The ACIT,Circle-2(1)(1), Ahmedabad V. M/s. Arham Pumps, Ahmedabad

MA 59/AHD/2022

AI Insights

The case involves a Miscellaneous Application (M.A. No. 59/Ahd/2022) filed by the Revenue against M/s. Arham Pumps, challenging the Tribunal's earlier decision which quashed an intimation under section 143(1) of the Income Tax Act. The Revenue contended that the Tribunal's decision was based on a factual inaccuracy regarding the communication of adjustments to the assessee, which was actually sent by the CPC on 03.09.2019. The Tribunal, however, found that the Revenue's application was essentially a request for a review of its earlier decision, which is not allowed under the law. The Tribunal also emphasized that the notice in question was not part of the record during the original hearing, and thus could not be considered in the current proceedings.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114341 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-05-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 02-02-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 11-08-2022
• Other Referred Cases: ITO vs. Iraisaa Hotels P. Ltd., Paresh Dhanji Chedda vs. DCIT, Sesa Goa Ltd. vs. ACIT, CIT vs. Reliance Telecom Ltd., Vrundavan Ginning and Oil Mills vs. AR
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rectification of order; Reasonable cause
• Section: 260A; 143(1); 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Assistant Commissioner of Income Tax, Circle-2(1)(1), Ahmedabad (Appellant) Vs M/s. Arham Pumps B-10 & B012, Jagannath Industrial Estate, Nr. Gujarat Bottling, Rakhial, Ahmedabad PAN: AAOFA2797E (Respondent) Assessee Represented:Shri ParimalsinghB Parmar, A.R. Revenue Represented:Shri Satish Solanki, Sr. D.R. Date of hearing : 03-02-2023 Date of pronouncement : 03-05-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This present Miscellaneous Application is filed by the Revenue on the ground that the Tribunal quashed the intimation passed u/s. 143(1) passed by CPC, without affording an opportunity to the assessee to make out the adjustment either in writing or in electronic mode as per the 1 st proviso to Section 143(1) of the Act. M.A. No. 59/Ahd/2022 (in ITA No. 206/Ahd/2021) Assessment Year 2018-19 M.A. No. 59/Ahd/2022 A.Y. 2018-19 Page No ACIT vs. M/s. Arham Pumps 2 2. But after passing of this order by the Tribunal, it is noticed by the Revenue that there was a communication sent by CPC to the assessee on 03.09.2019 to make disallowance u/s. 36(1)(va) of the Act. However the assessee did not respond to the said communication sent by the CPC. As per the 2 nd proviso to Sectio143(1)(a), CPC has 30 days time and thereafter on 19.10.2019 intimation u/s. 143(1) was passed by the CPC. Thus Tribunal was factually incorrect in quashing the 143(1) proceedings for not following the first and second proviso to section 143(1)(a) of the Act and which is apparent mistake on record and requested to recall the order and decide the case on merits. 3. The above M.A. was listed for hearing on 23.12.2022. We do not found the so called communication dated 03.09.2019 sent by CPC to the assessee. When the same was pointed out to the knowledge of Ld. D.R., he sought time to produce the same. Thus the M.A. was adjourned to 20.01.2013. Again in the said hearings, the Ld. D.R. has not produced the so called communication dated 03.09.2019, hence the M.A. is adjourned to 03.02.2023. In the meanwhile, the Ld. D.R. vide its letter dated 23.01.2023 filed the communication dated 03.09.2019 by CPC proposing to make adjustments u/s. 143(1)(a) of the Act to the assessee, namely late payment of PF and ESIC contribution. Thus the ld. D.R. appearing for the Revenue stated the Revenue though could not produce the communication by CPC during the course of hearing, the same is now produced by the Revenue in this Miscellaneous Application and requested to recall the order dated 27.04.2022 passed by the Hon’ble Tribunal in ITA No. 206/Ahd/2021. M.A. No. 59/Ahd/2022 A.Y. 2018-19 Page No ACIT vs. M/s. Arham Pumps 3 4. Per contra, the Ld. Authorized Representative Shri Parimalsingh B Parmar appearing for the assessee strongly objected to the admission of the communication by CPC dated 03.09.2019. The Hon’ble Tribunal in Para 5 of the order has clearly recorded by the arguments of the Ld. D.R. that he supported the order of the Lower Authorities, Jurisdictional High Court have repeated by held that late payment of PF and ESIC contribution certainly requires disallowance u/s. 36(1)(va) of the Act. In Para 7 of this order, the Hon’ble Bench has categorically held that “CPC has not followed the first proviso to Section 143(1)(a) of the Act. This was not contravented by the Ld. D.R. appearing for the Revenue”. Then in again Para 8 of this order, “both the CPC and NFAC orders are silent about the intimation given to the assessee before making adjustment u/s. 143(1)(a) of the Act”. Then again in Para 9 of the Tribunal order, “as the fundamental principle of “audi alterm partem”, is not followed by CPC thereby quashed the intimation passed u/s. 143(1)(a) of the Act”. Thus the Ld. A.R. summarized during the course of the hearing of the appeal before the Tribunal, the Ld. D.R. was not in a position to controvert the aspect that CPC has not issued notice to the assessee with respect to the proposed adjustment. There was no documentary evidence was furnished by the Ld. D.R. before the Tribunal either “prior to” or “during the course of hearing” to the effect that any such notice was ever issued by CPC. 4.1. Even, in the present Misc. Application, the Revenue in Paragraph 3 states that from the record available to this (Department) office, necessary opportunity was given by CPC M.A. No. 59/Ahd/2022 A.Y. 2018-19 Page No ACIT vs. M/s. Arham Pumps 4 issuing notice dated 03.09.2019. Therefore the observation of the Tribunal is factually incorrect in quashing the 143(1) proceedings. The Ld. Counsel further submitted the “record available with the Revenue” does not mean “record filed before the Tribunal”. Section 254(2) of the Act provides for rectification of any error apparent from the “record”. Further Rule 18(6) of the ITAT Rules, 1963 provides that Documents that are referred to and relied upon by the parties “during the course of arguments” shall alone be treated as “part of the record of the Tribunal”. 4.2. Thus conjoint reading of above, section 254(2) and Rule 18(6) makes it clear that “notice dated 03.09.2019” is not forming “part of record of the Tribunal”. Thus while passing the order, the Hon’ble Tribunal has not committed any mistake or error ad relied upon the following judgments: • ITO vs. Iraisaa Hotels P. Ltd. - (2018) 173 ITD 30 (Mum); • Paresh Dhanji Chedda vs. DCIT - (2016) 160 ITD 656 (Hyd.); • Sesa Goa Ltd. vs. ACIT - (2015) 55 taxmann.com 28 (Panaji). 4.3. The Ld. Counsel further submitted that the “scope of rectification of order u/s. 254(2) of the Act” is extremely limited and it does not extend to correcting the errors of law or “re-appreciating the factual findings”. Thus, if the assessee or revenue is of the opinion that the order passed by the Hon’ble ITAT is erroneous, “either on facts or in law”, the only remedy to the aggrieved party is to prefer “Tax Appeal” u/s. 260A of the Act before the Hon’ble High Court concerned and also placed on record, the following decisions: M.A. No. 59/Ahd/2022 A.Y. 2018-19 Page No ACIT vs. M/s. Arham Pumps 5 • CIT vs. Reliance Telecom Ltd. - 440ITR 1 (SC). • Vrundavan Ginning and Oil Mills vs. AR - 434 ITR 583 (Guj); 4.4. Thus the ld. Counsel in view of the factual position as well as the legal position submitted that the present Misc. Application filed by the Revenue deserves to be dismissed. 5. We have given our thoughtful consideration and perused the materials available on record. It is seen from the Tribunal order, the ld. D.R. could not contravent that any notice was sent by CPC as per first proviso to Section 143(1)(a) of the Act during the course of the hearing of the appeal. 5.1. There is no further reference to the so called notice dated 03.09.2019 issued by CPC to the assessee for the proposed adjustment to be made in the 143(1) intimation order. Thus the Revenue failed to produce the required documents before the Tribunal and by this Misc. Application producing the new document that too from the “office record of the Revenue” and requesting to recall the order, which is not permissible u/s. 254(2) of the Act. 5.2. The Hon’ble Supreme Court in the case of CIT vs. Reliance Telecom Ltd. reported in [2021] 133 taxman.com 41 (SC), has considered the powers of the Tribunal u/s. 254(2) and held as follows: “..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- M.A. No. 59/Ahd/2022 A.Y. 2018-19 Page No ACIT vs. M/s. Arham Pumps 6 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.) ....................... As observed hereinabove, the powers under section 254(2) of 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.” 5.3. The Hon’ble Jurisdictional Gujarat High Court in the case of Vrundava Ginning and Oil Mill vs. Assistant Registrar reported in [2021] 126 taxmann.com 227 after considering elaborately the powers u/s. 254(2) which has examined by the Delhi High Court judgment in the case of CIT vs. ITAT held as follows: “......13. The contours of the jurisdiction under section 254 (2) were examined by the Delhi High Court in CIT v Income-tax Appellate Tribunal [2005] 204 CTR 349. It was held that: “6. It is evident from the above that the power available to the Tribunal is not in the nature of a review as is understood in legal parlance. The power is limited to correction of mistakes apparent from the record What is significant is that the section envisages amendment of the original order of the Tribunal and not a total substitution thereof. That position is fairly well-settled by two decisions of this Court in Ms. Deeksha Suri v. ITAT and Karan and Co. v. ITAT [2002] 253 1TB 131. This Court has in both these decisions held that the foundation for the exercise of the jurisdiction lies in the rectification of a mistake apparent from the record which object is ensued by amending the order passed by the Tribunal. The said power does not however, contemplate a re-hearing of the appeal for a fresh disposal. Doing so would obliterate the distinction between the power to rectify mistakes and the power to review the order made by the Tribunal. The following passage from the decision of this Court in Karan and Co.'s case (supra) elucidates the difference between review and rectification of an order made by the Tribunal: M.A. No. 59/Ahd/2022 A.Y. 2018-19 Page No ACIT vs. M/s. Arham Pumps 7 "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. We 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 section 254(1) is the effective order so far as the appeal is concerned. Any order passed under section 254(2) either allowing the amendment or refusing to amend gets merged with the original order passed. The order as amended or remaining unamended is the effective order for all practical purposes. The same continues to be an order under section 254(1). That is the final order in the appeal. An order under section 254(2) does not have existence de hors the order under section 254(1). Recalling of the order is not permissible under section 254(2). Recalling of an order automatically necessitates re-hearing 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 or Rule 24 of the Income- tax (Appellate Tribunal) Rules, 1963, and that too only in cases 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. This position was highlighted by one of us (Justice Arijit Pasayat, Chief Justice) in CIT v. ITAT. Judged in the above background the order passed by the Tribunal is indefensible." ............................... 19. Having regard to the materials on record, we find it difficult to take the view that the ground No. 3, which the writ applicant is talking about, has not been dealt with at all by the Appellate Tribunal. The Appellate Tribunal, in its own way, has discussed the said issue and recorded a particular finding. If the writ applicant is dissatisfied, then it is always open for him to prefer an appeal under section 260A of the Act before this High Court and in the course of the appeal, it can be pointed out to the Court as regards the ground No. 3 and if the Court is convinced, then it may remit the matter to the Tribunal for fresh consideration of the ground No. 3 which the writ applicant is talking about. The power to rectify an order under section 254(2) of the Act is extremely limited, as observed by the Delhi High Court in the case of CIT v. Maruti Insurance Distribution Services Ltd. [2012] 26 taxmann.com 68/[2013] 212 Taxman 123. It does not extend to correcting the error of law or re-appreciating the factual findings. Those properly fall within the appellate review of an order of Court of first instance. What legitimately falls for consideration are errors (mistakes) apparent from the record. 5.4. The Co-ordinate Bench of Mumbai Tribunal in the case of ITO Vs. Iraisaa Hotels Pvt. Ltd. reported in [2018] 97 taxmann.com 623 wherein it has been held as follows: “...As could be seen from the narration of facts in the authorization memo of the learned PCIT, he admits that proper enquiry was not done by the learned Commissioner (Appeals) and by the Assessing Officer at the stage of remand which resulted in not bringing certain facts to the notice of the Tribunal. Thus, it is crystal clear that the Tribunal has proceeded on the basis of facts and material on M.A. No. 59/Ahd/2022 A.Y. 2018-19 Page No ACIT vs. M/s. Arham Pumps 8 record and as were placed before it at the time of hearing by the learned Counsels appearing for the parties. It must be understood that the role of the Tribunal as a second appellate authority is of an adjudicator and not an investigator. The Tribunal under the provisions of the Act has to decide the grounds raised in an appeal filed either by the assessee or by the Department on the basis of the facts and materials available on record or brought to its notice at the time of hearing of appeal. .......................... 9. What the Department wants by filing this application is a review of the earlier decision of the Tribunal which is not permissible under the provision of section 254(2) of the Act which is very limited in its scope B and ambit and only applies to rectification of mistake apparent on the face of record. With the aforesaid observations, we decline to entertain the misc. application filed by the Revenue.” 5.5. The Co-ordinate Bench of Panaji Bench in the case of Sesa Goa Ltd. Vs. ACIT reported in [2015] 55 taxmann.com 28 (Panaji –Trib.) wherein it has been held as follows: “...We noted that Rule 18(6) of the Appellate Tribunal Rules states that documents that are referred to and relied upon by the parties during the course of arguments shall alone be treated as part of the record of the Tribunal. The Revenue has put up an application before us mentioning therein that due to certain information found during the course of survey and post inquiries conducted/statement recorded from various fabricators it was noticed that the Assessee company suppressed certain vital material facts regarding setting up of EOUS at Amona and Chitradurga and C these facts were necessary to decide whether the Assessee is eligible for deduction u/s 10B, From the submission of the Revenue it is apparent that the material and information on which the Revenue relied by putting up the miscellaneous application has been procured subsequent to the passing of the order not only by the Hon'ble Tribunal but also after dismissing the various questions by the Hon'ble High Court vide its order dt. 23.9.2013. Rule 18(6) of the Appellate Tribunal Rules explicitly mentions that only the documents that are referred to and relied upon by the parties during the course of the argument shall alone be treated to be part of the record of the Tribunal. ........................... 13. Sec. 254(2) empowers the Tribunal to rectify mistake which is apparent on record within 4 years from the date of the order suo moto or on application by the Assessee or Revenue. The provisions of Sec. 254(2) can not be construed in a manner that produces an anomaly or otherwise produces irrational or illogical result. The Id. DR even though vehemently argued, but could not bring to our knowledge that this Tribunal failed to consider the case law as cited before the Tribunal or the Tribunal has not considered the contentions, pleas and arguments raised before the Tribunal by both the sides. The power u/s 254(2) does not contemplate re- hearing which would have the effect of re-writing the order affecting the merit of the case. If the power given u/s 254(2) is read in that manner, then, in our opinion, there will not be any difference between the power to review and the power to rectify the mistake. The legislature has not deliberately conferred the power of review on the Tribunal and the Tribunal cannot review its order under the garb of power given u/s 254(2). In view of our aforesaid discussion, we are of the view that the decision of the Tribunal is based on the appreciation of the facts and the case laws. Therefore, the Miscellaneous M.A. No. 59/Ahd/2022 A.Y. 2018-19 Page No ACIT vs. M/s. Arham Pumps 9 Application filed by the Revenue, in our opinion, does not relate to mistake apparent on the record rectifiable u/s. 254(2) of the Act.” 6. Respectfully following the above decisions of the Hon’ble Supreme Court, High Court and Co-ordinate Benches of the Tribunal, we are of the considered opinion that the present Misc. Application filed by the Revenue is to review the earlier order/decision of the Tribunal which is not permissible u/s. 254(2) of the Act. Further as per Rule 18(6) of the ITAT Rules the so called “notice dated 03.09.2019” is not “part of the record of the Tribunal” while passing the order. Thus the tribunal has not committed any mistake or error, therefore the present M.A. is devoid of merits and the same is liable to be dismissed. 7. In the result, the Misc. Application filed by the Revenue stands dismissed. Order pronounced in the open court on 03-05-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 03/05/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद