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2016 (2) TMI 525 - DELHI HIGH COURT

2016 (2) TMI 525 - DELHI HIGH COURT - [2016] 382 ITR 25 - Rectification of mistake - Interest income earned - income from other sources OR business income - Held that:- In the present case, the Court finds that the order dated 12th October, 2012 merely records that the Assessee did not carry on the business of Vyaj Badla during AY 2006-07. As pointed out by Mr Aggarwal, although in the AY in question the Assessee may not have carried out the business of Vyaj Badla, it was necessary for the ITAT .....

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for approaching the ITAT under Section 254 (2) of the Act for rectification of the above order in view of the law explained by the Supreme Court in Honda Siel Power Products Ltd. v CIT (2007 (11) TMI 8 - Supreme Court of India ).

In that view of the matter the impugned order dated 19th December, 2014 passed by the ITAT is set aside and the application for rectification filed by the Assessee before the ITAT under Section 254 (2) of the Act is treated as disposed of. However, this would .....

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ates ORDER Dr. S. Muralidhar, J. 1. This is a writ petition filed by the Petitioner challenging the order dated 19th December, 2014 passed by the Income Tax Appellate Tribunal (ITAT) in M.A. No. 06/Del/2013 in ITA No. 427/Del/2010 under Section 254(2) of the Income Tax Act, 1961 ( Act ) for the Assessment Year ( AY ) 2006-07. 2. The background facts are that the Petitioner is a public limited company incorporated under the Companies Act, 1956 and is carrying on the business of investment, financ .....

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earn any income from the Vyaj Badla business, has been treated as business income. 3. Aggrieved by the order of the Assessing Officer (AO) treating the interest income earned during the AY 2006-07 as income from other sources and not as business income, the Assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. In the order dated 26th November 2009 dismissing the appeal, the CIT(A) did not specifically deal with the issue of interest income being treated as business i .....

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n by the Assessee does not throw any light about the acceptance of business activity of the Assessee . 5. The above order led the Assessee to file an application under Section 254(2) of the Act before the ITAT. It was urged by Mr Salil Aggarwal, learned counsel appearing for the Petitioner, that before the ITAT in the rectification application the Petitioner urged the ground of applicability of the principle of consistency and contended that the Revenue had treated the interest income earned by .....

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rasing earlier order of the ITAT dated 12th October 2012, the ITAT observed that admittedly, the rental income, dividend income, income from long terms/short term capital gain cannot be the business income. Now, only other interest was the interest income of ₹ 48,312/- which too was held by the Assessee by investment of own funds." Therefore, the question before the ITAT was "whether the earning of the interest was of ₹ 48,312/- by investing own funds can be said to carryin .....

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Petitioner, if it was aggrieved by the ITAT's order dated 12th October 2012, was to have filed an appeal before this Court under Section 260A of the Act. However, Mr Salil Aggarwal, learned counsel for the Petitioner states that in view of the enunciation of the law by the Supreme Court in Honda Siel Power Products Ltd. v CIT (2007) 295 ITR 466 (SC), the Assessee decided to file a rectification application since there was a fundamental legal error with the ITAT declining to apply the rule o .....

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ed that it would be recognising a power of review of the ITAT which clearly was not permissible within the scope of Section 254(2) of the Act. Having failed to avail the remedy of filing an appeal against the original order of the ITAT dated 12th October, 2012 the Petitioner could not be permitted to indirectly seek the same relief. 9. What the scope of powers of the ITAT under Section 254(2) of the Act is, was explained by this Court earlier in four decisions CIT v. K. L. Bhatia (1990) 182 ITR .....

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legal certainty in rule of law. That principle is not obliterated by section 254(2) of the Income-tax Act, 1961. When prejudice results from an order attributable to the Tribunal s mistake, error or omission, then it is the duty of the Tribunal to set it right. Atonement to the wronged party by the court or the Tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review. In the present case, the Tribunal was justified in exercising its powers under secti .....

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proceedings on the basis that if prejudice had resulted to the party, which prejudice is attributable to the Tribunal s mistake, error or omission and which error is a manifest error then the Tribunal would be justified in rectifying its mistake, which had been done in the present case. 10. The above decision was followed by a Full Bench of this court in Laxman Das v. ACIT (2011) 330 ITR 243 (Del). While, paraphrasing the decision of the Supreme Court in Honda Siel Power Products Ltd. v CIT (20 .....

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g as a precedent without appreciating the underlying principle is not allowable. In Honda Siel Power Products Ltd., (supra), the Division Bench of this court considered the stance of the counsel that the decision in K.L. Bhatia [1990] 182 ITR 361 (Delhi) and the other decisions that have followed it, forbids recall of the Tribunal s entire decision on the basis that in the grab of rectification, the order cannot be recalled. When the matter travelled to the apex court, their Lordships as is evid .....

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urther opined that atonement to the wronged party by the court or the Tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review. Their Lordships further took note of the fact that the Tribunal committed a mistake in not considering the material which was already on record and the Tribunal acknowledged its mistakes and accordingly rectified its order. It is wrong nothing that their Lordships have clearly stated that they are not going by the doctrine or .....

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h travelled from this court wherein it had been held that the Tribunal had no power of recall of its own order in entirety; that the court was not going by the doctrine or concept of inherent power; that the rule of precedent which is an important part of legal certainty in rule of law is not obliterated by section 254(2) of the Act; that if prejudice has resulted to the party due to the mistake, error or omission which is attributable to the Tribunal and it is manifest from the record, the mist .....

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have been rendered by this court have proceeded on the basis of review, the limited power of recall as provided under rule 24 of the Income-tax (Appellate Tribunal) Rules, 1963 as regards the exercise of power which cannot be exercised directly or exercised indirectly and that even if there is any irregularity caused, that would not clothe the Tribunal with the power of review as it may ultimately result in rehearing of the appeal. Thus, the entire stream of decisions has gone by the concepts wh .....

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ertain circumstances can recall its own order and section 254(2) of the Act does not totally prohibit so." 11. Ultimately, the Full Bench of this Court in Laxman Das (supra) overruled the earlier decisions in K. L. Bhatia (supra), J. N. Sahni (supra), Baljeet Jolly (supra) and Deeksha Suri (supra) to be not laying down the correct law. 12. The result of the above discussion of the legal position is that, it will be open for the ITAT in application of Section 254(2) of the Act, to also exami .....

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