2017 (11) TMI 2050 - AT - Income Tax

Rectification u/s 154 - period of limitation - validity of action of the CIT(A) in holding that order passed by the AO u/s. 154 was time barred - HELD THAT - While framing the assessment order AO has not computed income of assessee u/s. 115JB. This omission was identified at a subsequent date accordingly AO has passed the order to rectify the same. The impugned order so passed by the AO was dated 21/01/2014 which is much beyond the limitation period to be reckoned from the end of the Financial Year 2007-08. Even though AO has mentioned in his order that the order is passed to give the effect to the order of CIT(A) s order. However in fact the rectification has been made in respect of mistake committed by him in the order passed u/s. 143(3) dated 28/15/2007. Accordingly we do not find any infirmity in the order of CIT(A) for holding that the order passed u/s. 154 was time barred under the provisions of Section 154(7) of the Act. The issue under consideration is also squarely covered by the decision Sakseria Cotton Mills Limited 1979 (2) TMI 17 - BOMBAY High Court wherein it was held that rectification of mistake- period of limitation u/s. 154(7) will apply from the date of original order of the ITO and not from the date of ITO s order giving effect to the AAC s order in respect of points not the subject matter of the order u/s. 154. No infirmity in the order of CIT(A).

Summary

Issues:
1. Time bar on order passed u/s. 154 by AO.
2. Jurisdiction of AO to pass rectification order.
3. Applicability of Section 154(7) of the Act.
4. Interpretation of the term "time-barred."

Analysis:
1. The appeal filed by the Revenue and Cross Objection by the assessee were against the order of CIT(A)-2, Mumbai for A.Y. 2005-06 under Section 154 of the IT Act. The revenue contested the CIT(A)'s decision that the order passed by the AO u/s. 154 was time-barred.

2. The AO had passed an assessment order u/s. 143(3) on 28.12.2007, and subsequently rectified some errors pointed out by the assessee through a rectification application dated 24.01.2008. The AO passed a rectification order on 26.03.2008 and another one on 20.01.2014, which was challenged by the assessee before the CIT(A).

3. The CIT(A) held that the order passed by the AO u/s. 154 was time-barred as it was beyond the limitation period to be reckoned from the end of the Financial Year 2007-08. The AO had rectified the mistake in the original order dated 28/12/2007, which did not include the computation of income u/s. 115JB. The jurisdiction of the AO to pass the rectification order was questioned.

4. The Tribunal found that the rectification order passed by the AO on 21/01/2014 was indeed beyond the limitation period as per Section 154(7) of the Act. The AO's mention of giving effect to the CIT(A)'s order was deemed inaccurate, as the rectification was related to his own mistake in the assessment order. The decision was supported by a precedent from the Bombay High Court regarding the period of limitation for rectification of mistakes.

5. Ultimately, the Tribunal dismissed the appeal of the Revenue and the Cross Objection filed by the assessee, upholding the CIT(A)'s decision that the order passed u/s. 154 was time-barred. The judgment was pronounced on 27/11/2017, concluding the legal proceedings in this matter.