IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:11.09.2009 CORAM THE HON'BLE MR.JUSTICE P.JYOTHIMANI WRIT PETITION NO.3686 OF 2009 and M.P.No.1 of 2009 M/s.Visvas Promoters P Ltd. A private Limited Company represented by its Managing Director Mr.S.Seetharaman. .. Petitioner vs. 1.The Income Tax Appellate Tribuna; Chennai Bench "B" Rajaji Bhavan, Besant Nagar Chennai 600 020. 2.The Assistant Commissioner of Income Tax Circle-I, Madurai. .. Respondents Writ petition filed under Article 226 of the Constitution of India praying for issuance of Writ of Certiorarified Mandamus as stated therein, petition presented to this Court to issue a Writ of Certiorarified Mandamus calling for the records on the file of the first respondent herein in MP.No.379/Mds/2008 in ITA.No.1912/MDS/07 quash the impugned passed u/s.254(2) of the Act dated 30.01.2009 and consequently direct the 1st respondent herein to restore the appeal in ITA.No.1912/Mds/07. For petitioner : Mr.R.Sivaraman For respondents: Mr.Arun Kurian Joseph for Mrs.Pushya Seetharaman for R.2 ORDER This writ petition is directed against the order of the Income- tax Appellate Tax Appellate Tribunal, Chennai dated 30.1.2009 passed in M.P.No.379/mds/2008, rejecting the said petition filed by the assessee for cancellation of earlier order of the Tribunal dated 13.10.2008 in respect of assessment year 2004-05 by which the appeal filed by the Department was allowed and for restoration of the appeal and to pass further orders. https://hcservices.ecourts.gov.in/hcservices/ 2. The petitioner is carrying on the business of real estate and during the assessment year 2004-05 the petitioner is said to have put up construction of four housing projects in Madurai city, viz. Agrini, Vajra, Porkudam Phase I and Phase II. In respect of two projects, viz., Agrini and Vajra, the construction of flats has been done and the size of the flats was more than 1500 sq.ft. and in respect of some of the flats, the size was less than 1500 sq.ft. area. In respect of flats which are measuring less than 1500 sq.ft., the petitioner claimed deduction under section 80I-B(10) of the Income-tax Act. 2(a). The assessing officer, by order dated 26.12.2006, held that the petitioner was not entitled for deduction in respect of those two projects since all the flats were not of specified size. As against the said order, the petitioner filed an appeal before the Commissioner of Income-tax (Appeals), who allowed the appeal and granted deduction under section 80I-B(10) of the Income-tax Act (in short, "the Act") in respect of residential units which are less than 1500 sq.ft. of size, based on the Division Bench order of the Income-tax Appellate Tribunal in Bengal Ambuja Housing Developments Ltd. v. Commissioner of Income-Tax in ITA No.1595/Kol/2005. 2(b). It was, as against the said order of the Commissioner of Income-tax (Appeals), the respondent Department filed an appeal before the Income Tax Appellate Tribunal, which came to be allowed on13.10.2008, thereby setting aside the order of the Commissioner of Income-tax (Appeals) and rejecting the claim of deduction made by the petitioner under section 80I-B(10) of the Act. 2(c). The case of the petitioner is that during the course of argument before the first respondent Appellate Tribunal, when the appeal was filed as against the order of the Commissioner of Income- tax (Appeals), it was brought to the notice of the first respondent, Tribunal, the decision of the co-ordinate Bench of the Kolkatta Bench Tribunal in Bengal Ambuja Housing Developments Ltd. v. CIT and also the subsequent decision of Calcutta High Court in CIT v. Bengal Ambuja Housing Developments Ltd. Dated 5.1.2007, confirming the decision of the Tribunal and the first respondent Tribunal without referring to the decision of co-ordinate Bench of Kolkatta Tribunal and the decision of Calcutta High Court, has passed the final order allowing the appeal of the Department. 2(d). The petitioner, after the decision by the Appellate Tribunal, filed the above M.P.No.379 of 2008 before the first respondent Tribunal as if a mistake has crept in the order of the Tribunal dated 13.10.2008, in not referring to the decision of the Co-ordinate Bench of Kolkatta Tribunal and also the judgment of the Calcutta High Court and to rectify the error by recalling the earlier order. That application came to be dismissed by the Income-tax https://hcservices.ecourts.gov.in/hcservices/ Appellate Tribunal on the basis that the entire issue has been dealt with in detail in the earlier order dated 13.10.2008 and by filing the said application the petitioner really wants to review the earlier order. The Tribunal held that there is no error apparent in the earlier order of the Tribunal. It is as against the order of the Appellate Tribunal, the present writ petition is filed. 3. The validity of the said order is challenged on the ground that it was the case of the petitioner that the first respondent Appellate Tribunal, while passing the original order dated 13.10.2008 has not taken note of the Co-ordinate Bench decision of Kolkatta Tribunal and the Calcutta High Court judgment, wherein in respect of residential units of less than 1500 sq.ft. size deduction under section 80I-B(10) of the Income-tax Act was granted, which is binding on the first respondent Appellate Tribunal and it was not intended that the first respondent should consider that aspect in the miscellaneous petition. The petitioner would rely upon the judgment of the Supreme Court in Honda Siel Power Products Ltd. v. CIT (295 ITR 466), apart from the judgments of this Court in Lakshmi Vilas Bank Ltd. v. CIT (284 ITR 93) and CIT v. L.G.Ramamurthi (110 ITR 453). 4. It is the case of the petitioner that in all fairness, the first respondent having realised non-consideration of the Co-ordinate Bench decision of Kolkatta Tribunal and the judgment of the Calcutta High Court should have set aside its earlier order dated 13.10.2008 and passed even a similar order by considering the decision of Co- ordinate Bench of Kolkatta Tribunal and the judgment of the Calcutta High Court and differing with the stand taken in those judgments, on facts, since under section 254(2) of the Income-tax Act, no party should suffer on account of any mistake committed by the Tribunal. It is also stated that the Supreme Court has held that the Tribunal has to rectify its mistake, which is its inherent power. 5. In the counter affidavit filed by the respondent Department, it is stated that as against the original order of the first respondent dated 13.10.2008, even if there was any mistake, the further course of action which was available to the petitioner was to file a tax case appeal before the Division Bench of this Court under section 260A of the Act. By way of the claim of rectification of some mistake, in fact, the petitioner seeks an order from the first respondent to set aside its own order, which amounts to review. It is also stated that there is no Co-ordinate Bench and the ruling of a Bench at different place would not be binding upon the Tribunal at Chennai. 5(a). It is not the law that the decisions of Tribunals at other places are binding precedents. The respondent would rely upon the judgment of Bombay High Court in CIT vs. Thana Electricity Supply https://hcservices.ecourts.gov.in/hcservices/ Ltd., [(1994) 206 ITR 727) and submit that the decision of Kolkatta Tribunal or the Calcutta High Court is not binding upon the Tribunal at Chennai. The respondent would rely upon the judgment of Punjab and Haryana High Court in CIT vs. Vardhman Spinning [(1997) 226 ITR 296], wherein it was held that rectification of mistake cannot be done based on the decision of another jurisdiction. It is also stated that the decision of the Supreme Court in Honda Siel Power Products Ltd. v. CIT [(2007) 295 ITR 466) relates to a decision taken by a different Bench of Delhi Tribunal and it does not relate to various branches of different Tribunals. 6. Mr.R.Sivaraman, learned counsel appearing for the petitioner would vehemently contend that non-consideration of the Calcutta High Court judgment by the first respondent Tribunal in its original order dated 13.10.2008 is a mistake on the face of record and that should have been rectified by the first respondent by allowing the miscellaneous petition filed by the petitioner. He would rely upon the judgment of the Delhi High Court in CIT vs. Havell's (P) Ltd., [(2008) 165 Taxman 510(Delhi)] and submit that a tax case appeal can be filed before the High Court under section 260A of the Act only against an order passed under section 254(1) of the Act on the substantial merit of the case and an order passed under section 254 (2) of the Act is not an order which is appealable under section 260A of the Act. He would rely upon the judgment of the Bombay High Court in Chem Amit vs. CIT [(2005) 272 ITR 397] to substantiate his contention that the decision of Co-ordinate Bench of other Tribunal is binding. His submission is that in the original order of the first respondent dated 13.10.2008, even there is no mention about the decision of the Co-ordinate Bench of Kolkatta Tribunal or the judgment of the Calcutta High Court and thus, a substantial mistake has been committed on the face of record and the same has to be rectified. He would also rely upon the judgment in CIT vs. Highway Construction Co.(P) Ltd., [(1996) 217 ITR 234) and CIT vs. Smt.Nirmalabai K.Darekar [(1990) 186 ITR 242). 7. On the other hand, it is the contention of the learned counsel for the respondent/revenue that the High Courts of different jurisdiction and their judgments are not binding on the respondent Tribunal. It is his submission that every Income-tax Appellate Tribunal is an independent entity and there is no question of binding precedent between the decisions of various Tribunals in various places in India. He would rely upon the judgment in Nova Films and Paper Manufacturing Company vs. Income Tax Officer [(2008) 296 ITR 340) to contend that the writ petition is not maintainable. He also placed reliance on the decision in CIT vs. Thana Electricity Supply Ltd., [(1994) 206 ITR 727] and CIT vs. Vardhman Spinning [(1997) 226 ITR 296]. It is his contention that in fact in the impugned order, the first respondent has considered the Bench decision of the Kolkatta Tribunal and there is no grievance to the petitioner. https://hcservices.ecourts.gov.in/hcservices/ 8. I have heard learned counsel for the petitioner and the respondent and given my anxious thoughts to the issue involved in this case. 9. While the facts are not in dispute, it is relevant to note that as against the order of the Commissioner of Income-tax (Appeals) dated 7.5.2007, by which the Commissioner of Income-tax (Appeals) held that the petitioner was entitled for deduction under section 80I-B(10) of the Income-tax Act in respect of residential units which are less than 1500 sq.ft. in size, a substantial appeal was filed before the first respondent under section 253 of the Act. 10. The Income-tax Appellate Tribunal is constituted as per section 252 of the Act by the Central Government consisting of judicial and accountant members and the Government also appoints one of the Senior Vice-Presidents to be the President of the Appellate Tribunal and one or more of the members of the Appellate Tribunal as Vice President or Vice Presidents and also appoints one of the Vice Presidents to be the Senior Vice President and the Senior Vice Presidents or Vice Presidents shall have all the powers and functions of the President as may be delegated to him by the President by general or special order in writing. Section 252 is as follows: Section 252. Appellate Tribunal " (1) The Central Government shall constitute an Appellate Tribunal consisting of as many judicial and accountant members as it thinks fit to exercise the powers and discharge the functions conferred on the Appellate Tribunal by this Act. (2) A judicial member shall be a person who has for at least ten years held a judicial office in the territory of India or who has been a member of the Indian Legal Service and has held a post in Grade II of that Service or any equivalent or higher post for at least three years or who has been an advocate for at least ten years. Explanation.- For the purposes of this sub-section,- (i)in computing the period during which a person has held judicial office in the territory of India, there shall be included any period, after he has held any judicial office, during which the person has been an advocate or has held the office of a member of a Tribunal or any post, under the Union or a State, requiring special knowledge of law; (ii)in computing the period during which a person has been an advocate, there shall be included any period during which the person has held judicial office or the office of a member of a Tribunal or https://hcservices.ecourts.gov.in/hcservices/ any post, under the Union or a State, requiring special knowledge of law after he became an advocate. (2A) An accountant member shall be a person who has for at least ten years been in the practice of accountancy as a chartered accountant under the Chartered Accountants Act,1949 (38 of 1949), or as a registered accountant under any law formerely in force or partly as a registered accountant and partly as a chartered accountant, or who has been a member of the Indian Income-tax Service, Group A and has held the post of [Additional] Commissioner of Income-tax or any equivalent or higher post for at least three years.] (3) The Central Government shall appoint the Senior Vice-President or one of Vice-Presidents of the Appellate Tribunal to be the President thereof. (4) The Central Government may appoint one or more members of the Appellate Tribunal to be the Vice-President or, as the case may be, Vice-Presidents thereof. (4A) The Central Government may appoint one of the Vice- Presidents of the Appellate Tribunal to be the Senior Vice- President thereof. (5) The Senior Vice-President or a Vice-President shall exercise such of the powers and perform such of the functions of the President as may be delegated to him by the President by a general or special order in writing." Therefore, there is no difficulty to conclude that there is only one President in the Income-tax Appellate Tribunal and the powers of the President are delegated to various Vice Presidents in the Tribunals in various States. 11. The procedure to be followed by the Appellate Tribunal is contemplated under section 255 of the Act, in which it is stated that Benches may be constituted by the President of the Appellate Tribunal from among its members. As against the orders of the Appellate Tribunal passed in appeal, a further appeal lies to the High Court, on the High Court being satisfied that the case involves a substantial question of law under section 260A(1) of the Act which is stated as follows: "Section 260A. Appeal to High Court. (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal before the date of establishment of the National Tax Tribunal, if the High Court is satisfied that the case involves a substantial question of law." Such appeal has to be heard by the High Court by not less than two Judges under section 260B of the Act and thereafter an appeal is provided to the Supreme Court under section 261 of the Act. https://hcservices.ecourts.gov.in/hcservices/ 12. While passing the orders, the Income-tax Appellate Tribunal has the powers to decide the issue in the main appeal by giving opportunity of being heard to both the parties as per section 254(1) of the Act and in cases where the Tribunal has passed final orders under the above said section 254(1), within four years or thereafter, if there is a mistake apparent on record, the same can be rectified by way of making amendment to the order. Sections 254(1) and (2) are as follows: " Section 254. Orders of Appellate Tribunal. (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. (2) The Appellate Tribunal may, at any time within four years from the date of the order, 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. Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard: Provided further that any application filed by the assessee in this sub-section on or after the 1st day of October,1998, shall be accompanised by a fee of fifty rupees." 13. On the facts of the present case, the impugned order which is challenged in this writ petition, is admittedly passed in an application filed after the original appeal was disposed of and within four years under section 254(2) of the Act. However, in the impugned order, the first respondent Tribunal has come to a conclusion that there is no mistake apparent on record to rectify and what is called by the petitioner is to review the decision of the Tribunal which is not permissible under the Act. 14. In Chem Amit vs. Assistant Commissioner of Income Tax [(2005) 272 ITR 397), a Division Bench of Bombay High Court has held that an order passed by the Income-tax Appellate Tribunal under section 254 (2) of the Act rejecting an application for rectification cannot be said to be an order passed in an appeal by the Tribunal and therefore, a further appeal to the High Court under section 260A against such order would not lie. The above said decision of Division Bench of Bombay High Court, in my view, correctly shows that only https://hcservices.ecourts.gov.in/hcservices/ when a substantial question of law arises, which has been framed, an appeal lies to the High Court under section 260A of the Act which would be possible only on a final judgment of the Income-Tax Appellate Tribunal to decide the issue in appeal on merits and not against the technical grounds or rectification of errors under section 254(2) of the Act. By referring to section 256 which was omitted by the National Tax Tribunal Act, 2005 wherein there was a provision to make a reference to the High Court, it was held that the words contained in section 256 viz., 'question of law' cannot be equated to the substantial question of law, as found in section 260A of the Act. It was further held that if an application under section 254(2) was allowed and mistake was rectified in the original order, that original order of the Appellate Tribunal may be deemed to be an order under section 254(1), against which an appeal would lie to the High Court under section 260A of the Act. The operative portion of the judgment is as follows: " 6. In Durga Engineering & Foundry Works (Supra), the Supreme Court held that the reference under s.256 of the IT Act,1961, could be made from the order of the Tribunal passed on the application for rectification under S.254(2). That was so held by the Supreme Court in the light of the language of S.256 which empowered the assessee and the Revenue to "require the Tribunal to refer to the High Court any question of law arising out of an order passed under S.254". Sec.254 comrpises two sub-sections. Sub-s.(1) of S.254 provides that the Tribunal may pass such order on an appeal as it thinks fit after giving both the parties to the appeal an opportunity of being heard. Sub-s.(2) of s.254 permits the Tribunal to rectify any mistake apparent from the record and amend any order passed under sub-s.(1) within four years from the date of the order. The expression employed in s.260A that provides for an appeal to the High Court is materially different from the expression used in s.256 that empowers the assessee and the Revenue to require the Tribunal to refer to the High Court any question of law. As already noticed above, in s.256 the expression used is, "require the Tribunal to refer to the Hgih Court any question of law arising out of an order passed under s.254". However, in s.260A, the legislature has not provided an appeal to the High Court from every order passed under s.254 but has confined it to the order passed in appeal by the Tribunal. This is made clear by the use of expression, "an appeal shall lie to the High Court from every order passed in appeal by the Tribunal". If the legislature intended to provide an appeal to the High Court from the order passed by the Tribunal on the application for rectification under s.254(2), the legislature would not have used the expression in s.260A that an appeal shall lie to the High Court from every order https://hcservices.ecourts.gov.in/hcservices/ passed in appeal by the Tribunal, but instead used the expression as is used in s.256 that an appeal shall lie to the High Court from every order passed in appeal by the Tribunal, but instead used the expression as is used in s.256 that an appeal shall lie to the High Court from every order passed under s.254. The expression, "an appeal shall lie to the High Court from every order passed in appeal by the Tribunal" in s.260A cannot be equated with the expression, "an appeal shall lie to the High Court from every order passed under s.254". In Durga Engineering & Foundry Works (supra) also, the Supreme Court observed that "s.256 contemplates the reference of the question of law arising out of an order passed under s.254; that is to say, an order passed both under s.254(4) and s.254(2)". We have already highlighted the departure of the language in s.260A from the language occurring in s.256. 7. In a given case where as the consequence of an order passed on the rectification application under s.254(2), the amendment in the order passed in appeal under s.254(1) takes place, such amended order in appel as a consequence of the order passed in the rectification application, however, shall be amenable to appeal under s.260A. Insofar as the present case is concerned, the assessee has only challenged the order of the Tribunal rejecting the application of rectification, the appeal under s.260A is not maintainable." 15. Therefore, the term, 'every order' referred to in section 260A, apart from being qualified as one involving substantial question of law, would mean an order which finally disposes of the rights of the parties in controversy. In cases where an application for rectification is made and an order passed under section 254(2) of the Act by merely rejecting such application, it does not decide the substantial issue involved between the parties, since the issue has already been decided under section 254(1) of the Act by the Tribunal and if the application is filed subsequently under section 254(2) by way of miscellaneous petition for rectification of mistake within the period of limitation, viz., 4 years and the same is rejected, it would only make the original order passed by the Income-tax Appellate Tribunal final and if at all there is any substantial question of law that may arise or any right of the parties is finally decided by the Income-tax Appellate Tribunal, the same can be only under the orders passed as per section 254(1) of the Act. Therefore, such order cannot be construed as, 'any order' referred to under section 260A of the Act to enable the aggrieved party to file appeal before the High Court. 16. That was also the view taken by the Calcutta High Court in Shaw Wallace & Co.Ltd., vs. Income Tax Appellate Tribunal & Others [(1999)