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TMI Blog2019 (9) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... ix of the case, orders passed by authorities below, contentions raised by both the parties before the tribunal were all considered and thereafter detailed well reasoned appellate order dated 04.10.2017 were passed by the tribunal for ay: 2008-09 and 2009-10 running into 56 pages. It is now well settled that scope of tribunal to rectify its own appellate order(s) , within provisions of Section 254(2) of the 1961 Act is limited to rectifying mistakes which are apparent from records. The tribunal has no powers to review its own decision within limited scope of Section 254(2) of the 1961 Act. The first grievance of the assessee is that in paragraph 10 of page 27 of the tribunal's orders dated 04.10.2017 it is mentioned erroneously by tribunal that: "it was also submitted by learned counsel for the assessee that even quantum of disallowance made of Rs. 17,99,90,677/- for A.Y.2009-10 by invoking section 40A(3A) is also not challenged by the assessee." The assessee by raising this grievance is not coming out with complete facts. The contention of the assessee during the course of hearing before the Bench when appeal was originally heard that once books of accounts are rejected by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 04.10.2017 for ay: 2008-09 and 2009-10 where all the contentions of both the litigating parties were dealt with. The tribunal also directed to remove double jeopardy in its order so that the assessee is not prejudiced twice for the same additions. The power of tribunal while dealing with MA u/s 254(2) is very limited to rectifying mistakes apparent from records and we have no power to review our decision . The next contention of the assessee in this MA is that the tribunal did not deal with overriding effect of Section 40A(3) wherein it is now contended that it did not override all the provisions of the 1961 Act but only override provisions of the Act dealing with computation of income under the head 'Profit and Gains of Business or Profession'. We are afraid that this contention of the assessee is also not acceptable as tribunal duly dealt with this issue in detail in page 49-55 of its appellate order dated 04.10.2017 , as under: "The claim and contentions of the assessee is that once books of accounts are rejected by the AO u/s 145(3) , there will be absolute embargo on the AO and he cannot have any recourse to such rejected books of accounts to compute income and the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained by the assessee, he proceeds to assess the assessee on the basis of his "best judgment". In doing so , he may take such assistance as the assessee's account may afford ; he may also rely on other information gathered by him as well as the surrounding circumstances of the case. The assessment made on the basis of the assessee's accounts and those made on " best judgment" basis are totally different types of assessments ..... So long as the estimate made by him is not arbitrary and has nexus with facts discovered , the same cannot be questioned. In the very nature of things the estimate made may be an over-estimate or an under-estimate. But, that is no ground for interfering with his "best judgment". It is true that the basis adopted by the officer should be relevant to the estimate made. The High Court was wrong in assuming that the assessing authority must have material before it to the prove the exact turnover suppressed . If that is true, there is no question of "best judgment" assessment. The assessee cannot be permitted to take advantage of his own illegal acts. It was his duty to place all facts truthfully before the assessing authority. If he fails to do his duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such cases there would be a hiatus in the Act and that sub-section (3) of Section 23 would not work. As I have already pointed out, sub-section (3) of Section 23 does not specify or define the material on which the Income-tax Officer may base his finding. While making the assessment under that sub-section any material which tends to show the assessable income of the assessee is good material on which assessment may be based, provided the assessee's attention has been drawn to that material...." Hon'ble Kerala High Court in the case of CIT v. Nathekkattu Constructions reported in (2004) 269 ITR 346(Ker.) held as under: "5. We have considered the rival submissions. We have also perused the orders of the Assessing Officer and the two appellate authorities. As we have already stated, the Assessing Officer did not accept the books of account of the assessee which was subjected to a special audit provided under section 45AD of the Act. The main reason for rejecting the books of account was that the Assessing Officer, after considering the statements and depositions of the seven sub-contractors, was of the view that they were only name lenders. It is in the above circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the first appellate authority. However, in paragraph 16 of the appellate order, which we have already extracted, the Appellate Tribunal did not consider this aspect of the matter even though the Tribunal found it difficult to accept the case of the assessee regarding payment to the sub-contractors. We notice that the Tribunal has adverted to the award passed by the Arbitrator and found that the amount awarded represents the value of the extra work done, which also represent interest at the rate of 12 per cent. The Tribunal was of the view that even if the additional work was not got done through sub-contractors, it might have been done by the assessee itself, which aspect has not been considered. The Tribunal however, observed that it is not possible to say that the entire amount of award is a profit to the assessee and taxable as contended by the Department. In such circumstances, according to us it was for the Tribunal to remit the matter to the Assessing Officer or at any rate the first appellate authority to consider the matter afresh. However, what we find is that the Tribunal has agreed with the first appellate authority that this is a case which calls for estimation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in favour of purchasing parties but in favour of third parties who were in the opinion of the Revenue merely an accommodation entry providers not doing any genuine business as against the so called purchasing parties from whom the assessee showed purchases . Thus, the whole edifice of the purchases and the business of the assessee was doubted by the AO keeping in view factual matrix of the case. The assessee even did not produced purchase bills and in-fact admitted that there was infringement of Section 40A(3)/40A(3A) which is an admitted position by the assessee. The enquiries made by the AO with these purchasing parties as well with the third parties in whose favour cheques were issued revealed that none of these parties existed as they could not be traced and it was concluded that they were mere accommodation entry operators . Section 40A(3) and 40A(3) are deeming provisions which brings fictional income to tax and it could not be said that the said income has not accrued to the assessee. Thus, the contention of the assessee that once books of accounts are rejected then the AO cannot have recourse to incriminating material gathered from books of accounts during assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly reveals that it has a non obstante clause which clearly stipulates that Section 40A(which includes 40A(3)/40A(3A) ) has an overriding effect notwithstanding anything to the contrary contained in any other provision of the 1961 Act relating to the computation of income under the head 'Profit and gains of business or profession' . Section 28 deals with computation of income from profits and gains of business or profession which is to be computed in accordance with the provisions contained in Section 30 to 43D which included Section 40A(3)/40A(3). Section 40A(1) has a non obstante clause 'notwithstanding anything to the contrary contained in any other provision of the 1961 Act relating to the computation of income under the head 'Profit and gains of business or profession'' as is contained in Section 40A(1) and in our considered view even if accounts are rejected u/s 145(3) , the AO can estimate income of the assessee by taking recourse to Section 40A(3) which has an overriding effect over Section 145(3) r.w.s. 144. The assessee in the instant case has admitted that books of accounts were rightly rejected by the AO u/s 145(3) and hence in our considered view, the AO has rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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