2018 (7) TMI 2058 - AT - Income Tax

Rectification of mistake u/s 254(2) - validity of show cause notice issued u/s 263 - withdrawing the approval u/s 10(23C)(vi) - HELD THAT - Provisions of section 10(23C)(vi) were duly considered by the Tribunal and it was found that the show cause notice for withdrawing the approval granted under section 10(23C)(vi) is a mandatory condition and can be issued by the Competent Authority who has power to withdraw the approval. This defect in the show cause notice cannot be cured and, therefore, the provisions of section 292BB cannot be pressed into service for such an illegality and defect in the show cause notice. Tribunal has also considered all the aspects of show cause notice issued as per the directions of the ld. CIT (E) and, therefore, it was found by the Tribunal that there is nothing in the language of the show cause notice to reveal that the decision was taken by the ld. CIT (E) to set out the grounds in the show cause notice for withdrawal of approval. Tribunal has specifically considered this aspect and found that the language of show cause notice does not exhibit any thought process of CIT(E) but it reveals that it was issued and signed by the DCIT Hqrs as per the instructions and directions of the CIT (E). Tribunal even went further on this point and observed that the matter would have been different if the show cause notice brings out the thought process and application of mind by the ld. CIT (E), but was only signed by the DCIT Hqrs. Hence the Tribunal found that the CIT (E) delegated the power to the DCIT Hqrs to issue the show cause notice which is not permissible as per the provisions of the Act. In view of the detailed finding based on the analysis of the facts and provisions of law, the Miscellaneous Application filed by the revenue has no substance as the revenue is raising the contentions on the merits of the issue and not pointed out any apparent mistake which can be rectified as per the provisions of section 254(2) of the Act. The scope and jurisdiction to rectify the mistake under section 254(2) is very limited and circumscribed. The Tribunal can rectify the mistake which is manifest and apparent on the face of the record and not something which requires a long drawn reasoning. Hence the decision taken on merits cannot be reviewed or revised in the proceedings under section 254(2) - Tribunal has not restricted its finding only on the technical issue but the merits of the order passed by the CIT (E) withdrawing the approval under section 10(23C)(vi) was also decided and hence in view of the facts and circumstances of the case, the Miscellaneous Application filed by the revenue is devoid of any merit. Miscellaneous Application filed by the revenue is dismissed.

Summary

Issues Involved:
1. Validity of the Show Cause Notice issued under Section 10(23C)(vi) of the IT Act.
2. Jurisdiction of the CIT (Exemptions) to withdraw approval retrospectively.
3. Scope and jurisdiction to rectify mistakes under Section 254(2) of the IT Act.

Issue-wise Detailed Analysis:

1. Validity of the Show Cause Notice issued under Section 10(23C)(vi) of the IT Act:
The Tribunal examined whether the show cause notice issued under Section 10(23C)(vi) was valid. The revenue argued that the notice was valid as it was issued with the prior approval and direction of the CIT (Exemptions) by the DCIT Headquarters. However, the assessee contended that the notice was invalid as it was not issued by the competent authority, i.e., the CIT (Exemptions), but by the DCIT Headquarters. The Tribunal found that the show cause notice must be issued by the prescribed authority, which in this case is the CIT (Exemptions). The Tribunal observed that the language and tenor of the show cause notice did not exhibit any thought process or satisfaction of the CIT (Exemptions) but revealed that it was issued by the DCIT Headquarters. The Tribunal concluded that the notice was invalid as it was not issued by the competent authority, thereby rendering the proceedings and the consequential order void.

2. Jurisdiction of the CIT (Exemptions) to withdraw approval retrospectively:
The assessee argued that the CIT (Exemptions) did not have the power to withdraw approval retrospectively, as the assessments for prior years were completed without any violations found. The Tribunal noted that the power to withdraw approval retrospectively must be explicitly conferred by legislation. In the absence of such conferment, the delegated authority cannot issue a notification with retrospective effect. The Tribunal referred to the decision of the Hon'ble Supreme Court in the case of State of Rajasthan and others vs. Basant Agrotech India Ltd. and others, which stated that only legislation can make a law retrospective. Consequently, the Tribunal held that the withdrawal of approval by the CIT (Exemptions) could only be prospective, not retrospective.

3. Scope and jurisdiction to rectify mistakes under Section 254(2) of the IT Act:
The revenue filed a miscellaneous application under Section 254(2) alleging various mistakes in the Tribunal's order. The Tribunal emphasized that the scope and jurisdiction to rectify mistakes under Section 254(2) are very limited and circumscribed. It can only rectify mistakes that are manifest and apparent on the face of the record, not those requiring long drawn reasoning. The Tribunal found that the revenue's contentions were on the merits of the issue and did not point out any apparent mistake. The Tribunal reiterated that its decision on the validity of the show cause notice and the merits of the CIT (Exemptions)'s order was comprehensive and based on detailed analysis. Therefore, the Tribunal dismissed the miscellaneous application filed by the revenue as devoid of merit.

Conclusion:
The Tribunal dismissed the miscellaneous application filed by the revenue, upholding its earlier decision that the show cause notice issued under Section 10(23C)(vi) was invalid as it was not issued by the competent authority. It also held that the CIT (Exemptions) did not have the jurisdiction to withdraw approval retrospectively and clarified the limited scope of rectifying mistakes under Section 254(2).