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M/s Biswanath Pd v. cit - INCOME TAX REFERENCE No. 43 of 1988  RD-AH 1553 (30 November 2004)
Income Tax Reference No.43 of 1988
M/s Biswanath Prasad & sons, Varanasi v.
The Commissioner of Income Tax, Allahabad
Hon'ble R.K.Agrawal, J.
Hon'ble Prakash Krishna, J.
(Delivered by R.K.Agrawal, J.)
The Income Tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:-
"Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in dismissing the application under Section 254(2) of the Act on the ground that it was virtually a review application?"
Briefly stated, the facts giving rise to the present reference are as follows:-
The reference relates to the assessment year 1977-78. During the assessment year in question the Income Tax Officer had disallowed a sum of Rs.55,383/- out of interest claimed by the applicant on the ground that part of the borrowings have not been utilised by the applicant for the purposes of its business. The disallowance has been upheld by the Tribunal. The application filed under Section 256(1) of the Act, seeking reference, has been rejected by the Tribunal. Thereafter, the applicant filed a miscellaneous application purporting to be under Section 254(2) of the Act contending that the order of the Tribunal suffered from a mistake apparent on the record as it has not given any finding that any part of the capital borrowed by it, has not been utilised for the purposes of business and, therefore, the interest claimed, as deducted under Section 36(1)(iii) of the Act, could not be disallowed. The applicant had referred to a decision of the Madhya Pradesh High Court in the case of D & H Secheron Electrodes Pvt. Ltd. v. Commissioner of Income Tax, M.P. I, (1983) 142 ITR 528. The Tribunal had rejected the said application on the ground that under Section 254(2) of the Act, it is empowered to rectify any mistake which is apparent from the record and it has no power to review its own order. Through the present application, the applicant wants the review of its order dated 30.8.1980, which obviously cannot be done.
We have heard Sri S.B.L.Srivastava, learned counsel for the petitioner, and Sri Shambhoo Chopra, learned Standing Counsel appearing for the Revenue.
The learned counsel for the applicant submitted that in view of the decision given by the Madhya Pradesh High Court in the case of D & H Secheron Electrodes Pvt. Ltd. (supra) for disallowing a part of interest incurred on the capital borrowed, a finding has necessarily to be recorded that the part of the capital borrowed has not been utilised for the purposes of the business and, in the absence of any such finding, no amount of interest paid on borrowed capital could have been disallowed. It was a mistake apparent on the record, which ought to have been rectified by the Tribunal in exercise of its power under Section 254(2) of the Act and it was not a case of review as held by the Tribunal.
The learned Standing Counsel, however, submitted that the Tribunal had upheld the orders passed by the authorities wherein disallowance of interest in question paid on the capital borrowed has been upheld on the ground that it had not been utilised by the applicant for the purposes of its business. The order of the Tribunal is that of one of affirmance and, therefore, no separate reasoning is required to be given. He further submitted that the Tribunal does not possess any power of review. In support of his aforesaid submissions, he has relied upon the following decisions:-
(i) Patel Narshi Thakershi and others v. Pradyumansinghji Arjunsinghji, AIR 1970 SC 1273;
(ii) Bishwanath Prasad & Sons v. Commissioner of Income Tax, (1987) 163 ITR 715 (Alld); and
(iii) Laxmi Electronic Corporation Ltd. v. Commissioner of Income Tax, (1991) 188 ITR 398 (Alld).
Having heard the learned counsel for the parties, we find that in the assessment order for the assessment year in question the Income Tax Officer has recorded a categorical finding that the interest has been paid by the firm for non-business purpose, i.e., for advancing interest free loan to the sister concern and close relatives of the partners. The corresponding amount of interest has been disallowed. The Appellate Assistant Commissioner of Income Tax, Varanasi, while deciding the appeal preferred by the applicant, has also held that during the year under consideration and even before the business transactions with its debtors were very small and on the basis of these transactions, it could not be held that non-charging of interest from these sister concern where the partners of the applicant firm or their relation are deeply interested, was for business consideration. The disallowance made by the Income Tax Officer was confirmed. The Tribunal while upholding the order of disallowance of the amount of interest in question, had considered the matter in detail and had come to the conclusion that the advances cannot, in the circumstances, be regarded as having been made in the course of the applicant's business. The Tribunal did not find any fault in the reasoning of the Appellate Assistant Commissioner and was agreeable with his order on the point.
It is well settled that a statutory authority has no power of review unless the statute specifically confers such power upon it. In the case of Patel Narshi Thakershi (supra) the Apex Court has held that the power to review is not an independent power. It must be conferred by law either specifically or by necessary implication.
In the case of Laxmi Electronic Corporation Ltd. (supra) this Court has held that the Income Tax Appellate Tribunal has no power to review. Its only power is one of rectification conferred by sub-section (2) of Section 254 of the Act.
In the case of Dr. (Smt.) Kuntesh Gupta v. Management of Hindu Kanya Mahavidyalaya, Sitapur (U.P.) and others, AIR 1987 SC 2186, the Apex Court has held that it is now well established that the quasi-judicial authority cannot review its own order unless the power of review is specifically conferred on it by the statute under which it derives its jurisdiction.
This Court in Income Tax Reference No.2 of 1983, Commissioner of Income Tax v. M/s Mool Chand Shyam Lal, Agra, decided on 29.7.2004, has held that it is now well settled that in the absence of any specific power conferred by the statute or inferred by implication, the Tribunal which has been constituted under the Act, cannot exercise any power of review. No such power can be inferred by implication nor there is any specific provision in the Act providing for review. However, if an error falls within the provisions of Section 254 (2) of the Act then surely the Tribunal can exercise the power conferred under the said Act and rectify its mistake. It is well settled that if the facts of a particular case has been recorded incorrectly or some error has crept in, which does not require any debate and is apparent on the record, such a mistake can be corrected in exercise of powers under section 254 (2) of the Act.
Applying the principle laid down in the aforesaid cases to the facts of the present case, we find that the Tribunal has upheld the disallowance of the amount of interest in question on the ground that the advances were made by the applicant for non-business purpose. The reference application filed under Section 256(1) of the Act in respect of the correctness of the aforesaid finding has already been rejected by the Tribunal, which order, we are informed, has become final between the parties. The Tribunal having dealt with the matter in one way or the other, it cannot be said that on the basis of the decision rendered by the Madhya Pradesh High Court in the case of D & H Secheron Electrodes Pvt. Ltd. (supra), any mistake which is apparent on the record, has crept in the Tribunal's order. The Tribunal was justified in holding that there was no error apparent on the record in its order dated 30.8.1980 and, in fact, it was a case of review.
The decision of this Court in the case of Bishwanath Prasad & Sons (supra), relied upon by the learned counsel for the Revenue does not touch upon the issue at all in as much as in the aforesaid case this Court had only allowed the application filed by the present applicant under Section 256(2) of the Act and had directed the Tribunal to refer the aforementioned question of law to this Court.
In view of the foregoing discussion, we answer the question referred to us in the affirmative, i.e., in favour of the Revenue and against the assessee. There shall be no order as to costs.
Nov. 30, 2004
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