2012 (12) TMI 867 - HC - Income Tax

Delay in filing appeal - Rejection of appeal by ITAT without going into the merits - addition made on reassessment - appeal filed before the Tribunal challenging the said order of addition by Commissioner( Appeals) & also an application for rectification u/s 154 - Held that - The Tribunal committed an error in rejecting the assessee s appeal without examination of issues on merits. After the Commissioner dismissed the assessee s appeal by an order dated 9.1.2002, the assessee s application for rectification was substantially allowed. In such rectification application, the assessee had raised two issues pertaining to an addition of Rs.1 ,48,00,000 /- and other to Rs.43,300/-. The assessee s case with respect to addition of Rs.1 ,48,00,000 /- was allowed. The request for deleting addition of Rs.43 ,300 /- was not accepted. It was only when the Tribunal while allowing the Revenue s appeal and holding that the Commissioner erred in rectifying his own order that the Commissioner s original order dated 9.1.2002 was revived. It was therefore, only by virtue of Tribunal s order dated 31.3.2008 that the appellant s cause to challenge the Commissioner s order dated 9.1.2002 came to be revived. For the first time therefore, after rectification was allowed in favour of the assessee by the Commissioner( Appeals), he was aggrieved by the Commissioner s original order dated 9.1.2002 only when the Tribunal resorted to such an order by judgement dated 31.3.2008. Between 17.3.2003 when the Commissioner had allowed rectification application and 31.3.2008 when the Tribunal reversed such order, the assessee had no cause, no reason, no possibility of maintaining any appeal against the Commissioner s original order dated 9.1.2002. Under the circumstances, he has filed fresh appeal before the Tribunal once the entire reason for challenging the Commissioner s order changed, therefore, delay was technical in nature and well explained. Tribunal having held that Commissioner (A) should not have exercised rectification powers, had the responsibility to examine the assessee s challenge to the original order dated 9.1.2002 by which its appeal came to be dismissed by the Commissioner. The assessee only required an opportunity to challenge on merits the additions made by the Assessing Officer and confirmed by the Commissioner - appeal in favour of the appellant and against the Revenue. Order of the Tribunal is reversed. Delay caused in filing the appeal before the Tribunal stands condoned. Appeal shall be heard by the Tribunal on merits - in favour of assessee

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal was right in dismissing the appeal without going into the merits of the case on the grounds of maintainability?

Analysis:
The case involved an appeal against an assessment order for the year 1993-1994. The Commissioner granted substantial relief to the petitioner by deleting a major addition in a rectification order. The appellant withdrew the appeal before the Tribunal for the remaining disputed additions. The Tribunal allowed the Revenue's appeal against the Commissioner's rectification order, stating that rectification could only be done for mistakes apparent from the record. The Tribunal dismissed the appellant's rectification application, stating that the appeal could not be reopened. The appellant then filed an appeal against the original order before the Tribunal, seeking condonation of delay, which was rejected as being time-barred.

The High Court found that the Tribunal erred in rejecting the appeal without examining the merits of the case. The Court noted that the rectification application had raised two issues, one of which was allowed by the Commissioner. The Court emphasized that the appellant had no case to argue against the original order since it was reversed by the Commissioner in the rectification proceedings. The Court held that the delay in filing the appeal was technical and well explained. The Court reversed the Tribunal's order, condoned the delay, and directed the Tribunal to hear the appeal on merits.

The Court clarified that the issue regarding a specific addition that was not altered in the rectification order would not be pressed by the appellant in the appeal. The Court disposed of the appeal accordingly, in favor of the appellant.

In conclusion, the High Court found in favor of the appellant, reversing the Tribunal's decision and allowing the appeal to be heard on its merits. The Court emphasized that the delay in filing the appeal was technical and justified, given the circumstances of the case. The Court directed the Tribunal to examine the appellant's challenge to the original order and hear the appeal on its merits, excluding the issue that had achieved finality.