ORDER
V.K. Gupta, Accountant Member
1. This appeal filed by the assessee is directed against the order of CIT(A) VII Mumbai, dated 30.11.2000 for the assessment year 1996-97.
2. We have heard both the parties and have also perused the records and other applicable legal position.
3. Ground No. 3 was not pressed, hence, the same is dismissed as not pressed.
4. In Ground No. 1 & 2, the assesses is nggrieved by the decision of the learned CIT(A) in confirminy the action of Assessing Officer in invoking the provisions of Section 73 and holding that loss in trading of shares was a speculation loss.
5. The facts, in brief, are that the assessee company filed its return of income showing loss at Rs. 43,26,691/-. The composition of income comprises of the following:
(i) Business less (-) Rs.45,91,536/- (ii) Dividend Income Rs. 3,83,247/- (iii) Capital Gains Rs. 6,48,092
The Assessing Officer noted that assessee was engaged in the business of investment and trading in shares and securities, hence, asked the assessee to explain/why explanation to Section 73 of the Act was not applicable. The Assessing Officer also required the assessee to work out the net loss after taking into account the expenses. The assessee submitted that loss had arisen during the year in the regular course of business. The Assessing Officer held that assessee’s case was not covered under the exception provided in Explanation to Section 73. The Assessing Officer relying on the decision in the case of C.I.T. v. Sun distributors and Mining Company Ltd. as reported in 68 Taxman 222, C.I.T. v. Arvind Investments Ltd. as reported In 192 ITR 365 and Eastern Aviation and Industries Ltd, C.I.T. as reported in 208 ITR 1023 held that share trading loss was be treated as speculation loss. The Assessing Officer also attributed expenses in the ratio of sales to total turnover to arrive at the net loss and completed the assessment proceedings. Aggrieved by this, the assessee carried the matter into appeal before the learned CIT(A). The learned CIT(A) also confirmed the action of Assessing Officer in regard to applicability of Explanation to Section 73 of the Act. As regards the yardstick of allocation of expenses to be adopted towards proprietary share activity, the learned CIT(A), restored the matter to the file of Assessing Officer to be decided after taking into consiceration the submissions made by the assessee company and as per provisions of law. Still aggrieved, the assessee is in appeal before us.
6. The case was originally fixed for hearing on 7.8.7006 wherein the learned Counsel for the assessee had placed reliance on the decision of the Tribunal in the case of M/s Associated Capital Market Management Pvt. Ltd. v. JCIT, order dated 31.3. 2003 in ITA No. 1103/M/01 for A.Y. 1996-97, wherein, the Tribunal had decided in favour of the assessee. The learned Counsel for the assessee had stated that the facts of the case under consideration were stated to be identical to the facts of that case, hence, the case was heard mainly as a covered case and the result was pronounced during the course of hearing itself. The learned Counsel for the assessee had also contended that the decision of the Hon’ble Calcutta High Court in the case of Eastern Aviation and Industries Pvt. Ltd. v. C.I.T. as reported in 208 ITR 103 was not binding and for this proposition, he placed reliance on the decision of the Hon’ble jurisdictional High Court in the case of Thane Electricity Company, as reported in 206 ITR 727.
7. The learned D.R. placed reliance on the order of learned C1T(A) who had followed the decision of Hon’ble Calcutta High Court.
8. Thereafter, during the course of further study of the files, the Bench thought that certain observations in the order of the Special Bench in the case of Concord Commercial as reported in 95 ITD 117 (S.B.) were relevant and also the decision of the Tribunal in the case of Yucca Invest. As reported in 101 ITD 403 were also relevant, hence, the case was released for fresh hearing as a part heard case so as to confront these two decisions to the assessee. Accordingly, this case was finally heard on 11th June, 2007. In course of hearing on that date, the learned Counsel for the assessee first stated that only Ground No. 1 & 2 were pressed as was the case during the course of hearing on 7.8.2006. The learned Counsel also narrated the factual background and pointed out that during the course of original hearing, the Revenue had not cited any decision. In this background, the learned Counsel took a preliminary objection that the Tribunal had pronounced the order, hence, if any decision was taken contrary to the decision pronounced, it would amount to review of order and which was beyond its powers. The Id. Counsel for the assessee, in this regard, placed reliance on the decision of the Hon’ble Delhi High Court in the case of CIT v. Sudhir Choudhary as reported in 278 ITR 490 and in the case of CIT v. Sagar Suri & Sons as reported in 185 ITR 484.
9. The Id. D.R., at this stage, pointed out that the decision of the Hon’ble Delhi High Court in the case of G. Sagar Suri & Sons (supra) was altogether in a different context wherein the written order was at variance with the pronouncement made during the course of hearing and in that situation, it was held that there was a mistake in the written order which could be rectified. The learned D.R. also contended that this proposition rather supported the approach of Tribunal in the present case where an adequate opportunity of hearing was given to the assessee before taking any other view in the matter. The Id. D.R. also contended that the decision of the Hon’ble Delhi High Court in the case of Sudhir Choudhary (supra) was again in different context, hence, it did not support the contention of the assessee in a substantial manner.
10. Without moving forward to decide the matter on merits, we consider it pertinet deal with this aspect first. In this context, we would like to refer to the decision of the Hon’ble Supreme Court in the case of HAT v. V.K. Agarwal and Anr., wherein the Hon’ble Supreme Court on the basis of Rule 34 & 35 of the rr(Appellate Tribunal) Rules, 1963 held that unless the order of the Bench was signed by all Members constituting it and was dated, it was not an order of the Tribunal. It was also observed that the signed and dated order had to be communicated both to the assassee and to the Commissioner. Thus, for the ready reference, we consider it pertinent to reproduce the said Rule 34 & 35.
34. (1) The order of the Bench shall be in writing and shall be signed and dated by the members constituting it.
[The members constituting the Bench or in the event of their absence by retirement or otherwise, the Vice President {Senior Vive President} or the President may mark an order as (sic) for publication]
(2) Where a case is referred under Sub-section (4) of Section 255, the order of the member or members to whom it is referred shall be signed an dated by him or them, as the case may be.
35. The Tribunal shall, after the order is signed, cause it to be communicated to the assessee and to the Commissioner.
A plain look at Rule 34 makes it clear that the order of the Tribunal can be only in writing as duly signed and dated by the members constituted it, hence, legally speaking oral pronouncement during the course of hearing is not an order at all. It is only an intimation of likely result or prima facie conclusion expressed on the basis of the contentions made by the patties. It is only a procedural aspect and it does not create any statutory embargo or limitation. If looked upon in other way, any party cannot proceed further unless it receives an order in writing and in the case of orders passed by the Tribunal, the limitation also starts from the date when the order is served, hence, oral pronouncement does not give any inherent right or creates any limitation with regard to statutory rights of the parties to the disputes. Even an entry to this effect, in the Order Sheet signed by the Members of the bench would not constitute an order within the meaning of Rule 34 of the ITAT Rules because as judicially settled that an order is a mandate precept or command but the reasoning is its soul, hence, without any reasoning or conclusion based upon considered or authoritative opinion on a matter or context, oral pronouncement cannot be an order in a strict sense. Thus, in our considered opinion, there is no merit in the contentions raised by the Id. Counsel in this regard.
11. To sort out this controversy, we would further like to deal with the matter even if it is presumed that oral pronouncement during the course of hearing is an order, then the Tribunal being a Court of plenary jurisdiction is well within its powers within the meaning of Section 254(1) of the Act to re-fix it for clarifications before passing an order in writing. The Hon’ble Punjab High Court, in the case of Oriental Building and Furnishing Co. v. C.I.T. as reported in 21 ITR 105, held as under:
The Tribunal’s power of dealing with an order passed by an Appellate Assistant Commissioner is plenary and has been expressed in Section 33(4) of the Indian Income Tax Act, 1922, as widely as can be conceived. In an appeal under Section 33 the Tribunal is competent to decide facts as well as law and possess authority to substitute its own order of assessment for the order under appeal. It is also competent for the Tribunal to base its decisions on a ground not set forth in the memorandum of appeal provided the party who is affected thereby is afforded sufficient opportunity of being heard on that ground.”
Thus, the above observations make it amply clear that, in such situations, what is required, is grant of an opportunity of hearing being given to the parties who are likely 1.0 be affected. The following observations of Hon’ble Allahabad High Court in the case of S.B. Singar Singh & Sons v. ITAT, Allahabad Bench and Anr. are also relevant:
the Supreme Court in Shivdeo Singh v. State of Punjab has held that “the power of review which inheres in every court of plenary Jurisdiction to prevent miscarriage of justice or to correct grave and palpable, errors committed by it” We power of the Tribunal in dealing with the orders of the Appellate Assistant Commissioner is sufficiently wide and has been so expressed under Section 33(4) of the Indian Income-tax Act, 1922. It has been held by this Court in Sri Bhagwan Radha Kishen v. Commissioner of Income-tax that the Tribunal has inherent powers to set aside an order deciding an appeal on wrong grounds; even if Rule 24 may not give that power, the inherent jurisdiction for setting right the injustice is there. In Oriental Building and Furnishing, Company v. Commissioner of Income-tax it has bee held that fie Tribunal has plenary jurisdiction. Thus, according to the decision of the Supreme Court, all courts of plenary jurisdiction have an inherent jurisdiction to rectify manifest and palpable mistakes. A fortiori the Tribunal has an inherent jurisdiction to rectify its mistakes. Therefore, the Tribunal’s order rejecting the application of the petitioner on the ground that it was barred by limitation is manifestly unsustainable in law.
An interesting question arose before the Hon’ble Kerala High Court in the case of CIT. v. Dr T.K. Jayaraj as reported in 256 ITR 252, wherein Reference Application was dismissed by the Tribunal as one filed beyond time which was subsequently restored by the Rectification of the dismissal order. The Hon’ble Kerala High Court held that the Tribunal had jurisdiction to restore the Reference Application once dismissed by it as time barred by mistake. The relevant observations of the Court are as under:
In any case in view of the developments in this case, we proceed to consider whether the Tribunal has jurisdiction to restore the reference application once dismissed by it as time barred by nistake. We are inclined to agree with the position canvassed by counsel for the Department that the Tribunal has inherent power to correct its own mistakes, because the party cannot be made to suffer on account of a mistake committed by a court or Tribunal. Our attention was invited to the decision of the Allahabad High Court in Srimathi Lachmana alias Mulraia v. Deputy Director of Consolidation [1966] RD 419, wherein the Allahabad High Court held that the Tribunal has inherent jurisdiction apart from statutory jurisdiction to correct an error committed by it. Similarly, the Punjab High Court in Mangat Ram Kuthiala v. CIT [1960] 33 ITR 1, held as follows:
that it was a settled rule that a judicial Tribunal could recall and quash its own order in exceptional cases when it was shown that it was obtained by fraud or by palpable mistake or Was made in utter ignorance of a statutory provision and the like, and for the application of that rule the class of the Tribunal was not a material matter but what was of substance and material was the nature of the proceedings before it: if the proceedings were in the nature of judicial proceedings, then irrespective of the class of the Tribunal, the rule applied,
Simitar is the view of the Bombay High Court in the case decided in Khushalchand B. Daga v. T.K. Surencran, Fourth ITO [1972] 35 ITR 48, wherein the Bombay High Court held as follows:
The Tribunal, in my view, ought to have set aside the said impugned order in exercise of its inherent powers and should have reheard the appeal on merits, without going into the question as to whether the application for rectification of the mistake was within time or not, for, after all, no court or Tribunal can allow a party to suffer for its own mistake. That the court or the Tribunal has such inherent power to correct its own mistake is well-settled.
Therefore we are of the view that the Tribunal has inherent power to correct its mistake and having dismissed the reference application by mistake as one filed beyond time, it has the power to restore the same on an application by the aggrieved party. We hold that the Tribunal rightly restored the reference application vide its order dated June 28, 1996, and decided the same on the merits. Therefore, we dismiss the original petition filed by the assessee challenging the order of the Tribunal restoring the reference application. In view of our decision in the original petition, we answer the questions on the same issue referred in I.T.R. No. 275 of 1999 at the instance of the assessee, in favour of the Department and against the assessee.
Thus, on the basis of aforesaid decisions, it can be said that the Tribunal has inherent power to re-fix the cases in such type of situations to prevent miscarriage of justice or to grant substantial justice. The only condition which is required to be satisfied is that the aggrieved party must be given an opportunity of hearing which has been done in this case, hence, there is nothing wrong in the procedure adopted by the Tribunal.
12. We would further add that many times ox parte orders are passed on merits. However, when an application is being made by the aggrieved party for re-hearing the appeal after giving an opportunity to the assessee, such ex parte order is re-called though there is no express provision exist in this regard because the source of such power exist Under Section 254(1) of the Act itself. In the situation, when the Tribunal is clear in its mind that the provisions of Section 254 (1) were not complied in true spirit in passing the ex parte order it can recall such order for disposal afresh after giving an opportunity of hearing to both the parties and in such cases it does not amount to review of its earlier order because the purpose of setting aside an ex parte order is to consider the whole matter afresh by affording an opportunity of being heard. Similarly, the Tribunal before passing a written order can re-fix the case suo motu for clarifications so as to apprise the issue afresh in the light of other facts or material. There is nothing wrong in it because principles of natural justice are equally applicable to judicial authorities as these are applicable to the parties to the disputes.
13. We would further like to refer to Section 151 of the Code of Civil Procedure which reads as under:
151. Saving of inherent powers of court- Nothing in this Code shall be deemed to limit or otherwise affect the inherent power of the Court to make such orders as may be necessary for the ends or justice, or to prevent abuse of the process of the Court.
Though the Tribunal is not akin to a Court but the functions discharged by it are similar to a Court, hence, in addition to its expressed statutory powers it has got inherent power to pass such orders as may be necessary for the ends of justice, hence, by re-fixing the case, the Tribunal has exercised itself inherent powers and by giving an opportunity to the assessee it has also complied that principles of natural justice, hence, action of the Tribunal is in accordance with law. Accordingly all contentions raised by the assessee in this regard are rejected.
14. Now, coming to the merits of the case, the assessee has mainly contended that the income chargeable to tax would not include negative income and, hence, business loss under the head income from business or profession’ had to be ignored for the purpose of determining the gross total income as provided in the first exception of the explanation to Section 73 of the Act. It was also contended that positive income, howsoever, small would always be more than the negative income howsoever large, hence, income in other heads was to be taken as more than the business loss. The Id. Counsel also contended that the facts of the case before Special Bench of the Tribunal in the case of Concord Commercials P. Ltd; (supra) were different, hence, the same was no?: applicable. The learned Counsel, however, fairly conceded that the decision of the Tribunal in the case of Yucca Finvest Pvt. Ltd, v. D.C.I.T. as reported in 101 ITR 403 was against the assessse.
15. The Id. D.R., mainly relied on the orders of Revenue Authorities.
16. We have considered the submissions made by both sides, material on record and orders of authorities below. It is a settled judicial principle that the ratio of the decision of the higher judicial forum is binding on the subordinate forum. In this background, we find that the facts of the case before the Special Bench of the Tribunal in the case of Concord Commercials P. Ltd. (supra) is different only to the extent that business loss was less than the income from dividend as against it being more from income from different heads in the present, however, the ratio of that Special bench decision regarding whether loss is to be considered for deciding the applicability of exception is concerned, the same has to be taken into consideration. The relevant observations of the Special Bench of the Tribunal are reproduced as below:
Para 31: Once we have held that the rule to be followed in the present case is the test of “gross total income”, we have to examine how the gross total income of the assessee in this case, is made Up of the assessee company has profit of Rs. 2,83,29,053/- from its business of trading in steel, yarn and fabrics and from service charges. The assessee company has also incurred a loss of Rs.2,84,26,4ll/- in the purchase and sale of shares. Altogether., the income from business is a loss of Rs. 97,358/-. The assessee company has further earned dividend income of Rs. 10,18.91 from shares held as is stock-in-trade. The less Of Rs.97,358/- has been computer under the head profits and gains of business or profession”. The dividend income of Rs.10,18,914/- has been computed under the head “income from other sources”. After the set off of the dividend income and the business toss, the gross total income has; been worked out to Rs. 9,21,556/- which is entirely made up of dividend income computed under the head “income from other sources”.
Para 32: In the present case, the gross total income is made up of dividend income chargeable to tax under the head “income from other sources”. To character of gross total income for the purpose of Explanation to Section 73 is to be examined in the light of the “Chargeability” to tax, of various; components of the gross total income under the specified heads of income. The “chargeability” is to be looked into with reference to the heads of income. The emphasis given to “chargeability” on the basis of the heads of income is apparent from the relevant text of law given in Explanation to Section 73, which is extracted below:
Where any part of the business of a company other than a company whose gross total income consists mainly of income which is chargeable under the heads “Interest on securities”, “Income from house property”, “Capita gains” and “Income from other sources”, or a company the principal business of which is the business of banking or the granting of loans and advances consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sate of such shares.
Para:33: The chargeability of income under a specified head is the prime consideration in verifying the composition of gross total income for the purpose of Explanation to Section 73. As the question whether an income is chargeable under any of the specified heads of income or not is to be looked into, it is equally important to fellow the principles governing the classification of income. The classification of income: under different heads is important in the context of “charge” of income tax. The charge is on total income. The total income Is the aggregate of incomes “chargeable” under different heads specified in Section 14′. Income which is not chargeable under any of the specified head of income cannot be brought to tax at all.
Para 48: In the case of Eastern Aviation & Industries Ltd. v. CIT [1994] 208 ITU 1023 (Cal), the assessee had a share trading loss of Rs.12,90,145 and a speculation toss of Rs.7,95,447. The positive income from other sources was Rs.3,87,603/-. In Aryasthan Corn. Ltd. v. CIT also, the facts were identical when; the business loss was higher than positive income from other sources. But in assessc’s case, dividend income is higher than the business loss. Income from other sources by way of dividend was Rs. 10,18,914 whereas income from business was a loss of Rs.97,358. Even when business loss is treated as negative profit, the negative profit: was less than the positive income from dividends. Therefore, on the facts of the present case, the above two decisions of the Calcutta High Court are not applicable to issue.
Para 49: The Revenue has also raised certain supporting arguments that the case need to be considered in the light of the intention of the Legislature in enacting Explanation to Section 73, which has been clarified in CBDT Circular No. 204, dated 24.7.1976 [110 ITR (St.) 21, 32] and that the meaning of the expression “gross total income” defined in Section 80B(5) cannot be imported into the context of Section 73 of the Act.
Para 50: There are no materials on record to show that the assessee company did make loss in the share trading activities in order to reduce the tax incidence. In respect of the contention regarding “gross total income” Section 73 does not provide for any special treatment. The Supreme Court has held in CIT v. Venkateswara Hatcheries P. Ltd. [1999] 237 ITR that the same word occurring more than once in the act should generally be given the same meaning, but the context may Indicate- the contrary legislative intention there Section 73 and the Explanation thereto. Therefore, the meaning of the expression “gross total income has to be construed as given in Section 806(5).
In para 48, hereinbefore, the Tribunal had specifically observed that even when business loss was treated as negative profit, the negative profit was less than the positive income from dividend, hence, the decisions of the Hon’ble Calcutta High Court were not applicable to the issue in that case. However, these observations of Special Bench clearly indicate that the Special Bench impliedly followed the ratio of decisions of the Hon’ble Calcutta High Court. Thus, business; loss being negative profit cannot be ignored in determining the applicability of exception clause of Explanation to Section 73 of the Act.
17. Similarly, in the decisions of Yucca Finvest Pvt. Ltd., the Tribunal has also held so and that too after considering the decision of Associated Capital Market Management (P) Ltd. (supra) heavily relied on by the assessee in this case, the Tribunal has also taken into consideration the decisions of Hon’ble Calcutta High Court in the case of Eastern Aviation & industries v. C.I.T. as reported in 208 ITR 1023, C.I.T. v. Park View Properties Pvt. Ltd. as reported in 261 ITR 473, Aryasthan Corpn. Ltd. v. C.I.T. [2002] as reported in 253 ITR 401 and the decision of the Division Bench of the Tribunal in the case of D.C.I.T. v. Akrosh Investment and Leasing Pvt. Ltd. as reported in 90 ITD 287 for the proposition that abslute figures had to be compared for determining as to whether the assessee company’s main income was from business or under other four residuary sources. We further add that in this case, the Tribunal has also taken into consideration the observations of Hon’ble Bombay High Court in the case of CIT v. Thane Electricity ‘Supply Co. Ltd. as reported in 206 ITR 727 and has held that the decision of a non-jurisdictional High Court in the absence of contrary decision of another non-jurisdictional High Court had a great persuasive value which was required to be followed. We further find that the Tribunal in the case of Yucca Finvest (P.) Ltd. (supra) has rejected the contention of the assessee that even postive figure of Rupee One was more than the loss of any extent, hence, in cases where there was a loss under the business head and positive income in other heads, the assessee would always fall under exception. The relevant findings of the Tribunal are as under:
We have another reason to hold that it is the absolute figures of the loss or of income either under the head “Business” or under the head ‘Other sources’ without ‘sign’ which should be taken for companson. To consider the figures along with “sign” for comparison will yield distorted results. To consider the figures with ‘sign’ means income of Rs. 100 will be greater than loss of Rs. 1 lakh i.e. if income from ‘other sources’ is Rs. 100 whereas the loss from trading in shares is Rs. One lakh, then by considering the figures ‘with sign’ would give the result that assessee’s income from ‘other sources’ is more than its income from trading in shares as positive 100 is more than negative one lakh and hence the case falls in one of the exceptions provided in Explanation to ”Section 73, as per arguments canvassed by learned Counsel for the assess. But what will happen, if the income from other sources is also a loss say Rs. 100 and income from trading :in shares is also a loss of Rs. 1 lakh i.e. both are on the same side of the ‘sign’. If we follow the arguments of the learned Counsel for the assessee, then negative ‘100’ will be more than negative 1,00,000 and income of the assessee; from other sources’ will be more than the income from trading In another example just opposite to this. If income from other sources is + and Income from trading is + 1,00,000 then this 1,00,000 income will be more than Rs. 100 (+) and hence income from trading in shares will be more than income from “other sources”. Just by reversing the ‘sign’ of income, the results become just opposite (notwithstanding the position of law that when there is a positive income under the head ‘business’, Explanation to Section 73 may not be applicable). We are afraid this interprclallo is giving absurd result. When ‘sign’ of both incomes are (sic), the assessee can be said to be deriving income mainly from trading (i.e. -i-1,00,000 is more than + 100) when ‘sign’ of both incomes are ‘+ve’, the assessee will be said to be deriving income mainly from ‘other source;’ (as -100 is more, than -1,00,000). When any interpretation gives an absurd result, it has to be avoided. Thus this; interpretation of the phrase ‘gross total income consists mainly of income which is chargeable under the head…’ in Explanation to Section 73 which gives contrary results when ‘sign’ of the two incomes are reversed i.e. with negative signs of the incomes, the GTI is mainly from ‘other sources’ and with +ve sign of two incomes, the GTI is mainly from trading is unfair, irrational and unreasonable. Thus, such interpretation needed to be avoided. In our considered view if Rs. 1,00,000 is more than Rs. 100, then it is always, more-irrespective of the sign attached to it. Thus, it is the absolute figures of the two incomes divorced from ‘sign’ i.e. irrespective of whether it is +ve income or ‘loss’ has to be considered for comparison for deciding as to whether the case falls in the first exception of Explanation to Section 73 or not. Further, we are of the view that “loss is always chargeable to tax as it is liable to be adjusted against other income under the head “Business’ in the current year Or if allowed to be carried forward then income of following year/s.; ‘According to us, word “chargeable” used in Explanation to Section 73 does not mean “charged”. In other words, when we say that high negative income i.e., higher figure of loss is less than the positive income from other sources i.e. lesser figure of income, we indirectly subscribe to the view that the loss is not chargeable to tax. According to us, the word “chargeable” used in Explanation to Section 73 would refer to chargeability to tax under the Act. This would only mean that loss may not be charged to tax directly in the current year. But by adjustment against other business income in that year or in following years, it reduces the other income on which tax is levied. Hence, negative income i.e., loss is as equally chargeable to tax as positive income. Hence, we have to consider absolute figure to determine as there an assesses company’s gross total income ‘ costs of mainly of income chargeable to tax under business” head or under other four heads described In Explanation to Section 73.
Thus, taking consideration of all relevant facts of the case and the decision in the case of Yucca Finvest P. Ltd. (supra) duty supported by observations of the Special Bench of the Tribunal in the case of Concord Commercials P. Ltd. (supra), we reject: ground No. 1 & 2 of the assessee.
19. In the result, appeal filed by the assessee stands dismissed.