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Statement Of Problem
The present research focuses on critically analyzing the case of Asstt. IT v. Saurashtra Kutch Stock Exchange Ltd of Taxation-I The research in this furtherance has analyzed the issues which were discussed in the instant case and what could be the proximate solution to such issues. Therefore, the researchers have tried to analyze the existing jurisprudence and have put forth relevant solutions in every possible scenario as have also been put forth in the case as well.
Aim and Objectives
The purpose of this research is to critically analyse the aforesaid case. The objective could have been diversified, therefore, the researcher has tried to look onto a small aspect of this issue, i.e., restricting with the analysis of this case.
The research has considered the following hypothesis
What were the issues of the instant case?
Whether the assessee can claim the exemptions on merits ?
What was held in the instant case?
Rationale of Study
The rationale of this study is to analyze the case of Asstt. IT v. Saurashtra Kutch Stock Exchange Ltd. ‘and critically analyze the issues resolved therein.
The researcher in the project has used primary sources for getting the desired information by referring to the relevant books available online and offline. On the other hand, secondary sources have been employed to assist the relevant papers published in authentic journals. The doctrinal research methodology is employed to use the already available information and data on the subject, i.e., Taxation Laws. Since the research is supposed to critically analyze the issues of the case and the good-bad aspects and repercussions of the case, the nature and approach of the research are primarily analytical. To maintain coherence in the research, the research project is divided into four independent parts.
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Scope and Limitation
The extent of this research assignment is in the reasons why there is a need to have laws and secondly, what are the possible ways such efficiency of laws could be attained. The limitation of the research project is restricted to the time paucity and the dearth of properly executed and effective Taxation Laws.
A quasi-judicial organization with expertise in handling appeals related to the Direct Taxes Acts is the Income Tax Appellate Tribunal (ITAT). In accordance with Section 254, the Appellate Tribunal may make any orders regarding the appeal that it deems appropriate after providing both parties with a chance to be heard. The Appellate Tribunal’s decision is definitive on an issue of fact, and the High Court cannot hear an appeal against it. However, the assessee may submit a writ appeal to the High Court contesting the fact-finding procedure if the Appellate Tribunal’s fact finding was improperly conducted. If the High Court determines that the Assessee’s claim is true, it will instruct the Appellate Tribunal to carry out the fact-finding process in accordance with the correct procedure.
The Tribunal may revise any order it issues under subsection (1) of the Income-tax Act of 1961 at any time during the four years following the date of the order in order to correct any error that becomes apparent from the record. Therefore, the error that is being sought to be corrected must be evident from the record and must also be in any order made in accordance with section 254(1) for section 254(2) to be applicable. An order that denies rectification pursuant to Section 254(2) is not an order made pursuant to Section 254(1) and cannot be corrected pursuant to Section 254. (2).
Let’s look at the 2008 case of ACIT v. Saurashtra Kutch Stock Exchange Ltd., where the question at hand was whether or not the Tribunal had made a mistake that was clear from the record when it decided the appeal and, therefore, whether or not the order of the Tribunal was subject to correction under Section 254(2) of the Act.
The assessee was a stock exchange company which was registered under section 25 of the Companies act 1956. Being a stock exchange company, it was a charitable Institution which was entitled exemptions under section 11 and section 12 of the Income Act. The registration under section 12A was granted to the assessee with the condition that it will be examined on the yearly basis. Wherein when the return of the income for the AY 1996-97 was filed, NIL taxable income was declared by the assessee claiming the exemptions under section 11 of the Income Tax Act. Initially the return was processed under section 143 (1) (a) of the Act. Wherein after that the assessee was served with the notice under section 154 proposing the rectification and withdrawing the exemptions under section 11. In reply of the said notice it was stated by the assessee that the exemptions were claimed in accordance of section 12 A and was entitled to exemptions under section 11 of the Act. The regular assessment was completed by the order dated 3/12/1999 under section 143 (3) of the Act by the assessee with the rejection of the claim of exemption under section 11 of the act, wherein the ACIT confirmed the same i.e. The order assessing officer and dismissed the appeal of the assessee.
Further the appeal made by the assessee, the tribunal stated that the authorities were right on their part by not granting the exemption. Later the appeal of the assessee was dismissed by the tribunal on 27th October 2000. In the case of Hiralal Bhagwati v. C.I.T (2000) 246 ITR 188 (Gujrat High Court) the Gujarat high court held that the trust was entitled to the exemptions under section 11 of the Act on the facts that were similar to the assessee. The aforesaid decision was held few months prior to the order of the tribunal mentioned in the said case of the appellant. But unfortunately, the said decision was not been cited before the tribunal while hearing the matter. The appellant later considering the above mentioned the decision and filed miscellaneous application before the tribunal under section 254 (2) of the Income Tax Act dated 13th November 2000. Wherein the miscellaneous application was allowed by the tribunal and it was later on held that there was a ‘mistake apparent from the record’ which needed rectification and finally revoked its previous order dated 27th October 2000. The tribunal relied upon the decision held in Hiralal Bhagwati v. C.I.T (supra) and Suhrid Geigy ltd v. CIT (1999) 237 ITR 834, But the revenue being dissatisfied with the order passed by the tribunal in favour of miscellaneous application on the ground of ‘mistake apparent from record’ writ petition was filed before Gujarat High Court which again was dismissed by High Court on 31st March 2003. (ACIT v. Saurashtra Kutch Stock Exchange ltd (2003) 262 ITR 1146 Gujarat HC). Later the appeal was filed by the revenue before the Honourable Supreme Court.
Whether the tribunal was right in exercising the power under Section 254(2) of the act on the grounds that there was ‘mistake apparent from the record’ committed by the tribunal while deciding the appeal?
Whether it could have been revoked the order on that ground?
Whether the assessee can claim the exemptions on merits?
View of the Court
The Revenue argued before the Supreme Court that the Tribunal’s use of the authority granted by Section 254(2) of the Act and its recalling of an earlier order issued in an appeal were errors of law and jurisdiction. It lacks the authority to revisit its own choices. The authority granted by section 254(2) may be used in the event of any “error obvious from the record.” The attorney claims that even if the Tribunal’s order was factually or legally incorrect, it would not fall under the definition of “error obvious on record.” According to subsection (4) of section 254 of the Act, the order of the Tribunal has become final, and subsection (2) of section 254 cannot be used to revoke that finality. Additionally, the revenue claimed that the assessee’s claim was unpersuadable even on the merits of the case. The Gujarat High Court’s ruling in the case of Hiralal Bhagwati (above) was relied upon by the Tribunal, however the Supreme Court held a different opinion in Delhi Stock Exchange Association Ltd. v. CIT (1997) 225 ITR 235. (SC). The revenue argued that the assessee was not entitled to the exemption on the grounds of the case because of the Supreme Court’s pronouncement of law.
On the other hand, the assessee agreed with the decision made by the Tribunal in the Miscellaneous Application and the recall of its prior ruling. The assessee maintained that the Tribunal was operating by using its authority within the State of Gujarat and that, as an inferior tribunal, it was under the High Court of Gujarat’s supervision pursuant to Article 227 of the Constitution. The Gujarat High Court’s ruling is consequently binding on the Tribunal. The subject under consideration by the authorities was the Gujarat High Court’s consideration of the exemption u/s. 11 to the trust in the case of Hiralal Bhagwati. The abovementioned ruling was binding on the Tribunal and all other authorities subject to the Act. Since the error was obvious from the record, the Tribunal was required to recall its prior order, which it has done. The Tribunal’s conduct of recalling the earlier order cannot be considered unlawful in any way. The assessee further stated that because the Tribunal had neither upheld its appeal nor reversed the assessment order, there had been no harm done to the revenue by simply recalling the ruling. The assessee argued that they were qualified for the exemption with regard to the claim’s merits. The assessee argued that the Supreme Court had agreed with the Gujarat High Court’s position in Hiralal Bhagwati (supra) in Asst. CIT v. Surat City Gymkhana, (2008) 5 DTR 115 (SC). In light of this, it was argued that the department’s appeal should be rejected since it lacks merit.
The Supreme Court noted that the Tribunal has just recalled its prior ruling in the appeal by the order in the Miscellaneous Application, and the same will be heard again. The revenue appeals the decision. It would not be appropriate for the Supreme Court to rule on the merits of the case since the assessee has no complaints regarding the contested ruling. In light of this, the Supreme Court chose not to weigh in on the second question, which concerned the case’s merits.
The Supreme Court then began to consider the section 254 provisions. The Supreme Court noted that sub-section (2) of the section addresses two different circumstances: I It gives the Tribunal the ability to amend any order passed under sub-section (1) at any time within four years of the date of the order in order to correct any error that is apparent from the record; and (ii) It requires the Tribunal to make such an amendment if the error is brought to its attention by the assessee or the AO. However, there is no disagreement among the parties as to the fact that the Tribunal must use its authority under subsection (2) of Section 254 of the Act if the Assessee notifies it of a “mistake apparent from the record.” While the Supreme Court acknowledged that section 254 of the Act does not provide the Tribunal the authority to review an order, as the revenue claimed, it does give the Tribunal that authority to correct an error that is obvious from the record, as the assessee claimed.
As a result, the Supreme Court noted that the fundamental query is: For the purposes of section 254(2) of the Act, what constitutes an error apparent from the record? The Supreme Court cited rulings in the cases of Satyanarayan Laxminarayan Hegde v. Mallikarjun BhavanappaTirumale (1960) 1 SCR 890, Batuk K. Vyas v. Surat Municipality I LR 1953 Bom 191, and T.S. Balaram, ITO v. Volkart Bros. (1971) 2 SCC 526. The Supreme Court ultimately decided that an error that is obvious on the face of the record and can be addressed while exercising certiorari jurisdiction is one that is patent, manifest, and self-evident and does not require extensive examination of supporting facts or argument (rectification). If one must look outside the record to determine whether the judgment is valid or not, one cannot say that an error is obvious on the face of the record. An error that is obvious from the record’s appearance is one that can be identified just by glancing at it, without the need for a laborious deliberation process over issues where there may be conflicting viewpoints. Such an error shouldn’t need any further information to demonstrate its incorrectness. Or, to put it another way, it should be so obvious and plain that no court would allow it to be recorded. The case cannot be considered to be covered by an error that is obvious on the surface of the record if the viewpoint the Court accepted in the initial judgment is one of the available viewpoints. The Supreme Court ruled that failure to consider a ruling by a lower court or the Supreme Court qualifies as a “mistake apparent from the record.”
The Supreme Court came to the conclusion that the Tribunal had not violated any legal or jurisdictional requirements in using its authority under subsection (2) of Section 254 of the Act and in correcting “mistakes obvious from the record.” The High Court did not err in confirming the abovementioned order because the Tribunal did not err in correcting the mistake. Both directives were determined to be absolutely legal and no intervention was required.
Author: Jidnyasa Kshirsagar, National Law University, Nagpur, in case of any queries please contact/write back to us via email to email@example.com or at Khurana & Khurana, Advocates and IP Attorney.