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Issues involved: Interpretation of limitation period u/s 154(7) of the Income-tax Act, 1961 for rectification of orders.
Summary: The High Court of Orissa was required to address the question of whether the Tribunal's decision on the rectification order being barred by limitation u/s 154(7) of the Income-tax Act, 1961 was justified. The case involved a partnership firm that had assessments for the years 1968-69 and 1969-70, with subsequent rectification of errors by the Income-tax Officer. The Appellate Assistant Commissioner set aside the rectification orders due to lack of following natural justice principles. The Income-tax Officer then passed a fresh order after providing a reasonable opportunity to the assessee. The Tribunal accepted the assessee's contention that the rectification was barred by limitation, leading to the Revenue filing applications u/s 256(2) for reference of the legal question. The limitation period for rectification u/s 154(7) of the Act was crucial. The provision stated that no amendment shall be made after four years from the date of the order sought to be amended. The orders in question were dated July 16, 1971, and October 26, 1971, making the limitation period expire on July 16, 1975, and October 26, 1975. However, the Income-tax Officer's orders challenging these were dated November 18, 1976, clearly falling outside the limitation period. The argument that the orders were passed within the limitation period from October 16, 1971, was refuted, as the amendment to the July 16, 1971 order was still time-barred. Additionally, the contention that orders set aside for natural justice violations were exempt from the limitation period u/s 154(7) was dismissed. The High Court emphasized that any order passed without following natural justice principles is void, and the subsequent order cannot save it from the limitation period. The Tribunal's decision on the rectification being time-barred was upheld, affirming that the order was justified in its conclusion.
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