2018 (8) TMI 1477 - HC - Income Tax

Power of tribunal recalling an earlier order in exercise of powers for rectification u/s 254 - nature of additional income disclosed - assessee contended that the additional income also arose out of his agriculture operations - ITAT, by majority order, recalled the order - Held that - Whatever be the correctness of these findings it cannot be stated that the Tribunal arrived at such findings without proper consideration of materials on record. Several issues were presented before the Tribunal and were examined before coming to such specific finding. The Tribunal could not have recalled the entire order under purported exercise of rectification powers. It is well settled through series of judgements of this Court and the Supreme Court that power of rectification are circumscribed with the condition that the same can be exercised for correcting error be of law or facts apparent on record. The jurisdiction to correct errors vested in the Tribunal is not akin to review powers. As noted, the Accountant Member, while showing inclination to exercise rectification powers, had not cited any reason in support of his opinion. Rectification order set aside - Decided in favor of assessee.

Summary

Issues:
Challenge to decision of Income Tax Appellate Tribunal recalling an earlier order in exercise of powers for rectification.

Analysis:
The petitioner, an individual, challenged the decision of the Income Tax Appellate Tribunal recalling an earlier order in exercise of powers for rectification. The petitioner was subjected to a search, during which cash was found in possession. The petitioner disclosed additional income in the returns filed under section 153A of the Income Tax Act. The Assessing Officer treated the additional income as income from undisclosed sources, which led to the matter reaching the Tribunal. The Tribunal, in its order, accepted the petitioner's contentions that the additional income was agriculture income. The Tribunal found no incriminating material to reject the claim of additional income being derived from agriculture operations. The Revenue filed appeals against the Tribunal's decision, and pending such appeals, applied for rectification of the order. The Tribunal, with a difference of opinion between its members, eventually sided with the view that the rectification application should be allowed, leading to the recall of the earlier order.

The High Court, after hearing the legal contentions, found that the Tribunal committed an error in recalling its earlier order. The fundamental issue was whether the additional income disclosed by the assessee was agriculture income or income from other sources. The Tribunal had considered the evidence on record and found the Assessing Officer's conclusion believable based on the submissions and evidence. The High Court noted that the power of rectification is limited to correcting errors of law or facts apparent on record and cannot be equated with review powers. The Accountant Member, in favor of rectification, did not provide reasons for his opinion. The High Court set aside the impugned order, allowing the petition and disposing of the matter.

In conclusion, the High Court found that the Tribunal erred in recalling its earlier order under the guise of rectification powers. The decision was based on proper consideration of materials on record, and the Tribunal's power of rectification is limited to correcting errors of law or facts apparent on record. The High Court emphasized that rectification powers cannot be used for a complete review of the order and must be exercised within the specified boundaries. The High Court allowed the petition, setting aside the impugned order with all consequential effects.