2022 (7) TMI 1406 - AT - Income Tax

Rectification u/s 154 - whether the AO while taking refuge of section 154 has rightly passed second order on the same application for rectification of the order which has already been decided on merit? - HELD THAT - Section 154 of the Act mandates that an amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the Assessee or (the deductor) or (the collector), shall not be made under this section unless the authority concerned has given notice to the person(s) referred above of its intention to doso and has allowed a reasonable opportunity of being heard. The rule of Audi laterampartem says hear the other side . If the order is passed by the authority without providing notice or the reasonable opportunity of being heard to the person affected by it, if mandatorily required under the statute, then the same would be invalid and liable to be set aside. Coming to the instant case, from the record and order u/s 154 of the ACT, it clearly appears that the AO has neither given any notice to the Assessee qua its intention to do such amendment, which has the effect of enhancing or reducing a refund or otherwise increasing the liability of the Assessee, nor provided any opportunity of being heard to the Assessee, while passing an order u/s. 154 of the Act, hence dents the roots of the case. On the aforesaid analyzations, we are of the considered view that the order u/s. 154 of the Act by the AO, is unsustainable being invalid and void ab initio.

Summary

Issues:
1. Rectification application u/s. 154 of the Income-tax Act for refund of excess amount.
2. Jurisdiction of the Commissioner (Appeals) to remand the case.
3. Validity of the Assessing Officer's order u/s. 154 of the Act.

Issue 1: Rectification Application for Refund
The Assessee filed a rectification application u/s. 154 seeking a refund of excess tax paid. The Assessing Officer initially allowed the refund but later rejected it, citing non-filing of return within the prescribed time. The Commissioner (Appeals) directed the Assessing Officer to reconsider the rectification application. The Tribunal found that the second order by the Assessing Officer on the same application was invalid as there cannot be two orders on a single application. The Tribunal highlighted the importance of providing notice and an opportunity to be heard to the Assessee, which was lacking in the Assessing Officer's actions. Consequently, the Tribunal held the order u/s. 154 as invalid and set it aside, allowing the Assessee's appeal for the refund.

Issue 2: Jurisdiction of the Commissioner (Appeals)
The Assessee contended that the Commissioner (Appeals) exceeded jurisdiction by directing the Assessing Officer to reconsider the rectification application. The Tribunal analyzed the provisions of section 251 of the Act and concluded that the Commissioner (Appeals) has the power to remand a case or issue to the lower authority under certain circumstances not covered by other clauses of the section. The Tribunal rejected the Assessee's contention, stating that the Commissioner (Appeals) was empowered to pass the order in question, which did not fall under the limitations specified in section 251.

Issue 3: Validity of Assessing Officer's Order
The Tribunal scrutinized the Assessing Officer's actions regarding the rectification application and the subsequent order u/s. 154. It was observed that the Assessing Officer's second order on the same application, which had already been decided, was against the principles of law. The Tribunal emphasized the requirement for notice and an opportunity to be heard before making amendments that affect the Assessee's liability. Since the Assessing Officer failed to provide such notice or opportunity, the Tribunal deemed the order u/s. 154 as invalid and set it aside, thereby allowing the Assessee's appeal.

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