2019 (9) TMI 736 - HC - Income Tax

Rectification u/s 154 - Assistant Commissioner, observed that rectification application assumes character of a matter being sub-judice, it needs to be dismissed - HELD THAT - In view of the plain language of section 154, there is no embargo on the power of amendment if an appeal or revision is merely pending. The rejection of the rectification application on this ground was unwarranted. We are informed that the Appeal is still pending. The Assistant Commissioner has failed to exercise the jurisdiction vested in him and thus the impugned order will have to be set aside and the application will have to be decided. Writ Petition succeeds. The impugned order dated 13 June 2019 is quashed and set aside. The rectification application filed by the Petitioner under section 154 of the Income Tax Act, 1961 stands restored to the file of Assistant Commissioner of Income Tax 21(2), Mumbai to be disposed of on its own merits.

Summary

Issues:
1. Rectification of Income tax assessment order.
2. Interpretation of Section 154 of the Income Tax Act.
3. Power of amendment by the Authority under Section 154.

Analysis:

Issue 1: Rectification of Income tax assessment order
The Petitioner, an investment fund, filed an application for rectification of the Income tax assessment order after the Assistant Commissioner rejected it, citing the pending statutory appeal filed by the Petitioner. The Assistant Commissioner refused to decide the rectification application due to the ongoing appeal before the Commissioner of Income Tax (Appeals). The Petitioner sought rectification under Section 154 of the Income Tax Act, claiming that the credit of advance tax had not been given, resulting in a refund entitlement. The rejection of the rectification application was based on the belief that the issue was sub-judice and should be decided by the appellate authority. The High Court found this reasoning unwarranted and ordered the restoration of the rectification application for proper consideration.

Issue 2: Interpretation of Section 154 of the Income Tax Act
Section 154(1) empowers the Authority to rectify and carry out amendments, including amending orders, intimations, and deemed intimations under various sections. Section 154(2) allows the Authority to make amendments on its own motion or upon being informed by the assessee or other Authorities about any mistake. Section 154(1A) places a limitation on the power of rectification, stating that if a matter has been considered and decided in appeal or revision, the order shall not be amended. The High Court emphasized that the phrase "considered and decided" should be interpreted in the past tense, meaning that pending appeals or revisions do not restrict the power of amendment. By failing to exercise the jurisdiction vested in him, the Assistant Commissioner's rejection of the rectification application was deemed improper and the impugned order was set aside.

Issue 3: Power of amendment by the Authority under Section 154
The High Court clarified that the Authority has the power to rectify mistakes and make amendments under Section 154, provided the conditions specified in the Act are met. The Assistant Commissioner's refusal to consider the rectification application solely based on the pendency of an appeal was deemed incorrect. The Court directed the restoration of the rectification application to the Assistant Commissioner for proper evaluation and disposal based on its merits. The Writ Petition was successful, and the impugned order was quashed, allowing the rectification application to be reconsidered by the Assistant Commissioner.

In conclusion, the High Court's judgment emphasized the correct interpretation and application of Section 154 of the Income Tax Act, ensuring that the Authority's power to rectify mistakes is not unduly restricted by pending appeals or revisions. The decision reinstated the Petitioner's rectification application for a fair assessment by the Assistant Commissioner.