2006 (12) TMI 120 - HC - Income Tax

Interpretation of statutes - Power and jurisdiction to amend the orders u/s 254 - Whether the Tribunal has the power or jurisdiction to rectify its order beyond the time limit of four years specified u/s 254(2) - Rectification Based on Subsequent Supreme Court Judgment - HELD THAT - In our view the power and jurisdiction provided under section 254 should be construed as far as the language permits so as to give effect to the scope and object of the statute and the intention of the legislature. The elementary principle of interpreting or construing a statute is to gather the mens or sententia legis of the Legislature. It is a well-settled principle in law that the court cannot read anything into a statutory provision which is plain and unambiguous. (vide Vemareddy Kumaraswamy Reddy v. State of A.P. 2006 (2) TMI 640 - SUPREME COURT ). A construction which reduces the statute to a futility has to be avoided. A statute is designed to be workable and the interpretation thereof by a court should be to secure that object unless crucial omission or clear direction makes that end unattainable (vide CIT v. Hindustan Bulk Carriers 2002 (12) TMI 10 - SUPREME COURT ). Applying the above principle when section 254(2) is clear in its terms viz. 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 meaning thereby that the order of rectification should be passed within the outer time-limit of four years and it is not possible for the court to read anything else into the said provision viz. 254(2) of the Act which is plain and unambiguous which would otherwise extend the outer-limit prescribed therein. In this view of the matter we are of the considered opinion that the order passed by the Appellate Tribunal beyond the period of four years is nothing but a nullity. Furthermore the power u/s 254(2) of the Act intended to rectify an error apparent from the record is not remedial in nature but it is rectifiable in nature in the sense that it is to rectify a mistake committed in an order which is apparent and not to provide a remedy to the aggrieved party whether it is the assessee or the Revenue. The power in respect of remedial action has to be exercised within the time-limit prescribed and such period cannot be elastically extended by the court. Similarly the power to rectify an mistake apparent from the record should also be exercised by the income-tax authorities in the same manner. Otherwise it would amount to conferring enormous power on the income-tax authority or the Tribunal under one pretext or the other. The mere usage of and between two limbs of section 254(2) will not in any way enlarge the limitation prescribed for passing the order of amendment u/s 254(2) of the Act . Consequently any order of amendment that would be passed by the Appellate Tribunal beyond the period of four years would lack jurisdiction assuming the Appellate Tribunal has got a right to pass an order of rectification to rectify the mistake in the light of the subsequent interpretation of law by any court as per Circular No. 68 dated November 17 1971. Therefore it follows that in any case of rectification the income-tax authorities and the Appellate Tribunal are within their power and jurisdiction to amend their respective orders under sections 154 and 254 respectively in the light of subsequent interpretation of law by the courts but such power and jurisdiction could be exercised statutorily only within the time of four years not beyond the period of four years. For all these reasons when the section is plain and unambiguous any other interpretation if made would lead to a situation where the authority would exceed its jurisdiction. We are therefore of the view that the Appellate Tribunal should have passed the order of rectification within four years from the date of the order sought to be rectified. Thus we hold that the order passed by the Appellate Tribunal is barred by limitation. Accordingly the order impugned and the consequential order dated June 12 2003 are set aside as it is settled that when initiation of proceedings under a statute lacks jurisdiction the final or consequential order is also liable to be struck down. The questions are answered in favour of the Revenue and against the assessee. The appeal stands allowed.

Summary

Issues Involved:
1. Whether the Tribunal was right in rectifying its order u/s 254 of the Income-tax Act based on a Supreme Court judgment rendered six years after the date of the order rectified.
2. Whether the Tribunal has the power or jurisdiction to rectify its order beyond the time limit of four years specified u/s 254(2).

Summary:

Issue 1: Rectification Based on Subsequent Supreme Court Judgment
The Tribunal rectified its order dated December 9, 1996, based on the Supreme Court judgment in Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273, which was rendered six years later. The Tribunal followed the ratio laid down in Apollo Tyres Ltd.'s case, where the Supreme Court held that the Assessing Officer has limited power to examine whether the books of account are certified by the authorities under the Companies Act and cannot go behind the net profits shown in the profit and loss account except as provided in the Explanation to section 115J. The Tribunal also referred to Circular No. 68, dated November 17, 1971, which states that a mistake arising from subsequent interpretation of law by the Supreme Court constitutes a mistake apparent from the records. Consequently, the Tribunal allowed the rectification petition in favor of the assessee.

Issue 2: Jurisdiction to Rectify Beyond Four Years
The Revenue contended that u/s 254(2), the Tribunal must rectify any mistake within four years from the date of the order. The Tribunal's order of rectification passed beyond this period is barred by limitation. The court examined sections 154 and 254(2) of the Act, emphasizing that both sections prescribe an outer limit of four years for rectification. The court noted that the power to rectify a mistake is not remedial but rectifiable in nature and must be exercised within the prescribed time limit. The court disagreed with the Rajasthan High Court's decision in Harshvardhan Chemicals and Minerals Ltd. v. Union of India [2002] 256 ITR 767, which allowed rectification beyond four years if the application was made within the time limit. The court held that section 254(2) is clear and unambiguous, requiring rectification orders to be passed within four years.

Conclusion:
The court concluded that the Tribunal's order of rectification passed beyond the four-year period is a nullity and lacks jurisdiction. Consequently, the impugned order and the consequential order dated June 12, 2003, were set aside. The questions were answered in favor of the Revenue and against the assessee. The appeal was allowed without costs.