M/s. Prakash Industries Ltd, New Delhi V. ACIT, Hisar

MA 95/DEL/2022

AI Insights

The case involves M/s. Prakash Industrial Ltd., which filed a Miscellaneous Application under section 254(2) of the Income Tax Act, 1961, seeking recall of an order that dismissed their appeal as withdrawn. The initial withdrawal was based on the advice of a counsel, mistakenly believing that a Supreme Court judgment had rendered their appeal futile. Upon realizing the mistake, they sought to restore the appeal. The Tribunal considered various precedents and the specific provisions of the Income Tax Act and Tribunal Rules, ultimately deciding to recall the order and restore the appeal for a decision on merits, emphasizing the need for justice and correct legal procedure.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300692 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 26-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 31-08-2023
• Assessment Year: 2007-2008
• Appeal Filed On: 24-05-2022
• Other Referred Cases: Rolta India Ltd. (2011) 330 ITR 470, CIT vs. Kwality Biscuits Ltd. (2006) 284 ITR 434, CIT vs. Glaxo Laboratories, Jiyajeerao Cotton Mills Ltd. vs. ITO [1981] 130 ITR 710, PCIT vs. Mangalore Refinery & Petrochemicals Ltd. (2020) ITA No. 875/2017, Jet Ply Wood Private Ltd. & Anr vs Madhukar Nowlakha & Ors. Appeal (Civil) no. 1367 of 2006, Federal Mogul Goetze (India) Ltd. vs. ACIT (2022) 439 ITR 204 (Delhi HC), Reliance Telecom Limited, Civil Appeal No.7110 of 2021, Jayant D. Sanghavi vs.The Income Tax Appellate Tribunal, order dated 1/2/2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset converted into stock in trade; Opportunity of being heard; Bonafide mistake; Set aside
• Section: 154; 234B; 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘F’ NEW DELHI BEFORE SH. N.K.BILLAIYA, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER M. A NO. 95 /Del/2022 (A.Y 2007-08) in (Arising out of I.T.A.No. 1389/Del/2014) M/s. Prakash Industrial Ltd. Srivan, Near Indian Oil Petrol Pump, Main Road, Bijwasan, New Delhi-110061 (APPLICANT) vs ACIT, Hisar (RESPONDENT) Applicant by Sh. Ajay Wadhwa, Adv. Respondent by Sh. Manu Chaurasia, Sr. DR ORDER PER ANUBHAV SHARMA, JUDICIAL MEMBER : This Miscellaneous Application u/s 254(2) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) has been filed by the assessee for recall/ rectification of the order dated 13.10.2020 passed by the Co-ordinate Bench whereby the appeal of the assessee was dismissed by the following observations in para 3 and 4; 3. Learned Counsel for the Assessee placed on record an application praying for withdrawal of the appeal. Learned Counsel for the Assessee also seeks permission to withdraw the appeal, to which, the ld. DR has no objection. Date of Hearing 04.08.2023 Date of Pronouncement 27.09.2023 2 M.A No. 95/Del/2022 M/s. Prakash Industries Ltd. 4. In view of the above, appeal of the assessee is dismissed as withdrawn.” 2. On hearing Ld. AR upon the application it came up that appeal was sought to be withdrawn unconditionally on what Ld. AR now submits was a bona fide mistake of the assessee based upon wrong advise tendered by another counsel. It was pointed out that the impugned order challenged before Tribunal was one u/s 154 of the Act wherein the Ld. AO had invoked the provisions of u/s 154 on the basis of judgment of Hon’ble Supreme Court of India in Rolta India Ltd. (2011) 330 ITR 470 dated 07.01.2011. The case of assessee was that relying judgment of Hon’ble Supreme Court of India in case of CIT vs. Kwality Biscuits Ltd. (2006) 284 ITR 434 dated 26.04.2006 interests was not paid on the shortfall in the payment of advance tax and was paid on the tax liability determined on book profits. Ld. AR submitted that based on this judgment in Kwality Biscuits Ltd (supra), the Ld. AO had accepted the claim of assessee, but subsequently relying order of Hon’ble Supreme Court of India in Rolta Indian Ltd. (supra) he exercised power u/s 154 of the Act and the same could not have been done as it was settled proposition of law that based on the subsequent judgment of binding nature from Hon’ble Supreme Court, the rectification powers cannot be exercised by the assessing officer. Reliance in this regard is placed on the judgment 2.1 Ld. AR submitted that at that time the assessee was advised by counsel to withdraw the appeal on the mistaken belief that since judgment in the case of Rolta India Ltd. (supra) has come, the benefit of Kwality Biscuits Ltd Case (supra) is no longer available to assessee. Ld. AR submitted that the assessee was not well advised as settled proposition of law is that subsequent judgment of Hon’ble Supreme Court reversing an earlier judgment will not permit the Assessing Officer to assume jurisdiction to rectify the order u/s 154 of the Act. As 3 M.A No. 95/Del/2022 M/s. Prakash Industries Ltd. for this, Ld. AR specifically referred to Hon’ble Supreme Court judgement in the case of CIT vs. Glaxo Laboratories (supra) SLP (Civil No.) 12469 of 1993. He also relied Jiyajeerao Cotton Mills Ltd. vs. ITO [1981] 130 ITR 710. Ld. AR relied the judgment of Hon’ble Bombay High Court in the case of PCIT vs. Mangalore Refinery & Petrochemicals Ltd. (2020) ITA No. 875/2017 judgment dated 17.03.2020 to contend that Hon’ble High Court has observed that assessee cannot be blamed for failure to pay advance tax on the book profits by following Kwality Biscuits Ltd. judgment where Rolta India Ltd judgment had come later on. 3. As with regard to exercise of powers u/s 254(2) for restoration of the appeal, Ld. AR has relied judgment of Hon’ble Supreme Court of India in the case of Jet Ply Wood Private Ltd. & Anr vs Madhukar Nowlakha & Ors. Appeal (Civil) no. 1367 of 2006 on 28 February, 2006 and the judgment of Hon’ble Delhi High Court in the case of Federal Mogul Goetze (India) Ltd. vs. ACIT (2022) 439 ITR 204 (Delhi HC). 4. Rebutting the aforesaid, Ld. DR submitted that powers of Section 254(2) of the Act cannot be invoked, as is no error apparent from record. 5. The Bench has given thoughtful consideration to facts casted and submission and the point for determination is whether exercising powers u/s 254(2) of the Act, the appeal which was dismissed withdrawn can be restored? 6. In this context, it can be considered that there is no provision cited on behalf of the Ld. AR under the Act or the Income Tax Rules or the Income-tax (Appellate Tribunal) Rules, 1963 ( hereinafter referred Tribunal Rules) where there is an express and specific provision for restoration of an appeal dismissed as withdrawn. 4 M.A No. 95/Del/2022 M/s. Prakash Industries Ltd. 6.1 However, the Rule 4A (xx) of Tribunal rules, defining powers and functions of the Registrar of ITAT provide that the Registrar have the powers and duties to obtain orders of the Bench on applications for withdrawal of appeals and applications and put up before the Bench. 6.2 Then, with regard to ‘Miscellaneous Application withdrawing the Appeal’ the Official Manual of the Tribunal provides Clause 86 and 87 as follows; “86. Miscellaneous Application under section 254 or under corresponding sections of the other Acts. (a) Under the provision of section 254(2) of the Income-tax Act, 1961 and under corresponding sections of the other Acts, the appellant/ respondent may prefer Miscellaneous Application for rectification of any mistake(s) which is/are apparent from record and the Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it. (b) Such Miscellaneous Applications are put up before the Members, who passed the order, for order. If the case is ordered to be fixed for hearing, it is fixed and entered in the diary and notices are issued in the same manner as in the Appeals. (c) If the Application is under section 254 and the mistake/mistakes is/are apparent from record, draft order in the form as at APPENDIX XXII is put up for approval of the Bench. After approval, copies of the orders are issued to all concerned in the form as at APPENDIX XX (b). Order passed after hearing the Miscellaneous Applications are also issued in the same manner as other orders. 87. Miscellaneous Application withdrawing the Appeal/Cross Objection/ Application. On receipt of an Application from the Appellant/ Applicant or from the authorised representative of the Appellant/Applicant for withdrawal of Appeal/Application an order granting the withdrawal and dismissing the appeal for non-prosecution is passed by the bench. If necessary, draft order in the form as at APPENDIX XXII is submitted for approval. Copies of 5 M.A No. 95/Del/2022 M/s. Prakash Industries Ltd. such orders are issued to the parties and authorities concerned as in other appeals with endorsement in the form as at APPENDIX XX b).” 7. Relevant to the issue are also provisions of Section 254 of the Act, Rule 24 and Rule 34A of the Income Tax Appellate Tribunal Rules, 1963 which are reproduced below; “Orders of Appellate Tribunal. Section 254. (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. (2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record 97, amend any order passed by it under sub-section (1), and shall make such amendment 97 if the mistake is brought to its notice by the assessee or the [Assessing] Officer :” Hearing of appeal ex parte for default by the appellant. “Rule 24. Where, on the day fixed for hearing or on any other date to which the hearing may be adjourned, the appellant does not appear in person or through an authorised representative when the appeal is called on for hearing, the Tribunal may dispose of the appeal on merits after hearing the respondent : Provided that where an appeal has been disposed of as provided above and the appellant appears afterwards and satisfies the Tribunal that there was sufficient cause for his non- appearance, when the appeal was called on for hearing, the Tribunal shall make an order setting aside the ex parte order and restoring the appeal. Procedure for dealing with applications under section 254(2). 34A. (1) An application under section 254(2) of the Act shall clearly and concisely state the mistake apparent from the record of which the rectification is sought. (2) Every application made under sub-rule (1) shall be in triplicate and the procedure for filing of appeals in these rules will apply mutatis mutandis to such applications. 6 M.A No. 95/Del/2022 M/s. Prakash Industries Ltd. The Applicant shall also state whether any Miscellaneous Application under section 254(2) was filed earlier before the Tribunal against the same order and if so, the fate of such application. Copies of the orders passed by the Tribunal on such applications shall also be filed before the Tribunal in triplicate along with the Miscellaneous Application. (3) The Bench which heard the matter giving rise to the application (unless the President, the Senior Vice-President, the Vice-President or the Senior Member present at the station otherwise directs) shall dispose it after giving both the parties to the application a reasonable opportunity of being heard: (4) An order disposing of an application, under sub-rule (3), shall be in writing giving reasons in support of its decision.” 8. Now, i t will be beneficial to first take into consideration the judgments cited by Ld. AR as to powers of Tribunal u/ 254(2) of the Act to recall the order of withdrawal of the appeal and restore it for hearing on merits and what comes up is that the judgment in Jet Ply Wood Private Ltd.(supra) was in regard to a civil suit which was withdrawn to be restored upon application of plaintiff on the basis that the suit was withdrawn on the ground that plaintiff had been misled into making such application for withdrawal, on accounts of the misrepresentation of the opposite party that they would sell the disputed property to him provided plaintiff withdraw the suit. In that background of the case having taken into consideration provisions of Order 23 Rule 1 of the Code of Civil Procedure, which bars a suit dismissed withdrawn without liberty to file afresh suit and the provisions of Section 151 of CPC, which provides inherent powers to the court, Hon’ble Supreme Court had upheld the order of Hon’ble High Court permitting restoration of the suit. 9. However, there is no express provision in Income Tax Act 1961 describing and declaring inherent powers as Section 151 of the CPC or allowing withdrawal 7 M.A No. 95/Del/2022 M/s. Prakash Industries Ltd. of the appeal with liberty to file afresh as there being in Order 23 Rule 1 of CPC. But, as observed above in the Tribunal Rules and Official Manual of the Tribunal there are provisions for filing Miscellaneous Application for withdrawal of the appeal but none for restoration. Thus we need to find if in absence of specific powers there can be restoration of appeal on finding a mistake apparent form record. 10. If the judgment of Hon’ble Delhi High Court in Federal Mogul Goetze (India) Ltd.(supra), is considered there the Hon’ble High Court has allowed restoration of appeal before the Tribunal, in the background that the assessee in that case had withdrawn the appeal as the issue pertaining to transfer pricing adjustment concerning the assessment year 2011-12 stood resolved. The resolution took place as the assessee had entertained an advance pricing agreement. However, apart from the issue as resolved there were two other distinct ground under contest and by way of filing miscellaneous application, the assessee sought adjudication qua additional grounds which formed part of the withdrawn appeal. Accordingly, Hon’ble High Court made following observations; “3. It is our view that, the power available to the Tribunal under sub-section (2) of section 254 of the Act is not limited to a mistake committed by the Tribunal. The amendment to the order of the Tribunal can also made, if it is triggered on account of a mistake of the counsel for the parties. 3.1 In other words, once a mistake error is brought to the notice of the Tribunal, which is apparent on face of record, either by the assessee or the Assessing Officer, the Tribunal would have the necessary power to rectify/amend its order. This power will also extend to a situation, such as the one obtaining in the present case, where the petitioner's counsel withdrew the appeal, for the reason that, the issue concerning transfer pricing adjustment in respect of the assessment year (AY) in issue Le.. AY 2011-12, stood resolved. 8 M.A No. 95/Del/2022 M/s. Prakash Industries Ltd. 3.2 The petitioner's counsel, inadvertently, failed to bring to the notice of the Tribunal, that the issues raised in ground nos. 6 and 7 of the appeal were outstanding, and that they needed to be adjudicated upon. 4. Thus, having regard to the aforesaid, we are of the view that the impugned order dated 23-9-2020, passed by the Tribunal in the miscellaneous application i.e., MA No. 555/Del/2019 deserves to be set aside. 4.1 It is ordered accordingly. 5. The Tribunal is requested to take up the petitioner's appeal, insofar as the issues pertaining to grounds 6 and 7 are concerned, and adjudicate upon the same, after hearing the concerned parties and/or their authorized representative.” 11. The Bench is of considered opinion that withdrawal of an appeal is akin to not pressing the grounds of challenge as was in the case of Federal Mogul Goetze (India) (supra) where certain grounds regarding transfer pricing adjustment had become infructuous due to the resolution of the issue while the remaining grounds stood on merits, for which there was an obligation on the Bench to decide on merits. Accordingly, in these circumstances, as there was non-determination of the two grounds, the order qua those two grounds was a rectifiable mistake even if it crept due to error on part of counsel of assessee. 12. But more important is the fact that Hon’ble High Court has recognized the power of restoration of an appeal if the appellant satisfies the Bench that there was a mistake of fact or law, behind the withdrawal of the appeal. 13. The source of all orders of Tribunal thus are Section 254(1) of the Act which provides that “The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.” This power to pass such orders thereon as Bench thinks fit, includes power to 9 M.A No. 95/Del/2022 M/s. Prakash Industries Ltd. consider the Miscellaneous application put up before the Bench for withdrawal and Bench can allow the appellant to withdraw the appeal and that withdrawal may be absolute or conditional or with liberty, if any, sought by the appellant. 14. The Bench is of considered view that as the Rules permit filing of Miscellaneous application for withdrawal of an appeal and on which u/s 254(1) of the Act an order of withdrawal, as the facts warrant, can be passed, the rectification powers u/s 245(2) of the Act have to be exercised in accordance with the nature of relief granted to the assessee. So the general principle of law now settled by Hon’ble Supreme Court in Reliance Telecom Limited, Civil Appeal No.7110 of 2021 dated 03rd December, 2021 reported as (2021) 323 CTR (SC) 873 restricting rectification powers, is not applicable in strict sense as there is no order u/s 254(1), on the merits of issues. 15. Accordingly we have no hesitation to hold that only where the order u/s 254(1) of the Act, in appeal, is on the merits of the grounds, the limitation of limited scope of rectification power comes into effect. But where the order is passed u/s 254(1) of the Act, otherwise on merits of ground, the rectification powers have to commensurate, the nature of order passed u/s 254(1) of the Act. The phrase ‘mistake apparent from record’ has to be seen facing the facet of final order as stands passed. Thereby meaning that if the withdrawal was by way of a bonafide mistake of fact or law, then as there being no determination of issues on merits, remedy of restoration is inherent in the order passed u/s 245(1) of the Act, at the time of withdrawal. 16. Now coming to the case in hand the appeal was withdrawn unconditionally. The withdrawal application as available on record does not mention the reason for withdrawal. The application dated 10.10.2020 merely mentions that the assessee 10 M.A No. 95/Del/2022 M/s. Prakash Industries Ltd. has instructed the AR to withdraw the appeal and accordingly, the application was filed by ld. AR. There is no mention of the fact that the assessee was advised by ‘some other counsel’ and accordingly, the appeal was withdrawn by Ms. Ragini Handa, CA appearing for the assessee. 17. On queries from the Bench, on behalf of applicant/appellant an affidavit of Chief Financial officer of the Company is filed deposing about the fact of receipt of legal opinion from one Sh, Gobind Ram Keswani, CA, who was consultant of the assessee company, leading to withdrawal of the appeal by office of arguing counsel on the instructions of then CFO, Sh. P.L Gupta. Copy of said legal opinion is also placed before us where relying the judgement in Rolta India Ltd. Case (supra) the Sectoin 154 order of Ld. AO was advised to be correct. 18. Apart from aforesaid what is material is that assessee in grounds of appeal, had raised a very specific ground no 7 as follows; “That on facts and circumstances of the case and in law, CIT(A) erred in passing the order of rectification u/s 154 of the Act is bad in law since the judgement of the hon’ble Supreme Court in Rolta India Ltd. was passed on 7 january 2011 and was not part of record since the order u/s 143(3), not charging interest u/s 234B was passed on 23 rd December 2009.” 19. Hon’ble Bombay High Court in Writ petition no. 2966 OF 2016, Jayant D. Sanghavi vs.The Income Tax Appellate Tribunal, order dated 1/2/2017 has dealt with similar issue and held Assessee can seek restoration of Appeal withdrawn on advise of her Advocate on submitting Advocate’s letter. It will be appropriate to reproduce the relevant findings here below; “3. The grievance of the petitioner is that the Tribunal ought to have exercised its powers under Section 254(2) of the Act and withdrawn / recalled its order dated 7th May, 2010. This 11 M.A No. 95/Del/2022 M/s. Prakash Industries Ltd. would have been in the interest of justice, as the petitioner has acted on advise of the Advocate to withdraw its appeal. It is submitted that no litigant should suffer on account of its Advocate's mistake. In support reliance was placed on two decisions of the Calcutta High Court in Binaguri Tea Company Pvt. Ltd. vs. Deputy Commissioner of Income Tax [2016]389 ITR 648] and in re : Mahamaya Banerjee [AIR 1989 Cal 106]. 4. At the very outset we must point out that it is the petitioner's case that he acted on the advise of the Counsel in withdrawing the appeal. However, this submission of the petitioner is without there being anything on record from the Advocate concerned that he advised the petitioner to withdraw his appeal. Further the communication dated 23rd April, 2010 addressed to the Tribunal for withdrawal of the appeal was by the petitioner himself and in that communication he does not mention that the appeal is being withdrawn on account of legal advise. In fact it is an unconditional withdrawal of the appeal. Further, there is no explanation also offered for having made a miscellaneous application for recall of the order dated 7th May, 2010 in July, 2013 i.e. after over a period of three years. 5. Therefore in these facts, particularly in the absence of any evidence to indicate that the petitioner acted on the advise of Advocate to withdraw his appeal it cannot be said there is any error apparent on the record. In the above circumstances, no fault could be found with the order of the Tribunal in rejecting the application by the impugned Order under Section 254(2) of the Act. 6. Reliance placed by Ms.Sathe, learned Counsel appearing for the petitioner on Binaguri Tea Company Pvt. Ltd. (supra) in our view does not assist the petitioners. In the facts of the above case, the appeal was withdrawn by assessee therein on the advise of his lawyer. Further, the letter of the assessee to the Tribunal itself indicated that the appeal is being withdrawn due to advise of his Advocate as there was no chance of success in view of decision of the Tribunal. However, at that time i.e. when the appeal was not presssed there was an jurisdictional High Court Judgment in its favour and not known to the assessee or his Advocate. One more fact is that the application for rectification was made within two months from the date the appeal was dismissed. 12 M.A No. 95/Del/2022 M/s. Prakash Industries Ltd. 7. It was in the aforesaid circumstances and particularly the existence of jurisdictional High Court Judgment at the time when the appeal was dismissed as withdrawn, covering the issue in favour of the assessee. Therefore, it was a clear case of error apparent on record which would necessarily warrant the Tribunal to exercise its jurisdiction under Section 254(2) of the Act.” 20. Thus given the fact that order passed is silent of reasons for withdrawal, the Bench is inclined to accept the bonafide of assessee in going by the professional advice as rendered to withdraw the appeal, inspite of raising substantial grounds. The same has to be considered to be a mistake apparent from record, though at instance of appellant accordingly the application in hand deserves merit. 21. As sequel to above, the application is allowed, however, subject to deposit of cost of Rs. 10,000/- (ten thousand) with the Prime Minister's National Relief Fund, (PMNRF) and the order dated 13.10.2020 is recalled for disposal of grounds of appeal on merits. The registry is directed to list the appeal in due course with notice to parties. Order pronounced in the open court on 27 th September, 2023. Sd/- Sd/- (N.K.BILLAIYA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated :27 th .09.2023 *Binita, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi