2014 (12) TMI 636 - HC - Income Tax

Validity of rectification order Doctrine of merger of orders - Whether the Tribunal was right in holding that the AO can pass a rectification order modifying the original assessment order carried into appeal and having already merged with the order of the CIT(A) while giving effect to the order passed by CIT(A) Held that - Assessee rightly contended that the Tribunal has gravely erred in confirming the action of revenue by holding that if a mistake apparent on record has occurred while giving effect to the order of CIT(A) then the AO is competent to rectify the order giving effect to the order of CIT(A) after considering the decision in TS Balaram, Income-Tax Officer, Company Circle IV, Bombay Versus Volkart Brothers And Others 1971 (8) TMI 3 - SUPREME Court it has to be held that the Tribunal and the CIT(A) have committed an error in upholding the rectification made by the AO - A decision on a debatable point of law is not a mistake apparent on the record - after the implementation of order passed by CIT(A), it was not appropriate on the part of AO to review the earlier order under the guise of rectification and in arriving at new facts and new order could not be passed unless order of CIT(A) was challenged or modified thus, the order of the Tribunal and the rectification order passed by the AO is set aside Decided in favour of assessee.

Summary

Issues:
Challenge to the rectification order passed by the Assessing Officer after the order of CIT(A) - Mistake apparent on record - Competency of Assessing Officer to rectify order post CIT(A) order.

Analysis:

Issue 1: Challenge to Rectification Order
The appellant challenged the rectification order passed by the Assessing Officer after the order of CIT(A). The appellant contended that the Assessing Officer exceeded his authority by rectifying the order post the CIT(A) order. The appellant relied on the decision in T.S. Balaram vs. Volkart Brothers to support their argument that only CIT(A) can rectify orders made in consequence of appeals. The High Court noted the appellant's argument that the rectification order by the Assessing Officer was void ab-initio and should have been quashed by the Tribunal.

Issue 2: Mistake Apparent on Record
The High Court referred to the decision in Vokart Brothers case where it was emphasized that a mistake apparent on the record must be obvious and patent, not a matter of debate or differing opinions. The Court highlighted that a decision on a debatable point of law does not constitute a mistake apparent on the record. The High Court concluded that the Tribunal and CIT(A) erred in upholding the rectification by the Assessing Officer as it involved a debatable point of law, not a clear mistake on record.

Issue 3: Competency of Assessing Officer
The High Court held that after the implementation of the CIT(A) order, it was not appropriate for the Assessing Officer to review the earlier order under the guise of rectification. The Court emphasized that new facts and orders could not be passed unless the CIT(A) order was challenged or modified. The High Court found that the findings of the CIT(A) and Assessing Officer were not only erroneous but also against legal provisions, requiring them to be set aside.

Conclusion:
The High Court allowed the appeal, quashed the impugned orders of the Tribunal and CIT(A), and set aside the rectification order by the Assessing Officer. The Court ruled in favor of the appellant, emphasizing that the Assessing Officer exceeded his authority in rectifying the order post the CIT(A) decision. The judgment highlighted the importance of clear mistakes on record and the limitations of rectification powers of the Assessing Officer post CIT(A) orders.