IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1514 TO 1797 OF 2006 WITH TAX APPEAL No. 573 TO 618 AND 1216 TO 1233 OF 2007 WITH TAX APPEAL No. 182 & 204 OF 2002 WITH TAX APPEAL No. 27 TO 30 OF 2004 AND TAX APPEAL No.1536 TO 1635 OF 2005 AND SPECIAL CIVIL APPLICATION No. 1073 OF 2008 WITH SPECIAL CIVIL APPLICATION No. 1236 TO 1824 OF 2008 For Approval and Signature:
HONOURABLE THE CHIEF JUSTICE Y.R.MEENA HONOURABLE MR.JUSTICE J.C.UPADHYAYA ======================================
1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
Whether this case involves a substantial question of 4 law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
====================================== COMMISSIONER OF INCOME TAXII Appellant(s) Versus PUNITABEN KARSANBHAI PATEL Opponent(s) ====================================== Appearance :
MRS MAUNA M BHATT for Appellant(s) : 1,MR MANISH R BHATT for Appellant(s) : 1, MR S.N. SOPARKAR, SR. ADVOCATE WITH MRS SWATI SOPARKAR for Opponent(s) : 1, ====================================== CORAM : HONOURABLE THE CHIEF JUSTICE Y.R.MEENA and HONOURABLE MR.JUSTICE J.C.UPADHYAYA Date : /06/2008 CAV JUDGMENT PUNITABEN K. PATEL OSDFT AND OTHERS 284 CASES TAX APPEAL NOS. 1514 TO 1797 OF 2006 MANJULABEN PRAMODBHAI PATEL AND OTHERS 64 CASES TAX APPEAL NOS. 573 TO 618 AND 1216 TO 1233 OF 2007 JANAK PRAMODBHAI PATEL AND OTHERS 6 CASES TAX APPEAL NOS. 182 & 204 OF 2002 WITH TAX APPEAL NOS.27 OF 30 OF 2004 Present Tax Appeals are of 354 cases of 100 Assessees. Special Bench of ITAT passed combined order dt. 07.07.2006. In these appeals, CIT revised assessment u/S.263 of I.T. Act of the order passed by A.O. Tribunal allowed Assessee’s appeal and reversed the order passed by CIT. Revenue preferred Tax Appeal by raising following questions of law.
A. “Whether, when the order under the Kar Vivad Samadhan Scheme (KVSS) did not decide any judicial issue, the Tribunal was right in law and on facts in holding that when the tax arrears of the main trust were settled under KVSS, the assessee beneficiary Trust could not be assessed in respect of the share income from the main trust?”
B. “Whether the Appellate Tribunal is right in law and on facts in holding that when the main Trust settled its arrears under the KVSS, the share income cannot again be assessed in the hands of the assessee beneficiary?”
C. “Whether the Appellate Tribunal is right in law and on facts in holding that the Department had exercised the option to `assess’ the main trust under the KVSS and, therefore, the same income would not be again taxable in the hands of the assessee beneficiary on distribution?”
D. “Whether, when the main Trust avails the benefit under the KVSS, it tantamounts to `assessment’ under the Act?”
E. “Whether the Appellate Tribunal is right in law and on facts in canceling the order passed by the CIT u/S.263 of the Act, when declaration was filed by the main Trust and the assessee Trust was given benefit thereof by the Assessing Officer?”
F. “Whether the Appellate Tribunal is right in law and on facts in impliedly extending the benefit of KVSS to the assessee Trust, who was a nondeclarant under the KVSS?”
G. “Whether the Appellate Tribunal is right in law and on facts in holding that the assessee was entitled to refund of all the amount of tax paid on self assessment as well as advance tax or tax deducted at source or prepaid tax with reference to the returned income, despite the judgment of this Court in the case of Saurashtra Cement reported in 194 ITR 659?”
Tribunal noted that facts and circumstances of these 284 cases were exactly identical and the revision orders have been the same in all these appeals were clubbed together for joint hearing and analogous disposal. Identical questions were raised by revenue in all these 284 appeals. Common order is passed for all these 284 Tax Appeals.
The controversy arising in these appeals is whether income of Main Trust assessed on a substantive basis and liabilities finally settled under Kar Vivad Samadhan Scheme, 1998 (hereinafter referred to as KVSS) could again be assessed in the hands of corresponding beneficiaries which are respondents in these Tax Appeals here assessed on a protective basis.
The facts of one case, i.e. Punitaben K. Patel Oral Spec. Def. Family Trust for Asst. Year: 198384 was discussed by ITAT on which decision was taken by ITAT. The said trust was beneficiary in S.K. Patel Family Trust (Main Trust). Beneficiary trust filed its Return of Income showing income from Main Trust. Main Trust allocated income among beneficiaries and beneficiaries paid taxes on its returned income. Originally Incometax Officer in the order dt. 100383 accepted that Main Trust is a specific trust and income should be assessed in the hands of beneficiary trust. CIT revised assessment u/S.263 of IT Act in the case of main trust on 18385 holding that income pertaining to beneficiary trusts should be taxed at maximum marginal tax. In the assessment order u/S.143(3) of I.T. Act dt. 17386, beneficiary trusts were assessed on a protective basis. CIT(A) passed order against which, appeals were preferred before Tribunal. Assessee as well as revenue filed cross appeals before Tribunal. Main Trust has succeeded its appeal before Tribunal and Tribunal vide order dt. 241194 held that Main Trust is a specific trust and reversed the revision order passed by CIT u/s.263 of I.T. Act. Revenue filed reference which was allowed by tribunal vide order dt. 30 495. This reference was settled under KVSS. The necessary payment was made under KVSS. The certificate for full and final settlement of tax arrears u/S.90(2) rws 91 of the Finance (No.2) Act, 1998 in respect of KVSS was issued in Form No.4 by CIT on 2799. Hence, the stand of the department was accepted by Main Trust. Income was finally assessed in the case of Main Trust.
ITAT while disposing of cross appeals of the beneficiary trusts passed order dt. 03.04.00 and found that beneficiaries were taxed on a protective basis. Tribunal directed not to tax again.
Incometax Officer passed order u/s.154(1)/155(2) of I.T. Act dt.22.8.00 and excluded income which was assessed in the case of Main Trust and settled under KVSS. The resultant refund was issued with interest. This order dt. 22.8.00 was revised u/s.263 of I.T. Act by CIT vide order dt.12.03.03. Special Bench of ITAT passed order on 772006 and reversed the order u/s.263. Revenue preferred Tax Appeals before this court.
Mr. Manish Bhatt argued that the income should be assessed in the hands of beneficiaries though Main Trust had settled the dispute under KVSS and paid due taxes. He submitted that the taxes paid by the beneficiaries on its returned income cannot be refunded. He relied on the decision of this court in the case of CIT V/s. Saurashtra Cement and Chemical Ind. Ltd. v/s. I.T.O. (194 ITR 659). He further submitted that beneficiaries should be assessed though Main Trust paid taxes under KVSS for which he relied on the decision of this court in the case of Shankerlal Nebhumal Uttamchandani v/s. CIT (251 ITR 876). He submitted that the income consisting of share of profit from Main Trust to beneficiaries and interest from Main Trust to the beneficiaries. He conceded that as far as share income is concerned, it cannot be assessed twice i.e. in the case of Main Trust as well as in the case of beneficiaries. He submitted that the beneficiaries being the right persons, they should be assessed. For this he relied on the decision of Apex Court in the case of ITO V/s. C.H. Atchaiah (218 ITR 239). He submitted that Tribunal has wrongly dealt with interest on refund, which was not subject matter of discussion of CIT in the revision order. He has also pointed out that in this group case, this court has passed order (Coram: Mr. Justice A.R. Dave and Mr. Justice D.A. Mehta) dt. 30.07.01. He also submitted that revenue has not challenged this order before Supreme Court. In the proceedings for different Asst. years, another Division Bench referred the matter before Larger Bench. Revenue wants to rely on the material not earlier produced before Tribunal. Larger Bench observed that it would be appropriate for the petitioner to raise the contention before Tribunal and Tribunal shall consider the same after hearing the concerned parties, take a decision thereon in accordance with law. Mr. Bhatt relied on the decision of Apex Court in the case of Shelly Products (261 ITR 367). The refund of the taxes paid on the returned income should not be refunded.
Mr. Soparkar on behalf of the respondents supported the order of ITAT. He has pointed out that controversy was covered by the decision of this court dt.30.07.01 which has attained finality. Revenue cannot contest the issue again and again when the issue was decided by this court. He has submitted that various decisions cited by the revenue were already raised in the earlier proceedings of the decision of this court dt.30.07.01. He submitted that once the assessment of the Main Trust has become final where substantive assessment is made, protective assessment in the hands of beneficiaries would go, the same income cannot be taxed twice. He submitted that it was department case that income belongs to Main Trust which was accepted by Main Trust and due taxes were paid under KVSS. On the same income when beneficiaries were assessed on a protective basis, the same income cannot be assessed again. He referred to the circulars issued by the board under KVSS and also on protective assessment. He submitted that the decisions relied upon by the revenue were not applicable to the facts of the case. He has also submitted that CIT passed order which was in contravention to the directions of ITAT vide order dt.03.04.00. The order of Tribunal dt.03.04.00 was not challenged before this court and hence became final. If CIT is again directing to assess income in the case of beneficiaries, it is contrary to the decision of Tribunal. He has also challenged the jurisdiction of the CIT to revise the assessment on the ground that though this was only view, it is, at least, one of the two views possible and hence order passed by A.O. dt.22.08.00 cannot be revised by CIT u/s.263 of the IT Act. He also relied on the decisions of Apex Court in the case of Malabar Industries Co. Ltd. V/s. CIT 243 ITR 83, G.M. Mittal 263 ITR 255 and this court in the case of CIT V/s. Mehsana Dist. Coop. Milk Producers Union Ltd. 263 ITR 645. On the issue of protective and substantive assessment, he relied on the decision of this court in the case of Banyan and Berry v/s. CIT 222 ITR 831.
We have heard the contentions and perused the facts carefully. We find that Main Trust had settled the dispute under KVSS. This is the dispute which department has originated and is agitating before higher appellate authorities. It was department’s case that income belongs to Main Trust and not to the beneficiaries that is the reason why incomes were assessed substantively in the case of Main Trust and protectively assessed in the case of beneficiaries. When Main Trust settled the disputes under KVSS and paid due taxes, that is the end of the dispute between department and Main Trust as well as Assessees on the taxability of incomes. When in the case of Main Trust where substantive assessments were made, the protective assessments made in other cases viz. beneficiaries of Main Trust should be deleted.
This controversy was already decided by this court vide order dt.
30.07.01 (Coram: Mr. Justice A.R. Dave and Mr. Justice D.A. Mehta), it was held as under:
“In our opinion, no question of law, much less a substantial question of law, arises in these appeals. It is a settled principle that one particular income cannot be taxed in the hands of different assessees. In the instant case, as the income has been substantively assessed in the hands of the main trust, the same income cannot be again assessed in the hands of the beneficiary trusts. For the sake of abundant caution, it has been directed by the Tribunal that the revenue should look into the facts and see whether the income which has been assessed on protective basis in the hands of the respondent trusts was, in fact, assessed in the hands of the main trust.”
This order was not challenged before Supreme Court and has become final. Following the same, we agree with the decision of Tribunal that income should not be taxed again in the case of beneficiaries where protective assessments were made on the same income.
On this reasoning, Tax Appeals filed by the revenue were dismissed at the admission stage. This court has held in case of CIT Vs Nirma Industries Ltd – TA No.632 of 2005 regarding implication of dismissal of Tax Appeals which is binding on the lower authorities. Hon’ble Supreme Court dismissed S.L.P. No.557 of 2007 vide order dt.54.2007.
The issue was also amply clear by the question and answer which was issued by CBDT while explaining the provisions of KVSS. Question and Answer No.32 given in circular reads as under:
Question No.32 Where certain income has been charged to tax in the hands of two different persons or where it has been charged to tax in the case of same person in two different assessment years, one on substantive basis and the other on the protective basis, will the declarant or the other person get advantage in respect of additions made both substantively and protectively.
Answer The assessees are advised to make declaration in cases or for assessment years where the additions are made on substantive basis. The protective demand is not subject to recovery unless it is finally upheld. Once the declaration in a substantive case or year is accepted, the tax arrear in protective case/year would no longer be valid and will be rectified by suitable orders in the normal course. This position is not peculiar to Samadhan Scheme.
In view of this, we find, without any iota of doubt, that in the case of beneficiaries where protective assessment is made for the same Asst. Year, the assessment in the case of beneficiaries should be modified and the income should be excluded from the beneficiaries. We also find that circular No.71 dt.20.12.1971 also clarified the position regarding protective and substantive assessments. Operative part of the circular reads as under:
“Order u/s.119(2)(b) of the I.T. Act, 1961. The Board’s authorization for taking action u/s.154 be action u/s.154 beyond the time limit fixed u/s.154(7) in cases of protective assessments requiring to be cancelled. Where the same income was assessed, as a protective measure, in the hands of more than one assessee or as the income of more than one assessment year, and one or more of these protective assessments needs to be cancelled as a result of some of the relevant assessments having become final and conclusive, it has been the practice of the Incometax Department to cancel the redundant assessment u/s.154 of the Incometax Act, 1961, treating these as involving mistakes apparent from the records.”
Hence, we find that controversy is covered by these two circulars.
Circulars issued by CBDT are binding on department.
This issue was also decided by this court in the case of Banyan and Berry v/s. CIT 222 ITR 831 wherein it has been held that once substantive assessment is final, protective assessment is nullity.
Mr. Bhatt has conceded that as regards the share income, the same income cannot be again assessed in the case of beneficiaries.
As regards refund of taxes paid on returned income, we find that facts of the present case are different than the two decisions in case of this court in the case of CIT V/s Saurashtra Cement and Chemical Ind. Ltd. V/s I.T.O. 194 ITR 659 and Hon’ble Supreme Court in the case of Shelly Products 261 ITR 367. This is not the case of annulment of the assessment. Hon’ble Supreme Court in the case of Shelly Products held that refund of taxes paid on returned income cannot be given, if assessment order is held void, ab initio. In the present case, there is no assessment order which is held void, ab initio. Hon’ble Supreme Court at page 382 also specified some instances, wherein refund can be granted on tax paid on returned income. This is neither a case of annulment nor on account of failure on the part of revenue to pass assessment.
In this case, refund arose on account of the assessments and further appellate proceedings. Hence, the refund should be granted, may be on account of taxes on the returned income, if the refund arose on exclusion of income from the beneficiaries case, where incomes were substantively assessed in the case of Main Trust.
Mr. Bhatt referred to the decisions of Supreme Court in the case of ITO V/s. C.H. Atchaiah 218 ITR 239 S.P. Jaiswal V/s. CIT 224 ITR 619. We find that facts of these two decisions are not applicable to the present case. In the present case, issue is of protective assessments and substantive assessments. Protective assessments cannot be continued in the appellate proceedings once substantive assessments become final. In the present case, revenue assessed income in the case of Main Trust on a substantive basis, which was accepted.
The finding of CIT is contrary to the decision of Tribunal dated 03 042000 which is not permitted. CIT being subordinate authority to the Tribunal cannot take contrary to the decision of Tribunal.
When CIT revised order, controversy was already decided by this court vide order dt. 30.07.01 (Coram: Mr. Justice A.R. Dave and Mr. Justice D.A. Mehta).
The decision of CIT in the revision order is contrary to the above decision of court which cannot be permitted. Reference to the larger bench cannot be ground to revise assessment u/s.263 of I.T. Act. On this ground also we uphold the order of Special Bench of ITAT.
We find that this is the only conclusion that once assessment in the substantive case is final, protective assessment cannot be continued in the case of beneficiaries. When CIT revised order, there exist order of this court dt.30.07.01. Hence, atleast this is one of the views, though we find that this is the only view, revision order u/s.263 is not permissible on jurisdictional ground. This is the decision of Hon’ble Supreme Court in the cases of Malabar Industries Co. Ltd. V/s CIT 243 ITR 83 and G.M. Mittal 263 ITR 255. When the decision of High Court was reversed by Supreme Court on merits, Hon’ble Supreme Court held that revision order cannot be sustained as on the date of revision order, order of High Court did exist. Following the same, we hold that CIT had no jurisdiction to pass revision order u/s.263 on 12.03.03. On that day, the order of this court dt.30.07.01 did exist. On the contrary, this order has become final.
As regards grant of interest on refund, we find that Tribunal was justified in holding that refund should be granted with interest.
We are in full agreement with the order of Special Bench of Tribunal. We repeat that revenue should not drag the respondents to unnecessary avoidable litigation.
Accordingly, we dismiss the appeals filed by revenue except Tax Appeals Nos. 182 and 204 of 2002 with Tax Appeals Nos.27 to 30 of 2004, i.e., the appeals of the assessees in the cases of Janak Pramodbhai Patel, Pramodbhai Kanjibhai Patel HUF, Bharat & Piyush ODFT and C.J. Zala ODFT.
Therefore, Tax Appeals Nos. 182 and 204 of 2002 and Tax Appeals Nos.27 to 30 of 2004 stand allowed for the same reasons.
ABHIMANYU DISCRETIONARY FAMILY TRUST AND OTHER 99 CASES TAX APPEALS NOS. 1536 TO 1635 OF 2005 This is a bunch of 100 appeals filed by the revenue against order of Tribunal. Tribunal reversed the order passed by CIT u/s.263 of the I.T. Act for Asst. Year:9192. The facts of the case, in brief, are that these are the beneficiaries of Ambica Trust. Ambica Trust filed its return of income showing income of Rs.6,57,620. The income was allocated amongst beneficiaries, assessable u/s.161 of I.T. Act.
Ambica Trust revised return of income declaring the same income but offered for tax at maximum marginal rate u/s.164 of I.T. Act with the disclosure in the return of income. Assessing Officer passed assessment order u/s.143(3) of I.T. Act and assessed the income at Rs.22,82,700. The income was assessed at maximum marginal rate treating the trust as discretionary trust assessable u/s.164 of I.T. Act. CIT(A) held that trust is a discretionary trust and tax should be charged at maximum marginal rate. Ambica Trust settled the arrear demand of Rs.1,18,267 under Kar Vivad Samadhan Scheme, 1998 (KVSS) introduced by Finance (No.2) Act, 1998. Appeal to the Tribunal was dismissed as withdrawn vide order dt.08.07.99 in ITA No.1217/Ahd/94.
In the case of beneficiary trusts being respondents, income from Ambica Trust was originally not offered for tax with the disclosure in the return of income. Income from Ambica Trust was assessed to tax on a protective basis. CIT(A) held to assess the same on a substantive basis. Revenue preferred appeal before Tribunal and Tribunal set aside the issue back to the file of A.O. to pass fresh order in the light of the opinion of the High Court in similar other matters.
While giving effect to the order of Tribunal, A.O. passed fresh assessment order on 11.09.00 determining the issue of rate of taxation. In this order, A.O. excluded share income of the respondent beneficiaries which was settled under KVSS by Ambica Trust.
This order was revised by CIT u/s.263 of I.T. Act vide order dt.27.03.03. CIT found that order dt.11.09.00 was erroneous and prejudicial to the interest of revenue. CIT was of the opinion that the matter was settled under KVSS by Ambica Trust. According to him, benefit cannot be given to the respondent beneficiaries. It does not grant any benefit or concession or immunity to the respondent beneficiaries, who were different assessees. He referred to the decision of this court in the case of Shankerlal Nebhumal Uttamchandani v/s.CIT (251 ITR 876). He was of the view that income should be assessed in the right person and the respondent beneficiaries were the right persons. He also held that interest granted by A.O. u/s.244A should not be granted in view of the decision of this court in the case of Saurashtra Cement and Chemical Ind. Ltd. 194 ITR 669.
Tribunal has held that it is the option of the revenue either to assess the respondent beneficiaries or the trustees in the representative capacity. Once the option is exercised by the revenue and the income was assessed in the case of Ambica Trust, the same income cannot be again assessed in the case of respondent beneficiaries.
Shri M.R. Bhatt, standing counsel for the department and Shri S.N. Soparkar, Senior Advocate for the respondents appeared and made their respective submissions.
We have heard both the parties. On perusal of facts and submissions, we find that decision under consideration is that whether the same income can be assessed in the case of Ambica Trust as well as in the case of respondent beneficiaries.
Section 4 of I.T. Act provides charging of income tax in respect of total income of the previous year. Chapter XV deals with liability in special cases which includes representative assessees. Section 161(1) provides as under:
“Sec.161(1) Every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax shall subject to the other provisions contained in this Chapter, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him.”
Hence, tax can be levied upon and recoverable from the person only in the like manner and to the same extent as it would be leviable upon and recoverable from a person represented by him. This was held by Supreme Court in the case of CWT Vs. Trustees of H.E.H. Nizzam’s Family (Remainder Wealth) Trust 108 ITR 555 and in the case of CIT Vs. Kamalini Khatau 209 ITR 101. In this case, revenue assessed Ambica Trust and recovered due taxes including arrear demand through KVSS. Revenue has, therefore, exercised option and assessed income in the case of Ambica Trust. In the order passed by A.O. dt.11.09.00, he has excluded income in the case of beneficiaries which was already assessed in the case of Ambica Trust. We find that the order of A.O. dt.11.09.00 has no infirmity. The same is in accordance with the provisions of I.T.
Act. It is neither erroneous nor prejudicial to the interest of revenue. CIT has wrongly revised assessment u/s.263 of I.T. Act which was corrected by the Tribunal.
This issue can be examined from different angle. In the case of beneficiaries, the income was protectively assessed which requires to be excluded once substantive assessment in the case of Ambica Trust was finalised. CIT had made various observations regarding KVSS which was not discussed by Tribunal.
The income cannot be assessed twice. We find that section 4 of the I.T. Act is clear. Charge is on the income and charge is only once. The same income cannot be taxed in the hands of two different persons. We fully agree with the Tribunal’s finding that under the theory of double taxation also if the income is assessed in the case of trustees, it cannot be again assessed in the case of respondent beneficiaries – vice versa. If assessed in the case of respondent beneficiaries, it cannot be taxed in the case of representative assessees. Therefore, the same income which has been assessed in the case of trust/trustees, again it cannot be assessed in the case of beneficiaries.
We also agree with the Tribunal that interest u/S.244A should be granted on refund of tax. If on giving effect to the appellate order, refund is due that has to be granted with interest. The decision of this court in the case of Saurashtra Cement and Chemical Ind. Ltd. 194 ITR 669 and Supreme Court decision in the case of Shelly Products (261 ITR 367) were not applicable to the facts of the case. The decision of Hon’ble Supreme Court was on refund of taxes paid on assessment, where the assessment order was held void ab initio.
This is not the case of annulment of assessment but refund arose after process of assessment and consequential effect of the orders passed by the appellate authorities.
Mr. Soparkar has also argued that in view of the decisions of Hon’ble Supreme Court in the case of Malabar Industries Vs. CIT 243 ITR 83 and G.M. Mittal 263 ITR 245, CIT has no jurisdiction to revise the assessment when A.O. takes one of the possible views. We agree with this contention. We find that view taken by A.O. was correct and hence CIT has no jurisdiction to revise the assessment.
Mr. Soparkar has also submitted that questions raised before this court were pertaining to KVSS which do not arise from the order of Tribunal. Tribunal has allowed the appeal on the first principle about taxation on representative assessees and not on implications of KVSS. We agree that Tribunal has allowed the appeal on first principle and not of KVSS.
In the result, we confirm the order of Tribunal and dismiss the appeal filed by the revenue.
MALIK DISC. FAMILY TRUST & OTHERS SCA NOS.1073 OF 2008 AND 1236 TO 1824 OF 2008 590 writs were filed against combined order passed by Tribunal dt.31.07.07. The facts of the case are that these are beneficiaries of Main Trusts. The dispute is for different Asst. Years: 198485, 198990 and 199091. The facts of the lead case Malik Discretionary Family Trust for Asst. Year: 8990 were discussed.
Appellant trust is beneficiary of Harsiddh Specific Family Trust (hereinafter referred to as Main Trust). In the return of income, total income of Rs.1,62,580 was declared. Assessment order u/s.143(3) was passed on 28.09.89 wherein income from main trust and other incomes were assessed on a protective basis.
CIT(A) passed order dt.22.03.91. Tribunal set aside the matter to A.O. vide order dt.27.08.97 with certain directions. In the intervening period, Main Trust settled the dispute under Kar Vivad Samadhan Scheme (KVSS) on 24.02.99 and offered whole income under KVSS. A.O. passed fresh order dt.22.03.00 excluding incomes, which were offered for taxation under KVSS by main trust. These incomes were originally assessed on a protective basis. The order dt.22.03.00 was revised by CIT u/s.263 of I.T. Act on 25.11.01. Tribunal quashed the order of CIT vide order dt.24.05.02 on the ground of jurisdiction and on merits. Revenue preferred Miscellaneous Application u/s.254(2) on 25.06.02 on the ground of interest u/s.244A of IT Act which was later on withdrawn. Revenue filed writ petitions before this court. Division bench referred the matter to larger bench as on this controversy this court has earlier decided the matter in favour of the Appellant vide order dt.31.07.01. Before larger bench, Revenue wanted to refer some new documents. Larger bench vide order dt.17.09.03 disposed off petitions with a liberty to the revenue to raise contentions sought to be raised before the High Court, not raised before Tribunal in their application for revising and/or modifying the order of Tribunal. Revenue filed application u/s.254(2) on 17.12.03. Tribunal passed order dt.31.07.07 recalling its earlier order dt.2452002 completely.
Mr. M.R. Bhatt on behalf of revenue objected about maintainability of the writ petitions. He supported the order of Tribunal.
Mr. S.N. Soparkar submitted that writs were maintainable. He submitted that earlier order passed by Tribunal dt.24.05.02 was correct and had no infirmity. He pointed out that the controversy was subject matter of decision of this court in the very case of appellant for Asst. Year: 199495 vide order dt.30.07.01. He has submitted that Special Bench of Tribunal in the case of Punitaben K Patel Oral Spec. Def. Family Trust and Others vide order dt.07.07.06 has also dealt with the issues and controversy was decided in favour of the Appellants. He has pointed out that each and every ground raised in the Miscellaneous Application was fully covered by the decision of High Court as well as Special Bench of Tribunal as per the chart given and reproduced in the Tribunal order. He has submitted that order was recalled on the ground that appeals have been admitted by the High Court against decision of Special bench of Tribunal dt.772006. He has submitted that mere admission of Tax Appeal cannot be the ground for recalling the earlier order. He strongly objected the same. According to him this amounts to mockery of law.
We have heard arguments of both the parties. We admit writ. On perusal of facts, we find that order of Tribunal is erroneous in recalling its earlier order. Section 254(2) of I.T. Act provides as under:
“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, amend any order passed by it under sub section (1), and shall make such amendment if the mistake is brought to its notice by the assessee of the Assessing Officer.”
Tribunal can amend order us.254(2) with a view to rectifying any mistake apparent on record. But there should exist mistake apparent on record. We find that in the impugned order dt.31.07.07, Tribunal has not found mistake apparent on record in the earlier order of Tribunal dt.24.05.02 which is rectifiable u/s.254(2) of I.T. Act. The chart filed by the appellant and reproduced in order of ITAT is reproduced as under:
III. On each of the ground raised in para (a) to (e) of the memo, the view taken by the earlier Bench is correct as shown below:
(i) The said decisions have no bearing in any case.
(ii) Non consideration of decision not cited by party cannot be of ground for rectification.
(iii) No such contentions have been made in the impugned order passed u/s.263 of I.T. Act.
(iv) No such finding given by the
(v) Matter squarely covered by the decision of Gujarat High Court in the group cases.
(vi) Matter squarely applicable by the decision of Special Bench of I.T.A.T. where also identical arguments raised.
(vii) Squarely covered by the
(ii) bearing in any case.
(iii) ground for rectification.
(iv) Act.
(v) raised by either party.
(vi) Court in the group cases. Matter squarely applicable by the decision of Special Bench of ITAT where also identical
(vii) arguments raised.
(i) The said decisions have no bearing in any case.
(ii) Non consideration of decision not cited by party cannot be of ground for rectification.
(iii) No such contentions have been made in the impugned order passed u/s.263 of I.T. Act.
(iv) No such finding given by the ITAT in the appellate order because no such controversy raised by either party.
(v) Matter squarely covered by the decision of Gujarat High Court in the group cases.
(vi) Matter squarely applicable by the Decision of Special Bench of ITAT where also identical arguments raised.
(vii) Squarely covered by the CBDT Circular which is binding on the revenue.
(i) No such contentions have been made in the impugned order passed u/s. 263 of I.T. Act.
(ii) ITAT in the appellate order
(iii) the decision of Gujarat High Court in the group cases.
(iv) the decision of Special Bench of ITAT where also identical arguments raised.
(v) circular which is binding on the revenue.
(a) Both these decisions were rendered in ignorance of the direct decision of the High Court. Judgement of High Court is preferred over the tribunal order.
(b) In any case, it is for this reason that the Special Bench was formed and Special Bench adjudicated the issue and upheld the view in favour of the Assessee. View taken was correct view being the conformity with the High never be erroneous.
G.M. Mittal (263 ITR 255) (S.C.) In any case if A.O. takes one of the two course of actions, then the view cannot be erroneous so as to be prejudicial to the interest of revenue.
(i) Malabar Industrial Co. Ltd. V/s. CIT (243 ITR 83) (S.C.)
(ii) Arvind Jewellers (263 ITR 645) (Guj.)
(iii) Mehsana District (263 ITR 645) (Guj.)
(iv) D.P. Karai (266 ITR 113) (Guj.) Hence on perusal of the above, it is found that on each ground, matter was squarely covered by the decision of this court or by Special Bench of ITAT where identical arguments were raised. Tribunal has wrongly observed that in the earlier order of Tribunal the issue relating to interest u/s.244A was not considered. Mr.Soparkar has invited our attention to paras 21 and 22 where Tribunal had discussed and held to grant interest u/s.244A of I.T. Act. Hence, we find that Tribunal was wrong on this ground.
We find no substance and completely disagree with the decision of Tribunal which has recalled the order on the ground that appeals were admitted by High Court against Special Bench order dt.772006. Mere admission of Tax Appeal cannot be ground to pass order u/s.254(2) of I.T. Act. The order of Special Bench dt. 772006 continued to operate and had force. The order of Special Bench is binding on the Division Bench of Tribunal. Tribunal was completely wrong in recalling its earlier order on this ground. This should not be permitted to allow. Tribunal has categorically held at the bottom of page 17 that all the issues are covered by the decision of Special Bench. We are astonished that when the issues were covered by the decision of Special Bench how the order of Tribunal dt.24.05.02 can be recalled. This cannot be permitted to operate.
Tribunal must consider the provisions of Section 254(2) of I.T. Act carefully and should not recall its earlier order dt.24.05.02. In fact, the order of Tribunal dt.24.05.02 has followed the order of this court dt.30.07.01. The identical controversy was already decided by this court. The order of this court dt.30.07.01 (Coram: Mr. Justice A.R. Dave and Mr. Justice D.A. Mehta) reads as under:
“In our opinion, no question of law, much less a substantial question of law, arises in these appeals. It is a settled principle that one particular income cannot be taxed in the hands of different assessees. In the instant case, as the income has been substantively assessed in the hands of the main trust, the same income cannot be again assessed in the hands of the beneficiary trusts. For the sake of abundant caution, it has been directed by the Tribunal that the revenue should look into the facts and see whether the income which has been assessed on protective basis in the hands of the respondent trusts was, in fact, assessed in the hands of the main trust.”
Now on this reasoning, Tax Appeals filed by the revenue were dismissed at the admission stage. This court has held in case of CIT Vs Nirma Industries Ltd. – T.A. No.632 of 2005 regarding implication of dismissal of Tax Appeals which is binding on the lower authorities. Hon’ble Supreme Court dismissed S.L.P. No.557 of 2007 vide order dt.5 42007.
On the ground of interest on refund, we find that revenue has withdrawn its earlier application unconditionally. Having withdrawn the same, revenue cannot file rectification application on this issue.
It is held by M.P. High Court in the case of CIT V/s. Smt. Gunwanti Bal 219 ITR 632 that Tribunal had no jurisdiction to decide the matter on merits and take a second opinion. Tribunal cannot review its order to set aside any appeal over its earlier order. This view is taken by Patna High Court in the case of ITO V/s. Incometax Appellate Tribunal & Another 229 ITR 651 (Pat.).
We fully agree with the proposition that Tribunal cannot review its own order. The order cannot be permitted to recall and that too completely when no mistake is found in the earlier order. We strongly object to the most casual way in which the Tribunal passed the order dated 31.07.2007 recalling its earlier order. We do not agree with the reasoning of the Tribunal and we allow the writ petitions and reverse the order of the Tribunal. In the result, recalling of the order is cancelled.
(Y.R. MEENA, C.J.) (J.C. UPADHYAYA, J.) [sn devu] pps