2009 (1) TMI 46 - HC - Income Tax

Rectification of mistake - allowance of bad debt of lease rentals - revenue submitted that once an order is passed the Tribunal becomes functus officio and the Tribunal has no jurisdiction to modify its own order in the garb of rectification in view of circumstances of the case held that the Tribunal was justified in rectifying the apparent error on the face of the record - rectification carried out by tribunal cannot be said to be in the nature of review - revenue s petition is dismissed

Summary

Issues:
Challenge to order passed by I.T.A.T., Deduction of bad debt under section 36(1)(vii) of the Income Tax Act, 1961, Disallowance of claim by assessing officer, Appeal to C.I.T. (A), Appeals before I.T.A.T., Rectification of order by Tribunal, Jurisdiction of Tribunal to modify its own order, Review vs. Rectification

Analysis:

The High Court judgment involves a challenge to the order passed by the Income Tax Appellate Tribunal (I.T.A.T.) regarding the deduction of bad debt under section 36(1)(vii) of the Income Tax Act, 1961 for the assessment year 1998-99. The assessing officer disallowed the entire claim of the assessee in respect of bad debts written off, leading to an appeal by the assessee. The Commissioner of Income Tax (C.I.T.) (A) upheld the disallowance partially and allowed the claim only to a certain extent. Both the assessee and the revenue filed appeals before the I.T.A.T., which restored the issue relating to the allowance of bad debt of lease rentals.

The Tribunal's original order contained a direction in paragraph 15 regarding the assessment of lease rentals, which the assessee sought to rectify through a Miscellaneous Application. The Tribunal allowed the rectification, leading to the present petition challenging this decision. The petitioner contended that the Tribunal exceeded its jurisdiction by modifying its own order under the guise of rectification without any apparent error on the face of the record.

The High Court, however, dismissed the petition, upholding the Tribunal's rectification. It held that the Tribunal was justified in rectifying the error as the original direction in the order was erroneous and contrary to the facts on record. The Court emphasized that the issue was not about the taxability of the amount in question but rather its deduction as a bad debt, as it was not income earned in the relevant assessment year. Therefore, the rectification by the Tribunal was not a review but a correction of an apparent error on the face of the record, and thus valid.

In conclusion, the High Court found no merit in the petition and dismissed it, affirming the Tribunal's rectification of the order.