Rajarathnam's Jewels, Bengaluru V. Assistant Commissioner Of Income Tax, Circle-1(1), Bangalore

MA 12/BANG/2023

AI Insights

The case involves M/s. Rajaratnam's Jewels, which filed a miscellaneous application under Section 254 of the Income Tax Act, 1961, seeking rectification of an earlier Tribunal order dated 28.10.2022. The Tribunal had previously dismissed the assessee's appeal concerning the assessment year 2013-14, citing differences in facts compared to earlier years (2006-07 to 2012-13) where similar issues were ruled in the assessee's favor. The assessee argued that the Tribunal had erred by not considering relevant documents and precedents that supported their case. However, the Tribunal, referencing a Supreme Court decision, clarified that its powers under Section 254(2) are limited to rectifying mistakes apparent from the record and do not extend to reviewing the merits of the case.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 115323 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-04-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-02-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 15-12-2022
• Other Referred Cases: CIT v. Reliance Telecom Ltd. [2021] 133 taxmann.com 41 (SC)/[2022] 284 Taxman 517 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 254(2); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU “B” BENCH, BENGALURU Before Shri N.V. Vasudevan, Vice President and Shri Laxmi Prasad Sahu, Accountant Member MP No. 12/Bang/2023 (Arising out of ITA No. 370/Bang/2022) (Assessment Year: 2013-14) M/s. Rajaratnam's Jewels B-12, Devatha Plaza Bengaluru 560025 PAN – AABFR5632E vs. ACIT, Circle - 1(1) Bengaluru (Appellant) (Respondent) Assessee by: Shri H. Anil Kumar, CA Revenue by: Shri Gudimella VP Pavan Kumar, JCIT Date of hearing: 10.02.2023 Date of pronouncement: 10.04.2023 O R D E R Per: Laxmi Prasad Sahu , A.M. This miscellaneous application under Section 254 of the Income Tax Act, 1961 (the Act) is filed by the assessee seeking rectification of the order of the Tribunal dated 28.10.22 in ITA No. 370/Bang/2022 as follows:- MP No. 12/Bang/2023 Page 2 of 10 “2. The Present Order dated 28.10.2022 has been passed by this Honourable Bench dismissing Ground No.4, in the Petitioners appeal, through on the date of the hearing, on August 10th, 2022, the Honourable Members after going through Paragraph 8 to 15 of the Hon'ble ITAT 'C' Bench, Benglauru in its order in ITA No 1344 to 1350/Bang/2017 in appellant's own case for Asst. Year 2006-07 to 2012-13 (Earlier Tribunal Order) appeared to have accepted the ground that the case was covered in Petitioner's favour and the hearing was closed without finding necessity for further discussion on the merits of the case. Accordingly, the extensive documents which were filed before the Honourable Tribunal in ITA No 1344 to 1350/Bang/2017 were not filed in this case. Surprisingly, the issue has now been decided against the Petitioner, without the Honourable Bench having all the relevant documents on record and no further arguments made on the merits of the case. 3. The Honourable Tribunal has now erred in holding in Paragraph 22 of the Present Order that the Earlier Tribunal Order did not go into the merits of the case and the said order was not relevant for A Y 2013-14, ignoring the clear findings in Paragraph 8 to15 of the Earlier Tribunal Order which was the basis for conclusion in Paragraph 16 of the said order. 4. The Present Tribunal Order while holding that the Earlier Tribunal Order was not relevant to the facts of the case has missed the finding in Paragraph 15 of the Earlier Tribunal Order, where in the Honourable Tribunal has held : " The facts prevailing in the present case are totally different. All along the assessee has been showing that the impugned gold of 17.319 kgs belong to the family members only and not the assessee firm. Further, the assessee has been paying the user fees to some of the family members for using the gold. Hence, we are of the view that the above said decision is not applicable to the fact of the present case". MP No. 12/Bang/2023 Page 3 of 10 The "above said decision" referred to therein relates to the case of Rajatha Jewellers, where the jewellery was found by the Honourable Karnataka High Court to form part and parcel of the book stock and reliance on the said decision by the A.O. was rejected in the Earlier Tribunal Order. 5. The Present Tribunal Order has erred in holding that the Earlier Tribunal Order is not relevant to assessment year 2013-14 when there is a clear observation made in Paragraph 10 of the order that the method of accounting followed by the Petitioner could not be found fault with and the clear findings in Paragraph 15 above. 6. The Honourable Tribunal despite having the findings in the Paragraphs 8 to 15 of the Earlier Tribunal Order before it, erred in embarking on a fresh examination of the issue whether the partners of the firm have treated the family gold as an asset of the firm when there was nothing new emanating in the current financial year requiring a fresh examination. 7. The conclusion of the Honourable Tribunal in Paragraph 26 of the Present Order that "the jewellery was brought into the firm as contribution by the partners and the firm has ownership over the same" is in absolute contradiction to the findings in the Earlier Tribunal Order (referred to supra) 8. The reasoning that " It is not possible for the firm on one hand to exercise its right, to sell the jewellery and on the other hand to hold the jewellery in trust" has been made i) without having the agreements before it ii) No such finding is there in the Earlier Tribunal Order. iii) and which it is humbly submitted should not be relevant to the issue when there is an obligation to return the jewellery in specie as already observed by the Honourable Members. MP No. 12/Bang/2023 Page 4 of 10 9. The reasoning that the firm is showing the jewellery as its asset in the Revised Balance Sheet filed by the Assessee is not as per facts and is also not valid for the following reasons : i) There was no such revised Balance sheet ii) A redrafted Balance Sheet was only prepared during the course of the hearings to show the A.O. that the Profit remains unaffected by taking the third party gold as an asset in the books, which has been corroborated in Paragraph 2.1 of the assessment order. iii) There is a clear comment in Paragraph 10 of the Earlier Tribunal Order that the method of accounting followed by the Petitioner could not be found fault with. iv) There is an observation in Paragraph 11 of the Earlier Tribunal Order which is not considered. "11. During the course of hearing, the Ld A.R submitted that the assessee has been following very same method since many years and the same has been accepted by the assessing officer. He invited our attention to pages 93 to 95 of the paper book, which contains a statement taken from one of the partners of the assessee in the earlier survey operations conducted on 16.03.2001. In answer given to question no.5, the partner has reconciled the physical gold stock, after including gold of 17.319 kgs belonging to family members. It was not shown to us that the above said reconciliation of physical gold stock was not accepted by the revenue. This fact would show that the assessing officer is well aware of the fact that the gold belonging to family members were taken by the assessee as metal loan way back before 2001 itself It also shows that the assessee is consistently following the practice of including the metal loan in its stock register as belonging to family members without showing the same as its own stock. We also notice that the assessee has been consistently not showing the value of gold as capital contribution/liability." MP No. 12/Bang/2023 Page 5 of 10 10. The conclusion in the Present Order that the statement recorded in the second survey of the partners also confirms the fact that the gold jewellery of the firm was treated as an asset of the firm is without basis and i) merely relies on certain extracts of the sworn statement in the assessment order without having the full sworn statement before it, ii) does not have the extract of the sworn statement recorded in the first survey for comparison, iii) Ignores the findings of the first survey, iv) Presumes that the family gold as received in its original shape was not melted/sold at the time of the first survey, and it happened subsequently, v) Ignores the conduct of the Petitioner since inception of the agreements of excluding the stock held "in trust" from the opening and closing physical stock of gold in arriving at the profits of the Petitioner which was accepted in Paragraph 15 of the Earlier Tribunal Order. vi) Ignores the fact that the return for A Y 2005-06 was already accepted in assessment under Section 143(3), which is fact was noted by the Honourable Tribunal Paragraph 12 of the Earlier Tribunal Order. vii) Ignores the clear understanding of the facts of the case as recognised in the Earlier Tribunal Order in particular Paragraph 11 and Paragraph 15. 11. This Present Order is passed ignores the findings in Paragraph 12 of the Earlier Order of the Honourable Tribunal regarding relatives' gold. 12. The Present Order is erroneous as while supporting the conclusion of the A.O that when the stock of the partner/family member of a partner can be sold by the Assessee and when the Assessee is duty bound only to return the quantity of gold in specie and not the actual MP No. 12/Bang/2023 Page 6 of 10 jewellery deposited, there was a conversion of the partners asset as an asset of the firm, and sustains the addition without requiring the A.O to give deduction for equal amount of liability towards value of the partners' and relatives' gold which as per the findings in the Present Order also are required to be returned. There is no explanation as to why this Honourable Bench has not required the AO to grant deduction for the said liability. 13. Accordingly, as no new facts have emerged in Asst. Year 2013-14 to differ from the findings on the facts of the case as brought out in the Earlier Tribunal Order, the Honourable Tribunal rectify its Present Order dated 28-10-2022 and allow the appeal as covered by the Earlier Tribunal Order. OR Modify the said Present Order directing the A 0 to grant deduction of equal amount, towards the liability of the Petitioner towards the gold to be returned in specie, which are required to be returned as per the Honourable Tribunal's own findings in the Present Order.” 2. The ld. AR vehemently argued that the Tribunal has dismissed the appeal of the assessee without appreciating facts submitted by the ld. AR for the assessee during the course of hearing of the appeal that it was covered by the decision of the Tribunal in assessee’s own case for AYs 2006-07 to 2012-13 in ITA Nos. 1344 to 1350/Bang/2017 wherein it was held that the assessee has been consistently not showing the value of gold as capital contribution /liability. Accordingly, the extensive documents filed in the assessee’s case for earlier AYs were not filed in this case and no further arguments were made on the merits of the case by the assessee. It was submitted that the Tribunal erred in holding that the earlier order of the Tribunal in assessee’s own case for MP No. 12/Bang/2023 Page 7 of 10 AYs 2006-07 to 2012-13 was not relevant for AY 2013-14 under consideration wherein in para 10 of that order it was held that the method of accounting followed by the Petitioner could not be found fault with. 3. On the other hand, the ld. DR relied on the order of the Tribunal and submitted that the Tribunal has rightly decided the issue in favour of revenue by taking into account all the relevant facts and material available on record and also the agreements executed on 1.11.1998. The duration of the agreement was for 3 years and thereafter no documents showing renewal of the agreement was produced before the revenue authorities or before the Tribunal. As per the agreement, clause 5 to 11 are more relevant and during the course of survey statement, the partners have categorically accepted that gold initially deposited is in stock in the business of the assessee. The Tribunal has considered all the relevant aspects as well as legal issues and merits of the case & considering the Partnership Act also. The ld DR submitted that by way of this petition, the assessee prima facie seeks to review the order passed by the Tribunal which is not permissible and relied on the judgment of the Hon’ble Supreme Court in CIT v. Reliance Telecom Ltd. [2021] 133 taxmann.com 41 (SC)/[2022] 284 Taxman 517 (SC). 4. We have heard both the sides and perused the entire material on record. The contention of the assessee is that the Tribunal failed to appreciate that gold of 17.319 kg. still belonged to the family members MP No. 12/Bang/2023 Page 8 of 10 and partners who had contributed as per agreement dated 1.11.1998 as held in its order in assessee’s own case for earlier assessment years. The Tribunal in its order dated 28.10.2022 has considered all the relevant facts before coming to the conclusion that the earlier order of the Tribunal was distinguishable on facts for the present AY 2013-14 and has passed a detailed order in dismissing the appeal of the assessee. We find no apparent error in the order of the Tribunal warranting any rectification. The Hon’ble Supreme Court in Reliance Telecom Ltd. (supra) has held as follows:- “3.1 We have considered the order dated 18-11-2016 passed by the ITAT allowing the miscellaneous application in exercise of powers under section 254(2) of the Act and recalling its earlier order dated 6-9-2013 as well as the original order passed by the ITAT dated 6-9-2013. 3.2 Having gone through both the orders passed by the ITAT, we are of the opinion that the order passed by the ITAT dated 18- 11-2016 recalling its earlier order dated 6-9-2013 is beyond the scope and ambit of the powers under section 254(2) of the Act. While allowing the application under section 254(2) of the Act and recalling its earlier order dated 6-9-2013, it appears that the ITAT has re-heard the entire appeal on merits as if the ITAT was deciding the appeal against the order passed by the C.I.T. In exercise of powers under section 254(2) of the Act, the Appellate Tribunal may amend any order passed by it under sub-section (1) of section 254 of the Act with a view to rectifying any mistake apparent from the record only. Therefore, the powers under section 254(2) of the Act are akin to Order XLVII Rule 1 CPC. While considering the application under section 254(2) of the Act, the Appellate Tribunal is not required to re-visit its earlier order and to go into detail on merits. The powers under section 254(2) of the Act are only to rectify/correct any mistake apparent from the record. MP No. 12/Bang/2023 Page 9 of 10 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 ITAT and merely because the parties might have filed detailed submissions, it does not confer jurisdiction upon the ITAT to pass the order de hors section 254(2) of the Act. As observed hereinabove, the powers under section 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that.” Even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers it may pass an order recalling its earlier order which is an erroneous order, cannot be accepted. As observed hereinabove, if the order passed by the ITAT was erroneous on merits, in that case, the remedy available to the Assessee was to prefer an appeal before the High Court, which in fact was filed by the Assessee before the High Court, but later on the Assessee withdrew the same in the instant case. 5. The contention of the assessee is that the Tribunal ought to have followed its earlier decision in assessee’s own case for AYs 2006-07 to 2012-13. The Tribunal has given a clear finding that the facts of the assessee’s case for earlier years are different from the facts in the present AY 2013-14 and concluded that the earlier years order of Tribunal in assessee’s case was not relevant. The assessee’s plea that its submission that the appeal was covered by earlier years order of Tribunal in assessee’s own case appeared to be accepted during the course of hearing and hence there was no further discussion on merits of the case and hence no further extensive documents was filed before the Tribunal cannot be accepted. The power of the Tribunal u/s. 254(2) of the Act is limited only to rectification of mistakes apparent on the record. The assessee cannot seek a review of the order passed by the Tribunal through miscellaneous petition u/s. 254(2) of the Act, MP No. 12/Bang/2023 Page 10 of 10 as held by the Hon’ble Supreme Court in Reliance Telecom Ltd. (supra). However, the contentions raised in this petition by the assessee is not about the mistakes apparent on record, but rather a review of the conclusion arrived at by the assessee based on earlier years order of the Tribunal in assessee’s own case which is not permissible u/s. 254(2) of the Act. We therefore reject the miscellaneous petition of the assessee. 6. In the result, the miscellaneous petition filed by the assessee is dismissed. Pronounced in the open court on this 10 th day of April, 2023. Sd/- Sd/- ( N V VASUDEVAN ) ( LAXMI PRASAD SAHU ) VICE PRESIDENT ACCOUNTANT MEMBER Bangalore, Dated, the 10 th April, 2023. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.