Kantilal Jain, Bangalore V. Income Tax Officer, Ward-3(3)(1), Bangalore

MA 138/BANG/2022

AI Insights

The case involves Kantilal Jain, the appellant, who filed a miscellaneous petition against an order of the Income Tax Appellate Tribunal concerning the assessment year 2017-18. The original appeal addressed issues related to additions to income from other sources, short grant of TDS credit, and levy of interest under section 234B of the Income-tax Act, 1961. The Tribunal's earlier decision remitted the issue of taxation of net amounts from insurance premiums to the Assessing Officer, provided no deductions under section 80C were claimed. The appellant contended that this condition was a mistake of law, as section 10(10D) does not stipulate such a condition. However, the Tribunal dismissed the petition, reiterating its lack of authority to review or recall its decisions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129978 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 22-02-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-02-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 01-12-2022
• Other Referred Cases: ITO v Bir Engg. Works [2005] 94 ITD 164 (ASR.)(SB), Bharath Biotech International Ltd. v DClT (2015) 57 taxmann.com 117 (Hyd - Trib), CIT vs. Pearl Woollen Mills (330 ITR 164), CIT vs. Hindustan Coca Cola Beverages (P) Ltd. (2007) 207 CTR (Del) 119; (2007) 293 ITR 163 (Del)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rectification of order; Reasonable cause; TDS
• Section: 80C; 234B; 10(10D); 207; 254(2)

Judgement Text

MP No.138/Bang/2022 Kantilal Jain, Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” “A’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER MP No.138/Bang/2022 (Arising out of ITA No.579/Bang/2022) Assessment Year: 2017-18 Kantilal Jain #34, Kumbarpet Main Road Kumbarpet Bangalore 560 002 PAN NO : ABEPJ7246C Vs. ITO Ward-3(3)(1) Bangalore APPELLANT RESPONDENT Appellant by : Shri B.R. Sudheendra, A.R. Respondent by : Shri Ganesh R. Ghale, Standing Counsel for Department Date of Hearing : 17.02.2023 Date of Pronouncement : 23.02.2023 O R D E R By this miscellaneous petition, assessee seeks rectification/recall of order of the Tribunal dated 18.8.2022 in ITA No.579/Bang/2022. The ld. A.R. submitted that assessee came in appeal before this Tribunal and raised the grounds with regard to additions to income from other sources based on 26AS, short grant of TDS credit and levy of interest u/s 234B of the Income-tax Act,1961 ['the Act' for short]. While disposing of the appeal, the Tribunal given an finding in para 8 of the order as follows: “8. From a reading of the aforesaid observation as well as taking note of contention of the assessee in respect of premium paid to the insurance company cannot be brought to tax subject to the MP No.138/Bang/2022 Kantilal Jain, Bangalore Page 2 of 8 fact that assessee shall not avail deduction u/s 80C of the Act in respect of premium paid towards that insurance policy. Being so, we remit this issue to the file of AO to consider only net amount as discussed above to taxation provided assessee has not claimed deduction u/s 80C of the Act in respect of premium paid on life insurance policy or claimed any deduction u/s 10(10D) of the Act. With this observation, we remit this issue to the file of AO for fresh consideration after hearing to the assessee.” 2. Accordingly, the ld. A.R. submitted that the Tribunal has directed the AO to consider only net amount as discussed above to taxation provided assessee has not claimed deduction under section 80C of the Act in respect of premium paid on life insurance policy. However, there is no such condition in section 10(10D) of the Act that the net amount is taxable only if the assessee has not claimed deduction under section 80C of the Act. In fact, section 80C(2)(i) provides a deduction in respect of sums paid to effect or to keep in force an insurance on the life of persons specified in sub-section (4). Sub-section (3) of section 80C of the Act which states the following: “(3) The provisions of sub-section (2) shall apply only to so much of any premium or other payment made on an insurance policy, other than a contract for a deferred annuity, issued on or before the 31st day of March, 2012, as is not in excess of twenty per cent of the actual capital sum assured.” 2.1 As per the above provision, deduction under section 80C is allowable up to 20 per cent of sum assured in respect of an insurance policy issued before 31.03.2012. In other words, if life insurance premium paid is more than 20 per cent of capital sum assured in a life insurance policy issued before 31.03.2012, the excess i.e.. premium paid in excess of 20% of sum assured is not eligible for deduction under section 80C. Alternatively, even in respect of life insurance policies, income from which, is not eligible for exemption under section 10(10D), deduction under section 80C is allowable for premium paid to the extent of 20% of sum assured. There is no such condition under section 80C of the Act that deduction under section 80C is not allowable if premium paid is in excess of 20% of capital sum assured. Deduction under section 80C MP No.138/Bang/2022 Kantilal Jain, Bangalore Page 3 of 8 of the Act is allowable even in respect of such cases to the extent of premium paid or 20% of sum assured whichever is less. In the present case, the life insurance policy was issued on 28.10.2006. The capital sum assured on such policy was Rs. 10,00,000. The half yearly premium was Rs. 1,06,275 for 5 years. Annual premium payable amounted to Rs. 2,12,550. The details of premium paid and the permissible limits of deduction allowable under section 80C are tabulated as under: Financial year Total premium paid (Rs.) Maximum for claim as 80C(3) – 20% assured of 10,00,000 Over all limit of deduction permissible under section 80C (Rs.) Deduction claimed u/s 80C in the IT return (Rs.) 2006-07 1,06,275 2,00,000 1,00,000 1,00,000 2007-08 2,12,550 2,00,000 1,00,000 1,00,000 2008-09 2,12,550 2,00,000 1,00,000 1,00,000 2009-10 2,12,550 2,00,000 1,00,000 1,00,000 2010-11 2,12,550 2,00,000 1,00,000 1,00,000 2011-12 1,06,275 2,00,000 1,00,000 1,00,000 2.2 The ld. A.R. submitted that it may be observed from the above that the petitioner has claimed deduction under section 80C in respect of premium paid on life insurance policy under consideration, within the permissible limits as specified. Therefore, the direction of the Tribunal that the petitioner should not have claimed any deduction under section 80C in respect of premium paid on life insurance policy is a mistake of law apparent from record. The ld. A.R. relied on the order of coordinate bench of the Amritsar Bench of Tribunal (Special Bench) in the case of ITO v Bir Engg. Works [2005] 94 ITD 164 (ASR.)(SB) wherein held that as per provisions of section 254(2), Tribunal is vested with powers to rectify mistakes of law or facts. Further he relied on the coordinate bench of Hyderabad Tribunal in the case of Bharath Biotech International Ltd. v DClT (2015) 57 taxmann.com 117 (Hyd MP No.138/Bang/2022 Kantilal Jain, Bangalore Page 4 of 8 - Trib), wherein held that if the Tribunal has omitted to consider a ground of appeal taken before it or if it has failed to pass such order or to issue such directions which were necessary for proper adjudication of subject-matter of appeal, it is a mistake apparent from record. Such mistake can be rectified by amending the order in the course of deciding the miscellaneous application. 3. On the other hand, the ld. D.R. submitted that there is no mistake apparent on record, which warrants the rectification or recall of the order of the Tribunal cited (supra). 4. I heard both the parties and perused the material on record. The argument of the AR is totally misconceived. The Tribunal considered the issue in dispute in its order and given a categorical finding on the issues before Tribunal. Now, the assessee's counsel wants to re-argue the case for which the Tribunal has no power to review its own order. 4.1 It is well settled that statutory authority cannot exercise power of review unless such power is expressly conferred. There is no express power of review conferred on this Tribunal. Even otherwise, the scope of review does not extent to re-hearing of the case on merit. It is held in the case of CIT vs. Pearl Woollen Mills (330 ITR 164): “Held, that the Tribunal could not readjudicate the matter under section 254(2). It is well settled that a statutory authority cannot exercise power of review unless such power is expressly conferred. There was no express power of review conferred on the Tribunal. Even otherwise, the scope of review did not extent to rehearing a case on the merits. Neither by invoking inherent power nor the principle of mistake of court not prejudicing a litigant nor by involving doctrine of incidental power, could the Tribunal reverse a decision on the merits. The Tribunal was not justified in recalling its previous finding restoring the addition, more so when an application for the same relief had been earlier dismissed.” MP No.138/Bang/2022 Kantilal Jain, Bangalore Page 5 of 8 4.2 The scope and ambit of application of section 254(2) is very limited. The same is restricted to rectification of mistakes apparent from the record. I shall first deal with the question of the power of the Tribunal to recall an order in its entirety. Recalling the entire order obviously would mean passing of a fresh order. That does not appear to be the legislative intent. The order passed by the Tribunal under s. 254(1) is the effective order so far as the appeal is concerned. Any order passed under s. 254(2) either allowing the amendment or refusing to amend gets merged with the original order passed. The order as amended or remaining un-amended is the effective order for all practical purposes. An order under s. 254(2) does not have existence de hors the order under s. 254(1). Recalling of the order is not permissible under s. 254(2). Recalling of an order automatically necessitates rehearing and re- adjudication of the entire subject-matter of appeal. The dispute no longer remains restricted to any mistake sought to be rectified. Power to recall an order is prescribed in terms of Rule 24 of the ITAT Rules, 1963, and that too only in case where the assessee shows that it had a reasonable cause for being absent at a time when the appeal was taken up and was decided ex-parte. Judged in the above background the order passed by the Tribunal is indefensible. 4.3 The words used in s. 254(2) are ‘shall make such amendment, if the mistake is brought to its notice’. Clearly, if there is a mistake, then an amendment is required to be carried out in the original order to correct that particular mistake. The provision does not indicate that the Tribunal can recall the entire order and pass a fresh decision. That would amount to a review of the entire order and that is not permissible under the IT Act. The power to rectify a mistake under s. 254(2) cannot be used for recalling the entire order. No power of review has been given to the Tribunal under the IT Act. MP No.138/Bang/2022 Kantilal Jain, Bangalore Page 6 of 8 Thus, what it could not do directly could not be allowed to be done indirectly. 4.4 In the case of CIT vs. Hindustan Coca Cola Beverages (P) Ltd. (2007) 207 CTR (Del) 119; (2007) 293 ITR 163 (Del), their Lordships while considering the powers of the Tribunal under s. 254(2) of the IT Act, 1961 observed as under: “Under s. 254(2) of the IT Act, 1961, the Tribunal has the power to rectify mistakes in its order. However, it is plain that the power to rectify a mistake is not equivalent to a power to review or recall the order sought to be rectified. Rectification is a species of the larger concept of review. Although it is possible that the pre-requisite for exercise of either power may be similar (a mistake apparent from the record), by its very nature the power to rectify a mistake cannot result in the recall and review of the order sought to be rectified.” 4.5 Thus the scope and ambit of application u/s. 254(2) is as follows: a) Firstly, the scope and ambit of application of s. 254(2) of IT Act is restricted to rectification of the mistakes apparent from the record. b) Secondly, that no party appearing before the Tribunal should suffer on account of any mistake committed by the Tribunal and if the prejudice has resulted to the party, which prejudice is attributable to the Tribunal’s mistake/error or omission, and which an error is a manifest error, then the Tribunal would be justified in rectifying its mistake. The “rule of precedent” is an important aspect of legal certainty in the rule of law and that principle is not obliterated by s. 254(2) of the Act and non-consideration of precedent by the Tribunal causes a prejudice to the assessee. MP No.138/Bang/2022 Kantilal Jain, Bangalore Page 7 of 8 c) Thirdly, power to rectify a mistake is not equivalent to a power to review or recall the order sought to be rectified. d) Fourthly, under s. 254(2) an oversight of a fact cannot constitute an apparent mistake rectifiable under the section. e) Fifthly, failure on the part of the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on record, although it may be an error of judgement. f) Sixthly, even if on the basis of a wrong conclusion the Tribunal has not allowed a claim of the party it will not be a ground for moving an application under s. 254(2) of the Act. g) Lastly, in the garb of an application for rectification under s. 254(2) the assessee cannot be permitted to reopen and reargue the whole matter as the same is beyond the scope of s. 254(2) of the IT Act. 4.6 In view of the above discussion, I find no merit in the argument of the assessee's counsel. The Tribunal cannot review its own order and the remedy lies elsewhere. I do not find any mistake apparent on record which warrants rectification of Tribunal's order. Accordingly, the ground raised by the AR is rejected. 4.7 However, I make it clear that the addition is to be restricted to the amount received over and above the sum assured and to the extent of deduction claimed u/s 80C of the Act on premium paid. MP No.138/Bang/2022 Kantilal Jain, Bangalore Page 8 of 8 5. In the result, the MP filed by the assessee is dismissed. Order pronounced in the open court on 23 rd Feb, 2023 Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 23 rd Feb, 2023. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.