Second rectification application by either party is
maintainable only on issues not decided by Tribunal in any other rectification
application filed by either of parties
[2010] 6
taxmann.com 36 (Ker.)
HIGH COURT OF
KERALA
CIT
v.
Aiswarya
Trading Co.
ITA No. 829
of 2009
March 19,
2010
FACTS
The respondent assessee contested its
income tax assessment for the year 1994-95, in appeal before the Commissioner
of Income Tax (Appeals) and later before the Tribunal, which remanded the
matter to the assessing officer for re- consideration mainly on estimation of
income from arrack business. The assessing officer issued revised order, which
was again taken up in appeal on second round before the C.I.T (Appeals), who
enhanced the assessment, after notice to the assessee. On second appeal filed
by the assessee, the Tribunal refixed the net income from arrack at Rs.10 per
litre. However, while deciding the appeal, the Tribunal did not consider one of
the grounds raised by the assessee pertaining to the levy of interest under
Section 220(2) of the Act in the revised assessment after the first round.
Therefore, the assessee filed rectification application, M.P.30of 2001 before
the Tribunal to rectify the appellate order, which was allowed by the Tribunal.
The Tribunal allowed the assessee's rectification application by holding that
interest could not be levied under Section 220(2) on the demand of tax pursuant
to first round of remand order by the Tribunal. The Department thereafter filed
a rectification application M.P.42/2003 for rectifying the order issued by the
Tribunal in assessee's rectification application, M.P.30/2001. The Tribunal,
however, held that Department's rectification application is on the very same
issue agitated by the assessee in their rectification application and allowed
by the Tribunal and therefore it is not maintainable under Section 254(2) of
the I.T. Act.
HELD
We are of the view that the second
application on the very same issue is not maintainable before the Tribunal. In
fact, merger applies only on issues decided in rectification proceedings and
the Tribunal's order issued under Section 254(1) will remain unaffected on all
matters other than those covered by the rectification order issued under
Section 254(2). In other words, even after the Tribunal rectifies the appellate
order under Section 254(2) on any issue raised, still the original order can be
rectified on any other issue decided by the Tribunal. However, if the rectification
application filed by one of the parties is allowed or rejected by the Tribunal,
the very same issue cannot be agitated in another rectification application by
the opposite party. If this is done and allowed to be entertained by the
Tribunal, then what happens is that the Tribunal gets an opportunity to review
its own order for which it has no powers under the statute. Therefore, once the
rectification application filed by one of the parties is considered and decided
by the Tribunal rightly or wrongly, another rectification application on same
issue is not maintainable against the order issued by the Tribunal under
Section 254(2) of the Act. In this case, the question of liability for interest
payable by the assessee under Section 220(2) rightly or wrongly was decided by
the Tribunal in the rectification application filed by the assessee in their
favour and so much so, the Department cannot seek to rectify the very same
order again under Section 254(2) by filing another application. As already held,
the second rectification application by either party is maintainable only on
issues not decided by the Tribunal in any other rectification application filed
by either of the parties.
Ramachandran Nair, J.
1.This appeal is filed against the
order issued by the Tribunal refusing to entertain a rectification application
filed by the Revenue under Section 254(2) of the Income Tax Act to rectify the
order issued by the Tribunal in an earlier rectification application filed by
the assessee to rectify the very same appellate order.
2.We have heard standing counsel
appearing for the appellant and Adv.Sri.A.Kumar appearing for the respondent
assessee.
3.The respondent assessee contested its
income tax assessment for the year 1994-95, in appeal before the Commissioner
of Income Tax (Appeals) and later before the Tribunal, which remanded the
matter to the assessing officer for re- consideration mainly on estimation of
income from arrack business. The assessing officer issued revised order, which
was again taken up in appeal on second round before the C.I.T (Appeals), who
enhanced the assessment, after notice to the assessee. On second appeal filed
by the assessee, the Tribunal refixed the net income from arrack at Rs.10 per litre.
However, while deciding the appeal, the Tribunal did not consider one of the
grounds raised by the assessee pertaining to the levy of interest under Section
220(2) of the Act in the revised assessment after the first round. Therefore,
theassessee filed rectification application, M.P.30of 2001 before the Tribunal
to rectify theappellate order, which was allowed by theTribunal. The Tribunal
allowed the assessee's rectification application by holding that interest could
not be levied under Section 220(2) on the demand of tax pursuant to first round
of remand order by the Tribunal. The Department thereafter filed a
rectification application M.P.42/2003 for rectifying the order issued by the
Tribunal in assessee's rectification application, M.P.30/2001. The Tribunal,
however, held that Department's rectification application is on the very same
issue agitated by the assessee in their rectification application and allowed
by the Tribunal and therefore it is not maintainable under Section 254(2) of
the I.T.Act. The Tribunal relied on the decision of the Orissa High Court in
Commissioner of Income Tax and another v. Income tax Appellate Tribunal and
others (196 I.T.R. 838) against which this appeal is filed. The standing
counsel relied on another decision of the very same Bench of the Orissa High
Court reported at page 640 of the very same volume of the I.T.R. and contended
that, by virtue of the merger of the rectification order in the appellate
order, the application filed under Section 254(2) by the Revenue is still
maintainable. According to the standing counsel, the rectification order issued
under Section 254 (2) merges with the original appellate order issued under
Section 254(1) and so much so a further application under Section 254(2) is
maintainable. Counsel appearing for the assessee contended that, since the very
same issue agitated by the Revenue in their rectification application is the
one decided by the Tribunal, in the application filed by the assessee it is not
maintainable.
4.After hearing both sides and after
going through the appellate order, we are of the view that the second
application on the very same issue is not maintainable before the Tribunal. In
fact, merger applies only on issues decided in rectification proceedings and
the Tribunal's order issued under Section 254(1) will remain unaffected on all
matters other than those covered by the rectification order issued under
Section 254(2). In other words, even after the Tribunal rectifies the appellate
order under Section 254(2) on any issue raised, still the original order can be
rectified on any other issue decided by the Tribunal. However, if the
rectification application filed by one of the parties is allowed or rejected by
the Tribunal, the very same issue cannot be agitated in another rectification
application by the opposite party. If this is done and allowed to be
entertained by the Tribunal, then what happens is that the Tribunal gets an
opportunity to review its own order for which it has no powers under the
statute. Therefore, once the rectification application filed by one of the
parties is considered and decided by the Tribunal rightly or wrongly, another
rectification application on same issue is not maintainable against the order
issued by the Tribunal under Section 254(2) of the Act. In this case, the
question of liability for interest payable by the assessee under Section 220(2)
rightly or wrongly was decided by the Tribunal in the rectification application
filed by the assessee in their favour and so much so, the Department cannot
seek to rectify the very same order again under Section 254(2) by filing
another application. As already held, the second rectification application by
either party is maintainable only on issues not decided by the Tribunal in any
other rectification application filed by either of the parties. We, therefore,
clarify that the appellate order issued under Section 254(1) gets merged in
rectification orders only on the issues raised in the rectification application
and on all other issues decided by the Tribunal in the appeal, the appellate
order under Section 254(1) survives and is available for rectification again on
any other issue on an application filed by either of the parties. Consequently,
we uphold the order of the Tribunal and dismiss the Department appeal.