2011 (3) TMI 920 - AT - Income Tax

Reassessment - whether an application for rectification of mistakes apparent from the record can lie u/s.254(2) against the order of the Third Member passed u/s.255(4) of the Act - When there is a difference between the Members while disposing of the appeal it cannot be said that the appeal has been finally disposed of - Sub-section (4) of section 255 requires that after the opinion of the Third Member, the point of difference shall be decided according to the majority opinion and this clearly suggests that a final order has to be passed disposing of the appeal in its entirety which order alone would be an order passed by the Tribunal under sec.254(1) - in the present case the revenue seems to have missed the distinction between a finding on a point of difference and the final order of the Tribunal under sec.254(1) - Decided against the revenue

Summary

Issues:
1. Rectification of mistakes in the order passed by the Third Member of ITAT.
2. Jurisdiction of the Tribunal in rectifying mistakes in the order passed by the Third Member.

Issue 1 - Rectification of Mistakes:
The application was filed by the revenue under section 254(2) of the Income Tax Act against the order of the Third Member dated 12th May 2010. The Third Member had resolved a difference of opinion between two Members who originally heard the appeal. The points of difference referred for resolution were regarding the initiation of proceedings by the Assessing Officer under section 147 and the non-furnishing of reasons for reopening the assessment to the assessee. The Third Member held that the proceedings initiated by the Assessing Officer under section 147 were liable to be quashed due to lack of tangible material and that the reassessment order was null and void as reasons for reopening were not provided to the assessee. The revenue challenged this order, claiming there were mistakes apparent from the record requiring rectification.

Issue 2 - Jurisdiction of the Tribunal:
A preliminary question arose regarding whether an application for rectification of mistakes could lie under section 254(2) against the order of the Third Member passed under section 255(4) of the Act. The Tribunal's power under section 254(1) allows for passing orders finally disposing of the appeal. It was clarified that an order passed under section 255(4) by the Third Member did not finally dispose of the appeal until the point of difference was decided according to the majority opinion. The practice followed by the Tribunal was to fix the appeal for hearing before the Division Bench, which would pass a final order under section 254(1) conforming to the majority opinion. The decision of the Third Member was not a final order disposing of the entire appeal, as highlighted by legal precedents. Therefore, it was concluded that an application under section 254(2) could only be filed after the final order disposing of the appeal was passed, and not against the decision of the Third Member.

In conclusion, the application filed by the revenue was rejected as misconceived and not maintainable, emphasizing the distinction between a finding on a point of difference and the final order of the Tribunal under section 254(1. The judgment clarified the procedural requirements for rectification of mistakes in orders passed by the Third Member of the ITAT, highlighting the importance of following the prescribed legal procedures for final disposal of appeals.