2012-VIL-963-ITAT-HYD

Equivalent Citation: [2013] 21 ITR 396

Income Tax Appellate Tribunal HYDERABAD

ITA No.688/H/10

Date: 06.01.2012

SMT. V. KUMUDA, HYDERABAD.

Vs

DCIT, CIR-16(2) HYDERABAD

BENCH

SHRI CHANDRA POOJARI, SMT. ASHA VIJAYARAGHAVAN, JJ.

JUDGMENT

2. The learned authorized representative of the assessee submitted that the assessee raised a ground with regard to the allowability of deduction under section 54F wherein the Tribunal decided the issue against the assessee.

3. The authorized representative submitted that the Tribunal inadvertently not considered the decision of the same Bench in the case of ITO vs. R. Preeta Devi & two Others. In that case also the assessee explained that the investment in house property was out of rents received from Satyam Computers,. Security Deposits of the tenants, and loan taken from Karnataka Bank Banjara Hills, Hyderabad. Therefore, it is respectfully submitted that the rationale laid down by the earlier Divisional Bench decision has not been applied by the present Bench, therefore, there is a mistake apparent from the record.

4. He submitted that during the course of assessment proceedings, it was brought to the notice of the assessing officer that the assessee invested up to 31-3-2006, an amount of Rs.1,24,68,800/- and further, an amount of Rs.25,31,200/- was invested before the due date of filing of the return i.e., before 30-6-2006, therefore, an aggregate amount of Rs.1,50,00,000/- was invested before the due date of filing of the return of income and subsequently, an amount of Rs.1,56,98,000/- was invested by obtaining a loan from State Bank of India. While filing the original return as observed by the assessing officer a claim of exemption of Rs.2,10,16,139/- was made and subsequently a revised return was filed, reducing the claim of deduction under section 54F to Rs.1,31,90,045/-, which has been allowed by the Commissioner, considering the rationale of the judgment of the Hon’ble A Bench in the case of ITO vs. R. Preeta Devi and two others. The provisions of section 54(4) of the I T Act are not attracted in respect of claim of Rs.1,31,90,045/-.

5. It was contended that during the course of assessment proceeding the assessee submitted a copy of receipts and payment account as per which the assessee has sufficient funds of her own for other family members only. The investment made from the bank loan of State Bank of India is Rs.1,56,98,000/- after 30-6-2006, therefore, no claim is made in respect of this amount for deduction under section 56F of the IT Act.

6. He submitted that the Hon’ble Bench has appreciated the rationale of the decisions of Hon’ble Kerala High Court, in the case of K.C. Gopalan and observed that the money has no color; all which is required is compliance with the condition of investment within the specified time. In the case of assessee as seen from the receipts and payments account, the assessee made the investment in the residential house, before filing of the return of income under section 139 (1) of the IT Act, therefore, considering the rationale of the above judgment, the assessee should get relief under section 54F of the Act.

7. He submitted further that in identical circumstances the ITAT, Mumbai G- Bench in the case of Milan Sharad Ruparel vs. ACIT 121 TTJ 0770 held that the assessee is eligible for exemption u/s 54F of the I T Act in spite of major portion of purchase consideration of flats has been financed by Bank.  

8. He relied on the judgment in the case of CIT Vs. BR Constructions, 202 ITR the Hon’ble AP High Court observed as under:-

“The Principles applicable to courts in India were laid down by Subba Rao J. (as he then was) in Dr. K.C. Nambiar v. State of Madras, AIR 1953 Madras 351, which were approved by a Full Bench of our High Court in Subbarayudu v. the State, AIR 1955 AP 87 (FB): 1955 II ALT (Cri) 53. They are as follows (at page 94 of AIR 1955 AP):-

“A single judge is bound by a decision of a Division Bench exercising appellate jurisdiction if there is a conflict of Bench decisions, he should refer the case to a Bench of two judges who may refer it to a full Bench. A single judge cannot differ from a Division Bench unless a Full Bench of the Supreme Court over-ruled that the decision specifically or laid down a different law on the same point. But he cannot ignore a Bench decision, as I am asked to do on the ground that some observations of the Supreme Court made in different context might indicate a different line of reasoning. A division Bench must ordinarily respect ano0ther Divisional Bench of co-ordinate jurisdiction but if it differs, the case should be referred to a Full Bench. This procedure would avoid unnecessary conflict and confusion that otherwise would prevail.

In the case of JKT Fabrics (P) Limited vs. DCIT 004 SOT 0084 (Mum-Trib), it was held that “ A decision, which is per incuriam, is not a binding judicial precedent, it is also well-settled that when it is not open to a High Court Bench to differ from the decision of a Bench of equal strength, it cannot also be open to a Bench of the Tribunal to differ from the view taken by a co-ordinate Bench of equal strength.”

9. In view of the above, it was submitted that there is an inadvertent omission in the order of the Tribunal in not taking account the rationale laid down by the earlier Bench and hence it is prayed to recall the order of the Tribunal and decide the issue by following the order of the earlier Bench of the Tribunal.

10. On the other hand, the learned departmental representative while opposing the submissions of the learned counsel for the assessee not agreed with the recalling/reviewing of the Tribunal and relied on the order of the Tribunal in the instant case.

11. We have considered the rival submissions of the parties and perused the material available on record. We find that the grievance of the assessee in this Misc. Application is misconceived. The Tribunal considered the entire facts and the circumstances of the case and came to the conclusion that the assessee is not entitled for deduction under section 54F of the Act on the reason that the assessee has not utilized the sales consideration for the purchase of house property. The house was purchased by the assessee partly from bank loan and partly loans from family members and others. The Tribunal had given a categorical finding in its order that the sale proceeds of the shares received by the assessee were utilized for a different purpose and the assessee is left with no funds on this count. Moreover, the assessee was not having any own fund to acquire a residential house and the same was purchased from borrowed funds partly from bank and partly from relatives and friends. The sale proceeds are not appropriated towards the purchase of residential house and therefore the assessee is not entitled for deduction under section 54F of the Act. We find that the decision of the Tribunal is in conformity with the judgment rendered in the case of CIT vs. V.R. Desai (2011) 197 Taxman 52 (Ker) wherein it held as per head-notes of the decision as follows:

“There is no dispute that the transfer of the land by the assessee to the partnership firm towards his capital contribution to the firm is a transfer within the meaning of section 2(4&) which is subject to long-term capital gains under section 45(3). In the return filed for the assessment year 1995-96, he assessee had in fact offered tax on capital gains on the very same transaction of contribution of the above land towards his capital contribution as managing partner. However, since assessee had availed loan from HDFC bank and constructed house within three years from the date of transfer of the land to the firm, the assessee claimed exemption of capital gains on investment made in the construction of the new building under section 54F. The contention raised by the counsel appearing for the Revenue is that, in order to qualify for exemption under section 54F, the assessee should have purchased house within one year or should have constructed residential house within a period of three years from the date of transfer in either case by utilizing the sale proceeds of land. Further, for qualifying for exemption, the assessee should have, before the date of filing return, deposited the net sale consideration received in a nationalized bank in terms of the section 54F(4) and the receipts should have been produced along with the return filed. The counsel for the assessee on the other hand, contended that in order to qualify for exemption, there is no need to utilize the sale consideration towards the construction cost of the house and it is enough during the period of three years, equivalent amount is invested in the construction of the house. According to the assessee’s counsel, the assessee admittedly had constructed new house within three years from the date of transfer of the property and therefore is eligible for exemption.

On going through section 54F, particularly sub-section 4, in order to qualify for exemption on capital gains, before the last date for filing return, the net sale consideration should have been deposited in any bank account specified by the Government for this purpose. In fact, the requirement of subsection 4 of section 54F is that the assessee should produce along with the return, proof of deposit of the amount under the specified scheme in a nationalized bank. Admittedly, the assessee allowed the firm to which the property was transferred to retain and use it as a business asset and towards consideration he got only credit of land value in his capital account. In other words, sale consideration was not received by the assessee in cash or deposited the same in terms of cl. 4 of section 54F with any nationalized bank or institution. Consequently, the assessee did not have the sale proceeds available for investment in terms of scheme under section 54F (3). In order to qualify for exemption under section 54F(3), the assessee should have first deposited the sale proceeds of the property in any bank account and the construction of the house to qualify for exemption under s. 54F should have been completed by utilizing the sale proceeds also available with the assessee. In this case, though the assessee constructed new building within the period of three years from the date of sale, it was with funds borrowed from HDFC. The assessee is not entitled to exemption under section 54F because the assessee neither deposited the sale proceeds for construction of the building in the bank in terms of sub-section (4) before the date of filing returns nor was the sale proceeds utilized for construction in terms of section 54F(3). So much so, the assessee was not entitled to claim exemption on capital gains under section 54F of the Act which the AO rightly declined.”

12. Now the assessee wants to review the order of the Tribunal in the instant case citing certain decisions of the Tribunal.

13. It is well-settled that statutory authority cannot exercise power of review unless such power is expressly conferred. There is no express power of review conferred on this Tribunal. Even otherwise, the scope of review does not extent to rehearing of the case on merit. It is held in the case of CIT vs. Pearl Woollen Millos (2011) 330 ITR 164/(2010) 191 Taxman 286 (Punj. & Har.)

“Held, that the Tribunal could not re-adjudicate the matter under section 254(2). It is well settled that a statutory authority cannot exercise power of review unless such power is expressly conferred. There was no express power of review conferred on the Tribunal. Even otherwise, the scope of review did not extent to rehearing a case on the merits. Neither by invoking inherent power nor the principle of mistake of court not prejudicing a litigant nor by involving doctrine of incidental power, could the Tribunal reverse a decision on the merits. The Tribunal was not justified in recalling its previous finding restoring the addition, more so when an application for the same relief had been earlier dismissed.”

14. The scope and ambit of application of section 254(2) is very limited. The same is restricted to rectification of mistakes apparent from the record. We shall first deal with the question of the power of the Tribunal to recall an order in its entirety. Recalling the entire order obviously would mean passing of a fresh order. That does not appear to be the legislative intent. The order passed by the Tribunal under section 254(1) is the effective order so far as the appeal is concerned. Any order passed under section 254(2) either allowing the amendment or refusing to amend gets merged with the original order passed. The order as amended or remaining un-amended is the effective order for all practical purpose. An order under section 254(2) does not have existence de hors the order under section 254(1). Re-calling of the order is not permissible under section 254(2). Recalling of an order automatically necessitates rehearing and re-adjudication of the entire subject-matter of appeal. The dispute no longer remains restricted to any mistake sought to be rectified. Power to recall an order is prescribed in terms of Rule 24 of the ITAT Rules, 1963, and that too only in case where the assessee shows that it had a reasonable cause for being absent at a time when the appeal was taken up and decided ex parte. Judged in the above background the order passed by the Tribunal is indefensible.

15. The words used in section 254(2) are ‘shall make such amendment, if the mistake is brought to its notice’. Clearly, if there is a mistake, then an amendment is required to be carried out in the original order to correct that particular mistake. The provision does not indicate that the Tribunal can recall the entire order and pass a fresh decision. That would amount to a review of the entire order and that is not permissible under the I T Act. The power to rectify a mistake under section 254(2) cannot be used for recalling the entire order. No power of review has been given to the Tribunal under the I T Act. Thus, what it could not do directly could not be allowed to be done indirectly.

16. In the case of CIT vs. Hindustan Coca Beverages (P) Ltd. (2007) 293 ITR 163/159 Taxman 127 (Delhi), their Lordships while considering the powers of the Tribunal under section 254(2) of the IT Act, 1961 observed as under:- “Under section 254(2) of the IT Act, 1961, the Tribunal has the power to rectify mistakes in its order. However, it is plain that the power to rectify a mistake is not equivalent to a power to review or recall the order sought to be rectified. Rectification is a species of the larger concept of review. Although it is possible that the pre-requisite for exercise of either power may be similar) a mistake apparent from the record), by its very nature the power to rectify a mistake cannot result in the recall and review of the order sought to be rectified.”

17. In view of the above, we are of the considered opinion that the miscellaneous Application filed by the assessee is misconceived and accordingly the same is dismissed.

Order was pronounced in the Court on 06 -01-2012.

 

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