E CLAIM OF LOSS ON VALUATION IN VIEW OF THE HON'BLE BOMBAY HIGH COURT JUDGEMENT. IT WAS HIS SUBMISSION THAT THE ALLOCATION OF EXPENDITURE SHOUL D BE MODIFIED AS CLAIMED AND THIS SHOULD BE ALLOWED AS CLAIMED BY THE ASSE SSEE IN THE COMPUTATION UNDER SECTION 154. 6. IN REPLY, THE LEARNED D.R. SUBMITTED THAT THE ASSES SEES CLAIM THAT PETITION IS DEEMED TO HAVE BEEN ALLOWED UNDER THE P ROVISIONS OF SECTION 154 CANNOT BE ACCEPTED AS IT IS NOT MANDATORY. HE REFER RED TO VARIOUS CASE LAWS UNDER THE OLD PROVISIONS OF SECTION 154 TO SUBMIT T HAT THE CIT(A) CAN BE DIRECTED TO CONSIDER THE RECTIFICATION APPLICATION IF NOT DISPOSED ON MERITS AND IN NO CASE IT CAN BE CONSIDERED AS MANDATORY ALLOWING ASSESSEES PETITION IF NO ORDERS HAVE BEEN PASSED WITHIN THE T IME PRESCRIBED. HE THEN REFERRED TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GORDHANDAS DESAI PVT. LIMITED. VS. V. B. PALEKAR AN D OTHERS 129 ITR 495 WHEREIN THE HON'BLE BOMBAY HIGH COURT HAS REFERRED THE MATTER BACK TO THE ITO TO PASS NECESSARY ORDERS. LIKEWISE HE ALSO REFE RRED TO THE DECISION OF THE ITA NO. 6447/MUM/2008 M/S. DESAI INVESTMENT PVT. LTD. 4 HON'BLE HIGH COURT OF ALLAHABAD IN THE CASE OF VITH ALJI MADHAVJI VS. TIO 71 ITR 204 (ALL) WHEREIN THE HON'BLE HIGH COURT HELD T HAT WHERE THE ASSESSEE WAS UNABLE TO GET RECTIFICATION IN HIS FAVOUR AND A LSO APPLIED WITHIN TIME BUT THE ITO OMITTED TO CARRY OUT THE RECTIFICATION THE HIGH COURT DIRECTED THE ITO TO MAKE RECTIFICATION BEYOND LIMITATION. LIKEWISE H E ALSO RELIED ON THE FOLLOWING CASE LAWS FOR THE PROPOSITION THAT EVEN T HOUGH THE APPLICATION IS FILED IN TIME BUT NOT DISPOSED THE MATTER CAN BE DE CIDED ON MERITS AT THE INSTANCE OF THE HIGHER AUTHORITIES: - (I) SMT. RAJAMMA VS. ITO 152 ITR 657 (KAR) (II) JIYAJEERAO COTTON MILLS LIMITED VS. ITO 107 ITR 253 (CAL) 7. THE LEARNED D.R. ALSO RELIED ON THE PRINCIPLES ESTA BLISHED BY THE HON'BLE SUPREME COURT IN THE CASE OF SHREE AYYANAR SPINNING & WEAVING MILLS LTD. VS. CIT 301 ITR 434 WHEREIN THE HON'BLE SUPREME COURT HAS HELD THAT IN CASE AN APPLICATION FOR RECTIFICATION WAS M ADE WITHIN 4 YEARS IT IS THE TRIBUNAL WHO TOOK ITS OWN TIME TO DISPOSE OFF THE A PPLICATION UNDER SECTION 254(2) AND THE ORDER PASSED BY THE TRIBUNAL ON THE APPLICATION AFTER EXPIRY OF 4 YEAR PERIOD CANNOT BE HELD TO BE TIME BARRED. RELYING ON THE ABOVE PRINCIPLE THE LEARNED D.R. SUBMITTED THAT EVEN THOU GH THE ORDER PASSED BY THE CIT(A) WAS BEYOND THE TIME LIMIT PRESCRIBED, SI NCE THE APPLICATION WAS FILED WITHIN TIME THE ORDER CANNOT BE NULLIFIED ON THAT PRINCIPLE ALONE AND IT HAS TO BE CONSIDERED ON MERITS. REFERRING TO THE CA SE LAWS RELIED UPON BY THE ASSESSEE IT WAS SUBMITTED THAT PROVISIONS OF SECTIO N 12AA ARE ENTIRELY DIFFERENT FROM PROVISIONS OF SECTION 154. PROVISION S OF SECTION 154 ARE PROCEDURAL IN NATURE AND EFFECTS THE ASSESSMENT AN D IF THE APPLICATION IS CONSIDERED TO BE DEEMED TO HAVE BEEN ALLOWED THEN D UE TO VARIOUS ADMINISTRATIVE LAPSES ON THE PART OF THE DEPARTMENT MANY OF THE CLAIMS OF THE ASSESSEE MAY BECOME FINAL AND UNINTENDED BENEFI T MAY HAVE TO BE GRANTED BECAUSE OF LAPSE ON THE PART OF THE A.O. IN NOT PASSING THE ORDER IN TIME. EVEN THE DEBATABLE ISSUES MAY ALSO GOT DECIDE D IF THE A.O. HAS NOT EXAMINED WHETHER THERE IS A MISTAKE OR NOT IN THE O RDER. HE FURTHER EXPLAINED THAT THE PROVISIONS OF SECTION 12AA ARE O NLY ADMINISTRATIVE APPROVAL FOR REGISTRATION AND ACTUAL CLAIMS OF THE ASSESSEE WAS SUBSEQUENTLY ITA NO. 6447/MUM/2008 M/S. DESAI INVESTMENT PVT. LTD. 5 DETERMINED IN THE ASSESSMENT PROCEEDINGS AFTER FILI NG OF RETURN IN RESPECTIVE ASSESSMENT YEARS. JUST BECAUSE THE TRUST GOT REGIST RATION UNDER SECTION 12AA, IT DOES NOT MEAN THAT THE CLAIMS MADE ARE AUT OMATICALLY ALLOWED AND THERE ARE PROVISIONS UNDER THE ACT TO EXAMINE THE C LAIMS OF THE SAID TRUST EVEN THOUGH THERE IS A REGISTRATION OF THE TRUST UN DER THE ACT. THE REGISTRATION OF TRUST MAY NOT DEPRIVE THE DEPARTMEN T IN EXAMINATION THE CLAIMS SEPARATELY, BUT THOSE PRINCIPLES ARE INVOKED FOR THE PURPOSE OF SECTION 154, THERE WILL BE UNINTENDED BENEFITS GRAN TED TO VARIOUS ASSESSEES BY SIMPLY NOT APPLYING THE MIND BY THE A.O. IN TIME AS PRESCRIBED UNDER THE STATUTE. IN VIEW OF THIS, THE LEARNED D.R. SUBMITTE D THAT APPLICATION SHOULD NOT BE CONSIDERED ALLOWED JUST BECAUSE NO ORDER H AS BEEN PASSED WITHIN TIME LIMIT PRESCRIBED. THE APPLICATION CAN BE DISPO SED OFF ON MERITS AS CIT(A) HAS CONSIDERED THAT THERE IS NO MERIT IN THE APPLICATION WHICH THE ASSESSEE ALSO ADMITS THAT THE FIRST ISSUE IS NOT BE ING PRESSED. THE ASSESSEE HAS NO MERIT IN THE CLAIMS BEING A DEBATABLE ISSUE AT THE TIME OF APPLICATION ITSELF. IT IS HIS CONTENTION THAT THE ORDER SHOULD NOT BE CONSIDERED AS NONEST AND SHOULD BE DECIDED ON MERITS. REFERRING TO THE P ROVISIONS OF SECTION 154(8) AGAIN THE LEARNED D.R. SUBMITTED THAT THE ST ATUTE MANDATES PASSING THE ORDER WITHIN 6 MONTHS PERIOD BUT THERE IS NO PR OVISION OF LAW TO TREAT THE APPLICATION WHICH WAS NOT DISPOSED OFF BECOMES DEE MED ALLOWED. IF THAT SITUATION ARISES IT WILL BE INJUSTICE WHERE AN ORDE R IS PASSED REJECTING ASSESSEES APPLICATION, THE ASSESSEE HAS A REMEDY T O GO IN APPEAL WHEREAS THE ORDER WAS NOT PASSED AND DEEMED TO HAVE BEEN AL LOWED, THERE IS NO REMEDY AVAILABLE AS NO APPEAL CAN BE FILED WITHOUT AN ORDER AND NEITHER THE DEPARTMENT NOR THE ASSESSEE CAN CONTEST SUCH A SITU ATION. IT IS HIS SUBMISSION THAT THE APPLICATION SHOULD NOT BE CONSI DERED AS DEEMED ALLOWED BUT IT CAN BE DECIDED ON MERITS RELYING ON VARIOUS PRINCIPLES ESTABLISHED BY THE HON'BLE HIGH COURTS AND HON'BLE SUPREME COURT GIVEN IN THE CONTEXT OF RECTIFICATION UNDER THE ACT. 8. IN REPLY THE LEARNED COUNSEL REFERRED TO VARIOUS PR OVISIONS OF THE ACT OF SECTION 12AA, SECTION 154(8), SECTION 254(2) AND SU BMITTED THAT THE PROVISIONS OF SECTION 12AA(2) AND 154(8) ARE SIMILA R IN WORDING WHEREAS SECTION 254(2) USED THE WORD MAY. IN VIEW OF THAT THE RELIANCE OF THE ITA NO. 6447/MUM/2008 M/S. DESAI INVESTMENT PVT. LTD. 6 HON'BLE SUPREME COURT JUDGEMENT GIVEN IN THE CONTEX T OF SECTION 254(2) DOES NOT ARISE. FURTHER, WITH REFERENCE TO VARIOUS OTHER CASE LAWS RELIED UPON BY THE LEARNED D.R., IT WAS HIS SUBMISSION THA T THESE ARE ORDERS ON WRIT PETITIONS FILED BY THE RESPECTIVE ASSESSEES I N WHICH THE HON'BLE HIGH CURT HAS EXERCISED ITS POWERS AND DIRECTED THE A.O. TO DISPOSE OFF THE APPLICATION AND THOSE DECISIONS WERE GIVEN IN THE C ONTEXT OF OLD PROVISIONS WHERE THERE IS NO PROVISION LIKE SECTION 154(8). AC CORDINGLY IT WAS HIS SUBMISSION THAT ON THE BASIS OF THE ORDERS OF THE C OORDINATE BENCHES GIVEN IN THE CONTEXT OF SECTION 12AA, SINCE THE LEGISLATU RE HAS USED THE WORD SHALL AS AGAINST MAY, THE ASSESSEE URGED TO CON SIDER THAT HIS APPLICATION UNDER SECTION 154 WAS DEEMED TO HAVE ALLOWED. ACCOR DINGLY IT WAS HIS PRAYER THAT THE ORDER OF THE CIT(A) SHOULD BE CANCE LLED AND THE CIT(A) MAY BE DIRECTED TO ALLOW THE PETITION. 9. WE HAVE CONSIDERED THE ISSUE AND PERUSED THE VARIOU S PROVISIONS OF THE ACT. PROVISIONS OF SECTION 12AA RELIED BY THE A SSESSEE COMPARING TO SECTION 154(8), ARE AS UNDER: - 12AA .. (2) EVERY ORDER GRANTING OR REFUSING REGISTRATION U NDER CLAUSE (B) OF SUB- SECTION (1) SHALL BE PASSED BEFORE THE EXPIRY OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION WAS RECEIVED UNDER CLAUSE (A) [OR CLAUSE (AA) OF SUB-SECTION (1)] OF SECTION 12A. 10. INTERPRETING THIS VARIOUS COORDINATE BENCHES OF THE TRIBUNAL INCLUDING THE SPECIAL BENCH IN THE CASE OF BHAGWAD SWARUP SHR I SHRI DEVRAHA BABA MEMORIAL SHRI HARI PARMARCH DHAN TRUST VS. CIT 299 ITR (AT) 161 (DEL) (SB) HAS CONSIDERED THAT IN THE ABSENCE OF AN ORDER PASS ED WITHIN 6 MONTHS, THE APPLICATION MUST BE DEEMED TO HAVE BEEN ALLOWED. 11. THE PROVISIONS OF SECTION 154(7) AND (8) ARE AS UND ER: - 154 (7) SAVE AS OTHERWISE PROVIDED IN SECTION 155 OR S UB-SECTION (4) OF SECTION 186 NO AMENDMENT UNDER THIS SECTION IS MADE AFTER THE EXPIRY OF FOUR YEARS [FROM THE END OF THE FINANCIAL YEAR IN W HICH THE ORDER SOUGHT TO BE AMENDED WAS PASSED.] (8) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECT ION (7), WHERE AN APPLICATION FOR AMENDMENT UNDER THIS SECTION IS MAD E BY THE ASSESSEE ITA NO. 6447/MUM/2008 M/S. DESAI INVESTMENT PVT. LTD. 7 ON OR AFTER THE 1 ST DAY OF JUNE, 2001 TO AN INCOME-TAX AUTHORITY REFER RED TO IN SUB-SECTION (1), THE AUTHORITY SHALL PASS AN ORDER, WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE A PPLICATION IS RECEIVED BY IT, - (A) MAKING THE AMENDMENT; OR (B) REFUSING TO ALLOW THE CLAIM. 12. IN BOTH THE SITUATIONS THE AUTHORITY WAS MANDATED T O PASS THE ORDER BY THE LEGISLATURE USING THE WORD SHALL AND ACCORDINGLY THERE IS JUSTIFICATION IN THE CONTENTIONS RAISED BY THE LEAR NED COUNSEL IN HIS ARGUMENT. 13. HOWEVER, ON A CARE FULL ANALYSIS OF THE CONTENTIONS OF BOTH PARTIES WE ARE OF THE VIEW THAT JUST BECAUSE THERE ARE SIMILAR LY USED PHRASEOLOGY SHALL AVAILABLE IN BOTH THE PROVISIONS, THE PRINCIPLES ES TABLISHED WHILE CONSIDERING THE REGISTRATION CANNOT BE INVOKED FOR RECTIFICATIO N OF MISTAKES UNDER SECTION 154. AS SUBMITTED BY THE LEARNED D.R. THE REGISTRAT ION OF TRUST DOES NOT ESTABLISH ANY RIGHTS TO EITHER PARTIES AND THE CLAI MS OF EXEMPTIONS ARE TO BE EXAMINED BY THE A.O. IN THE COURSE OF ASSESSMENT PR OCEEDINGS AS MANDATED UNDER SECTION 11, 13, ETC. ACCORDINGLY, EVEN THOUGH REGISTRATION IS ONE OF THE PRESCRIBED METHODS, THE ASSESSEES DO NOT GET ANY RI GHT AUTOMATICALLY TO CLAIM EXEMPTION UNDER THE ACT AS THERE ARE OTHER PR OVISIONS TO SAFEGUARD VARIOUS CLAIMS. HOWEVER, IN THE CASE OF APPLICATION UNDER SECTION 154, FIRST OF ALL IT HAS TO BE SEEN WHETHER THERE IS ANY RECTI FIABLE MISTAKE OR NOT. AS CONSIDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF THE ITO VS. VOLKART BROTHERS 82 ITR 80, A MISTAKE APPARENT FROM RECORD MUST BE AN OBVIOUS AND APPARENT MISTAKE AND NOT SOMETHING WHICH CAN BE EST ABLISHED BY A LONG DRAWN PROCESS AND RAISING OF POINTS ON WHICH THERE MAY BE CONCEIVABLE TWO OPINIONS. THE DECISION ON DEBATABLE POINT IS NOT A MISTAKE APPARENT FROM RECORD. ACCORDINGLY ONCE A PETITION HAS BEEN FILED , IT REQUIRES APPLICATION OF MIND PRIMARILY TO DECIDE WHETHER THERE IS A MISTAKE APPARENT FROM RECORD UNDER THE PROVISIONS OF THE ACT. THEN ONLY THE QUES TION OF ALLOWING OR REJECTING THE ISSUE WILL COME INTO PICTURE. IN VIEW OF THIS, DEEMED ALLOWANCE OF APPLICATION DOES NOT OR SHOULD NOT ARISE AND THE A.O. OR THE OTHER ITA NO. 6447/MUM/2008 M/S. DESAI INVESTMENT PVT. LTD. 8 AUTHORITIES UNDER THE ACT HAVE TO PASS AN ORDER EIT HER ALLOWING OR REJECTING THE CLAIM EVEN IF IT IS BELATED. 14. SIMILAR ISSUE CAME UP IN CONSIDERING THE PROVISIONS OF SECTION 256(1), NOW OMITTED. SECTION 256(1) REQUIRED THE TRIBUNAL, IF IT THINKS THAT A REFERENCE TO BE MADE, DRAW UP A STATEMENT OF THE CA SE AND REFER TO THE HIGH COURT WITHIN 120 DAYS OF THE REPLY OF THE APPLICATI ON FOR REFERENCE. THE PROVISION, ALSO EMPLOYED THE WORD SHALL , IS CONSIDERED ONLY DIRECTORY AND NOT MANDATORY AND HELD THAT A REFERENCE MADE AFTER EXPIRY OF THE PRESCRIBED PERIOD DOES NOT ON THAT COUNT BECOME INVALID OR INC OMPETENT IN THE CASE OF RAJA BENOY KUMAR SAHAS ROY VS. CIT 24 ITR 70 (CAL) ON APPEAL 32 ITR 466 (SC). 15. FURTHER, THE PROVISIONS OF SECT IN 254(2) EMPOWERS THE ITAT FOR RECTIFYING ITS ORDERS. EVEN THOUGH NOT SPECIFICALLY PROVIDED UNDER SECTION 250 OR 251, AS CIT(A) IS AN INCOME TAX AUTHORITY, PROVI SIONS OF SECTION 154 ARE ALSO MADE APPLICABLE TO THE ORDERS UNDER SECTION 25 0 PASSED BY THE CIT(A). THE POWERS OF RECTIFYING MISTAKE OF THE JUDICIAL OR DERS ARE MORE OR LESS SIMILAR TO THE POWERS GRANTED TO THE ITAT UNDER SEC TION 254(2). PROVISIONS OF SECTION 254(2) ARE AS UNDER: - 254 .. (2) THE APPELLATE TRIBUNAL MAY , AT ANY TIME WITHIN FOUR YEARS FROM THE DATE OF THE ORDER, WITH A VIEW TO RECTIFYING ANY MI STAKE 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 .: [PROVIDED FURTHER] ( OMITTED AS NOT RELEVANT FOR THE DISCUSSION) 16. AS ANALYSED BY THE HON'BLE SUPREME COURT IN THE CAS E OF SREE AYYANAR SPINNING AND WEAVING MILLS LTD. VS. CIT 301 ITR 434 SECTION 254(2) IS IN TWO PARTS AND UNDER THE FIRST PART, THE TRIBUNAL MAY , AT ANY TIME, WITHIN FOUR YEARS FROM THE DATE OF THE ORDER, RECTIFY ANY MISTAKE APPARENT FROM THE RECORD AND AMEND ANY ORDER PASSED BY IT UNDER SUB-S ECTION (1). UNDER THE SECOND PART OF SECTION 254(2) REFERENCE IS TO THE A MENDMENT OF THE ORDER PASSED BY THE TRIBUNAL UNDER SUB-SECTION (1) WHEN T HE MISTAKE IS BROUGHT TO ITA NO. 6447/MUM/2008 M/S. DESAI INVESTMENT PVT. LTD. 9 ITS NOTICE BY THE ASSESSEE OR THE AO. THEREFORE, IN SHORT, THE FIRST PART OF SECTION 254(2) REFERS TO SUO MOTU EXERCISE OF THE P OWER OF RECTIFICATION BY THE TRIBUNAL WHEREAS THE SECOND PART REFERS TO RECTIFIC ATION AND AMENDMENT ON AN APPLICATION BEING MADE BY THE AO OR THE ASSESSEE PO INTING OUT THE MISTAKE APPARENT FROM THE RECORD. IN THIS CASE WE ARE CONCE RNED WITH THE SECOND PART OF SECTION 254(2). AS STATED ABOVE THE APPLICATION FOR RECTIFICATION WAS MADE WITHIN FOUR YEARS. APPLICATION WAS WELL WITHIN FOUR YEARS. IT IS THE TRIBUNAL WHICH TOOK ITS OWN TIME TO DISPOSE OF THE APPLICATI ON. THEREFORE, IN THE CIRCUMSTANCES, IT WAS HELD THAT THE HIGH COURT HAD ERRED IN HOLDING THAT THE APPLICATION COULD NOT HAVE BEEN ENTERTAINED BY THE TRIBUNAL BEYOND FOUR YEARS. THE IMPUGNED JUDGMENT OF THE HIGH COURT WAS SET ASIDE AND THE APPEAL WAS RESTORED ON THE FILE OF THE MADRAS HIGH COURT FOR FRESH DECISION ON THE MERITS OF THE MATTER. 17. AS CAN BE SEEN FROM THE ABOVE, EVEN THOUGH THE LEAR NED COUNSEL TRIED TO DISTINGUISH THAT THE WORDS USED IN SECTION 254(2 ) WAS MAY ,THE SECOND PART OF THE PROVISIONS OF SECTION 254(2) USES THE W ORD SHALL IF THE MISTAKE IS BROUGHT TO ITS NOTICE BY THE ASSESSEE OR THE A.O. I T MEANS THAT THE TRIBUNAL MAY NOT HAVE ANY POWER TO RECTIFY ANY MISTAKE WHICH HAS COME TO ITS NOTICE SUO MOTO AFTER FOUR YEARS, WHEREAS IT CAN MAKE SUC H AMENDMENTS, IF THE MISTAKE IS BROUGHT TO ITS NOTICE BY THE ASSESSEE OR THE A.O WITH IN FOUR YEARS BY AN APPLICATION VALIDLY. THE USE OF WORD SHALL IS SIMILAR TO THE WORD USED IN SECTION 154(8) AS WELL. IN VIEW OF THE SIMILARIT Y IN THE PROVISIONS OF SECTION 254(2) AND SECTION 154(8), WITH REFERENCE TO THE PO WERS OF THE CIT(A) WE ARE OF THE OPINION THAT THE PRINCIPLES ESTABLISHED BY T HE HON'BLE SUPREME COURT IN THE ABOVE REFERRED CASE WILL APPLY EQUALLY. IN T HE CIRCUMSTANCES, THOUGH THE CIT(A) HAS PASSED THE ORDER BEYOND THE PERIOD P RESCRIBED UNDER SECTION 154(7) AS WELL AS 154(8), SINCE THE APPLICATION WAS MADE WITHIN THE 4 YEAR PERIOD, THE ORDER PASSED CONSEQUENTIALLY CANNOT BE HELD TO BE TIME BARRED OR BAD IN LAW. IN VIEW OF THIS THE ISSUE RAISED BY THE ASSESSEE IN ADDITIONAL GROUND NOS. 1, 2 & 3 DOES NOT SURVIVE AND SO THEY A RE REJECTED. 18. NOW COMING TO THE MERITS THE CIT(A) HAS REJECTED TH E PETITION INVOKING THE PRINCIPLES ESTABLISHED BY THE HON'BLE SUPREME C OURT IN THE CASE OF ITA NO. 6447/MUM/2008 M/S. DESAI INVESTMENT PVT. LTD. 10 VOLKART BROTHERS REFERRED ABOVE. HOWEVER, IN THE BR IEF ORDER EXTRACTED ABOVE IN PARA 2, THE CIT(A) HAS NOT CONSIDERED THE ISSUES AT ALL ON MERITS AND HAS NOT EVEN DISCUSSED WHAT ARE THE ISSUES RAISED BY TH E ASSESSEE AND HOW THEY ARE NOT MISTAKE APPARENT FROM RECORD. THE CIT(A) HA S FORMED AN OPINION AND DISMISSED THE PETITION, BUT THE REASONS FOR THE OPI NION COULD NOT BE GATHERED FROM THE BRIEF ORDER. WE ARE OF THE VIEW THAT THE C IT(A) HAS TO PASS A DETAILED ORDER WHETHER THERE IS ANY RECTIFIABLE MISTAKE OR N OT AND IF SO WHETHER THE PETITION CAN BE CONSIDERED ON MERITS. FOR THIS PURP OSE, WHILE UPHOLDING THE PASSING OF THE ORDER BEYOND DUE DATE, WE, HOWEVER, SET ASIDE THE ORDER WITH A DIRECTION TO THE CIT(A) TO CONSIDER ASSESSEES AP PLICATION ON MERITS AFRESH AND PASS A DETAILED ORDER. NEEDLESS TO SAY THAT THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY. THE GROUNDS RAISED ARE CONSIDERED A LLOWED TO THAT EXTENT. 19. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH 2010. SD/- SD/- (R.K. GUPTA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31 ST MARCH 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) II, MUMBAI 4. THE CIT II, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.