Sanjay N. Kapadia, AR, for the Assessee.: R. Bhoopathi, DR, for the Revenue.

By means of these Miscellaneous Applications (MAs) filed under section 254(2) of the Income Tax Act, 1961 ( in short the ‘Act’), the applicant seeks rectification of the order dated 18.10.2019 passed by the ITAT ‘D’ Bench Mumbai (ITA Nos. 4683/MUM/2017 & 4682/MUM/2017) for the assessment years (AYs) 2004-05 & 2005-06. Facts being identical, we begin with the assessment year (AY) 2004-05. In Part-I, here-in-below, we mention the contentions of the Ld. counsel of the applicant, in Part-II, the submissions of the Ld. Departmental Representative (DR) and in Part-III, the reasons for our decision.

2. The contentions of the Ld. counsel follow the written submission dated 22.01.2020 filed by the applicant before the Tribunal. Therefore, we refer below the said written submission.

It is stated that Circular No. 3 of 2018 dated 11.07.2018 issued by Central Board of Direct Taxes (CBDT) has conveyed that the Department shall not file appeal or challenge in appeal, cases before ITAT where tax-effect does not exceed Rs.20,00,000/- ; in para 4 of the said Circular it is clarified that in case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against; further, in para 13 it is clarified that the said Circular will apply to SLPs/Appeals/Cross-objections/References to be filed henceforth in SC/HCs/Tribunal and it shall also apply retrospectively to pending SLPs/Appeals/Cross-objections/References ; the Circular mandates that pending appeals below the specified tax limits in said Para 3 may be withdrawn/not pressed.

It is also stated that vide Circular No. 17 of 2019 dated 08.08.2019 issued by CBDT, the monetary limit (tax-effect) for filing of appeal by the Department before the Tribunal is increased to Rs.50,00,000/-. The Ld. counsel explains that this Circular was issued by the CBDT after the date of hearing (23.07.2019) in the present case but before the date of pronouncement (18.10.2019) of the order by the Tribunal and in the present case the penalty u/s 271(1)(c) for the AY 2004-05 was Rs.27,20,000/- i.e. below Rs.50,00,000/-.

Relying on the order of the Tribunal in the case of ITO v. Dinesh Madhavlal Patel (2019) 108 taxmann.com 211 (Ahd-Trib.), the Ld. counsel submits that it is observed therein that the Circular dated 18.08.2019 is not a stand-alone Circular; it is to be read in conjunction with CBDT Circular No. 3 of 2018 and all it does is to replace paragraph Nos. 3 & 5 of the said Circular;clearly all other portions of the Circular No. 3 of 2018 have remained intact ; having so observed the Tribunal held that the relaxation in monetary limits for Departmental appeals vide CBDT Circular dated 18.08.2019 shall be applicable to the pending appeals, in addition to the appeals to be filed henceforth.

Thus the Ld. counsel submits that the appeal was pending between the date of hearing and date of pronouncement of the order ; this is because till the appeal is disposed of by the ITAT by pronouncement of the order, the CIT(A)’s order is not affected; further if after hearing, during the process of decision-making, the two members differ, then the third member decides the appeal ;

also reference to Special Bench and constitution of Special Bench can happen only after hearing but before pronouncement of the order ; therefore, the appeal is not disposed of merely on hearing but only on pronouncement of the order by the Tribunal.

Therefore, the Ld. counsel submits that since the appeal was pending till the date of pronouncement of the order, the Circular No. 17 of 2019 dated 08.08.2019 would apply since the said Circular was issued by the CBDT after the date of hearing (23.07.2019) but before the date of pronouncement (18.10.2019) of the order by the Tribunal.

Finally, the Ld. counsel submits that the penalty u/s 271(1)(c) (tax- effect) in this case was below the limit of Rs.50,00,000/- laid down in CBDT Circular No. 17 of 2019 dated 08.08.2019 and therefore, the Department should have withdrawn or should not have pressed the appeal; instead the appeal was duly heard and allowed by the Tribunal ; hence there is a mistake apparent from the record and the Tribunal may reject the appeal of the Department because of low tax-effect.

On the basis of the above submissions, the Ld. counsel submits that the omission to apply the provisions of CBDT Circular No. 17 of 2019 dated 08.08.2019 is clearly an error and thus has given rise to a mistake apparent from the record and such mistake be rectified.

3. On the other hand, the Ld. Departmental Representative (DR) submits that in the instant case, the Tribunal having discussed the facts in detail has restored the matter to the file of the Assessing Officer (AO) for a de novo order after giving reasonable opportunity of being heard to the assessee. Thus the Ld. DR submits that there is no mistake apparent from record in the impugned order passed by the Tribunal. He submits that the Tribunal has no power to review its order in the garb of section 254(2) of the Act.

4. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below.

Briefly stated, the facts of the case are that the assessee-company filed its return of income for the assessment year (AY) 2004-05 on 31.10.2004 declaring total income of Rs.5,45,17,923/-. The AO completed the assessment u/s 143(3) on 23.11.2006 at a total income of Rs.5,74,26,842/-.

Subsequently, it was revised u/s 251 to income of Rs.5,67,92,399/-. A search u/s 132(1) was conducted on 30.05.2008 in the business and office premises of Dorf Ketal group. As a result of the search, the group declared undisclosed income of Rs.7.54 crores for various assessment years in the hands of the Company and its directors and their spouses in addition to the regular income. Consequently, the assessee filed return of income on 12.02.2009 in response to notice u/s 153A dated 14.11.2008 issued and served by the AO. In the order u/s 143(3) r.w.s. 153A dated 30.12.2010, the AO arrived at a total income of Rs.6,85,90,913/-. The AO also initiated penalty proceedings u/s 271(1)(c) of the Act.

In the impugned order, we have stated at para 7.5 the following:

“7.5 As mentioned earlier, during the course of assessment proceedings the assessee claimed additional depreciation of Rs.75,80,338.16/- [Rs.2,14,87,143.57/- in original return and Rs.2,90,67,481.73/- in revised return] for AY 2004-05.

Similarly, it claimed excess depreciation of Rs.50,15,075.38/- [Rs.2,34,87,380.03/- in original return and Rs.2,85,02,455.40/- in revised return].

As per the assessee, the additional depreciation of Rs.75,80,338.16/- in A.Y. 2004-05 is because of the following:

1. In A.Y. 2003-04, office building which was grouped in Block I-Leasehold improvement was regrouped correctly to Block II -Building office Rs.1,63,86,400/-. This has resulted in increase in depreciation in Block II-2B by Rs.16,59,436/-.

2. In A.Y. 2003-04, Tools and Equipments of Rs.38,158/- and Plot J/10 construction equipment of Rs.29,572,085/- was regrouped correctly from Block II to Block V.This has resulted in increase in depreciation by Rs.5,418,986/-.

3. In A.Y. 2003-04, Stabilizer was grouped from Block III of Plant and Machinery to Block VI of computers. This has resulted in increase in depreciation by Rs.5,22,671/-

. 4. Depreciation has been claimed on Motor Car Block @ 25% instead of eligible @ 20%. This has resulted in decrease in depreciation by Rs.351,960/-.

5. Depreciation has been claimed on Office Equipments and Furniture and Fixture as eligible @ 15% instead of 10% which has claimed earlier. This has resulted in increase in depreciation by Rs.1,18,162/- and Rs.2,89,345/-.

6. Regrouping in AY 2003-04, in Block of Factory Building has resulted in decrease in depreciation of Rs.49,795/-.

7. Earlier claim includes Depreciation on R & D block which has not been claimed in the revised return of Rs.48,319/-.

During the course of assessment proceedings, the AO asked the assessee to file full details in respect of the above excess claim of depreciation. But the assessee failed to furnish the relevant documents on the above. In a situation like the present one, the assessee had to file the relevant documents/evidence from which the AO could have drawn correct inference. The assessee failed to do so. As a logical corollary, the burden cannot be shifted to the Department. The burden of proof rests with the assessee.”

In view of the above factual scenario, we held at para 8 the following :

“8. We are of the considered view that the Ld. CIT(A) has overlooked the above facts while passing the order dated 02.03.2017. A fortiori, he has not considered the fact that consequent to withdrawal of appeal before ITAT for AYs 2004-05 and AY 2005-06, the assessee re-worked its claim of depreciation for AY 2007-08 to AY 2014-15 before the Settlement Commission and as a result, the revised claim of depreciation on the basis of re-grouping of assets stood withdrawn.

Therefore, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make a de novo order after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence regarding the claim of additional depreciation of Rs.75,80,338.16/- on account of reclassification of certain assets during the year under consideration.

As the matter has been restored to the file of the AO, we are not adverting to the case laws relied on by both sides.

Facts being identical, our decision for the AY 2004-05 applies mutatis mutandis to AY 2005-06.

9. In the result, the appeals are allowed for statistical purposes.”

4.1 There is no dispute that “the Circular dated 18.08.2019 is not a stand- alone Circular; it is to be read in conjunction with CBDT Circular No. 3 of 2018 and all it does is to replace paragraph Nos. 3 & 5 of the said Circular; clearly all other portions of the Circular No. 3 of 2018 have remained intact.”

4.2 In the case of Dinesh Madhavlal Patel (supra), the following facts emanate from the first paragraph of the order of the Tribunal :

“These 628 appeals and COs pertain to the appeals are filed by various Assessing Officers, all these appeals call into question correctness of the relief granted to the taxpayers by the Commissioners of Income Tax (Appeals) and, most importantly,the tax effect involved in all these appeals does not exceed Rs. 50,00,000 in each of these appeals. The cross objections taken up for hearing are only such cross objections as emanate from these appeals and are broadly in support of the orders passed by the Commissioner (Appeals).”

On the basis of the above facts, the Tribunal held that “All cases in which overall tax effect, excluding interest except when interest itself was in dispute, by virtue of order passed by Commissioner (Appeals) was below Rs.50 lakh or less in assessee's case, shall be dismissed as withdrawn in view of CBDT Circular, dated 8-8-2019”

4.2.1 In Padmasundra Rao v. State of TN 255 ITR 147 (SC), the Constitution Bench of the Hon’ble Supreme Court has held that reliance should not be placed on a decision without discussing how the factual situation fits in with the factual situation of the decision on which reliance is placed. Also it was held therein that circumstantial flexibility, e.g. one additional or different fact, may make a world of difference between conclusions in two cases.

In the instant case, the Tribunal has passed the order dated 18.10.2019 u/s 254(1) of the Act. The assessee has filed an MA u/s 254(2) of the Act. As mentioned earlier in Dinesh Madhavlal Patel (supra) the issue was not the order passed by the Tribunal u/s 254(1) of the Act. Therefore, the instant case is distinguishable from the above order of the Tribunal.

4.3 The question arises whether the appeal heard by the Tribunal on 23.07.2019 and order pronounced on 18.10.2019 could be rectified in view of the CBDT Circular No. 17 of 2019 dated 08.08.2019, which was neither referred nor cited before the Bench?

Admittedly, during the course of hearing before the Bench on 23.07.2019, neither the Ld. counsel nor the Ld. DR made any mention of Circular No. 17 of 2019 dated 08.08.2019. In such a situation, whether the order dated 18.10.2019 passed u/s 254(1) by the Tribunal could be rectified? 4.4 It is pertinent to mention here that Circular No. 3 of 2018 dated 11.07.2018 also mentions at para 10 the following :

“10. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax entailed is less than the monetary limits specified in para 3 above or there is no tax effect:

a. Where the Constitutional validity of the provisions of an Act or Rule is under challenge, or

b. Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or

c. Where Revenue Audit objection in the case has been accepted by the Department, or

d. Where addition relates to undisclosed foreign income/undisclosed foreign assets (including financial assets)/undisclosed foreign bank account.

e. Where addition is based on information received from external sources in the nature of law enforcement agencies such as CBI/ED/DRI/SFIO/Directorate General of GST Intelligence (DGGI).

f. Cases where prosecution has been filed by the Department and is pending in the Court .”

4.4.1 Therefore, Circular No. 3 of 2018 dated 11.07.2018 would not be applicable if para 10 therein is applied. In the instant case, those aspects would be looked into if the said Circular is referred or cited, which was never done .

4.5 The final question is whether rectification of the impugned order dated 18.10.2019 passed by the Tribunal could be made?

In the impugned order all the submissions and explanations by the assessee and the department have been summarized and then a finding has been arrived at. The issue has been decided after considering the facts in entirety available on record. In fact full opportunity had been given to the assessee to make submissions.

For guidance, we may refer here to the decision in CIT v. Ramesh Electric & Trading Co. (1993) 203 ITR 497 (Bom), wherein their Lordships of the Hon’ble Bombay High Court have held:

“Under s. 254(2) of the IT Act, 1961, the Tribunal may, ‘with a view to rectifying any mistake apparent from the record’, amend any order passed by it under subs (1) within the time prescribed therein. It is an accepted position that the Tribunal does not have any power to review its own orders under the provisions of the IT Act, 1961. The only power which the Tribunal possesses is to rectify any mistake in its own order which is apparent from the record. This is merely a power of amending its order. In the present case, in the first order, there is no mistake which is apparent from the record at all. The Tribunal was required to decide whether the commission payment of Rs.54,000 was deductible under s. 37. After examining the circumstances, the Tribunal came to a conclusion that it was not so deductible. The Tribunal cannot, in exercise of its power of rectification, look into some other circumstances which would support or not support its conclusion so arrived at. The mistake the Tribunal is entitled to correct is not an error of judgment but a mistake which is apparent from the record itself. The Tribunal has, patently, far exceeded its jurisdiction under s. 254(2) in redeciding the entire dispute which was before it, in this fashion, and the Tribunal has committed a gross and inexplicable error. Failure by the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment.”

A perusal of the facts in the instant case clearly indicate that the applicant has not pointed out any mistake apparent from the record. A mistake apparent on the record must be an obvious mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. This view is supported by the decision of the Hon’ble Supreme Court in T.S. Balaram, ITO v. Volkart Bros., (1971) 82 ITR 50 (SC), Master Construction Co. P. Ltd. v.State of Orissa, AIR 1966 SC 1047, Karam Chand Thapar & Bros. (Coal Sales) Ltd. v. State of U.P. (1976) Tax LR 1921, 1927 (SC) and CCE v. ASCU Ltd., (2003) 9 SCC 230, 232.

We may refer here to the decision in ACIT v. Saurastra Kutch Stock Exchange Ltd. (2008) 305 ITR 227 (SC), wherein the Hon’ble Supreme Court relying on its decision in Patel Narshi Thakershi & Ors. vs. Pradyumansinghji Arjunsinghji (1971) 3 SCC 844, Hari Vishnu Kamath vs. Syed Ahmad Ishaque (1955) 1 SCR 1104, Satyanarayan Laxminarayan Hegde & Ors. vs. Mallikarjun Bhavanappa Tirumale (1960) 1 SCR 890 and Syed Yakoob vs. K.S. Radhakrishnan & Ors. (1964) 5 SCR 64A held that :

“Patent, manifest and self-evident error which does not require elaborate discussion of evidence or argument to establish it, can be said to be an error apparent on the face of the record and can be corrected while exercising certiorari jurisdiction. An error cannot be said to be apparent on the face of the record if one has to travel beyond the record to see whether the judgment is correct or not. An error apparent on the face of the record means an error which strikes on mere looking and does not need long drawn out process of reasoning on points where there may conceivably be two opinions. Such error should not require any extraneous matter to show its incorrectness. To put it differently, it should be so manifest and clear that no Court would permit it to remain on record. If the view accepted by the Court in the original judgment is one of the possible views, the case cannot be said to be covered by an error apparent on the face of the record.”

4.6 What is the meaning of the word ‘pending’? The term ‘pending’ means nothing more than undecided. A legal proceeding is said to be pending as soon as it is commenced and until it is concluded i.e. so long as the Tribunal or Court having original cognizance of it can make an order on the matters in issue, or to be dealt with therein. As a preposition ‘pending’ means while awaiting. As an adjective ‘pending’ means remaining undecided. As a phrase ‘pending appeal’ refers to the time before an appeal is taken, as well as to the period during which an appeal is in progress.

In the instant case, before the Tribunal, the hearing was concluded on 23.07.2019; the order was passed on 18.10.2019. There is no merit in the contentions of the Ld. counsel that since the appeal was pending till the date of pronouncement of the order, the Circular No. 17 of 2019 dated 18.08.2019 would apply. A mistake apparent on the record must be an obvious mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. Admittedly, during the course of hearing before the Bench on 23.07.2019, neither the Ld. counsel nor the Ld. DR made any mention of Circular No. 17 of 2019 dated 18.08.2019. As mentioned earlier, it is not a stand-alone Circular; it is to be read in conjunction with CBDT Circular No. 3 of 2018. Circular No. 3 of 2018 dated 11.07.2018 also mentions at para 10 that adverse judgments relating to six issues should be contested on merits notwithstanding that the tax entailed is less than the monetary limits specified in para 3 therein or there is no tax effect, which obviously requires long drawn process of reasoning.

In the impugned order, there is no trace of patent, manifest and self- evident error which can be said to be an error apparent on the face of the record .What the applicant wants is a review of the order passed by the Tribunal, which is not permissible under the Act.

4.7 In fact, not a single error in the impugned order has been pointed out by the applicant. What the applicant wants is a review of the order passed by the Tribunal. The Tribunal is a creature of the statute. The Tribunal cannot review its own decision unless it is permitted to do so by the statute. The Hon’ble Supreme Court has held in Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji (AIR 1970 SC 1273) that the power to review is not an inherent power. It must be conferred by law either specifically or by necessary implication. It is a settled law that the Tribunal has no power to review its order in the garb of section 254(2) of the Act as held in CIT v. Globe Transport Corpn. [1992] 195 ITR 311 (Raj) (HC), CIT v. Roop Narain Sardar Mal [2004] 267 ITR 601 (Raj) (HC), CIT v. Devilal Soni [2004] 271 ITR 566 (Raj) (HC),Jainarain Jeevraj v. CIT [1980] 121 ITR 358 (Raj.) (HC), Prajatantra Prachar Samiti v. CIT [2003] 264 ITR 160 (Orissa) (HC), CIT v. Jagabandhu Roul [1984] 145 ITR 153 (Orissa) (HC), CIT & Anr. v. ITAT & Anr. [1992] 196 ITR 640 (Orissa) (HC), Shaw Wallace & Co. Ltd. v. ITAT & Others [1999] 240 ITR 579 (Cal) (HC), CIT v. Suman Tea & Plywood Industries Pvt. Ltd. [1997] 226 ITR 34 (Cal) (HC), ITO v. ITAT & Anr. [1998] 229 ITR 651 (Pat.) (HC), CIT & Anr. v. ITAT & Anr. [1994] 206 ITR 126 (AP) (HC), ACIT v. C. N. Ananthram [2004] 266 ITR 470 (Kar) (HC).

5. Facts being identical, our decision for the AY 2004-05 applies mutatis mutandis to AY 2005-06. In view of the factual scenario and position of law delineated hereinabove, the MAs being bereft of merit, are dismissed.

Order pronounced through notice board under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963.

Sd/- Sd/-

(RAVISH SOOD) (N.K. PRADHAN)

JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai;

Dated: 26/10/2020