Non-Consideration of Binding Precedent is a Valid Ground for Rectification Application: ITAT Mumbai [Read Order]

Rectification Application

The Income Tax Appellate Tribunal, Mumbai in a recent decision, held that ‘non-consideration of a binding precedent’ can be a valid ground for filing a rectification application under the provisions of the Income Tax Act, 1961.

The Tribunal, in the light of the decision of the Supreme Court in Saurashtra Kutch Stock Exchangecase, observed that the same can be treated as a “mistake found apparent on the face of record” which is the most essential requirement for filing a rectification application.

The assessee, in the instant case is a company,engaged in the business of stock broking is a member of the Stock Exchange, Mumbai, who has filed its return of income for the relevant assessment year. The Assessing Officer, while completing assessment disallowed the assessee’s claim of depreciation on Bombay Stock Exchange Card.When the order was challenged before the First Appellate Authority, it was confirmed on ground that the same is duly covered by the decision of the Bombay High Court in the case Techno Shares and Stores Ltd.

Against the said order, the assessee preferred a rectification application under section 154 of the Income Tax Act by contending that the above decision of the Bombay High court was reversed by the Supreme Court in appeal. However, the FAA dismissed the application on ground that “the assessee was a member of BSE and NSE to provide electronic transfer of securities, that it had raised the issue of disallowance of depreciation on BSE card in the original appeal, thathis predecessor had discussed the issue in detail and had concluded that the actual cost of trading rights was neither nil or not ascertainable, that he had not allowed depreciation on the BSE card, that the assessee had accepted the decision of his predecessor, that it did not file any appeal before the tribunal, there was no mistake apron from the record, that the mistake should be obvious and Peyton, that the decision not debatable point of law was not a mistake apparent from the record.”Being aggrieved, the assessee preferred an appeal before the ITAT.

The Tribunal found that the FAA had adjudicated the issue of BSE card against the assessee by relying upon the judgment of the Bombay High Court, which was subsequently reversed by the Supreme Court.The Tribunal further noticed that after the decision of the Supreme Court in Saurashtra Kutch Stock Exchange, it is a well-settled legal position that non-consideration of a decision of jurisdictional court or of the Supreme Court can be said to be a “mistake apparent from the record” for the purpose of filing a rectification application.

Following the above decisions, the Tribunal accepted the contentions of the assessee and held that the First Appellate Authority’s order is not justified.

Read the full text of the order below.