Dhanwan leasing And Finance Company Limited, Indore V. Income Tax Officer 2 (2), Indore

MA 40/Ind/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4910 (ITAT-INDORE)
• Duration Of Justice: 3 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-11-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-09-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 28-08-2023
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Search and seizure
• Section: 148; 142(1); 143(2); 139(1); 254(2); 13; 153C

Judgement Text

आयकर अपीलȣय अͬधकरण, इंदौर Ûयायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER MA No. 40/Ind/2023 (Arising out of ITA No.225/Ind/2018) Assessment Year: 2010-11 M/s. Dhanwan Leasing and Finance Company Limited, 107, Sapna Sangeeta Road, Indore. बनाम/ Vs. ITO, Ward 2(2), Indore. (Assessee /Applicant) (Revenue / Respondent) PAN: AAACD 7026 L Assessee by Shri Sumit Nema, Sr. Adv. and Shri Gagan Tiwari, ARs (alongwith with Shri Pankaj Shah, erstwhile counsel) Revenue by Shri Ashish Porwal, Sr. DR Date of Hearing 15.09.2023 Date of Pronouncement 30.11.2023 आदेश/O R D E R Per B.M. Biyani, A.M.: This Misc. Application [‘”M/A”] u/s 254(2) of Income-tax Act, 1961 is filed by assessee seeking re-call/rectification of Order dated 10.02.2023 of ITAT, Indore Bench in ITA No. 225/Ind/2018 for assessment-year 2010-11 [“impugned order”] by which the assessee’s appeal was dismissed. M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 2 of 15 2. Ld. AR for assessee drew our attention to Para No. 3 of the impugned order wherein the ITAT has passed following order with reference to Ground No. 1 of appeal raised by assessee: “3. Ld. Counsel of the assessee submitted that the assessee does not want to press ground no.1, hence, the same is dismissed as ‘not pressed’.” 3. Ld. AR carried us to the impugned Ground No. 1 raised by assessee in its appeal, which reads as under: “GROUND 1: AGAINST RE-OPENING OF ASSESSMENT: 1. The learned Commissioner of Income-tax (Appeals)-I (CIT(A) erred in confirming the action of reopening the assessment for the year u/s 148 of the Act. 2. The Appellant prays that the said re-opening is bad in law and deserves to be upheld”. 4. Then, Ld. AR submitted that the order of ITAT in Para No. 3, as noted above in Para No. 2 of this order, suffers from certain mistakes rectifiable u/s 254(2). Although the assessee has narrated these mistakes as two (2) mistakes in Para No. 10 and 11 of M/A but for the sake of a smooth discussion, we re-arrange them as three (3) mistakes, as under: (i) The first mistake being claimed is such that the Ground No. 1 of appeal raised by assessee was not pressed by then arguing counsel, Shri Pankaj Shah (“erstwhile counsel”) for expediting the disposal of appeal. To support this claim of assessee, Ld. AR drew us to an affidavit of erstwhile counsel filed on record. In Para No. 2 thereof, the said counsel has made averments to the effect that the Indore Bench was functioning in virtual mode and during the month of November, 2022, a physical bench was held and the case of assessee was listed for hearing on 10.11.2022. But it was adjourned to 11.11.2022, 14.11.2022, 16.11.2022. Finally, when it was heard on 16.11.2022, there was a heavy board of 65 appeals and initially the counsel argued on merits, but when it came to addressing legal ground (impugned Ground No. 1), the Bench indicated time constraint and that if the counsel wished to argue the matter on legal ground No. 1, the matter would get adjourned. Therefore, the counsel opted to withdraw/not to press M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 3 of 15 ground No. 1. This decision was only taken for expediting the disposal of appeal. (ii) The second mistake, being pointed out with the support of Para No. 3 of same affidavit, is such that although the erstwhile counsel did not press aforesaid Ground No. 1 but at the same time the deciding Bench of ITAT was also not aware of a past decision of Co-ordinate Bench of ITAT, Indore in M/s. Flexituff International order dated 04.10.2021 in Cross-Objection No. 38/Ind/2019 (arising out of I.T.A. No. 448/Ind/2018), applicable to assessee, wherein it was held that the initiation of proceedings u/s 148 based on information gathered during the course of search proceedings of a third person is invalid because the only course of action available to department was proceeding u/s 153C. It is further submitted that had the deciding Bench been aware of decision, it would have brought the same to the notice of erstwhile counsel. With regard to non-awareness on the part of erstwhile counsel, it is submitted that the said decision was not available in public forum. It is also submitted that during briefing of the case before the Senior Advocate for the purpose of filing appeal before High Court, on being made aware of the said decision of ITAT, Indore in M/s Flexituff International (supra), it was realized by assessee and erstwhile counsel that they were unaware of the decision. It is then submitted “That, had the arguing CA and this Hon’ble Bench been aware of earlier decision passed in reference to Section 153C Vs. 148 of the Act, a different course of action or pleading qua Ground No. 1 might have been pursued and ground No. 1 would not have been withdrawn at the time of hearing.” Reliance is placed on Binaguri Tea Co. (P) Ltd. Vs. DCIT (2016) 75 taxmann.com 106 (Calcutta HC) wherein it was held that if the ITAT has allowed withdrawal of appeal by counsel of assessee, being unaware of decision, it constitutes a rectifiable mistake u/s 254(2). Further reliance is placed on Mahamaya Banerjee, in re AIR 1989 Cal. 106 where it was held that the petition withdrawn by party due to misconception/wrong advice of counsel is a sufficient cause for review of an order. Ld. AR also relied upon Federal M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 4 of 15 Mogul Goetze (India) Ltd. Vs. ACIT (2022) 134 Taxmann.com 322 (Del HC) to argue that the power of rectification u/s 254(2) is not limited to a mistake committed by Tribunal alone, it is available even for a case of a mistake of counsel. (iii) The third mistake being claimed is such that the erstwhile counsel was not having any authorization to withdraw the ground raised by the assessee and yet the ITAT has allowed withdrawal of ground No. 1, therefore, there is an apparent mistake in the impugned order. Ld. AR carried us to the “Letter of Authority” given by the assessee to erstwhile counsel and submitted that the said authority, enabled the counsel to make statements and explanations but did not confer any authority for withdrawal of any of the grounds. Therefore, non-pressing of ground by erstwhile counsel and allowing the same by ITAT without authority of counsel, constitutes an apparent mistake on the part of ITAT. Reliance is placed on Govindammal Vs. Maimuthu Maistry and Ors, AIR 1959 Mad 7 and Ganga Bishen & Sons Vs. AO (1997) 60 ITD 341 (Delhi ITAT) to contend that the Counsel needs a specific authority for withdrawal/non-pressing. Further reliance is placed on Ashok Kumar Vs. New India Assurance Company, Civil Appeal No. 4758 of 2023 to contend that a litigant cannot be made to suffer due to the mistake of a counsel. 5. Lastly it is submitted, with the support of ACIT Vs. Saurashtra Kutch Stock Exchange Ltd. (2008) 305 ITR 227 (SC) that rectification of an order stems from the fundamental principle that justice is above all and it is exercised to remove the error and to disturb the finality. With these submissions, Ld. AR prayed that the Ground No. 1 of assessee, as dismissed by ITAT, may be heard on merits by recalling the impugned order of ITAT. 6. Per contra, Ld. DR for Revenue strongly opposed this M/A with the first and foremost contention that the scope of section 254(2) is very limited. M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 5 of 15 Ld. DR submitted that in Para No. 3 of order, the ITAT has clearly mentioned “Ld. Counsel of the assessee submitted that the assessee does not want to press ground no.1, hence, the same is dismissed as ‘not pressed’.” Therefore, there is no doubt at all that it was a conscious, considered, well-thought, and well-planned decision of assessee to withdraw/not to press the impugned Ground and accordingly, the Counsel made a prayer to withdraw the said ground. Ld. DR submitted that the scope of ITAT in section 254(2) is very much restricted and limited in as much as the ITAT can only rectify a mistake “apparent from record”. He submitted that he fails to understand how the case of assessee can fit in the scheme of Section 254(2). 7. Then, Ld. DR made further submissions countering the points raised by Ld. AR, as under: (i) He submitted that the reason given in affidavit of counsel that the ground was withdrawn to expedite the hearing of appeal, is not a correct reason, it is just an after-thought now being claimed before this Bench. (ii) He submitted that the unawareness of any decision by counsel cannot be a valid ground for claiming any mistake in the order of ITAT, much less a “mistake apparent from record”. (iii) He submitted that there is no standard format of “Letter of Authority” being adopted by assessees/counsels. While some assessees/counsels narrate each and every aspect and some use general/wider M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 6 of 15 phraseology. In present case, the “Letter of Authority” given by assessee to counsel was much wider even though it did not spell out each and every item separately. Moreover, in the “Letter of Authority”, the assessee has also empowered the counsel to “compound matters wherever necessary”. Further, the authority also ends with “all statements and explanations made by the counsel shall be binding on us”. Therefore, the counsel had ample authority to withdraw ground. (iv) Lastly, Ld. DR submitted that if a situation of non-pressing ground by counsel is treated as a mistake apparent from record, it will open a window for the parties/counsels for not pressing any ground at the time of hearing of appeal and subsequently coming with a M/A u/s 254(2), when the order of ITAT goes against them on other grounds. Such approach shall be very fatal to judicial proceeding and it must be stopped and should not be entertained, encouraged and allowed in any case. 8. We have heard learned Representatives of both sides, considered their rival submissions and carefully perused the material placed before us. We find that the sole grievance of assessee in present M/A is such that Ground No. 1 of assessee’s appeal was wrongly dismissed by ITAT being not pressed by counsel at the desire of assessee. For this, the assessee/Ld. AR has raised as many as three (3) contentions discussed in earlier part of this order and in all those contentions, basically the assessee has pushed the entire responsibility onto ITAT. Therefore, at first, we scan and re-produce below the copy of Grounds of Appeal where the erstwhile counsel of assessee has diligently mentioned “Not pressed” in his own handwriting and also signed the same, in the open court during hearing of appeal by ITAT: M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 7 of 15 M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 8 of 15 M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 9 of 15 9. Now, we deal with various claims raised by assessee, one by one. The first claim projected by assessee is such that the erstwhile counsel has chosen not to press Ground No. 1 for expediting the disposal of appeal. It is submitted by means of affidavit of erstwhile counsel that the erstwhile counsel initially argued grounds on merits and thereafter when he took up Ground No. 1 (which is a legal ground), the Bench indicated paucity of time. We are afraid to accept such a contention because as a matter of procedure and judicial practice, the ITAT is first taking up legal grounds and thereafter merits of the case. Furthermore, it is also strange to accept that the counsel could skip Ground No. 1 and argue other Grounds (which were on merits) first and thereafter come back to argue Ground No. 1. This claim of assessee is very strange. In any case, even if we assume that it happened so, at least it is being accepted in the affidavit that the deciding Bench only indicated for further adjournment of hearing if the counsel wished to argue Ground No. 1 but never advised or pushed Ld. AR for withdrawal or non-pressing of ground. Needless to mention that even if the case would have been adjourned, the physical bench worked for 2 more days uptill 18.11.2022. Moreover, Indore Bench was regularly functioning in Virtual Mode immediately before and after the physical bench without any interruption for more than 2 years and the same counsel, Mr. Pankaj Shah, had also argued several other matters of his clients in Virtual Mode with all comfort. Therefore, there was no reason to take a decision for withdrawal of ground and thereby harming this client (assessee-appellant). It is also noteworthy that the assessee’s case did not involve voluminous papers or documents so that it could be difficult to hear in Virtual Hearing. Therefore, Ld. DR is very much justified in contending that this claim of assessee is not correct. The claim that the Ground No. 1 was withdrawn to expedite the hearing, is not credible and we are not inclined to accept the same. 10. The second claim projected by assessee is such that the counsel was not aware of an earlier decision of ITAT, Indore in M/s. Flexituff International (supra) favoring assessee, wherein it was held that the M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 10 of 15 initiation of proceedings u/s 148 based on information gathered during the course of search proceedings of a third person is invalid because the only course of action available to department was proceeding u/s 153C. It is also being claimed that even the Bench, which heard assessee’s appeal, was also not aware of the said decision. Then, it is being contended that had the Bench been aware and brought to the notice of assessee’s counsel, the assessee would have taken a different course of action rather than opting for withdrawal of Ground No. 1. In this regard, we firstly mention that when the assessee’s counsel made a submission that the assessee did not want to press Ground No. 1, why would ITAT look into the background facts and evidences of the Ground so as to identify which one out of the two sections, namely 148 or 153C, was applicable to assessee and which one was not applicable and then to check whether any earlier decision of ITAT, Indore governing those facts was available to the benefit of assessee or not. That apart the impugned Ground No. 1 was also raised by assessee before CIT(A) and the CIT(A) dismissed assessee’s ground by observing thus: “4.1 Ground No. 1 : Through this grounds of appeal, the appellant has challenged the reopening of the case u/s 148 of the IT Act, 1961. The notice u/s 148 was issued to the appellant on 05.02.2015. The notice u/s 148 has been issued after recording the reasons. The appellant has been provided the reasons recorded u/s 148 of the I. T. Act. As far as the adequacies of reasons are concerned in my opinion, they are adequate and based on relevant facts and material. The need to issue notice arose due to noticing of that the company was engaged in receiving accommodation entries from bogus companies. The appellant filed the letter dated 15.12.2015 stated that return filed u/s 139(1) of the I. T. Act, 1961, may be treated as return filed in response to notice u/s 148 of the Income-tax Act, 1961. Subsequently notice u/s 143(2) and 142(1) has been issued and appellant have complied the above notices. The AO has followed the proper procedure before issuing the notice u/s 148 of the Income-tax Act, 1961. Therefore, the appeal on this ground is dismissed.” On perusal of this para of CIT(A) and also the submissions made by assessee during first-appeal as noted in Para No. 3 of order of CIT(A), it can be easily found that the assessee never raised the issue of section 148 Vs. 153C. Notably, the application of section 153C depends upon satisfaction of requirements, conditions and stipulations prescribed in that section, which M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 11 of 15 have to be examined by a long-drawn process. In any case, if the assessee had a point that his case was to be governed by section 153C and not by section 148, it was for the assessee/assessee’s counsel to examine the facts/evidences of assessee and raise such a claim before ITAT. Even in that situation, the assessee would perhaps be required to raise an additional ground because the existing ground No. 1, with which we are concerned here, in its present form coupled with the adjudication made by CIT(A) in first-appeal, is confined to section 148 only and may not be sufficient enough to admit the consideration of applicability or non-applicability of section 153C. We may also add one more point at this stage. On one hand, the assessee claims that his counsel agreed for not pressing Ground No. 1 to expedite the disposal of case and on other hand, it is being claimed that it happened so because the counsel was not aware of the earlier decision favouring the assessee on section 148 Vs. 153C. Thus, there is a clear contradiction in two stands taken by assessee. Therefore, we do not find any substance in assessee’s claim. So far as the decisions in Binaguri Tea Co. (P) Ltd. and Mahamaya Banerjee (supra) relied upon by Ld. AR are concerned, those decisions are materially different from assessee’s case. In those decisions, the assessee’s counsels withdrew entire appeal/petition of assessee resulting acceptance of liability and not merely one ground which is legal in nature and could be better understood by the counsel. Therefore, those decisions do not help assessee. We do not have any quarrel for the decision in Federal Mogul Goetze (India) Ltd. (supra) referred to by Ld. AR wherein it was held that the power of rectification u/s 254(2) is not limited to a mistake committed by Tribunal alone, it is available even for a mistake of counsel. But that decision is also not applicable to present case, where the Counsel has made a conscious withdrawal of Ground No. 1 while arguing other grounds of appeal. Therefore, we do not find any merit in the second contention of assessee. 11. The third and last claim projected by assessee is such that the erstwhile counsel was not having any authorization to withdraw the grounds M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 12 of 15 raised by the assessee and yet the ITAT has allowed withdrawal of ground. In this regard, we scan and re-produce below the “Letter of Authority” filed by assessee’s erstwhile counsel: M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 13 of 15 On perusal of same, one can easily find that the assessee has given authority to his counsel to appear and present assessee before ITAT. Such authority was fullest, unlimited and unrestricted and there is no rider mentioned therein. Secondly, the assessee has specifically authorized his counsel “to compound matters wherever necessary”. This compounding, in a way, authorized assessee’s counsel to withdraw full or part of the appeal i.e. one or more grounds. Ld. AR submitted that this authority of compounding was limited for compounding of matters before income-tax authorities but neither the Ld. DR nor we are influenced to accept such submission of Ld. AR. Lastly, the assessee has also mentioned in the authority that the statements and explanations shall be binding upon him. At the cost of repetition, we re-cite Para No. 3 of the order of ITAT which is being attacked in this M/A: “3. Ld. Counsel of the assessee submitted that the assessee does not want to press ground no.1, hence, the same is dismissed as ‘not pressed’.” This order of ITAT clearly reveals that the counsel has simply submitted/stated what was instructed by the assessee i.e. the assessee did not want to press ground No. 1. That means, the decision of non-pressing was taken by assessee himself (may or may not be with the consultation of counsel) and the counsel has simply made a statement conveying assessee’s decision. This situation, in our view, very smoothly falls within the last sentence of Letter of Authority wherein the assessee has acknowledged that the statement made by counsel shall be binding upon him. Thus, the withdrawal/non-pressing of ground by counsel was within the power and authority being representative of assessee and the assessee’s claim that the ITAT has accepted withdrawal/non-pressing without authority of counsel is devoid of any merit. The decision in Govindammal Vs. Maimuthu Maistry M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 14 of 15 (supra) relied upon by Ld. AR was concerned with a case where lawyer of assessee entered into a compromise and the court held such action of lawyer within his authority. In Para No. 5 of order, after examining several judicial decisions, the Court categorically held “The decisions appear to be fairly clear that even in cases where there is no express authorization to enter into a compromise, under the inherent authority impliedly given to the Vakil he has power to enter into the compromise on behalf of his client.” Thereafter, in subsequent sentence, the Court only observed that in present state of clientele world, it would be better to get the signature of party affixed. This subsequent point mentioned by Court is more in the nature of guidance and does not rule out that express mention is absolutely necessary. Another decision in Ganga Bishen & Sons (supra) relied upon by Ld. AR, was also concerned with withdrawal of entire appeal and not withdrawal of one of the grounds of appeal. Further, those were the facts of case that the assessee sought to withdraw appeal by means of a written communication signed by assessee and counter-signed by his advocate which the ITAT noted while allowing withdrawal of appeal, but the ITAT has not ruled that in absence of a written-communication by assessee, the advocate cannot withdraw one of the grounds of appeal. Therefore, those decisions would not help the present case of assessee. In the ultimate, we are inclined to reject the third submission of assessese too. 12. We have sufficiently dealt all three contentions raised by assessee in this M/A. Before giving our final conclusion, we would also to like to mention that the Ld. DR is very much justified in claiming that if the non- pressing of a ground by counsel is treated as a mistake apparent from record, it will open a window for the parties/counsels for not pressing any ground at the time of hearing of appeal and subsequently coming with a M/A u/s 254(2), when the order of ITAT goes against them on other grounds. Such approach shall be very fatal to judicial proceeding and it must be stopped and should not be entertained, encouraged and allowed in any case. We do agree with Ld. DR. M/s.Dhanwan Leasing & Finance Co.Ltd., Indore, vs. ITO , Ward 2(2), Indore. M.A.NO.40/Ind/2023 Assessment year 2010-11 Page 15 of 15 13. In view of above discussions, we are inclined to dismiss the present M/A filed by assessee which is devoid of any merit. 14. Resultantly, this M/A is dismissed. Order pronounced in the open court on 30.11.2023. sd/- (VIJAY PAL RAO) JUDICIAL MEMBER sd/- (B.M. BIYANI) ACCOUNTANT MEMBER Indore Ǒदनांक /Dated :30.11.2023 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore