ORDER
O.P. Jain, Judicial Member
1. In this application, the assessee has challenged several orders of the Tribunal. But during the course of hearing, the learned advocate for the assessee has confined his argument only to the order passed by the learned 3rd Member insofar as it relates to question No. 1, which was referred to him for opinion.
2. The above captioned appeal had come up for hearing before Bombay Bench ‘C of the Tribunal consisting of Shri G.K. Israni, Judicial Member and Shri G.E. Veerabhadrappa, Accountant Member. Since there was a difference of opinion between these members on certain points, the Bench had made a reference to the Hon’ble President under Section 255(4) of the Income-tax Act and the President had nominated Shri U.T. Shah, the then Sr. Vice-President of the Tribunal for hearing on the points of difference. After hearing the parties, Shri Shah has expressed his opinion on 7-10-1992. Shri Shah has been elevated as a judge of the High Court and as such the application moved by the assessee has come up before me for disposal.
3. The Bench consisting of S/Shri G.K. Israni and G.E. Veerabhadrappa had framed the points of difference reading as under :
1. Whether, on the facts and in the circumstnaces of the case and in law, the assessee was entitled to deduction under Section 43B in respect of the customs duty of Rs. 17,31,882 and excise duty of Rs. 94,775 for the assessment year 1987-88 ?
2. Whether, on the facts and in the clrcumstnaces of the case, the liability of the assessee under the Medical Representatives’ Incentive Scheme was a contingent liability and the assessee was, therefore, not entitled to claim deduction in respect of the liability ?
4. Shri Shah was of the view that the issue posed in question No. 1 is not the controversy between the parties, nor there is any differnece between the learned members on the point. He also observed that the real controversy was about the working out of the closing stock. He, therefore, reframed the point of controversy. In this connection I can do no better than quote paragraph 9 from the opinion expressed by Shri Shah, which reads as under:
9. It would be easily discernible from the above that the issue posed in question No. 1 is not the controversy between the parties, nor there is any difference between the learned members, who heard the appeal. It is not in dispute that since the assessee has paid the customs/excise duty, it would be entitled to deduction under Section 43B of the Act, which in fact, has been allowed to it. The real controversy is about the working out of the closing stock. The real controversy could be framed as under:
Whether, on the facts and in the circumstances of the case, the customs/ excise duty paid on the raw material/finished goods should be deducted from valuing the closing stock, which includes such material/goods even though the duties relatable to such material/goods have been allowed in computing the total income of the assessee as per the method of accounting followed by the assessee from year to year’.
5. The learned advocate for the assessee has submitted that the learned Third Member was right in observing that the issue posed in question No. 1 is not the controversy between the parties, nor there is any difference of opinion between the learned members on that aspect of the matter. He however, argued that the learned Third Member was not entitled to reframe the question or to touch a point, which was not referred to him for opinion. According to him, the Third Member can only answer the point or points that are referred to him for decision on which there was a difference of opinion. In support of this stand, reference was made to the following decisions :
Jan Mohammed v. CIT [1953] 23 ITR 15 (All.)
Hanutram Chandanrnul v. CIT [1953] 23 ITR 505 (Pat.)
6. It was also argued by the learned advocate for the assessee that while disposing ofa reference under Section 255(4) of the Act, the Third Member does not sit in appeal or revision and as such he cannot travel beyond the question referred to him. It was contended that in refraining the question and deciding the point, which was not referred to him, the Third Member has exceeded the jurisdiction vested in him and as such the order passed by him needs rectification. In support of this stand reference was made to the following decisions :
GTO v. Parma Nand Aggarwal HUF [1988] 24 ITD 151 (Delhi) (TM)
CWT v. Shyam Mohan Rawat [1988] 25 ITD 105 (JP.) (TM)
ITO v. Deccan Gymkhana [1989] 30 ITD 16 (Pune) (TM)
7. Opposing the submissions of the assessee, the learned representative for the revenue had submitted that no final order in the appeal has yet been passed and therefore, the assessee’s application for rectification of the order is not maintainable.
8. In rejoinder, the learned advocate for the assessee has submitted that the order passed by the learned Third Member comes within the ambit of Section 254(2) and as such the application is maintainable. In the alternative, it was argued that the Tribunal has inherent jurisdiction to rectify a wrong committed by itself when that wrong causes prejudice to a party. It was also submitted that the error committed by the learned Third Member goes to the root of the matter and therefore, that can be rectified even under the inherent powers of the Tribunal.
9. Having considered the rival submissions and the decisions cited at the bar, I am of the opinion that the assessee cannot succeed. An application for rectification of an order lies under Sub-section (2) of Section 254 of the Act, 1961, which reads as under:
254(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.
The above provision refers to an order passed by the Tribunal under Sub-section (1). Sub-section (1) provides that the Tribunal may, after giving both the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit. It is, therefore, crystal clear that the order passed under Sub-section (1) is to be an order which disposes of the appeal. An order which does not have the effect of disposing of the appeal cannot be termed as an order under Sub-section (1) of Section 254 of the Act. In the case before me, it is undisputed that the appeal is still pending. This being so, I have no hesitation in holding that an application under Section 254(2) of the Act is not maintainable against the order (opinion) passed by the learned Third Member. The view expressed by the Third Member is only an expression of his opinion and it does not have the effect of disposing of the appeal. After the Third Member expresses his opinion, the matter has to go to the regular Bench for disposal of the appeal. This position becomes clear from a reading of Sub-section (4) of Section 255 of the Act, which reads as under:
255(4) If the members of a Bench differ In opinion on any point, the point shall be decided according to the opinion of the majority if there is a majority, but if the members are equally divided, they shall state the point or points on which they differ and the case shall be referred by the President of the Appellate Tribunal for hearing on such point or points by one or more of the other members of the Appellate Tribunal and such point or points shall be decided according to the opinion of the majority of the members of the Appellate Tribunal who have heard the case, including those who first heard it.
10. In taking the above view, I stand fortified from the decision of the High Court of Allahabad, in the case of Jan Mohammed (supra), the following observations of the High Court can be referred with advantage:
In our view, the case with the opinion of the Third Member should go back to the Tribunal for final decision. The Tribunal, when finally disposing of the appeal, may, no doubt, allow other points to be raised before it, if they consider it proper. The Third Member, however, can only answer the points that were referred to .him for decision and on which there was a difference of opinion. The reason is obvious. On the new point based on Section 16(3)(a)(iii) of the Income-tax Act there is only the opinion of the Third Member. The two other members of the Tribunal had no opportunity of going into that question and, if the point had been raised before them, they might not have taken the same view as the Third Member took. The jurisdiction of the Third Member, it appears to us, is clearly defined in Section 5A(7) of the Indian Income-tax Act and he cannot, therefore, take it upon himself to decide the appeal by either dismissing or by allowing the same.
I also find no substance in the contention of the assessee that the Third Member’s order should be rectified by invoking the inherent powers. Inherent jurisdiction by a Court or Tribunal is exercised only in exceptional circumstances particularly, when the wrong committed by the Court or the Tribunal causes prejudice to an innocent party. In the instant case, I am of the view that no prejudice is caused to the assessee by the order passed by the learned Third Member. In case, the Third Member has exceeded his jurisdiction in reframing the question and expressing an opinion on a point, which was not referred to him for opinion, then this aspect of the matter can be raised before the Bench when the appeal comes up for hearing before the Tribunal. In taking this view, reference can be made to the decision of the Allahabad High Court in Jan Mohammed’s case (supra), wherein it has been observed :
The Tribunal, when finally disposing of the appeal, may. no doubt, allow other points to be raised before it, if they consider it proper.
Reference can also be made to the decision of the Third Member in Shyam Mohan Rawat’s case (supra). At page 123 of the Report, the Third Member has observed as follows :
Moreover, as a Third Member my role is limited rather confined to the point of difference referred to me. My role as a Third Member is neither appellate nor revisional. I have to strictly confine to the point of difference of opinion and express my opinion thereon within facts found by the learned Members in their respective orders. Thereafter the matter will go before the regular Bench. It is for the regular Bench to pass an order in accordance with the opinion of the majority. In so doing the Bench can even if it so advised and considered desirable may re-apprise the whole issue and then consider aspects which were not considered before because the appeal cannot be considered to have been finally disposed of merely on making a reference to aThird Member on the point of difference of opinion to him. The appeal will have to be disposed of by the regular Bench in accordance with the majority opinion after hearing the parties. Having these limitations placed upon the Third Member I have to confine myself only to the question referred to me and that is naturally with reference to the question raised by the CIT in the reference application and that limitation also refrains me in re-framing the question so as to bring on par with the question raised by the Special Bench referred to by the learned Departmental Representative.
11. In view of the foregoing discussion, I find no merit in the application and the same is consequently dismissed.