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February 18, 2021

Non consideration of paper book filed is a mistake apparent from the record which can be amended by Tribunal – SC

by CA Shivam Jaiswal in Income Tax

Non consideration of paper book filed is a mistake apparent from the record which can be amended by Tribunal – SC

Income Tax Appellate Tribunal (ITAT) is a quasi-judicial institution which specializes in dealing with appeals under the Direct Taxes Acts. According to Section 254, 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. On a question of fact, the Appellate Tribunal order is a final order and no appeal can lie to High Court against this order. However, if the fact finding had not been done properly by the Appellate Tribunal, the assessee can file a writ petition to the High Court challenging the fact-finding process. If the High Court is satisfied that the claim of the assessee is correct then it will direct the Appellate Tribunal to conduct the fact finding as per the proper procedure.

Section 254(2) of the Income-tax Act, 1961, empowers the Tribunal to amend any order passed by it under sub-section (1) with a view to rectifying any mistake apparent from the record at any time within four years from the date of the order. Therefore, to attract the applicability of section 254(2), the mistake which is sought to be rectified must be apparent from the record and the same must be in any order passed under sub-section (1) of section 254. An order rejecting an application for rectification under section 254(2) is not an order passed under section 254(1) and it cannot be rectified under section 254(2).

Let us refer to the case of Nisha Synthetics Ltd. v CIT (2017), where the issue under consideration was whether the Tribunal had committed a mistake apparent from record in not considering the documents in the paper books filed while deciding the appeal and hence the order of the Tribunal was subject to rectification u/s. 254(2) of the Act or not.

Facts of the Case:

  • The appellant claimed that it had filed two paper books, Paper Book – I and Paper Book – II during the appellate proceedings before the Tribunal.
  • Paper Book I contained Page Nos. 1 to 40 and the Paper book – II contained Page Nos. 1 to 90.
  • There was no dispute about the paper book I being available on records.
  • Paper book II, as per the claim of the assessee, was filed during the course of the hearing before the Tribunal.
  • First part of Paper Book II i.e., Page Nos. 1 to 6 was containing the order of the Tribunal in the first round of hearings, vide which the matter was set aside to the assessing officer.
  • Part – 2 of the Paper Book II contained another set of papers from Sr. No. 1 to 90.
  • This contained the paper book filed before the CIT (A) in the fresh round of litigation, which the CIT (A) had not admitted.
  • The Tribunal passed the order and in the order of the Tribunal none of the papers contained in the Paper Book I or Paper Book II were referred to.

Miscellaneous Application filed by Assessee

  • The assessee filed a Miscellaneous Application u/s. 254(2) of the Act and claimed that there was a mistake apparent from the records in as much as the documents filed vide both the Paper Books have not been considered.
  • The said Miscellaneous Application was decided and the Tribunal accepted the fact that the Paper book I was filed/tendered during the hearing, leading to the order.
  • However, it was an admitted position that the document referred to in Paper book I, would have no bearing to the result arrived at, in the order passed in appeal.
  • So far as Paper book II was concerned, the Tribunal observed that no such compilation had been filed before it during hearing, leading to the order.
  • In view of this, the Miscellaneous Application of the assessee was dismissed.

Petition filed before the High Court (HC)

  • The assessee filed a writ petition before the HC against the order of the Tribunal dismissing the Miscellaneous Application.
  • Before the HC, the Registrar of the Tribunal filed an affidavit stating that on verification of the record, it was found that there was one compilation of Paper book I containing 40 pages and there was another compilation viz: Paper book II containing 6 pages, namely order of the Tribunal passed in respect of Assessment Year 1996-97.
  • On oath, the affidavit stated that no other documents/Paper book was available in the record of the case with the Tribunal.
  • The assessee also filed an affidavit of director of the assessee company.
  • This affidavit had a communication from the advocate who appeared for the petitioner in the appeal proceedings.
  • Both these documents inter alia stated that the compilation of documents (Paper book II) was filed.
  • However, the advocate in his communication had neither categorically stated the number of pages which Paper Book II contained nor did it state that the second paper book was in two parts i.e. from Page 1 to 6 and another from Page No. 1 to 90.
  • The Index to the second paper book also did not make any reference of documents being filed along with it, containing compilation of pages 1 to 90, which were sought to have been filed before the CIT(A).
  • Considering these factors, the HC held that there was no fault of the Tribunal in rejecting the assessee’s rectification application specially taking into account the conduct of the assessee.
  • HC inter alia held that the proceedings for rectification were not a proceeding to recall so as to have the matter reheard on merits by relying upon the evidence which were never produced before the Tribunal.
  • The assessee filed a Civil Appeal before the Supreme Court against the order of the HC.

Observations of the Supreme Court (SC)

  • Before the SC, the assessee submitted that even on the materials admitted to have been filed before the ITAT i.e. Paper Book I containing Page Nos. 1 to 40, the appellant can make out its case which has been admittedly filed by the assessee, though not as claimed by the assessee before the HC.
  • SC held that even going by the records which were found to have been received by the Tribunal, the Tribunal could have been directed to consider the case of the appellant.
  • The SC, therefore, directed the Income Tax Appellate Tribunal, to hear the appeal of the appellant afresh on the basis of the documents, which have already been found to be filed by the appellant.
  • The SC also clarified that the order passed by the HC shall not stand in the way of the Tribunal in passing the orders.

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