Deepak Gupta, J.@mdashBoth the aforesaid appeals are being disposed of by this common judgment since they arise out of the same order and
have been admitted on following identical questions of law which read as follows:
i) Whether the ITAT was justified in holding that the directions given in the order dated 2.9.2003 to the effect that ""the income assessed by the
A.O. should not be less than the income returned"", was an apparent mistake and could be rectified through a misc. application.
ii) Whether the ITAT was right in issuing a fresh direction to the effect that ""the assessed income should not be more than Rs. 1.4 crore, for the
A.Y. 1993-94, while completing the assessment"" as it is totally against the law, particularly when the direction has been issued in a misc.
application even though there was no such point in issue during the original appellate proceedings.
iii) Whether the ITAT was right in law in directing the Assessing Officer to reassesss the income of the assessee which should not be more than
income already assessed u/s 144 of the Income Tax Act, 1961 without bringing on record any material evidence as to the quantum of income of
the assessee.
iv) Whether the direction given by the Ld.ITAT in their order dated 30.7.2004 constitutes rectification of mistake u/s 254(2) of the Income Tax
Act, 1961 occurred in earlier order dated 2.9.2003 or it may be termed as review of ITAT�s own order.
2. Briefly stated the facts of the case are that the assessee-M/s. H.P State Forest Corporation is engaged in the business of purchase, conversion
and sale of timber. The assessee filed returns of income for the assessment years 1993-94 and 1994-95 declaring income of Rs. 58 lacs and Rs.
57 lacs respectively. These returns were filed on estimate basis since the accounts of the assessee had not been audited by the office of the
Comptroller and Accountant General. The Assessing Officer treated these returns to be ""non est"" as the audited accounts were not annexed with
the returns and he issued notices u/s 148 of the Income Tax Act for filing fresh returns. Fresh returns were admittedly not filed and thereafter the
Assessing Officer completed the assessment for both the assessment years in exercise of the powers vested in him u/s 144 of the Act by using the
best judgment method. He assessed the income for the two years at Rs. 1.40 crores and Rs. 1.50 crores respectively.
3. These assessments were challenged before the Commissioner, Income Tax (Appeals), Shimla who confirmed the action of the Assessing
Officer. The assessee then filed appeals before the Income Tax Appellate Tribunal (ITAT), Chandigarh. The assessee gave an explanation that
since the auditors were not appointed by the CAG, the audited accounts could not be filed. This explanation was accepted by the ITAT and it held
that since the Assessing Officer had not gone through the audited accounts, the assessment order was liable to be set aside. The matter was
remanded to the Assessing Officer to frame afresh assessment keeping in view the audited accounts now submitted by the assessee. This order
itself makes it clear that the assessments were to be framed ""de novo"". However, the ITAT went on to hold that the income to be assessed by the
Assessing Officer should not be less than the income returned by the assessee for both the assessment years in his original returns which had been
treated as ""non est"".
4. Thereafter, the assessee filed rectification applications and prayed that the direction of the ITAT not to assess the income less than the income
originally returned be set aside and further a direction be issued that the income should not be more than the income assessed by the Assessing
Officer u/s 144 of the Act. These rectification applications were decided by the impugned order dated July 30, 2004 whereby the rectification
applications were allowed. The condition that the fresh assessment framed should not be more than the income disclosed by the assessee alongwith
his original return was recalled and a fresh stipulation was incorporated that the assessment should not be more than the income assessed by the
Assessing Officer u/s 144 of the Act.
5. We have heard Mr. Vinay Kuthiala, Advocate for the revenue and Mr. M.M.Khanna, learned Senior counsel for the assessee.
6. We are of the considered view that once the Tribunal had set aside the order of the Assessing Officer framing the assessment under the best
judgment method u/s 144 of the Act, it could have remanded the case back to the Assessing Officer to frame the assessment afresh on the basis of
the audited accounts. The ITAT however, had no jurisdiction, whatsoever, to have further given a direction that the income of the assessee could
not be assessed at less than the amount of income returned by it in the returns which were treated to be ""non est"" by the Assessing Officer. Once
the returns were treated to be ""non est"" then it meant that they were nonexistent in the eyes of law. Such a return which is ""non est"" cannot be used
even against the assessee.
7. Furthermore, when the Tribunal was directing de novo framing of the assessment then it obviously meant that the assessment had to be framed
afresh keeping in view the audited accounts which were now available. Therefore, such a stipulation could not have been made.
8. Having held so, we are also of the opinion that the Tribunal could not have given a direction, while disposing of the rectification applications, that
the income or fresh assessment should not be assessed at an amount above the income assessed u/s 144 of the Act. The question as to what is the
income of the assessee had been reopened in view of the audited accounts submitted by the assessee himself. No fetters as to the upper or lower
limit could have been placed by the Tribunal on the Assessing Officer. He had to go through the audited accounts, apply his mind and frame the
assessment afresh in accordance with the duly audited accounts placed on record.
9. We may also add that the power of rectification vested in the Tribunal u/s 254 of the Act is akin to the power of review. Only an error apparent
on the record can be rectified. The Tribunal could have rectified its order to the extent that it had no power to place fetters on the Assessing
Officer that he should not assess the income at less than the income returned in the ""non est"" return but it did not have the power at the same time
to incorporate a fresh condition.
10. In view of the above discussion, we hold that the Assessing Officer shall assess the income afresh without being bound by any lower or upper
limit as laid down by the Tribunal. Question No. 1 is answered in favour of the assessee and against the revenue. Questions No. 2 and 3 are
answered in favour of the revenue and against the assessee. Question No. 4 is answered by holding that ITAT could have only rectified the
mistake as referred in the question and could not have issued fresh directions as already held by us. The appeal is disposed of in the aforesaid
terms.
11. No order as to costs.
