(ITAT AHMEDABAD)
ITO VS. DEVENDRA J KOTHARI
ITA No. 210/Ahd/15, DATED: 03.04.2019
Summarised Judgement
(Scroll for Complete Judgement)
Introduction:
The assessee in this
case is an individual. During the course of scrutiny assessment proceedings,
and as a result of AIR inputs available with the income tax department, it was
found that the assessee has deposited the sums of money aggregating to Rs
43,72,650 in his savings bank account with ICICI Bank Limited.
Facts of the case:
The assessee was thus
imposed a penalty of Rs 13,00,990 being equivalent to 100% of the tax sought to
be evaded. The facts of the case are also that the appellant had not only
offered no explanation for the cash deposits in his bank account. The facts of
the appellant’s case, penalty of Rs 13,00,990 levied under section 271(1)(c)
for concealment of income is confirmed.
However, when an appeal
against the stand so taken by the Commissioner (Appeals) came up before us, the
Tribunal accepted the explanation to the extent of Rs 39,35,385 and declined
the same in respect of the remaining amount, i.e. Rs 4,37,265. Thus, the
Tribunal restricted the penalty to 100% of tax sought to be evaded in respect
of Rs 4,37,265.
Judgement :
The dismissal of this rectification petition is on account of
delay in filing of rectification petition as also on account of inherently
limited powers vested in the Tribunal under section 254(2) of the Income Tax
Act, 1961. That does not affect the fact that, in the observations of Hon’ble
jurisdictional High Court, this Tribunal was in error in granting the relief in
the impugned order and we must gracefully acknowledge the same. The mistake
apparent on record, as, howsoever desirable be the ultimate objective, ends
cannot justify the means; the legal remedies can only be provided within the
framework of law.
In the result, the application is dismissed. Pronounced in the
open court today on the 3rd day of April, 2019.
====================================
Complete Judgement
(ITAT AHMEDABAD)
ITO VS. DEVENDRA J KOTHARI
ITA No. 210/Ahd/15, DATED: 03.04.2019
IN
THE INCOME TAX APPELLATE TRIBUNAL,
AHMEDABAD
“C” BENCH, AHMEDABAD
Coram : Pramod Kumar
(Vice President)
&
Mahavir Prasad (Judicial Member)
Income
Tax Officer
Ward
11(4), Ahmedabad …………………….. Applicant
Vs
Devendra
J Kothari ……………..…........Respondent
37,
C201 Shree Ghantakaran Mahavir Market
Sarangpur,
Ahmedabad 380 002 [PAN: ACFPK2973H]
Appearances by
S K Dev for the
applicant
S N Soparkar, along with Parin Shah, for the respondent
Date
of concluding the hearing : January 4, 2019
Date
of pronouncement : April 3, 2019
O R D E R
Per Pramod
Kumar, VP:
1.
This rectification application, seeking modification in our order dated 22nd
September 2017,
raises very interesting questions for our adjudication and must be dealt with
in some detail.
2.
It is, at the outset, necessary to understand the factual backdrop, as
discernible from the material on record, in which the present rectification
petition is moved. The assessee in this case is an individual. During the
course of scrutiny assessment proceedings, and as a result of AIR inputs
available with the income tax department, it was found that the assessee has
deposited the sums of money aggregating to Rs 43,72,650 in his savings bank
account with ICICI Bank Limited. When he was confronted with this fact, he had,
vide letter dated 7th January 2013, inter alia stated that, “I was doing
business of used clothes on small scale basis with retail lariwalas and hawkers
since last several years (,that) I have invested about Rs 18 lakhs as my past
profit, capital savings and capital received from my father on his death in the
said business in the earlier years (,that) the profit margin in the said
business is very low at 3 to 4% after deducting various expenses…….(,and that)
“I have also done business in F&O in the share market and there was a huge
loss in my said business”. In the absence of further details to substantiate
these contentions, the Assessing Officer held entire deposit of Rs 43,72,650 as
his unexplained investment and brought the same to tax under section 69. The
matter did not rest at that. The Assessing Officer also imposed the concealment
penalty under section 271(1)(c) by treating the entire amount of Rs 43,72,650
as income that the assessee concealed and in respect of which reasonable
explanation of the assessee was not available. The explanation given by the assessee
was rejected by the Assessing Officer who, inter alia, observed as follows:
However, the same (explanation) is not
acceptable as the assessee has not filed any justification of cash deposited in
bank account. The same story is repeated as submission filed by the assessee at
the time of assessment proceedings. As such, I have reasons to believe that the
assessee has nothing (worthwhile) to say about the penalty proceedings under
section 271(1)(c) of the Income Tax Act, 1961. Further, the assessee has not
filed appeal against the order passed under section 143(3) before the CIT(A).
3.
The assessee was thus imposed a penalty of Rs 13,00,990 being equivalent to
100% of the
tax sought to be evaded. In appeal, learned CIT(A) extensively reproduced from Hon’ble
Supreme Court’s judgment in the case MAK Data Limited Vs CIT [(2013) 358 ITR
593 (SC)], confirmed the said penalty and also observed that “In the present
case, the AO had clearly recorded his satisfaction that the assessee concealed
particulars of income and also furnished inaccurate particulars of income. The
facts of the case are also that the appellant
had not only offered no explanation for the cash deposits in his bank account and
has also reiterated all through that he is unable to do so and has no
explanation for the
same” and concluded that “Under the circumstances, and in view of the decision
of the
Hon’ble Supreme Court (MAK Data Limited, supra) which is squarely applicable on the
facts of the appellant’s case, penalty of Rs 13,00,990 levied under section
271(1)(c) for
concealment of income is confirmed”. However, when an appeal against the stand
so taken
by the Commissioner (Appeals) came up before us, the Tribunal accepted the explanation
to the extent of Rs 39,35,385 and declined the same in respect of the remaining
amount, i.e. Rs 4,37,265. The reasoning adopted was that when admittedly the
assessee was engaged in business in earlier years, and assessed on that basis,
one could possibly proceed on the basis that these deposits represent the
business receipts but then the assessee did not pay any tax on the profits of
the said business was either, and, to that extent, that concealment of income
has no explanation at all. Thus, the Tribunal restricted the penalty to 100% of
tax sought to be evaded in respect of Rs 4,37,265. The operative portion of the
order passed by the Tribunal was as follows:
“4.
We find, as evident from undisputed past history of this case, that the
assessee was stated to be engaged in some business and his bank account was
being used in respect of the same. Learned Departmental Representative has also
very fairly not disputed this possibility. We have, however, also noted that
even if the explanation of the assessee is to be accepted, the assessee does
not have any explanation for not disclosing the reasonable profits and on the
business which he stated to have carried out. As a matter of fact, his return
only shows interest income and salary income.
When
we put it to the assessee as to why he did not disclose, going by his version,
any business income, the assessee has nothing to say. In these circumstances,
in our considered view, the penalty deserves to be confirmed at least to the
extent of reasonable profit on turnover of the assessee reflecting by cash
deposits. Thus, as against an addition of Rs.43,72,650/- penalty to the extent
relatable to addition of Rs.4,37,265/- will certainly be justified. Learned
counsel for the assessee does not also dispute this position. As regards the
balance quantum addition, we find that similar deposits have been treated as
deposits in the course of business, in past, and, to that extent, explanation
deserves to be accepted at least for penalty purposes.
Accordingly,
in our considered view, accepting assessee’s explanation, though not proved to
the hilt, that the deposits represent dealings in connection with business, we confirm
the impugned penalty to the extent relatable to the addition of Rs.4,37,265/-. The
balance amount of penalty stands deleted.”
4.
Rather than challenging this relief in appeal before Hon’ble High Court, which
was not permissible anyway in the light of applicable monetary limits for
filing of appeals, the Principal Commissioner of Income Tax concerned filed a
writ petition before Hon’ble Gujarat High Court on the ground that the Tribunal
reduced penalty under section 271(1)(c) to “10% of the tax sought to be evaded
which was wholly impermissible”. Hon’ble High Court declined to entertain the
said writ petition and observed as follows:
It
may be possible for the Revenue to argue that the monetary limits set out by
the CBDT are for filing appeals before various foras, including the High Court
and the Supreme Court. These limitations imposed under the circular cannot be applied
to a writ petition that may be filed by the Revenue. However, when we recognize
the philosophy behind issuance of the said circular, which happens to be to
reduce litigation, such liberty to file writ petition, even if available,
cannot be lightly granted. In a rare and exceptional case, we may entertain a
writ petition filed by the Revenue ignoring the monetary limit set out by the
CBDT for filing the appeal particularly when we find that the judgment of the
Tribunal is likely to have long term or cascading effect or would result into
gross miscarriage of justice or such like. Under the (present) circumstances,
we are not inclined to entertain this petition.
5.
What essentially follows from the observations so made by Their Lordships, in
our humble
understanding, is as follows:
1.
The monetary limits set out by the CBDT for filing of appeals before the Hon’ble
High Court and Hon’ble Supreme Court do not apply to the writ petitions filed
before the Hon’ble Courts. In other words, even though an order may not be
appealable before the Hon’ble Courts above, in view of the monetary limits for
filing of appeals prescribed by the Central Board of Direct Taxes,in
appropriate cases, such an order can nevertheless be challenged by way of writ
petition.
2.
Even though the option of filing the writ petitions, and thus challenging the orders
of the authorities below, including this Tribunal, granting relief below the
specified monetary limits, is legally available to the Revenue, Hon’ble Courts
cannot lightly grant such a liberty to entertain the writ petitions as a matter
of routine. It is only in a “rare and exceptional” case that such writ petitions
can be entertained by the Hon’ble Courts above.
3.
The “rare and exceptional cases” in which the writ remedy can be availed by the
Revenue authorities are the cases in which decisions of this Tribunal can have
(a) long term or cascading effect; (b) gross miscarriage of justice; or (c) such
other undesirable and serious consequences.
4.
The present case does not fall in any of the above categories of “rare and exceptional
cases”, and, for this reason, Hon’ble jurisdictional High Court did not
entertain the writ petition challenging the order passed by the Tribunal.
5.
Hon’ble jurisdictional High Court has thus allowed the order passed by the Tribunal,
which was challenged in the writ petition, to achieve finality.
6.
Their Lordships, however, did not stop at that. Their Lordships had a message
of caution and of disapproval of the course adopted by this Tribunal as well,
and this message was so glaring in the closing observation as reproduced below:
Before
closing, however, we may record our disapproval of the approach adopted by the
Tribunal while reducing the penalty. In plain terms, statutory provisions
contained in section 271 envisage penalty which would be 100% of the tax sought
to be evaded and which may go upto 300% thereof. The Tribunal, however, found a
way to bypass this minimum limit by suggesting that the profit element embedded
in the cash deposits could be subjected to penalty. When the proceedings of
assessment in which the additions in the hands of the assessee were made, the
Tribunal could not have ignored such final conclusions by simply adopting the difference
mode or yardstick to judge the amount of tax sought to be evaded by the
assessee.
7.
Revenue’s efforts were not thus completely in vain. While Their Lordships did
not entertain
the writ petition filed by the Principal Commissioner of Income Tax, Their Lordships
did, in the above observations, disapproved the approach adopted by the
Tribunal. These observations about disapproval of the stand of the Tribunal are
being treated by the Assessing Officer as ammunition to keep his grievance
alive and once again approach the Tribunal for taking a second look at its
judgement. Armed with these observations, the Assessing Officer is before us
seeking rectification of mistake in the impugned order passed by the Tribunal,
and urging us to bring this order in parity and consonance with the legally valid
approach on how to compute the minimum penalty. The Assessing Officer, in this factual
backdrop, has moved the present rectification petition. The operative portion
of this rectification petition is as follows:
“1.
In this case assessment order was passed u/s. 143(3) of the Act dtd 21.01.2013 determining
total income at Rs. 45,30,320/- after making addition of Rs. 43,72,650/- on
account of unexplained cash deposits u/s. 69 of the Act in bank account and penalty
u/s. 271(1)(c) of the Act was also initiated for the addition made u/s. 69 of
the Act.
2.1
The assessee has not filed appeal against the assessment order. Thus the assessment
made and the addition of Rs. 43,72,650/- made u/s. 69 of the Act became final, penalty
of Rs. 13,00,990/- on the concealed income of Rs. 43,72,650/- waslevied u/s.
271 (1) (c) of the Act vide order dtd. 29/07/2013.
2.2
Being aggrieved with penalty order assessee filed an appeal before Ld. CIT(A). The
Ld. CIT(A) vide order No. CIT(A)-XVI/ITO/Wd.II(4)/1245/13-14 dtd 08.10.2014 had
dismissed the appeal.
2.3
Being aggrieved assessee filed further appeal before Hon'ble ITAT. The Hon'ble ITAT
vide order No. ITA No.210/Ahd/2015 dtd 22.09.2017 reduced the penalty on the
ground
that profit element and hence the concealment in the addition of Rs.43,72,650/-
was only 10% thereof. Since the quantum of addition made and consequently
concealment of income in this case became final, it was not open to Hon'ble
ITAT to adjudicate the same and determine the concealed income a fresh in an
appeal against penalty order.
2.4
The petitioner humbly submits that the quantum addition of Rs. 43,72,650/- on account
of unexplained cash deposit in account of assessee has attained finality. Thus,
the concealed income is Rs.43,72,650/- and this has attained finality. The tax
on the said addition is also calculated and thus, the tax sought to be evaded
works out to Rs.13,00,990/- as is evident from the penalty order dt.
29.07.2013.
2.5
As per law, therefore, minimum penalty leviable in this case is Rs.
13,00,990/-. However, the Hon'ble ITAT has upheld the penalty levied only of
tax sought to be evaded, which is in gross violation of law u/s 271(1)(c) of
the Act.
2.6.
I humbly and with full respect submit that the Appellate Tribunal has exceeded
its jurisdiction in penalty proceedings in restricting the penalty to 10% of
tax payable on concealed income despite the fact that the addition u/s 69 of
the Act has attained finality as the same has not been challenged by the
Assessee. It is this order dated 22.09.2017 passed by the Appellate Tribunal in
ITA No.210/Ahd/2015 which the petitioner seeks to rectify by way of filing this
present Misc. Application as the same is contrary to the bare provisions
contained in section 271(1)(c) of the Act.
2.7
Since the order of Hon'ble ITAT was found arbitrary, a Writ/Special Civil Application
No. 7872 of 2018, (application No. 0/13171/2018) was filed in the Hon'ble High
Court of Gujarat, Ahmedabad on 24.04.2018 by the Revenue. The Hon'ble High
Court of Gujarat, Ahmedabad vide its order No. SCA No. 7872/2018 application
No. 0/13171 /2018 dtd 11/05/2018 had though declined to entertain the Writ
petition, for the reasons recorded therein, but in para 5 of the order Hon'ble High
Court has observed that....
"5.
Before closing however we may record our disapproval of the approach adopted by
the Tribunal while reducing the penalty. In plain terms, statutory provisions
contained in section 271(1)(c) envisage penalty which would be 100% of the tax
sought to be evaded and which may go up to 300% thereof. The Tribunal, however,
found a way to bypass this minimum limit by suggesting that the profit element
embedded in the cash deposits could be subject to penalty. When the proceedings
of assessment in which the additions in
the hands of the assessee were made, the Tribunal could not have ignored such
final conclusions by simply adopting the different mode or yardstick to judge
the amount of tax sought to be evaded by the assessee."
3.
In view of the submissions made and considering the observation made by the Hon'ble
High Court and the provisions of section 271 (1)(c) of the I.T. Act,1961 it is evident
that an error is apparent from records in the impugned order of Hon'ble ITAT wherein
minimum penalty leviable u/s. 271(1)(c) of the Act has been reduced from 100%
to 10% , the order passed by the Hon'ble ITAT-'C' Bench ITA No.210/Ahd/2015 dtd
22.09.2017 needs to be rectified accordingly.
Prayer
of the Department: -
It
is therefore, humbly prayed that:- The Hon'ble ITAT may kindly rectify the
error apparent from record in the order passed on 22/09/2017 and correct the
same on the basis of the facts mentioned herein above and as per law and amend
the order as per law accordingly.”
8.
We have heard Shri Dev, learned Departmental Representative, and Shri Soparkar,
learned Senior Advocate representing the assessee. We have also carefully
perused the material
on record and duly considered facts of the case in the light of the applicable
legal position.
9.
We must, at the outset, humbly bow to the observations made by Hon’ble jurisdictional
High Court and state, with all humility and in all sincerity, that we have
taken a careful note of what Their Lordship consider the right course of
action, and we will bear in mind these observations, in letter and in spirit,
in the discharge of our judicial duties. As we go
along, we may have to explain what the approach of the Tribunal was but that is
not from the point of view of a debate on merits but simply from the limited
point of view of whether our decision can be rectified under the limited scope
of section 254(2) and there is absolutely no, and there cannot be any, question
about reservations on what Their Lordships hold to be correct approach. As was
said by Hon’ble Supreme Court in the case of Assistant Collector of Central
Excise vs Dunlop India Ltd. [1985] 154 ITR 172, where the Hon’ble Court has itself
quoted from the decision of House of Lords, "…..as was said in Cassell
& Co. Ltd. v. Broome [1972] AC 1027 (HL), we hope it will never be
necessary for us to say so again that "in the hierarchical system of
courts" which exists in our country, "it is necessary for each lower
tier", including the High Court, "to accept loyally the decision of
the higher tiers". "It is inevitable in hierarchical system of courts
that there are decisions of the Supreme appellate Tribunal which do not attract
the unanimous approval of all members of the judiciary... But the judicial
system only works if some one is allowed to have the last word, and that last
word, once spoken, is loyally accepted.".
. . The better wisdom of the Court below must yield to the higher wisdom of the
Court above. That is the strength of the hierarchical judicial system."
(Emphasis, by underlining,
supplied by us). There is no escape from the fact that our understanding of
what is correct and what is legally permissible was indeed at variance with
Their Lordships’ take on the same, and we must now stand corrected in our
approach.
10.
The mere words of remorse- even if we express any, according to the learned Departmental
Representative, will not suffice. He wants tangible results in terms of the relief
granted to the assessee being vacated. Nothing less than our suitably amending
our order,
so as to bring it in conformity with the views expressed by the Hon’ble High
Court, will satisfy the learned Departmental Representative. His prayer thus is
that the relief granted by the Tribunal, in the impugned order, must be vacated
by way of an order under section 254(2).
11.
That’s where learned senior counsel for the assessee, joins the issue with him.
Learned senior counsel has three fold defence to the prayer of the applicant-
first, that the application
is time barred; second, that there is no mistake apparent on record in the
order of the Tribunal, and; third, even if there be a mistake apparent on
record in the order of the Tribunal that is not the kind of error which can be
rectified within inherently limited scope of section 254(2). There are thus three
aspects of the matter that we must address ourselves to:-
(a)
legal position with respect to admissibility of the present rectification
petition- particularly with respect to the time limit under section 254; (b)
the nature of mistake which is sought to be rectified; and
(b)
the scope of our powers under section 254(2) of the Act. Let us now take up
these three aspects one by one.
12.
So far as the limitation aspect is concerned, we find that Section 254(2), as
it stands, provides,
inter alia, that “the Tribunal may, at any time within six months from the end
of the
month in which the order was passed, 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 or the Assessing
Officer”. This time limit of six months from the end of the month in which the
order has been passed is, as learned representatives fairly agree, judicially
construed as application being filed within six months from the end of the
month in which order is served on the aggrieved party and that is how the
rectification petitions are being dealt with this Tribunal consistently. The delay
is explained as on account of approaching the Hon’ble High Court and it is
contended that, for that reason, the delay was bonafide and the same deserves
to be condoned. The impugned order was passed on 22nd September 2017 while the
present rectification petition is filed on 31st May 2018. Clearly, the rectification
petition is filed beyond the time limit set out in section 254(2). There is
neither any petition seeking condonation of delay, nor, in response to our
question, any powers are shown to have been conferred on us, by the statuteas in
the case of powers in respect of delay in filing of appeals, for condoning such
a delay in filing of rectification petitions. It is important to bear in mind
the fact that while section 253(5) specifically provides that the Tribunal “may
admit an appeal or permit the filing of a memorandum of cross-objections after
the expiry of the relevant period referred to in sub-section (3) or sub-section
(4), if it is satisfied that there was sufficient cause for not presenting it
within that period”, there is no such corresponding enabling provision, under the
statute, for the rectification petitions under section 254(2). What is thus
clear is that the Tribunal has no powers for condoning the delay in filing of
applications under section 254(2), and that, in any event, there is not even a
formal application on record seeking condonation of delay in filing of the
present application under section 254(2). The present application is thus
time
barred and we are not in a position to deal with the same on merits.
13.
That is not, however, the only reason for our inability to grant any relief in
the matter.
14.
There is no dispute that what can be rectified under section 254(2) is a
mistake in the nature
of “mistake apparent on record”. The expression “mistake apparent on record”
has limited
connotations, and every mistake, appearing in an order, cannot be covered by
the expression
“mistake apparent on record”. The connotations of expression “mistake apparent on
record” have been judicially interpreted, in the landmark judgment of Hon’ble
Supreme Court in the case of ITO Vs Volkart Brothers [(1971) 82 ITR 50 (SC)],
as follows:
………. an error which has to be
established by a long drawn process of reasoning on points where there may
conceivably be two opinions cannot be said to be an error apparent on the face
of the record. A decision on a debatable point of law is not a mistake apparent
from the record…..
15.
In this backdrop, let us look at the mistake committed by the Tribunal. The
Tribunal was
of the view that, so far as impugned addition of Rs. 43,72,650 was concerned,
looking to the undisputed past history of the case and the stand of the
Departmental Representative, these bank deposits, aggregating to Rs 43,72,650,
could be treated as business receipts but then there was no explanation for the
assessee not disclosing income element embedded therein to the extent of
profits, which were taken @10% of turnover- as per past case history. In effect
thus, explanation of the assessee was accepted to the extent of 90% of the
quantum addition of Rs 43,72,650 and there was no explanation at all for the
remaining amount of 10% of quantum addition i.e. Rs 4,37,265. The penalty to
the extent relatable to Rs 4,37,265 was confirmed, and as regards the balance
amount of Rs 39,35,385, the Tribunal observed that, “we find that similar deposits have been treated as deposits in the
course of business in the past, and, to that extent, explanation deserves to be
accepted at least for penalty purposes”. In effect thus, so far as the
addition of Rs 43,72,650 was concerned, the Tribunal held that the explanation
of addition to the extent of Rs 39,35,385 was acceptable in as much the
additions in question were of the same nature which were treated as business receipts
in past and only income embedded therein was brought to tax.
16.
It is only elementary that penalty is not merely a consequence of quantum
addition of income
in the hands of the assessee. In the penalty proceedings, what is to be
evaluated is the explanation, with respect to the related addition, offered by
the assessee. Of course, theexplanation of the assessee should be a reasonable
explanation and it is not that the moment any explanation is offered, the
penalty will not be leviable. In the landmark judgment in the case of CIT v. Nathulal Agarwala & Sons [1985]
153 ITR 292, a full bench of Hon’ble Patna High Court had inter alia
observed as follows:
"As to the nature of the
explanation to be rendered by the assessee, it seems plain on principle that it
is not the law that the moment any fantastic or unacceptable explanation is
given, the burden placed upon him would be discharged and the presumption
rebutted. It is not the law and perhaps hardly can be that any and every
explanation by the assessee must be accepted. In my view, the explanation of
the assessee for the purpose of avoidance of penalty must be an acceptable
explanation. He may not prove what he asserts to the hilt positively but as a
matter of fact materials must be brought on the record to show that what he
says is reasonably valid."
17.
The above views were approved by the Hon’ble Supreme Court in the case of CIT v. Mussadilal Ram Bharose [1987] 165 ITR
142.
Referring to the judgment of Hon’ble Patna High Court, Their Lordships observed:
"The Patna High Court emphasised
that as to the nature of the explanation to be rendered by the assessee, it was plain
on principle that it was not the law that the moment any fantastic or unacceptable
explanation was given, the burden placed upon him would be discharged and the
presumption rebutted. We agree. We further agree that it is not the law that
any and every explanation by the assessee must be accepted. It must be acceptable
explanation, acceptable to a fact-finding body."
18.
It is, therefore, the acceptability of the explanation of the assessee which
holds the key as to whether it is a fit case for imposition of penalty, or not.
The explanation was found acceptable to the Tribunal, and, to that extent, the
penalty was deleted. Hon’ble High Court, however, holds this exercise to be “a
way to bypass this minimum limit by suggesting that the profit element embedded
in the cash deposits could be subjected to penalty” and observes that “When the
proceedings of assessment in which the additions in the hands of the assessee
were made, the Tribunal could not have ignored such final conclusions by simply
adopting the difference mode or yardstick to judge the amount of tax sought to
be evaded by the assessee”. With utmost respect, we humbly bow to the
observations made by Their Lordships and accept, without entering into any
debate or controversy, that it was a mistake to accept explanation to the
extent of a part of the amount added to the income of the assessee, on the
basis of past case history, on the basis of stand of the Departmental Representation
and on the basis of what we considered to be reasonable explanation, but what
needs to be carefully examined today is whether mistake be said to be a mistake
apparent on record. The conclusions arrived at by us were purely factual and
somewhat subjective in the sense it was based on our perceptions of what is
reasonable. The observations of Hon’ble High Court, disapproving the
conclusions, are based on the proposition that the conclusion of the Tribunal
was a way to bypass the minimum limit. That is, with respect, a wholly a highly
subjective observation and all a matter of perception. The other way of looking
at the conclusions of the Tribunal could possibly be, and that’s how we looked
at it, that the explanation of the assessee was partly accepted and, as regards
the element of income on which explanation was not accepted, the penalty was
still one hundred percent of tax sought to be evaded. It was stated to be
accepted past history of the case, as pleaded before the Tribunal, that all the
cash deposits were not of income nature but in the nature of business receipts
and that only income embedded therein could be brought to tax. Wrongly though,
as we have learnt the hard way, we were in error in following the same path for
the purpose of evaluating explanation extended before the Tribunal during the
hearing, but then this was not altogether devoid of any basis or rationale. The
rationale or basis of our approach has turned out to be incorrect but it clearly
did exist. In any event, it was not something which was incapable of two
opinions. “Finding a way to bypass the minimum limit”, as Their Lordships put
it, is to decipher or discover the reason of why the Tribunal adopted a
particular path but then, beyond any controversy, that’s a highly subjective
cerebral
exercise
and rectification of any mistake on the basis of such an exercise is inherently
outside the limited scope of section 254. As regards the observation that “When
the proceedings of assessment in which the additions in the hands of the
assessee were made, the Tribunal could not have ignored such final conclusions
by simply adopting the difference mode or yardstick to judge the amount of tax
sought to be evaded by the assessee”, we may mention that we were under the
bonafide, but obviously incorrect impression, that the penalty proceedings are distinct
and separate proceedings and merely based on the findings in the assessment proceedings,
the penalty could not be levied. This approach, as we have learnt with the benefit
of hindsight, is a legally unsustainable, and thus incorrect, approach in the
present context but then it could not be said to be said to a glaring error
which is incapable of two views being taken. We cannot join the issue on merits
on what Their Lordships have held and any further analysis of legal position
will inevitably take us there, and we humbly accept our mistake. We may,
however, add that the school of thought that “It is settled that the findings
given in the assessment proceedings would be relevant and admissible materials
in penalty proceedings, but those findings cannot operate as res judicata because
the considerations that arise in penalty proceedings are different from those
in the assessment proceedings” has consistently found favour with several non
jurisdictional High Courts, including in the case of CIT Vs Ishitiaq Hussain
[(1998) 232 ITR 673 (All)]. The findings in the assessment proceedings have not
thus be treated as final adjudication binding in the penalty proceedings. An
approach adopted by the basis of the views expressed by Hon’ble High Court,
even if non jurisdictional, cannot be said to be a glaring error incapable of
two views being taken.
19.
In view of the above discussions, even if the rectification petition was to be
treated as a
petition filed well within the time limit, the rectification petition was to be
dismissed on merits
anyway- in the light of the nature of the mistake and the limited scope of
powers under section 254(2). There would not have been any difference to the
outcome of the exercise.
20.
As we part with the matter, we must again reiterate, with all humility and all
the emphasis at our command, that the dismissal of this rectification petition
is on account of delay
in filing of rectification petition as also on account of inherently limited
powers vested in the Tribunal under section 254(2) of the Income Tax Act, 1961.
That does not affect the fact that, in the light of the observations of Hon’ble
jurisdictional High Court, this Tribunal was in error in granting the relief in
the impugned order and we must gracefully acknowledge the same. There are,
however, limitation to what we can do in the course of exercise of our powers
under section 254(2) and as much as we must acknowledge our mistake, we must
also acknowledge our limitations of rectifying the same. Just as Their
Lordships, having noticed the mistake in the impugned order, declined to tinker
with the same, for the larger causes of justice, and allow it to thus reach
finality nevertheless, we must also refrain from revisiting the conclusions
arrived at in the impugned order, in the garb of rectifying the mistake apparent
on record, as, howsoever desirable be the ultimate objective, ends cannot
justify the means; the legal remedies can only be provided within the framework
of law.
21.
In the result, the application is dismissed. Pronounced in the open court today
on the 3rd
day of April, 2019.
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