GITA YOGENDRA DIRECHA, V. ITO 16(1)(1),

MA 585/MUM/2012

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 0026 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 13-03-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 11-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S C TIWARI; NATASHA MANGAT
• Keywords: Earning of tax free income; Reassessment proceedings

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G MUMBAI , . . / BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER /AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER M.A. NO. 585/MUM/2012 (ARISING OUT OF ITA NO. 2430/MUM/2011) ASSESSMENT YEAR 2005-06 SMT. GITA YOGENDRA DIVECHA, 807, CUMBALLA CREST, 42, PEDDAR ROAD, MUMBAI. PAN: AAIPD 2688 R VS. INCOME TAX OFFICER, 16(1)(1), MUMBAI. (APPLICANT) (RESPONDENT) APPLICANT BY : SHRI S.C. TIWARI & MS. NATASHA MANGAT RESPONDENT BY : NONE DATE OF HEARING : 15-02-2013 DATE OF PRONOUNCEMENT : 13-03-2013 / O R D E R PER RAJENDRA, A.M. VIDE HER APPLICATION, FILED ON 11.09.2012, ASS ESSEE HAS SUBMITTED THAT THERE WERE MISTAKES APPARENT FROM THE ORDER OF THE TRIBUNAL OR DER DTD.01.08.2012 AND SAME SHOULD BE RECTIFIED U/S.254(2) OF THE INCOME-TAX AC T,1961(ACT). ASSESSE HAS SUBMITTED AS UNDER : 2.GROUND NO. 1 OF THE APPEAL IS DIRECTED AGAINST T HE CONFIRMATION BY LEARNED CIT (A) OF THE ADDITION OF RS. 6,56,049/- BY THE ASSESSING OFFICER ON ACCOUNT OF THE ALLEGED ACCRUAL OF INTEREST ON THE CREDIT BALANCE APPEARING IN THE ACC OUNT OF THE APPELLANT AS A PARTNER IN THE PARTNERSHIP FIRM M/S. PRAKASH MIRROR CO., MUMBA I. DURING THE COURSE OF HEARING BEFORE M.A. NO. 585/MUM/2012 (ARISING OUT OF ITA NO. 2430/MUM/2011) 2 HONBLE TRIBUNAL, THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT SUBMITTED AS UNDER: (I) IT WAS POINTED OUT THAT THE RELEVANT CLAUSE (7) IN THE PARTNERSHIP DEED IS QUOTED IN PARA-3 OF THE IMPUGNED ORDER OF CIT (A). IT WAS POINTED OU T THAT AS PER THE RELEVANT CLAUSE (7) OF PARTNERSHIP DEED, NO FIXED RATE OF INTEREST WAS STI PULATED AND ONLY THE CEILING OF 12% WAS LAID DOWN IN RESPECT OF INTEREST IF ANY, MUTUALLY AGREED UPON BETWEEN THE PARTNERS TO BE PAID ON THE AMOUNTS OUTSTANDING TO THE CREDIT OF THE PARTNE RS CAPITAL, CURRENT OR LOAN ACCOUNT. IT WAS ALSO POINTED OUT THAT THE PARTNERS OF A FIRM CAN EV EN OTHERWISE BY COMMON CONSENT DECIDE NOT TO PAY ANY INTEREST AT ALL, IN ANY PARTICULAR YEAR. (II) IT WAS SUBMITTED THAT FINDING OF THE ASSESSING OFFICER THAT THE APPELLANT HAD WRONGLY STATED M/ S. PRAKASH MIRROR & CO. HAD INCURRED A HU GE LOSS OF RS. 735,851/- WAS NOT CORRECT. WITH REFERENCE TO PROFIT & LOSS ACCOUNT OF THE FIRM M/S. PRAKASH MIRROR CO., FILED ALONG WITH THE RETURN OF INCOME, IT WAS SHOWN THAT AS PER AUD ITED PROFIT & LOSS ACCOUNT OF M/S. PRAKASH MIRROR CO., THERE WAS INDEED LOSS OF RS. 73 5,851/-HOWEVER, AFTER TAKING INTO CONSIDERATION CAPIT1 GAINS OF RS. 50 LACS, THERE WA S A NET PROFIT WHICH WAS DISTRIBUTED AMONGST THE PARTNERS. CAPITAL GAINS, BEING UNUSUAL INCOME SHOULD NOT BE CONSIDERED AS PROFIT OF THE YEAR. (III) IT WAS SUBMITTED THAT IN THE ASSESSMENT OF PA RTNERSHIP FIRM M/S. PRAKASH MIRROR CO. NO DEDUCTION OF INTEREST PAYABLE TO THE APPELLANT HAS BEEN ALLOWED AS DEDUCTION. IT WAS FURTHER SUBMITTED THAT IF ANY INTEREST INCOME IS CONSIDERED TO HAVE ACCRUED TO THE APPELLANT AS A PARTNER CORRESPONDING EXPENDITURE IN THE CASE OF TH E FIRM SHOULD ALSO BE CONSIDERED AS HAVING ACCRUED AND ALLOWABLE IN THE CASE OF THE ASS ESSMENT OF THE FIRM. NOT DOING SO HAS RESULTED INTO TWICE ASSESSMENT OF THE SAME AMOUNT. FIRST IN THE CASE OF THE PARTNERSHIP FIRM AND SECONDLY IN THE CASE OF THE APPELLANT. IT WAS POINTED OUT THAT THE ASSESSMENT OF THE FIRM AND THE PARTNER CANNOT BE SEGREGATED OR VIEWED SEPA RATELY BECAUSE THE SAME ARE INTEGRAL. IN THIS CONNECTION, IT WAS SUBMITTED THAT THE ASSESSIN G OFFICER SHOULD TAKE A FAIR VIEW OF THE MATTER AND NOT ACT IN A PARTISAN MANNER, AS IF THE SCALES ARE WEIGHTED AGAINST THE ASSESSEE. RELIANCE IN THIS BEHALF WAS PLACED ON HONBLE SUPRE ME COURT JUDGMENT IN THE CASE OF CIT V. SIMON CARVES LTD. 105 1TR 212 (SC). (IV) IT WAS POINTED OUT THAT THE FIRM HAD NOT PAID ANY INTEREST NOR ACKNOWLEDGED ANY SUCH LIABILITY TOWARDS THE APPELLANT. THE ASSESSMENT OF THE SUM OF RS. 6,56,049/-WAS THEREFORE AN ALLEGED INCOME WHICH WAS ENTIRELY UNREALISTIC AND U NLIKELY TO BE RECEIVED BY THE PARTNER. RELYING UPON THE JUDGMENT OF SUPREME COURT. IN CASE OF GODHRA ELECTRICITY CO. LTD. V. CIT 225 ITR 746 (SC), IT WAS SUBMITTED THAT FOLLOWING T HE PRINCIPLES OF REAL INCOME, THIS SUM OF RS. 6,56,049/- SHOULD NOT BE ASSESSED AS THE APPELL ANTS INCOME CHARGEABLE TO TAX MERELY AS ACCRUED INCOME. 3.THE APPELLANT MOST RESPECTFULLY SUBMITS THAT NONE OF THE ABOVE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT DURING THE COURSE OF HEARING HAVE NOT BEEN MENTIONED AND CONSIDERED IN THE ORDER OF HONBLE TRIBUNAL RESULTING INTO MISCARRIAG E OF JUSTICE AND MISTAKE APPARENT FROM RECORD IN THE ORDER PASSED BY HONBLE CONSIDERATION OF THE SUBMISSIONS MADE BY THE APPELLANT AS ALSO SUPREME COURT JUDGMENTS FURNISHED DURING COURSE OF HEARING BY THE APPELLANT AMOUNTS TO MISTAKE APPARENT FROM RECORD A S HELD BY THE HONBLE SUPREME COURT IN THEIR JUDGMENTS IN THE CASE OF HONDA SIEL POWER PRO DUCTS LTD. V. CIT 295 ITR 466 (SC) AND ACIT V. SAURASHTRA KUTCH STOCK EXCHANGE LTD.305 ITR 227 (SC). 4. IN PARAGRAPH 6 OF THE TRIBUNAL ORDER SUPREME COU RT JUDGMENT IN THE CASE OF GODHRA ELECTRIC CO. LTD. HAS NOT BEEN MENTIONED. IN ANY CA SE, THE APPELLANT SUBMITS WITH GREAT RESPECT TO YOUR HONOURS, IT IS NOT OPEN TO INCOME T AX APPELLANT TRIBUNAL TO DISSENT FROM A SUPREME COURT JUDGMENT AND IF THAT IS DONE, THE SAM E CONSTITUTES A MISTAKE APPARENT FROM RECORD. M.A. NO. 585/MUM/2012 (ARISING OUT OF ITA NO. 2430/MUM/2011) 3 5. IN THE LIGHT OF THE ERRORS POINTED, OUT HEREIN A BOVE, IT IS RESPECTFULLY SUBMITTED THAT HONBLE TRIBUNAL MAY BE PLEASED TO SUITABLY AMEND ITS ORDER DATED 1 ST AUGUST 2012 IN THE CASE OF THE TRIBUNAL ON 1ST AUGUST 2012. IT IS SUBMITTED THAT N ON- 2. FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, AO FOUND THAT THE ASSESSEE HAD ADVANCED LOAN AMOUNTING TO RS.1.07 CRORES TO A PARTNERSHIP FIRM IN WHICH SHE WAS A PARTNER OF 25% SHARES AND THAT SHE HAD NOT SHOWN INTEREST INCOME FROM THE SAID FIRM WHILE FILING HER RETURN OF INCOME. WHEN AO MADE A QUERY WITH REGARD TO ISSUE OF INTEREST, IT WAS SU BMITTED THAT THE FIRM HAD INCURRED LOSS OF RS. 7.35 LACS FOR THE RELEVANT AY. AND HENC E, THE QUESTION OF CHARGING OF INTEREST DID NOT ARISE. ON VERIFICATION OF COMPUTA TION OF INCOME THE AO FOUND THAT SHE HAD SHOWN SHARE OF PROFITS FROM THE FIRM AT RS. 10.66 LAKHS AND HAD CLAIMED THE SAME IS EXEMPT INCOME U/S.10(2A) OF THE ACT. WHILE FINALISING THE ASSESSMENT AO HELD THAT THE CLAIM OF THE ASSESSEE ABOUT INCURRING OF LOSS BY THE FIRM WAS NOT CORRECT, THAT INTEREST INCOME ACCRUED TO THE ASSESSEE WAS LI ABLE FOR TAXATION. AO EXAMINED THE CLAUSE 7 OF THE PARTNERSHIP DEED OF THE FIRM ACCORD ING TO WHICH THE ASSESSEE WAS ENTITLED FOR SIMPLE INTEREST @ OF 12% ON THE AMOUNT STANDING TO THE CREDIT OF CAPITAL, CURRENT OR LOAN ACCOUNT. REFERRING TO THE SAID CLA USE, HE WORKED OUT INTEREST RECEIVABLE BY THE ASSESSEE @ 12%, AMOUNTING TO RS. 6,56, 049/- AND SAME WAS ADDED TO HER INCOME. IN THE APPELLATE PROCEEDINGS FAA UP HELD THE ORDER OF THE AO. APPEAL FILED BY THE ASSESSEE WAS DISMISSED BY THE C BENCH OF TRIBUNAL ON 01-08-2012. AGAINST THE SAID ORDER OF THE TRIBUNAL ASSESSEE HAS FILED THE PRESENT APPLICATION. 3. BEFORE US, AUTHORISED REPRESENTATIVE (AR) OF THE AS SESSEE, AFTER MENTIONING THE FACTS OF THE CASE, SUBMITTED THAT WHILE DECIDIN G THE APPEAL JUDGMENTS OF CIT V. SIMON CARVES LTD. 105 1TR 212 (SC) AND GODHRA ELECT RICITY CO. LTD. V. CIT 225 ITR 746 (SC) WERE NOT CONSIDERED, THAT NON CONSIDERATIO N /NON MENTIONING OF SAID JUDGMENTS WAS MISTAKE APPARENT FROM RECORD, THAT AR GUMENTS ADVANCED DURING HEARING BEFORE THE TRIBUNAL WERE NOT CONSIDERED, THAT INTER EST WAS SUBJECT TO MUTUAL AGREEMENT, THAT INTEREST HAD NOT BEEN PAID TO THE A SSESSEE AS EVIDENT FROM THE BOOKS OF ACCOUNTS OF THE FIRM, THAT ASSESSMENT OF THE FIRM A ND THE PARTNER WERE INTEGRATED. IN HIS SUPPORT AR FURTHER RELIED UPON THE ORDERS OF TH E HONBLE SUPREME COURT DELIVERED IN THE CASES OF HONDA SIEL POWER PRODUCTS LTD. V. C IT 295 ITR 466 AND ACIT V. SAURASHTRA KUTCH STOCK EXCHANGE LTD.305 ITR 227. 3.1. BEFORE DEALING WITH VARIOUS SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE ,WE WOULD LIKE TO DISCUSS THE MATTER OF SIMON CARVES LT D.(SUPRA).IN THAT CASE ORIGINAL ASSESSMENT OF THE ASSESSEE-COMPANY, FOR THE ASSESSM ENT YEAR 1959-60,WAS COMPLETED BY THE ASSESSING OFFICER (AO) BY INVOKING RULE 33 O F THE INCOME-TAX RULES,1922.WHILE FINALISING THE ASSESSMENT AO APPL IED ONE OF THE THREE METHODS PERMITTED THEREIN. SUBSEQUENTLY, AO RE-OPENED THE ASSESSMENT UNDER SECTION 147(B) OF THE INCOME-TAX ACT,1961, AND APPLYING A DIFFEREN T METHOD PERMISSIBLE, DETERMINED THE TAX LIABILITY ON HIGHER SIDE. THE APPELLATE TRI BUNAL HELD THAT IN REASSESSMENT PROCEEDINGS AO COULD NOT DEPART FROM THE METHOD OF COMPUTATION ADOPTED IN THE ORIGINAL ASSESSMENT AND DIRECTED THAT THE REASSESSM ENT BE MADE ADOPTING THE SAME METHOD OF COMPUTATION AS IN THE ORIGINAL ASSESSMENT SUBJECT TO ANY ADJUSTMENTS WHICH MIGHT BE JUSTIFIED. ON A REFERENCE HONBLE HIGH CO URT OF CALCUTTA HELD THAT IT WAS NOT A CASE OF INCOME ESCAPING ASSESSMENT. REVENUE AUTH ORITIES FILED APPEAL BEFORE THE HONBLE SUPREME COURT. DECIDING THE MATTER IT WAS HELD BY THE APEX COURT THAT DISCRETION WAS VESTED IN THE AO UNDER RULE 33 FOR T HE PURPOSE OF MAKING HIS CHOICE OF M.A. NO. 585/MUM/2012 (ARISING OUT OF ITA NO. 2430/MUM/2011) 4 THE METHODS, THAT THERE WAS NOTHING TO SHOW THAT TH E DISCRETION WAS NOT EXERCISED BY HIM IN A PROPER OR JUDICIOUS MANNER; NOR WAS IT SUG GESTED THAT THE OFFICER WAS ACTUATED BY SOME OBLIQUE MOTIVE, THAT FROM THE MERE FACT THAT THE METHOD SELECTED BY HIM WAS SUCH AS RESULTED IN LOWER TAX LIABILITY OF THE ASSESSEE COMPARED TO THE LIABILITY WHICH WOULD HAVE RESULTED FROM THE ADOPTION OF ANOT HER METHOD, IT DID NOT FOLLOW THAT THE DISCRETION WAS NOT EXERCISED IN A PROPER AND JU DICIOUS MANNER, THAT THE ORDER MADE BY THE AO AT THE TIME OF THE ORIGINAL ASSESSMENT WA S A LEGALLY CORRECT ORDER AND WAS NOT VITIATED BY ANY ERROR, THAT IN ABSENCE OF SUC H AN ERROR IT WAS NOT A CASE OF INCOME ESCAPING ASSESSMENT. IT WAS FURTHER HELD THAT WHER E THE ORDER MAKING THE ORIGINAL ASSESSMENT WAS A LEGALLY CORRECT ORDER AND WAS NOT VITIATED BY ANY ERROR, THE CASE WOULD NOT BE ONE WHICH WOULD FALL WITHIN THE AMBIT OF SECTION 147(B) OF THE ACT OF 1961 OR SECTION 34(1)(B) OF THE ACT OF 1922,THAT TH E AO ORDERING REASSESSMENT COULD NOT SIT AS A COURT OF APPEAL OVER THE AO MAKING THE ORIGINAL ASSESSMENT, THAT IS WAS NOT OPEN TO THE AO ORDERING REASSESSMENT TO SUBSTIT UTE HIS OWN OPINION REGARDING THE METHOD OF COMPUTING THE INCOME FOR THAT OF THE AO W HO MADE THE ORIGINAL ASSESSMENT, THAT THE ADOPTION OF A DIFFERENT METHOD OF COMPUTATION WOULD HAVE RESULTED IN HIGHER YIELD OF TAX WOULD NOT IN SUCH A CASE JUSTIFY THE REOPENING OF THE ASSESSMENT. FINALLY, THE APEX COURT HELD AS UNDER: THE TAXING AUTHORITIES EXERCISE QUASI-JUDICIAL POW ERS AND IN DOING SO THEY MUST ACT IN A FAIR AND NOT A PARTISAN MANNER. ALTHOUGH IT IS PART OF T HEIR DUTY TO ENSURE THAT NO TAX WHICH IS LEGITIMATELY DUE FROM AN ASSESSEE SHOULD REMAIN UNR ECOVERED, THEY MUST ALSO AT THE SAME TIME NOT ACT IN A MANNER AS MIGHT INDICATE THAT SCALES A RE WEIGHTED AGAINST THE ASSESSEE. AFTER CAREFULLY PERUSING THE FACTS AND THE JUDGMENT OF THE ABOVE REFERRED CASE WE ARE OF THE OPINION THAT FACTS OF BOTH THE CASES ARE NOT AT ALL SIMILAR I.E., PRESENT CASE AND THE MATTER OF SIMON CARVES LTD., ISSUE IN THE CASE OF SIMON CARVES LTD.(SUPRA) WAS VALIDITY OF REASSESSMENT PROCEEDINGS. IN THE CASE UNDER CONSIDERATION ISSUE TO BE DECIDED WAS INTEREST INCOME ACCRUED TO THE ASSESSEE . SECONDLY, AO HAS NOT PASSED ANY ORDER U/S.147.THERE IS NO DOUBT THAT HONBLE SU PREME COURT HAS HELD THAT THE TAXING AUTHORITIES SHOULD ACT IN FAIR MANNER AND N OT IN A PARTISAN MANNER, BUT IT HAS AT THE SAME TIME HELD THAT LEGITIMATE TAXES SHOULD NOT REMAIN UNRECOVERED. ACT HAS GIVEN DISCRETIONARY POWERS TO THE REVENUE AUTHORITI ES TO DETERMINE LEGITIMATE TAX. SO, WHILE PASSING AN ASSESSMENT, IF AO DECIDES AN ISSUE AGAINST THE ASSESSEE, IT CANNOT BE HELD THAT HE IS ACTING IN PARTISAN MANNER. SO, IN OUR OPINION THE CASE OF SIMON CARVES LTD.(SUPRA) IS OF NO HELP TO DECIDE THE M.A. FILED BY THE ASSESSEE. IN THE PRESENT CASE ASSESSEE HAD NOT SHOWN INTEREST INCOME DUE TO HER F ROM THE FIRM. AO WAS OF THE OPINION THAT INTEREST HAD ACCRUED TO THE ASSESSEE D URING THE YEAR UNDER CONSIDERATION. FAA FOUND THAT ARGUMENT OF THE ASSESSEE THAT IN THE RELEVANT AY FIRM HAD NEGATIVE INCOME WAS NOT FACTUALLY CORRECT. HE FOUND THAT FI RM HAD TENANCY RIGHTS AMOUNTING TO RS. 50 LACS WHICH WERE CREDITED TO P&L APPROPRIATIO N A/C. CONSIDERING THE ABOVE FACTS HE CONFIRMED THE ORDER OF THE AO. IN OUR OPIN ION ACTION OF THE AO AND FAA DO NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY. WE HAVE HELD THAT CONSIDERING THE PRINCIPLES OF ACCRUAL OF INCOME INTEREST ACCRUED TO THE ASSESSEE WAS TAXABLE IN HER HANDS. THEORY OF ACCRUAL OF INCOME IS NOT A NEW CON CEPT OF TAXATION-LAWS. 3.2. IN THIS CONTEXT WE WOULD LIKE TO DISCUSS THE CASE O F GODHRA ELECTRICITY CO. LTD. V. CIT (SUPRA).IN THAT MATTER HONBLE SUPREME COURT HAS HELD AS UNDER: INCOME-TAX IS A LEVY ON INCOME. NO DOUBT, THE INCO ME-TAX ACT TAKES INTO ACCOUNT TWO POINTS OF TIME AT WHICH THE LIABILITY TO TAX IS ATTRACTED, VIZ., THE ACCRUAL OF THE INCOME OR ITS RECEIPT; BUT THE SUBSTANCE OF THE MATTER IS THE INCOME. IF I NCOME DOES NOT RESULT AT ALL, THERE CANNOT BE M.A. NO. 585/MUM/2012 (ARISING OUT OF ITA NO. 2430/MUM/2011) 5 A TAX, EVEN THOUGH IN BOOK-KEEPING, AN ENTRY IS MAD E ABOUT A HYPOTHETICAL INCOME, WHICH DOES NOT MATERIALISE. FACTS OF THE CASE WERE THAT IN 1922, THE THEN GOVER NMENT OF BOMBAY HAD GRANTED A LICENCE TO THE LSC COMPANY AUTHORISING IT TO GENERA TE AND SUPPLY ELECTRICITY TO THE CONSUMERS IN GODHRA AREA. THE ASSESSEE-COMPANY WAS THE SUCCESSOR OF THE LSC COMPANY. THE STATE GOVERNMENT HAD FIXED THE CHARGES FOR SUPPLY OF ELECTRICITY AND MOTIVE POWER BY THE ASSESSEE-COMPANY WITH EFFECT FR OM FEBRUARY 1, 1952. AFTER THE AMENDMENT OF THE ELECTRICITY (SUPPLY) ACT, 1948, AS SESSEE-COMPANY INCREASED THE RATES FOR ELECTRICITY IN 1956 AND 1963. THIS UNILAT ERAL INCREASE IN THE RATES FOR SUPPLY OF MOTIVE POWER AS WELL AS ELECTRICITY FOR LIGHTS A ND FANS LED TO INSTITUTION OF TWO REPRESENTATIVE SUITS BY THE CONSUMERS. THE SUITS WE RE DECIDED IN FAVOUR OF THE CONSUMERS BY THE TRIAL COURT, BUT THE HONBLE HIGH COURT OF GUJARAT AND THE HONBLE SUPREME COURT DECIDED THE ISSUE IN FAVOUR OF THE CO MPANY. DURING THE PENDENCY OF THIS LITIGATION IN THE VARIOUS COURTS THE ASSESSEE- COMPANY WAS NOT ABLE TO REALISE THE ENHANCED CHARGES FROM THE CONSUMERS. AFTER THE DECI SION OF THE SUPREME COURT THE UNDER SECRETARY TO THE GOVERNMENT OF GUJARAT IN THE INDUSTRIES, MINES AND POWER DEPARTMENT, SENT A LETTER TO THE ASSESSEE-COMPANY T O MAINTAIN STATUS QUO FOR THE RATES TO THE CONSUMERS. MEANWHILE ANOTHER SUIT WAS FILED BY THE CONSUMERS AND WAS DECREED IN FAVOUR OF THE CONSUMERS BY THE CIVIL JUD GE BY HIS JUDGMENT IN 1974.WHILE THE SAID SUIT WAS PENDING BEFORE THE TRIAL COURT, T HE GUJARAT STATE ELECTRICITY BOARD, TOOK OVER THE COMPANY W.E.F. NOVEMBER 19, 1972. UP TO THE ASSESSMENT YEAR 1963- 64, THE ASSESSEE-COMPANY WAS ASSESSED ON THE BASIS OF THE ACCOUNTS MAINTAINED ACCORDING TO THE MERCANTILE SYSTEM. FOR THE SUBSEQU ENT ASSESSMENT YEARS, I.E., FROM 1964-65 TO 1967-68, THE ASSESSEE-COMPANY DEDUCTED A TOTAL AMOUNT OF RS. 10,87,828/- FROM THE TOTAL EARNINGS IN RESPECT OF SALE OF ELECT RICAL ENERGY ON THE GROUND THAT THE SAID AMOUNT WAS NOT ACTUALLY RECOVERED BY IT FROM T HE CONSUMERS. THE INCOME-TAX OFFICER, WHILE MAKING THE ASSESSMENT FOR 1969-70, I NCLUDED AN AMOUNT OF RS. 7,33,676 ON THE GROUND THAT THE SUIT FILED AGAINST THE ASSESSEE-COMPANY BY THE CONSUMERS WAS DECIDED IN FAVOUR OF THE ASSESSEE-COM PANY BY THE COURT DURING THE ACCOUNTING YEAR 1968-69, AND THE ASSESSEE-COMPANY H AD THE LEGAL RIGHT TO RECOVER THE SAID AMOUNT ON THE BASIS OF THE SYSTEM OF ACCOUNTIN G FOLLOWED BY THE ASSESSEE. THE ADDITION WAS DELETED BY THE APPELLATE ASSISTANT COM MISSIONER AND THIS WAS UPHELD BY THE TRIBUNAL. ADDITIONS MADE ON THE SAME BASIS FOR THE ASSESSMENT YEAR 1970-71 AND 1971-72 WERE ALSO DELETED BY THE TRIBUNAL. THE HIGH COURT, HOWEVER, HELD THAT THE ASSESSEE-COMPANY HAD A LEGAL RIGHT TO RECOVER THE C ONSUMPTION CHARGE AT THE ENHANCED RATE FROM THE CONSUMERS. ON APPEAL HONBLE SUPREME COURT HELD THAT THE ASSESSEE- COMPANY, COULD NOT IGNORE THE DIRECTION OF THE STAT E GOVERNMENT WHICH WAS COUCHED IN THE FORM OF AN ADVICE, WHEREBY THE ASSESSEE-COMP ANY WAS ASKED TO MAINTAIN STATUS QUO FOR AT LEAST SIX MONTHS AND NOT TO TAKE STEPS T O RECOVER THE DUES TOWARDS ENHANCED CHARGES FROM THE CONSUMERS DURING THE PERIOD. BEFOR E THE EXPIRY OF THE PERIOD OF SIX MONTHS, THE SUBSEQUENT SUIT HAD BEEN FILED BY THE C ONSUMERS AND DURING THE PENDENCY OF THE SAID SUIT THE UNDERTAKING OF THE ASSESSEE-CO MPANY WAS TAKEN OVER BY THE GOVERNMENT OF GUJARAT UNDER THE DEFENCE OF INDIA RU LES, 1971, AND SUBSEQUENTLY, THAT THOUGH THE ASSESSEE-COMPANY WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND HAD MADE ENTRIES IN THE BOOKS REGARDING ENHANCE D CHARGES FOR THE SUPPLY MADE TO THE CONSUMERS, NO REAL INCOME HAD ACCRUED TO THE AS SESSEE-COMPANY IN RESPECT OF THOSE ENHANCED CHARGES, THAT THE CLAIM AT THE INCRE ASED RATES AS MADE BY THE ASSESSEE- COMPANY ON THE BASIS OF WHICH NECESSARY ENTRIES WER E MADE, REPRESENTED ONLY M.A. NO. 585/MUM/2012 (ARISING OUT OF ITA NO. 2430/MUM/2011) 6 HYPOTHETICAL INCOME, AND THE AMOUNTS IN QUESTION BR OUGHT TO TAX BY THE AO DID NOT REPRESENT INCOME WHICH HAD REALLY ACCRUED TO THE AS SESSEE-COMPANY DURING THE RELEVANT PREVIOUS YEARS. IN OUR OPINION FACTS OF T HE CASE UNDER CONSIDERATION CANNOT BE COMPARED WITH THE FACTS OF GODHRA ELECTRICITY CO . LTD.(SUPRA).IN THE MATTER OF GODHRA ELECTRICITY CO. ASSESSEE HAD MADE ENTRIES IN THE BOOKS OF ACCOUNTS AND THE AO HAD ASSESSED THE SAID INCOME IN THE HANDS OF THE AS SESSEE. IN THE PRESENT CASE ASSESSEE MADE A CLAIM THAT BECAUSE OF LOSS TO THE FIRM SHE D ID NOT GET ANY INTEREST. THE FACTS BROUGHT OUT BY THE AO AND FAA PROVE THAT FIRM HAD P OSITIVE INCOME AND THERE WAS CLAUSE IN THE PARTNERSHIP AGREEMENT ABOUT PAYMENT O F INTEREST TO THE ASSESSEE. IN THESE CIRCUMSTANCES AO HAD FAA HAD RIGHTLY HELD THAT INT EREST HAD ACCRUED TO HER. IT IS NOT THE CASE WHERE THE INCOME COULD NOT BE SAID TO HAVE RESULTED AT ALL. WHERE AN ASSESSEE REGULARLY EMPLOYS THE MERCANTILE METHOD OF ACCOUNTI NG, HIS INCOME, PROFITS AND GAINS HAVE TO BE COMPUTED IN ACCORDANCE WITH THAT METHOD OF ACCOUNTING, I.E., ON THE BASIS OF ACCRUAL, AND NOT ON THE BASIS OF RECEIPT. THE BA SIC CONCEPTION OF THE ACCRUAL OF INCOME IS THAT THE ASSESSEE MUST HAVE ACQUIRED A RI GHT TO RECEIVE IT. IN OTHER WORDS INCOME ACCRUES WHEN IT BECOMES DUE TO AN ASSESSEE -POSTPONEMENT OF THE DATE OF PAYMENT DOES NOT AFFECT THE ACCRUAL OF INCOME. NOT ONLY THIS THE FACT THAT THE AMOUNT OF INCOME IS NOT SUBSEQUENTLY RECEIVED BY THE ASSES SEE ALSO DOES NOT DETRACT FROM OR EFFACE THE ACCRUAL OF THE INCOME, ALTHOUGH NON-RECE IPT MAY, IN APPROPRIATE CASES, BE A VALID GROUND FOR CLAIMING DEDUCTIONS. IN THE CASE UNDER CONSIDERATION ASSESSEE HAD A RIGHT TO RECEIVE INTEREST THAT HAD ACCRUED TO HER A S PER THE AGREEMENT. SO, IT WAS RIGHTLY TAXED BY THE AO WHILE FINALISING THE ASSESS MENT. 3.3. NOW WE WOULD LIKE TO DISCUSS THE MATTER OF HONDA SI EL POWER PRODUCTS LTD. (SUPRA). IN THAT MATTER HONBLE APEX COURT HAD HEL D THE PURPOSE BEHIND THE ENACTMENT OF SECTION 254(2) OF THE INCOME-TAX ACT, 1961, DEALING WITH THE POWER OF THE APPELLATE TRIBUNAL TO AMEND ANY ORDER PASSED BY IT UNDER SUB-SECTION (1), IF ANY MISTAKE APPARENT FROM THE RECORD IS BROUGHT TO ITS NOTICE, WAS BASED ON THE FUNDAMENTAL PRINCIPLE THAT NO PARTY APPEARING BEFOR E THE APPELLATE TRIBUNAL, SHOULD SUFFER ON ACCOUNT OF ANY MISTAKE COMMITTED BY THE T RIBUNAL, THAT IF PREJUDICE HAD RESULTED TO THE PARTY, WHICH PREJUDICE WAS ATTRIBUT ABLE TO THE TRIBUNALS MISTAKE, ERROR OR OMISSION, AND WHICH ERROR WAS A MANIFEST ERROR, THEN THE TRIBUNAL WOULD BE JUSTIFIED IN RECTIFYING ITS MISTAKE, THAT WHEN PREJ UDICE RESULTED FROM AN ORDER ATTRIBUTABLE TO THE TRIBUNALS MISTAKE, ERROR OR OM ISSION, THEN IT WAS THE DUTY OF THE TRIBUNAL TO SET IT RIGHT, THAT ATONEMENT TO THE WRO NGED PARTY BY THE COURT OR THE TRIBUNAL FOR THE WRONG COMMITTED BY IT HAD NOTHING TO DO WITH THE CONCEPT OF INHERENT POWER OF REVIEW, THAT RULE OF PRECEDENT WAS AN IM PORTANT ASPECT OF LEGAL CERTAINTY IN THE RULE OF LAW, THAT PRINCIPLE WAS NOT OBLITERA TED BY SECTION 254(2). IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD. (SUPRA)TRIBUNAL HAD IGNORED THE EARLIER DECISION OF THE COORDINATING BENCH, WHICH WAS CITED BEFORE IT A ND WHICH SUPPORTED THE CLAIM OF THE ASSESSEE. WHILE PASSING THE ORDER U/S.254(2) OF THE ACT TRIBUNAL RECTIFIED THE ORDER. FACTS OF THE PRESENT CASE ARE TOTALLY DIFFE RENT FROM THE FACTS OF THE HONDA SIEL POWER PRODUCTS LTD. NO MATTER HAVING THE IDENTICAL FACTS HAVE BEEN IGNORED BY US. IN OUR OPINION, WORDS A MANIFEST ERROR USED BY THE H ONBLE SUPREME COURT ARE VERY IMPORTANT TO DECIDE THE ISSUE. 3.4. WE WOULD LIKE TO DISCUSS THE CONCEPT OF MANIFEST E RROR AFTER DISCUSSING THE MATTER OF SAURASHTRA KUTCH STOCK EXCHANGE LTD.(SUP RA). IN THIS MATTER HONBLE SUPREME COURT HAD HELD THAT RECTIFICATION OF AN ORD ER STEMED FROM THE FUNDAMENTAL PRINCIPLE THAT JUSTICE ASS ABOVE ALL THAT IT WAS EX ERCISED TO REMOVE THE ERROR AND TO M.A. NO. 585/MUM/2012 (ARISING OUT OF ITA NO. 2430/MUM/2011) 7 DISTURB THE FINALITY. IN THAT CASE WHILE PASSING T HE ORDER DECISION OF THE JURISDICTIONAL HIGH COURT WAS NOT CONSIDERED BY THE TRIBUNAL AND S AME WAS BROUGHT TO NOTICE OF THE TRIBUNAL IN RECTIFICATION PROCEEDINGS. HONBLE SUP REME COURT HELD THAT EVEN A SUBSEQUENT DECISION CAN BE BASIS FOR FILING APPLICA TION U/S.254(2) OF THE ACT. 3.5. PRINCIPLES PROPOUNDED BY THE HONBLE SUPREME COURT ARE APPLICABLE IN CASES WHERE MISTAKES ARE APPARENT FROM RECORD. IN THE MA TTER OF SAURASHTRA KUTCH STOCK EXCHANGE LTD.(SUPRA) HONBLE APEX COURT HAS HELD TH AT A PATENT, MANIFEST AND SELF- EVIDENT ERROR WHICH DID NOT REQUIRE ELABORATE DISCU SSION OF EVIDENCE OR ARGUMENTS TO ESTABLISH IT, COULD BE SAID TO BE AN ERROR APPARENT ON THE FACE OF THE RECORD AND COULD BE CORRECTED WHILE EXERCISING CERTIORARI JURISDICTI ON, THAT AN ERROR COULD NOT BE SAID TO BE APPARENT ON THE FACE OF THE RECORD IF ONE HAD TO TRAVEL BEYOND THE RECORD TO SEE WHETHER THE JUDGMENT WAS CORRECT OR NOT, THAT AN ER ROR APPARENT ON THE RECORD MEANT AN ERROR WHICH STRUCK ONE ON MERE LOOKING AND DID N OT NEED A LONG DRAWN OUT PROCESS OF REASONING ON POINTS ON WHICH THERE MIGHT BE CONC EIVABLY TWO OPINIONS, THAT SUCH ERROR SHOULD NOT REQUIRE ANY EXTRANEOUS MATTER TO S HOW ITS INCORRECTNESS, THAT TO PUT IT DIFFERENTLY, IT SHOULD BE SO MANIFEST AND CLEAR THA T NO COURT WOULD PERMIT IT TO REMAIN ON RECORD, THAT IF THE VIEW ACCEPTED BY THE COURT I N THE ORIGINAL JUDGMENT WAS ONE OF POSSIBLE VIEWS, THE CASE COULD NOT BE SAID TO BE CO VERED BY AN ERROR APPARENT ON THE FACE OF THE RECORD. IF THE CASE OF THE ASSESSEE IS PUT TO TEST ON THE PARAMETERS FIXED BY THE HONBLE SUPREME COURT, IT IS EVIDENT THAT THERE IS NO MISTAKE APPARENT FROM THE RECORD. BY A LONG DRAWN PROCESS OF REASONING ASSES SEE WANTS US TO REVIEW THE ORDER OF 1 ST AUGUST,2012.BUT,IN OUR HUMBLE OPINION IT IS NOT PE RMISSIBLE AS PER THE PROVISIONS OF SECTION 254(2) OF THE ACT. ENTRIES I N THE BOOKS OF ACCOUNTS OF THE FIRM DO NOT PROVE/DISPROVE ANYTHING WITH REGARD TO THE I NCOME ACCRUED TO THE ASSESSEE. EVEN HAD THERE BEEN ENTRIES IN THE SAID BOOKS RATIO N OF JUDGMENT OF GODHRA ELECTRICITY CO. WOULD HAVE NULLIFIED IT, HAD THERE BEEN NO REAL INCOME. SO, SOLELY ON THE BASIS OF ENTRIES IN THE BOOKS OF A/CS. FINAL CONCLUSION CANN OT BE ARRIVED AT. 3.6. FINALLY, WE WOULD LIKE TO DISCUSS THE SCOPE OF THE PROVISIONS OF SECTION 254(2) OF THE ACT. WE ARE OF THE OPINION UNDER THE PROVIS IONS OF THE SAID SECTION IT IS NOT PERMISSIBLE FOR THE PETITIONER TO CONTEND THAT THE APPELLATE ORDER WAS VITIATED ON THE GROUND THAT THE TRIBUNAL FAILED TO DISCUSS ALL THE CONTENTIONS RAISED BY COUNSEL BEFORE IT AND TO GIVE REASONS FOR COMING TO THE CONCLUSION WHICH IT DID. IF ASSESSEE FINDS AN ORDER DEFECTIVE ON THIS GROUND, THE REMEDY LAY ELSE WHERE, AND NOT BY WAY OF A MISCELLANEOUS APPLICATION. IT IS SAID THAT THE INCO ME-TAX APPELLATE TRIBUNAL IS A CREATURE OF THE STATUTE AND IT IS NOT BEEN VESTED W ITH THE REVIEW JURISDICTION BY THE STATUTE CREATING IT. THE TRIBUNAL DOES NOT HAVE ANY POWER TO REVIEW ITS OWN JUDGMENTS OR ORDERS. WHAT ASSESSEE DESIRES, IN THE CASE UNDER CONSIDERATION, IS REVIEW OF THE ORDER PASSED ON IN THE GRAB OF RECTIFICATION APPLIC ATION. THE LANGUAGE OF SECTION 254(2) OF THE ACT IS VERY CLEAR. THE FOUNDATION FO R EXERCISING THE JURISDICTION IS WITH A VIEW TO RECTIFY ANY MISTAKE APPARENT ON THE RECOR D AND THE OBJECT IS ACHIEVED BY AMENDING ANY ORDER PASSED BY IT. IN THE CASE UND ER CONSIDERATION ASEESSEE WANTS REAPPRAISAL OF THE ENTIRE CASE. IT IS NOT POSSIBLE UNDER THE PROVISIONS OF SEC. 254(2) OF THE ACT. AS PER THE HONBLE JURISDICTIONAL HIGH CO URT, THE POWER OF RECTIFICATION AVAILABLE TO THE TRIBUNAL U/S. 254(2) OF THE ACT, C ANNOT BE EXERCISED ON FAILURE OF THE TRIBUNAL TO CONSIDER AN ARGUMENT ADVANCED BY EITHER PARTY FOR ARRIVING AT A CONCLUSION BECAUSE IT IS AN ERROR OF JUDGMENT AND NOT AN ERROR APPARENT ON THE RECORD.(203 ITR 497 AND 323 ITR 577). M.A. NO. 585/MUM/2012 (ARISING OUT OF ITA NO. 2430/MUM/2011) 8 WE ARE THEREFORE OF THE VIEW THAT THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE IS WITHOUT MERIT AND THE SAME IS LIABLE TO BE DISMISSED. WE ACCORDINGLY DISMISS THE MISCELLANEOUS APPLICATION AS THE SAME D OES NOT DISCLOSE ANY APPARENT ERROR IN THE ORDER OF THE TRIBUNAL. IN THE RESULT, THE MISCELLANEOUS APPLICATION IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH, 2013. ! ' # $%& 13 TH MARCH, 2013 ' ( SD/- SD/- ( / VIJAY PAL RAO ) ( / RAJENDRA ) ) / JUDICIAL MEMBER ' ) / ACCOUNTANT MEMBER / MUMBAI, $%/ DATE: 13 TH MARCH, 2013 TNMM COPY TO: 1. A PPLICANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE ,- .- //TRUE COPY// % % % % / BY ORDER, / // / / 0 0 0 0 DY./ASST. REGISTRAR , / ITAT, MUMBAI