M/s Synidicate Realtors, Hyderabad V. ITO, Ward-5(3), Hyderabad

MA 176/HYD/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 9381 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 18-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M H NAIK
• Keywords: Capital asset; Reasonable cause; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER MA NO. 176/HYD/2012 IN ITA NO. 188/HYD/2009 AY 2005-06 M/S. SYNDICATE REALTORS HYDERABAD PAN: AANFS8337C VS. THE INCOME TAX OFFICER WARD-5(3), HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI V. SRIDHAR RESPONDENT BY: SRI M.H.NAIK DATE OF HEARING: 16.11.2012 DATE OF PRONOUNCEMENT: 16.11.2012 O R D E R PER CHANDRA POOJARI, AM: THIS MISCELLANEOUS APPLICATION (MA) BY THE ASSESSE E IS SEEKING RECTIFICATION OF THE ORDER OF THE TRIBUNAL DATED 29 TH JANUARY, 2010 IN ITA NO. 188/HYD/2009 FOR A.Y. 2005-06. 2. IN THIS CASE THE ASSESSEE RAISED THE GROUND THAT TH E RATIO LAID DOWN BY THE HONBLE AP HIGH COURT IN THE CASE OF RA JYALAKSHMI TRADING COMPANY (250 ITR 581) IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. THE CASE BEFORE THE HONBLE JURISD ICTIONAL HIGH COURT IS U/S. 45(4) OF THE ACT AND WITH REFERENCE TO THE CA PITAL ASSET AND HAS NO APPLICATION TO STOCK-IN-TRADE WHICH IS NOT A CAPITA L ASSET. THE TRIBUNAL WHILE ADJUDICATING THIS ISSUE DECIDED AGAINST THE A SSESSEE BY HOLDING AS FOLLOWS: '8.1. THE HON'BLE SUPREME COURT IN THE CASE OF ALA FIRM VS. CIT HAVE HELD THAT ON DISSOLUTION OF THE F IRM, VALUATION OF STOCK IN TRADE HAS TO BE MADE AT MARKE T PRICE FOR MUTUAL ADJUSTMENT OF PARTNERS SHARES AND SURPLUS IS PROFIT LIABLE TO TAX. THE RELEVANT DECIS IONS OF THE HON'BLE SUPREME COURT IN THIS CASE IS HELD AS U NDER: 'THERE CAN BE NO MANNER OF DOUBT THAT IN TAKING ACC OUNTS FOR PURPOSES OF DISSOLUTION, THE FIRM AND THE PARTN ERS, M.A. NO. 176/HYD/2012 M/S. SYNDICATE REALTORS =================== 2 BEING COMMERCIAL MEN, WOULD VALUE THE ASSETS ONLY O N REAL BASIS AND NOT AT THE COST OR AT THEIR OTHER VA LUE APPEARING IN THE BOOKS. THE REAL RIGHTS OF THE PART NERS CANNOT BE MUTUALLY ADJUSTED ON ANY OTHER BASIS'. 8.2. IN THE CASE OF SAKTHI TRADING CO. VS. CIT (250 ITR 871) THERE WAS A DISSOLUTION OF THE FIRM FOLLOWING DEATH OF ONE PARTNER. HOWEVER, AS THE FIRM HAS BEEN RECONSTITUTED WITH THE REMAINING PARTNERS AND THERE WAS NO DISCONTINUANCE OF BUSINESS OF THE FIRM, THE HON' BLE SC HAVE HELD THAT THE CLOSING STOCK OF THE FIRM HAS TO BE VALUED AT THE COST OR MARKET PRICE WHICHEVER IS LOW ER. HOWEVER, IT IS PERTINENT TO MENTION HERE THAT IN TH IS CASE THE HON'BLE SC WHILE INDIRECTLY APPROVING THE DECIS ION IN THE ALA FIRMS CASE, HAVE CLEARLY NOTED THAT THE FAC TS IN THEIR EARLIER DECISION IN ALA FIRM'S CASE IS DIFFER ENT. IN THIS CONTEXT, IT IS PERTINENT TO REPRODUCE THE FOLL OWING OBSERVATIONS MADE IN THE SAID DECISION: 'FROM THE ABOVE, IT IS EVIDENT THAT IN ALA FIRM'S C ASE (189 ITR 285), THE COURT WAS CONSIDERING THE QUESTI ON OF VALUATION OF CLOSING STOCK AT MARKET VALUE IN A CAS E WHERE THERE WAS DISSOLUTION AND ALSO DISCONTINUANCE OF TH E BUSINESS OF THE FIRM. IN THAT CASE AFTER DISSOLUTIO N, TWO GROUPS WERE CARRYING ON SEPARATE BUSINESSES WITH TH E ASSETS AND LIABILITIES WHICH FELL TO THEIR SHARES F ROM THE DISSOLUTION OF THE FIRM'. 8.3. IN THE CASE OF RAJLAXMI TRADING CO. VS. CIT C ITED SUPRA WHICH WAS BEFORE THE HON'BLE JURISDICTIONAL H C, THE ASSESSEE WHICH WAS A REGISTERED FIRM, WAS DISSO LVED ON 31.8.1990. UPON SUCH DISSOLUTION, ONE OF THE PAR TNERS TOOK OVER ITS ASSETS AT THE BOOK VALUE OF RS. 2,17, 555. APPLYING THE PROVISIONS OF S. 45(4) OF THE ACT, THE ASSESSING OFFICER HELD THAT THE FAIR MARKET VALUE O F THE TRANSFERRED PROPERTY HAS TO BE TAKEN INTO ACCOUNT A S DETERMINED BY THE DISTRICT REGISTRAR AT RS. 5,36,10 0. HE THUS ADDED THE DIFFERENT AMOUNT OF RS. 3,18,545, IN THE HANDS OF THE ASSESSEE FIRM AS SHORT TERM CAPITAL GA INS. THE SAID ASSESSMENT WAS UPHELD BOTH BY THE CIT(A) A ND HON'BLE ITAT. ON FURTHER APPEAL BY THE ASSESSEE THE HON'BLE JURISDICTIONAL HIGH COURT HELD THAT THE TRI BUNAL WAS RIGHT IN TAKING THE MARKET VALUE AS THE FULL VA LUE OF THE CONSIDERATION RECEIVED OR ACCRUING FOR THE PURP OSE OF COMPUTING THE CAPITAL GAINS AND THUS UPHELD THE ADD ITION MADE IN THE ASSESSMENT. THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AS PER THE HEAD NOTE IS A S HELD UNDER: M.A. NO. 176/HYD/2012 M/S. SYNDICATE REALTORS =================== 3 'THAT THE PROVISIONS OF SECTION 45(4) CLEARLY SHOW THAT ON DISTRIBUTION OF CAPITAL ASSETS, AS A RESULT OF DISS OLUTION OF THE FIRM FOR THE PURPOSE OF SECTION 48, THE FAIR MA RKET VALUE OF THE ASSET ON THE DATE OF TRANSFER SHOULD B E TAKEN AS THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCR UING AS A RESULT OF TRANSFER. THEREFORE, THE TRIBUNAL WAS RIG HT IN TAKING THE MARKET VALUE AS DETERMINED BY THE DISTRI CT REGISTRAR AS THE FULL VALUE OF THE CONSIDERATION RE CEIVED OR ACCRUING FOR THE PURPOSE OF COMPUTING THE CAPITAL G AIN'. 3. THE LEARNED AR SUBMITTED THAT THE JUDGMENT OF THE H ON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RAJYALAKSH MI TRADING COMPANY WAS DELIVERED ON 02-02-2001 AND REPORTED IN [2001] 250 ITR 581 (AP). IN DECIDING THE CASE, THE HON'BLE ANDHRA PRADESH HIGH COURT FOLLOWED BY THE RATIO LAID DOWN BY THE SUPREME COUR T IN THE CASE OF ALA FIRM. THE JUDGEMENT OF THE SUPREME COURT IN THE CASE OF SHAKTI TRADING CO., RELIED ON BY THE ASSESSEE FIRM WAS DEL IVERED BY THE SUPREME COURT ON 02-08-2001 AND REPORTED IN THE SAM E ITR [2001] 250 ITR 871 (SC). IN THE SAID SHAKTI TRADING CASE, THE ISSUE BEFORE THE SUPREME COURT WAS THE VALUATION OF STOCK ON DISSOLU TION OF THE FIRM AND THE HON'BLE APEX COURT DISTINGUISHED THE RATIO LAID DOWN IN THE CASE OF ALA FIRM. THE THE AR DREW THE ATTENTION OF THE HON'BLE TRIBUNAL TO PAGE. NO. 8 OF THE ORDER DATED 29-01-20 10 WHEREIN THE ASSESSEE'S CASE WAS DISMISSED RELYING ON THE JUDGME NT OF THE HON'BLE ANDHRA PRADESH HIGH COURT IN THE RAJYALAKSHMI TRADI NG CO'S CASE. THE AR SUBMITTED THAT IN THE CASE OF RAJYALAKSHMI TRADI NG COMPANY THE ISSUE BEFORE THE COURT WAS VALUATION OF CAPITAL ASS ETS ON DISSOLUTION OF FIRM AND NOT STOCK IN TRADE. 4. THE AR SUBMITTED THAT THE ISSUE BEFORE THE HON'BLE SUPREME COURT BOTH IN THE CASE OF ALA FIRM AND SHAKTI TRADI NG CO., WAS WITH RESPECT TO VALUATION OF STOCK IN TRADE AT THE TIME OF DISSOLUTION OF THE FIRM AND THE JUDGMENT OF SHAKTI TRADING COMPANY WAS DELIVERED SUBSEQUENT TO RAJYALAKSHMI TRADING CO'S CASE, THE R ATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF SHAKTI TRA DING CO., IS RELEVANT AND APPLICABLE TO THE FACTS AND CIRCUMSTAN CES OF THE ASSESSEE'S CASE. THE ASSESSEE THEREFORE SUBMITS THAT THE DECIS ION OF THE M.A. NO. 176/HYD/2012 M/S. SYNDICATE REALTORS =================== 4 JURISDICTIONAL HIGH COURT IN RAJYALAKSHMI TRADING C O'S CASE IS NOT RELEVANT TO THE FACTS AND CIRCUMSTANCE OF THE ASSES SEE FIRM'S CASE AS THE SAME IS NOT CONCERNED WITH STOCK-IN-TRADE, BUT DEAL S WITH CAPITAL ASSETS VALUATION ON DISSOLUTION OF THE FIRM. THE AR SUBMIT TED THAT THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN SHAKTI TR ADING CO'S CASE NEEDS TO BE CONSIDERED AS IT IS APPLICABLE TO THE F ACTS AND CIRCUMSTANCE OF THE ASSESSEE'S CASE. THE ASSESSEE FIRM, ON THE B ASIS OF THE SUBMISSIONS MADE ABOVE RESPECTFULLY PRAYS THAT THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN ITA NO. 188/HYD/2 009 FOR ASST. YEAR 2005-06 MAY KINDLY BE RECALLED AND AN OPPORTUN ITY MAY KINDLY BE GIVEN TO THE ASSESSEE FIRM TO PRESENT ITS CASE FOR RECONSIDERATION. 5. THE DR STRONGLY RELIED ON THE ORDER OF THE TRIBUNAL . 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. AS SEEN FROM THE ARGUMENTS OF THE ASSESSEE 'S COUNSEL, THE ASSESSEE WANTS TO RE-ARGUE THE ISSUE BEFORE THE TRI BUNAL ONCE AGAIN WHICH IS NOT PERMITTED U/S. 254(2) OF THE ACT. THE TRIBUNAL WHILE ADJUDICATING THE ISSUE ON EARLIER OCCASION CONSIDER ED THE ENTIRE ARGUMENTS OF THE ASSESSEE'S CASE AND GIVEN THE FIND ING, INCIDENTALLY, NOT IN FAVOUR OF THE ASSESSEE. AS THE ISSUE IS DECIDED AGAINST THE ASSESSEE, NOW THE ASSESSEE FINDS THAT THERE IS MISTAKE APPARE NT ON RECORD WHICH IS ACTUALLY NOT SO. 7. FURTHER IT IS WELL SETTLED THAT STATUTORY AUTHORITY CANNOT EXERCISE POWER OF REVIEW UNLESS SUCH POWER IS EXPRESSLY CONF ERRED. THERE IS NO EXPRESS POWER OF REVIEW CONFERRED ON THIS TRIBUNAL. EVEN OTHERWISE, THE SCOPE OF REVIEW DOES NOT EXTENT TO RE-HEARING O F THE CASE ON MERIT. IT IS HELD IN THE CASE OF CIT VS. PEARL WOOLLEN MIL LS (330 ITR 164): HELD, THAT THE TRIBUNAL COULD NOT READJUDICATE THE MATTER UNDER SECTION 254(2). IT IS WELL SETTLED TH AT A STATUTORY AUTHORITY CANNOT EXERCISE POWER OF REVIEW UNLESS SUCH POWER IS EXPRESSLY CONFERRED. THERE WA S 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 INVOKIN G INHERENT POWER NOR THE PRINCIPLE OF MISTAKE OF COUR T NOT M.A. NO. 176/HYD/2012 M/S. SYNDICATE REALTORS =================== 5 PREJUDICING A LITIGANT NOR BY INVOLVING DOCTRINE OF INCIDENTAL POWER, COULD THE TRIBUNAL REVERSE A DECI SION ON THE MERITS. THE TRIBUNAL WAS NOT JUSTIFIED IN R ECALLING ITS PREVIOUS FINDING RESTORING THE ADDITION, MORE S O WHEN AN APPLICATION FOR THE SAME RELIEF HAD BEEN EARLIER DISMISSED. 8. THE SCOPE AND AMBIT OF APPLICATION OF SECTION 254(2 ) IS VERY LIMITED. THE SAME IS RESTRICTED TO RECTIFICATION O F MISTAKES APPARENT FROM THE RECORD. WE SHALL FIRST DEAL WITH THE QUES TION OF THE POWER OF THE TRIBUNAL TO RECALL AN ORDER IN ITS ENTIRETY. RE CALLING THE ENTIRE ORDER OBVIOUSLY WOULD MEAN PASSING OF A FRESH ORDER. THA T 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 AM ENDMENT OR REFUSING TO AMEND GETS MERGED WITH THE ORIGINAL ORD ER PASSED. THE ORDER AS AMENDED OR REMAINING UN-AMENDED IS THE EFF ECTIVE ORDER FOR ALL PRACTICAL PURPOSES. AN ORDER UNDER S. 254(2) D OES 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 O RDER AUTOMATICALLY NECESSITATES REHEARING AND RE-ADJUDICATION OF THE E NTIRE SUBJECT-MATTER OF APPEAL. THE DISPUTE NO LONGER REMAINS RESTRICTE D TO ANY MISTAKE SOUGHT TO BE RECTIFIED. POWER TO RECALL AN ORDER I S 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 B EING ABSENT AT A TIME WHEN THE APPEAL WAS TAKEN UP AND WAS DECIDED EX-PAR TE. JUDGED IN THE ABOVE BACKGROUND THE ORDER PASSED BY THE TRIBUNAL I S INDEFENSIBLE. 9. THE WORDS USED IN S. 254(2) ARE SHALL MAKE SUCH AM ENDMENT, 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 O RIGINAL ORDER TO CORRECT THAT PARTICULAR MISTAKE. THE PROVISION DOE S 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 TH AT IS NOT PERMISSIBLE UNDER THE IT ACT. THE POWER TO RECTIFY A MISTAKE UNDER S. 254(2) CANNOT BE USED FOR RECALLING THE ENTIRE ORDE R. NO POWER OF M.A. NO. 176/HYD/2012 M/S. SYNDICATE REALTORS =================== 6 REVIEW HAS BEEN GIVEN TO THE TRIBUNAL UNDER THE IT ACT. THUS, WHAT IT COULD NOT DO DIRECTLY COULD NOT BE ALLOWED TO BE DO NE INDIRECTLY. 10. IN THE CASE OF CIT VS. HINDUSTAN COCA COLA BEVERAGE S (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, I T 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 S IMILAR (A MISTAKE APPARENT FROM THE RECORD), BY ITS VERY N ATURE THE POWER TO RECTIFY A MISTAKE CANNOT RESULT IN THE RECALL AND REVIEW OF THE ORDER SOUGHT TO BE RECTIFIED. 11. THUS THE SCOPE AND AMBIT OF APPLICATION U/S. 254(2) IS AS FOLLOWS: (A) FIRSTLY, THE SCOPE AND AMBIT OF APPLICATION OF S. 2 54(2) OF IT ACT IS RESTRICTED TO RECTIFICATION OF THE MISTAKES APPA RENT FROM THE RECORD. (B) SECONDLY, THAT NO PARTY APPEARING BEFORE THE TRIBUN AL SHOULD SUFFER ON ACCOUNT OF ANY MISTAKE COMMITTED BY THE T RIBUNAL AND IF THE PREJUDICE HAS RESULTED TO THE PARTY, WHICH P REJUDICE IS ATTRIBUTABLE TO THE TRIBUNALS MISTAKE/ERROR OR OMI SSION, AND WHICH AN ERROR IS A MANIFEST ERROR, THEN THE TRIBUN AL 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 AC T AND NON- CONSIDERATION OF PRECEDENT BY THE TRIBUNAL CAUSES A PREJUDICE TO THE ASSESSEE. (C) THIRDLY, POWER TO RECTIFY A MISTAKE IS NOT EQUIVALE NT TO A POWER TO REVIEW OR RECALL THE ORDER SOUGHT TO BE RECTIFIE D. (D) FOURTHLY, UNDER S. 254(2) AN OVERSIGHT OF A FACT CA NNOT CONSTITUTE AN APPARENT MISTAKE RECTIFIABLE UNDER THE SECTION. (E) FIFTHLY, FAILURE ON THE PART OF THE TRIBUNAL TO CON SIDER 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. M.A. NO. 176/HYD/2012 M/S. SYNDICATE REALTORS =================== 7 (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 RECTIFICA TION UNDER S. 254(2) THE ASSESSEE CANNOT BE PERMITTED TO REOPEN A ND REARGUE THE WHOLE MATTER AS THE SAME IS BEYOND THE SCOPE OF S. 254(2) OF THE IT ACT. 12. BEING SO, IN OUR OPINION, THE ARGUMENT OF THE ASSES SEE'S COUNSEL HOLDS NO MERIT AND DESERVES TO BE REJECTED IN TOTO. 13. IN THE RESULT, THE MA FILED BY THE ASSESSEE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER, 2012. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 16 TH NOVEMBER, 2012 TPRAO COPY FORWARDED TO: 1. M/S. SYNDICATE REALTORS, REPRESENTED BY SRI SHEIK IBRAHIM, MANAGING PARTNER, 301A, VAMSHI EMPEROR, SUREKHA CHA MBERS, GREENLAND ROAD, AMEERPET, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD - 5(3), HYDERABAD. 3. THE CIT(A) - V, HYDERABAD 4. THE CIT - IV, HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD .