2018 (6) TMI 1715 - HC - Income Tax

Rectification Application u/s 254(2) - provisions of Section 11(1) Explanation 2 of the Act would warrant its appeal being allowed was not considered and its appeal was dismissed - HELD THAT - We find that the issue is no longer res judicata as it stands concluded by the decision of this Court in Safari Mercantile 2016 (6) TMI 1313 - BOMBAY HIGH COURT and Gyan Constructions 2015 (1) TMI 1427 - BOMBAY HIGH COURT that while dealing with the application for rectification, the Tribunal where it finds there is an error apparent on record, then it should recall the original order and place the Appeal for consideration of the issue on merits before the Regular Court. It is not appropriate to dispose of the controversy on merits of the submission while disposing of the Rectification Application. The impugned order dated 16th January, 2018 is quashed and set aside. The Rectification Application filed by the petitioner is restored to the Tribunal for fresh disposal.

Summary

Issues:
Challenge to Tribunal's order rejecting rectification application under Section 254(2) of the Income Tax Act, 1961.

Analysis:
The petitioner challenged the Tribunal's order dated 16th January, 2018, which rejected their application for rectification of the order dated 25th May, 2017. The primary grievance was that the Tribunal did not consider the petitioner's submission under Section 11(1) Explanation-2 of the Act, despite recording it in the original order. The petitioner contended that this non-consideration led to the dismissal of their appeal, prompting the rectification application under Section 254(2) of the Act.

The High Court observed that the impugned order did not address the petitioner's claim under Section 11(1) Explanation-2 of the Act to determine whether the petitioner was entitled to the benefit of Section 11(1) of the Act. The petitioner argued that this omission was contrary to the decisions of the Court in Safari Mercantile (P) Ltd. Vs. ITAT and Gyan Constructions V/s. Income Tax Appellate Tribunal. The respondent's counsel agreed to abide by the Court's decision.

The Court held that the issue was not res judicata, as per the decisions in Safari Mercantile and Gyan Constructions, which mandated that if an error is apparent on record during rectification, the Tribunal should recall the original order and consider the matter on merits before the Regular Court. The Court emphasized that it was improper to dispose of the controversy on merits while deciding a Rectification Application.

Consequently, the Court quashed and set aside the impugned order dated 16th January, 2018. The Rectification Application was restored to the Tribunal for fresh disposal in line with the principles laid down in Safari Mercantile and Gyan Constructions. The petition was disposed of accordingly.