ITO WD 6(2)(1), V. CREATVE OUTERWEAR LTD,

MA 669/MUM/2010

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 6052 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 28-01-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: misc
• Appeal Filed On: 12-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Keywords: Rectification of order; Retrospective amendment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K, MUMBAI BEFORE SHRI R.S. SYAL, A.M. AND SHRI V. DURGA RAO, J.M. M.A. NO. 669/M/10 (IN ITA NOS. 1562 & 1563/M/07 ASSESSMENT YEAR: 2001-02 & 2003-04) INCOME TAX OFFICER, 6(2)(1), APPLICANT AAYAKAR BHAVAN, MUMBAI. VS. M/S CREATIVE OUTERWEAR LTD., RESPONDENT 101, AMAR INDUSTRIAL ESTATE, SUN MILL COMPOUND, LOWER PAREL, MUMBAI 400 013 (PAN AAACC 0436F) APPLICANT BY : MR. SURENDRA KUMAR RESPONDENT BY : MR. VIJAY MEHTA ORDER PER V. DURGA RAO, J.M.: THIS MISCELLANEOUS APPLICATION HAS BEEN FILED BY TH E REVENUE U/S 254(2) OF THE ACT PRAYING FOR RECALL OF THE ORDER OF THE TRIBUNA L DATED 17/09/2009 IN ITA NOS. 1562/M/2009 AND ITA NO. 1563/MUM/2009. 2. THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTEND ED THAT THE TRIBUNAL WHILE ACCEPTING THE ASSESSEES GROUND ON THE CLAIM OF DED UCTION U/S 80 HHC IN THE CONTEXT OF DEPB RELIED ON THE SPECIAL BENCH DECISION IN TOPMAN EXPORTS VS.ITO [2009] 318 ITR (AT) 87 (MUM) (SB). IT WAS CONTENDED THAT THE SAID ORDER HAS BEEN OVERRULED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KA LPATARU COLOURS & CHEMICALS [2010] 328 ITR 451 (BOM.). IT WAS, THEREFORE, PRAYE D THAT THE IMPUGNED ORDER HAS NOW M.A. NO. 669/MUM/2010 M/S CREATING OUTERWEAR LTD. 2 BECOME ERRONEOUS IN VIEW OF THE SUBSEQUENT JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, WHICH SHOULD BE REVERSED. IN THE OPPOSITION THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON CERTAIN JUDICIAL DECISIONS FOR CONTENDING THAT THE SUBSEQUENT JUDGMENT OF THE HONBLE HIGH COURT CANNOT CONSTITUTE A MISTAKE IN T HE ORDER OF THE TRIBUNAL, NAMELY, SREE PALANIAPPA TRANSPORTS VS. CIT, 238 ITR 492 (MAD.) A ND THE DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF TRILOK SHIP BREAKERS (P ) LTD. VS. ACIT, [2009] 84 ITD 48 (MUM.). 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD. IT IS SEEN THAT THE TRIBUNAL ORDER ACCEPTING THE ASSESSEE S CLAIM ON DEPB WAS PASSED PRIOR TO THE JUDGMENT RENDERED BY TH'E HONBLE JURISDICTIONA L HIGH COURT IN CIT VS. KALPATARU COLOURS AND CHEMICALS (SUPRA) REVERSING THE SPECIAL BENCH ORDER IN TOPMAN EXPORTS VS. ITO (SUPRA). THERE IS NO CONFLICT ON THE POINT THA T AS PER THIS JUDGMENT, THE VIEW POINT OF THE AO HAS BEEN VALIDATED. NOW THE QUESTION ARISES AS TO WHETHER A SUBSEQUENT JUDGMENT RENDERED BY THE HONBLE JURISDICTIONAL HIGH COURT O N THE ISSUE CAN BE CONSIDERED FOR TREATING THE EARLIER CONTRARY ORDER OF THE TRIBUNAL , AS ERRONEOUS LIABLE FOR RECTIFICATION U/S 254(2) OF THE ACT. 4. IN THIS CONTEXT, IT MAY BE RELEVANT TO NOTICE TH E FOLLOWING OBSERVATION OF THE HONBLE APEX COURT IN THE CASE OF ACIT VS. SAURASHT RA KUTCH STOCK EXHANGE LTD. [2008] 305 ITR 227 (SC):- THE CORE ISSUE, THEREFORE, IS WHETHER NON CONSIDERA TION OF A DECISION OF JURISDICTIONAL COURT (IN THIS CASE A DECISION OF TH E HIGH COURT OF GUJARAT) OR OF THE SUPREME COURT CAN BE SAID TO BE A MISTAKE APPARENT FROM RECORD ?. IN OUR OPINION, BOTH THE TRIBUNAL AND THE HIGH COURT W ERE RIGHT IN HOLDING THAT SUCH A MISTAKE CAN BE SAID TO BE A MISTAKE APPARENT FRO M THE RECORD WHICH COULD BE RECTIFIED U/S 254(2). A SIMILAR QUESTION CAME UP FO R CONSIDERATION BEFORE THE HIGH COURT OF GUJARAT IN SUHRID GEIGY LTD. VS. COMMR. OF SURTAX (SUPRA). IT WAS HELD BY THE DIVISION BENCH OF THE HIGH COURT THAT IF THE POINT IS COVERED BY A DECISION OF THE JURISDICTIONAL COURT RENDERED PRIOR OR EVEN SUBSEQUENT TO THE ORDER OF RECTIFICATION, IT COULD BE SAID TO BE MISTAKE APPA RENT FROM THE RECORD UNDER SECTION 254(2) OF THE ACT AND COULD BE CORRECTED BY THE TRIBUNAL. IN OUR JUDGMENT, IT IS ALSO WELL-SETTLED THAT A JUDICIAL DECISION AC TS RETROSPECTIVELY. ACCORDING TO BLACKSTONIAN THEORY, IT IS NOT THE FUNCTION OF THE COURT TO PRONOUNCE A NEW RULE BUT TO MAINTAIN AND EXPOUND THE OLD ONE. IN OTHER WORDS, JUDGES DO NOT MAKE LAW, THEY ONLY DISCOVER OR FIND THE CORRECT LAW. TH E LAW HAS ALWAYS BEEN THE SAME. M.A. NO. 669/MUM/2010 M/S CREATING OUTERWEAR LTD. 3 IF A SUBSEQUENT DECISION ALTERS THE EARLIER ONE, IT (THE LATER DECISION) DOES NOT MAKE NEW LAW. IT ONLY DISCOVERS THE CORRECT PRINCIP LE OF LAW WHICH HAS TO BE APPLIED RETROSPECTIVELY. TO PUT IT DIFFERENTLY, EVE N WHERE AN EARLIER DECISION OF THE COURT OPERATED FOR QUITE SOME TIME, THE DECISION RE NDERED LATER ON WOULD HAVE RETROSPECTIVE EFFECT CLARIFYING THE LEGAL POSITION WHICH WAS EARLIER NOT CORRECTLY UNDERSTOOD. 5. FROM THE ABOVE ENUNCIATION OF LAW BY THE HIGHEST COURT OF THE LAND, IT BECOMES APPARENT THAT THE JUDICIAL DECISIONS OPERATE RETROS PECTIVELY AND IF A POINT IS COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT, RENDERED BEFORE OR AFTER THE ORDER, THE CONTRARY VIEW HAS TO MAKE THE SPACE FOR THE HIGHER WISDOM TO PREVAIL BY WAY OF RECTIFICATION OF THE EARLIER ORDER. IF THE VIEW POINT OF THE LD. AR IS A CCEPTED THAT THE SUBSEQUENT JUDGMENT BE IGNORED FOR THE PURPOSES OF RECTIFICATION O THE EAR LIER CONTRARY ORDER, IT WOULD MEAN THAT THE EARLIER ORDER WOULD BE HELD IN ACCORDANCE WITH THE LAW AS ON THE DATE OF PASSING OF ITS ORDER. IT WOULD, THEREFORE, MEAN THAT THE SUBSEQUEN T JUDGMENT OF THE HONBLE SUPREME COURT OR THE JURISDICTIONAL HIGH COURT IS NOT DECLA RATORY BUT PROSPECTIVE, WHICH IS CONTRARY TO THE SETTLED LEGAL POSITION. 6. WE ARE AWARE OF THE FACT THAT IN CERTAIN CASES I T HAS BEEN HELD THAT THE LATER JUDGMENT CANNOT CONSTITUTE THE BASIS FOR RECTIFICAT ION OF THE CONTRARY ORDER PASSED PRIOR TO SUCH JUDGMENT. BUT IT IS RELEVANT TO MENTION THAT I T IS NOT THE ONLY VIEW ON THE POINT. THE FULL BENCH OF THE PUNJAB & HARYANA HIGH COURT IN CI T VS. SMT. ARUNA LUYHRA [2001] 252 ITR 76 (P&H) HAS HELD THAT THE RECTIFICATION OF AN ORDER CAN BE INITIATED ON THE BASIS OF AN ORDER PASSED BY THE JURISDICTIONAL HIGH COURT OR THE SUPREME COURT SUBSEQUENT TO THE ORDER PASSED BY THE AUTHORITY UNDER THE ACT. S IMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE KERALA HIGH COURT IN KIL KOTAGIRI TEA AND C OFFEE ESTATES CO. LTD. VS. INCOME TAX APPELLATE TRIBUNAL AND OTHERS [1988] 174 ITR 57 9 (KER.) BY HOLDING THAT THE ORDER BASED UPON THE INTERPRETATION OF LAW FOUND WRONG SU BSEQUENTLY DISCLOSED MISTAKE APPARENT FROM RECORD WHICH IS RECTIFIABLE. IT HAS B EEN HELD THAT WHERE AN ORDER IS PASSED BY AN AUTHORITY ON THE BASIS OF A PARTICULAR DECISI ON, REVERSAL OF SUCH DECISION IN FURTHER PROCEEDINGS, WILL JUSTIFY A RECTIFICATION OF ORDER PASSED ON EARLIER DECISION. SIMILAR VIEW HAS BEEN TAKEN IN THE FOLLOWING CASES ALSO. I) M.K.K. KUPPURAJ VS. ITO [1995] 211 ITR 853 (MAD .) M.A. NO. 669/MUM/2010 M/S CREATING OUTERWEAR LTD. 4 II) SURAT TEXTILES MILLS LTD. VS. CIT [1971] 80 IT R 1 (GUJ.) III) SOUTHERN INDUSTRIAL CORPORATION LTD. VS. CIT [2002] 258 ITR 481 (MAD.) 7. MOREOVER WITH THE ADVENT OF THE JUDGMENT BY THE HONBLE SUPREME COURT IN SAURASHTRA KUTCH STOCK EXCHANGE LTD. (SUPRA) LAYING DOWN CLEARLY IN FAVOUR OF RECTIFICATION, THE CONTRARY JUDGMENTS OF SOME OF TH E HONBLE HIGH COURTS HOLDING OTHERWISE STAND IMPLIEDLY OVERRULED. WE, THEREFORE, HAVE NO HESITATION IN COMING TO THE CONCLUSION THAT THE JUDGMENT RENDERED BY THE HONBL E SUPREME COURT OR THE HONBLE JURISDICTIONAL HIGH COURT RENDERS THE EARLIER CONTR ARY ORDER PASSED BY THE TRIBUNAL ERRONEOUS, WHICH NEEDS TO BE RECTIFIED U/S 254(2) O F THE ACT. IT IS NOTWITHSTANDING THE FACT THAT SUCH JUDGMENT WAS PRONOUNCED BEFORE OR AFTER T HE PASSING OF THE ORDER BY THE TRIBUNAL. 8. UNDER THESE CIRCUMSTANCES, WE HOLD THAT THE IMPU GNED ORDER PASSED BY THE TRIBUNAL SUFFERS FROM INFIRMITY INASMUCH AS IT IS I N CONTRADICTION TO WHAT HAS BEEN SUBSEQUENTLY LAID DOWN BY THE HONBLE JURISDICTIONA L HIGH COURT IN KALPATARU CHEMICALS (SUPRA) AND THE SAME DESERVES TO BE RECTIFIED AND I S HEREBY RECTIFIED. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. FIRST APPELLATE AND REST ORE THAT OF THE AO ON THIS ISSUE. CONSEQUENTLY, THE APPEAL FILED BY THE REVENUE 9. IN THE RESULT, THE M.A. FILED BY THE REVENUE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF JANUARY, 2011. SD/- SD/- (R.S. SYAL) (V. DURG A RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED: 28 TH JANUARY, 2011 M.A. NO. 669/MUM/2010 M/S CREATING OUTERWEAR LTD. 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, K BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 20/01/11 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 24/01/11 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER