A tribunal cannot recall an order to examine a matter not raised before it.

Tribunal Order Recall Denied; Revenue Application Beyond Scope of Section 254(2)

Issue: Whether the Income Tax Appellate Tribunal (Tribunal) can recall its order under Section 254(2) of the Income-tax Act, 1961, based on the revenue’s application claiming the Tribunal overlooked the fact that the land sold by the assessee was a capital asset and not agricultural land.

Facts:

The assessee sold land situated eight kilometers beyond the city limit and claimed it was not a capital asset, thus the sale proceeds were not taxable.
The Tribunal, relying on CBDT Circular No. 17/2015, restored the matter to the Assessing Officer (AO) to examine the land’s distance from the municipal limit.
The revenue filed an application to recall the Tribunal’s order, arguing that the Tribunal overlooked that the land was a capital asset, not agricultural land.

Decision:

The court held that the revenue’s application was beyond the scope of the provisions of Section 254(2) of the Income-tax Act, 1961.

Key Takeaways:

Scope of Section 254(2): Section 254(2) allows the Tribunal to rectify any mistake apparent from the record. It does not provide for a complete review or recall of an order based on a change of opinion or arguments not initially considered.
Mistake Apparent from the Record: The mistake must be evident from the record itself, not based on new arguments or interpretations.
Change of Opinion Not Allowed: The Tribunal cannot recall an order merely because the revenue disagrees with its findings or wishes to present new arguments.
Limited Rectification Power: The power to rectify under Section 254(2) is limited to correcting errors, not to reconsidering the entire case.
Protecting Finality: This decision protects the finality of Tribunal orders and prevents the abuse of the rectification power for substantive reviews.
The court is emphasizing the limits of the Tribunals rectification power, and preventing the revenue from using it to re-argue a case.

IN THE ITAT SURAT BENCH

Income-tax Officer

Smt. Laxmiben Amratlal Patel

Pawan Singh, Judicial Member
and BIJAYANANDA PRUSETH, Accountant Member

M.A.NO. 26 (SRT) of 2024
IT Appeal No.751 (SRT) of 2023
[Assessment Year 2012-13]

JANUARY 8, 2025

Akshay M. Modi, CA for the Appellant. Mukesh Jain, Sr. DR for the Respondent.

ORDER

Pawan Singh, Judicial Member.- This Miscellaneous Application (MA) under section 254(2) of the Income Tax Act, 1961 is filed by the revenue for seeking rectification / re-calling the order dated 27.03.2024 passed in ITA No.751/SRT/2023 for assessment year (AY) 2012-13.

2. The learned Senior Departmental Representative (ld. Sr. DR) submitted that there is a mistake apparent in the order as the Tribunal has overlooked the essential fact while deciding the appeal of assessee, thus, deciding the appeal by overlooking the facts is mistake apparent on record. The ld Sr DR for the revenue submits that the assessee has sold non-agriculture land for a consideration of Rs. 95.00 lacs. The stamp valuation authority has valued the land at Rs. 2.09 Crore. The assessee has not offered capital gain in his return of income. The land was a capital asset within meaning of section 2(14)(iii) of the Act. Such fact is also evident from the contents of sale deed. Once it is established that land is capital asset, the contents of Circular No.17/ 2015, issued by Central Board of Direct taxes (CBDT) has no application on the facts of this case. Therefore, the order passed on 27.03.2024 may be recalled for adjudicating the appeal afresh.

3. On the other hand, learned Authorized Representative (ld. AR) for the applicant submitted that revenue seeking review of the order which is not permissible under the scope of section 254(2) of the Act. This scope of section 254(2) is extremely limited and confined the mistake apparent on record. If the revenue is aggrieved by the findings of the Tribunal, it is upon to them to file appeal in accordance with law. The Tribunal has considered all the facts and passed the order on merit specifically relying upon the CBDT Circular No.17/2015. Moreover, the matter was remitted back to the file of Assessing Officer for verification of distance of land for municipal limit. The Assessing Officer after considering the direction of Tribunal has passed order in given effect vide order dated 16.11.2024, copy of which is also placed on record. The ld. AR submits that application filed by the revenue is not maintainable and is liable to be dismissed. The revenue is seeking review of the order which is not permissible under the scope of application under section 254(2) of the Act. To support of his contention, the ld. AR relied on the decisions of Hon’ble Supreme Court in the case of ITO v. Volkart Brothers,1971] 82 ITR 50 (SC) and the decision of Hon’ble High Court of Gujarat in case of Vrundavan Ginning and Oil Mill v. ACIT

4. We have considered the rival contention of both the parties and have gone through the order of Tribunal dated 27.03.2024. We find that case of assessee is that assessee is an agriculturist and sold her land situated at R. S. No.122/39, Block No.514, Moje – Jalalpore, Ubhrat, Dist – Navsari. The assessee set up his case that the land is situated eight kilometres beyond city limit and is not a capital asset, thus consideration receipt on sale thereof is not chargeable to tax. It was further case of assessee that distance of location of land is to be measured to the shortest route distance and that amendment for measuring the distance aerially is applicable for AY.2014-15 and subsequent year. The CBDT has also issued Circular No.17/2015 in accepting such legal position. We find that ld CIT(A) while confirming the action of Assessing Officer confined his finding only on the distance of location of land by referring CBDT Circular No. 03/2014 dated 21.01.2014 and held that shortest possible route has to be taken as crow flies. However, this Tribunal after considering the contention of both parties, restore the matter back to the file of AO to examine the distance of land from municipal limit on the basis of subsequent CBDT Circular No.17/2015. So far as specific contention of revenue in its MA that the nature of land was converted from agriculture to non-agriculture is concern, it is settled position of law that in State of Gujarat, the agriculturist is debarred from selling of his land to non-agriculturist, or for other than agriculture purpose, and if in case the purchaser is not agriculturist, or the land is being transferred for other than agriculture purpose, the permissions of revenue authorities are required, but it will not change the character of land in the hand of seller (agriculturist). Even, the Hon’ble jurisdictional High Court including a leading decision in the case of CIT v. Siddharth J. Desai (Gujarat) held that when the assessee sold agricultural land and permission was granted under section 63 of the Bombay Tenancy & Agricultural Lands,1960 for using it for residential purpose, the land continued to be agricultural land till the date of sale. The permission was obtained prior to sale as it was necessary only because land was agricultural land and it was governed by provisions of Bombay Tenancy & Agricultural Lands Act. It was held that mere such permission was obtained does not mean that land cease to be agricultural land used. Thus, the sole controversy in the order impugned before Tribunal was with regard to distance of location of land and the manner of measuring it, either by road distance or by aerial view. The revenue is now seeking review of the order which is beyond the scope of provisions of section 254(2) as has been held by jurisdictional High Court in case of Vrundavan Ginning and Oil Mills v. ACIT (supra). Thus, we do not find any merit of in this Miscellaneous Application and the same is dismissed.

5. In the result, the MA filed by revenue is dismissed.