2018 (7) TMI 1856 - HC - Income Tax

Rectification of mistake - imposition of penalty based that one Sh. Pradeep Kumar Bansal had provided accommodation entries and that the credit claimed was not genuine - Held that - This Court has considered the overall circumstances of the case. On merits, the petitioner was unsuccessful before the three statutory authorities. Therefore, as far as the appreciation of facts and application of law is concerned, there is no question of interference under Article 226 of the Constitution. In any event, the narrow compass within which this Court is called upon to exercise jurisdiction under Article 226 is to consider whether the ITAT s refusal to rectify its previous order (which was based upon the merits of the matter, including the allegation of denial of natural justice), was illegal. The Court is of the opinion that having regard to the extremely circumscribed jurisdiction of the ITAT while considering the rectification application, its view cannot be considered unreasonable.

Summary

Issues Involved:
1. Rectification of order by Income Tax Appellate Tribunal (ITAT) under Section 254(2) of the Income Tax Act, 1961.
2. Allegation of denial of natural justice due to lack of opportunity to cross-examine a witness.
3. Jurisdiction of High Court under Article 226 of the Constitution to interfere with ITAT's decision.

Analysis:

1. Rectification of ITAT Order: The petitioner, an assessee, challenged the imposition of penalty based on the AO's findings regarding accommodation entries. The CIT(A) and ITAT upheld the penalty. The petitioner sought rectification under Section 254(2) of the Income Tax Act, 1961, alleging vital facts were overlooked. The High Court noted that the petitioner was unsuccessful before the statutory authorities on merits, and interference under Article 226 was not warranted regarding factual and legal aspects of the case.

2. Denial of Natural Justice: The petitioner contended that the ITAT erred by not providing an opportunity to cross-examine Sh. Bansal, a witness central to the case. The petitioner argued that the failure to allow cross-examination amounted to a denial of natural justice. The Court acknowledged the importance of providing such an opportunity but held that the ITAT's decision fell within its limited jurisdiction for rectification applications. It was observed that the ITAT's refusal to rectify its order, based on merits and the alleged denial of natural justice, was not illegal, given the restricted scope of review.

3. Jurisdiction of High Court: The High Court emphasized that its jurisdiction under Article 226 of the Constitution was limited in cases involving ITAT decisions. The Court clarified that it could only intervene if the ITAT's refusal to rectify its order was illegal. Considering the confined scope of the ITAT's authority in rectification matters, the High Court found the ITAT's decision not unreasonable. Consequently, the writ petition was dismissed as lacking merit, affirming the ITAT's stance within its prescribed boundaries.

This detailed analysis illustrates the key aspects of the judgment, encompassing the issues of rectification, denial of natural justice, and the jurisdiction of the High Court in reviewing ITAT decisions.