2019 (12) TMI 437 - AT - Income Tax

Rectification of mistake - error apparent on the face of record - time limit for making such rectification - disallowance u/s 40A(3) of the Act - HELD THAT - From the provisions of Sec.254(2) it is clear that Tribunal may at any time within six months from the end of the month, in which the order was passed, with a view to rectify any mistake apparent from the record, amend any order passed by it and shall make such amendment in appropriate cases. Further, makes it amply clear that a 'mistake apparent from the record' is rectifiable. In order to attract the application of section 254(2), a mistake must exist and the same must be apparent from the record. The scope for rectification of the order is very limited and depends upon the mistake apparent from record. The Tribunal can only rectify its mistakes apparent from the record and the provision of rectification does not permit the Tribunal to review its earlier order. There is wide difference between rectification and review. Rectification implies correction of error and removal of defect or imperfection and while exercising power rectification, the court can not exercise the power of review or revision - The scope and ambit of the power which could be exercised under section 254(2) of the Income Tax Act 1961 is circumscribed and restricted within the ambit of the power vested by the said section. Such a power is neither a power of review nor is akin to the power of revision but is only a power to rectify a mistake apparent on the face of the record. Rectification implies the correction of an error or a removal of defects or imperfections. It implies an error, mistake or defect which after rectification is made right. Error apparent on the face of record exists or not - HELD THAT - In the present case, there are no infirmity, impropriety and illegality in the order passed by the Ld. CIT(A), therefore, it does not require to be interfered with. It is trite to say that mistake must be apparent from record, which in the instant case does not appear - Appeal of Revenue dismissed.

Summary

Issues Involved:
1. Disallowance under Section 40A(3) of the Income Tax Act, 1961.
2. Reliance on previous judgments and pending Miscellaneous Applications.
3. Jurisdictional High Court's judgment recall and its impact on the case.
4. Scope and limitations of rectification under Section 254(2) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Disallowance under Section 40A(3) of the Income Tax Act, 1961:
The Revenue Department challenged the deletion of a disallowance amounting to ?1,56,87,500/- made under Section 40A(3) by the Assessing Officer (A.O.). This disallowance was related to cash payments for the purchase of land, which were subsequently sold as plots, and treated as business income. The CIT(A) had deleted this disallowance by relying on a previous ITAT order for the assessment year (A.Y.) 2010-11, which was based on the High Court decision in Gurdas Garg v. CIT Bathinda. The ITAT upheld the CIT(A)'s decision, affirming that the identity of payees was established, sale deeds were executed, and genuineness was certified by revenue authorities, thus disallowance under Section 40A(3) could not be made.

2. Reliance on Previous Judgments and Pending Miscellaneous Applications:
The Revenue argued that the ITAT's reliance on its own previous judgment in the case of Sakun Aggarwal (A.Y. 2010-11) was flawed because a Miscellaneous Application challenging that judgment was still pending. The ITAT, however, noted that the Miscellaneous Application in Sakun Aggarwal's case had already been dismissed. Therefore, the Tribunal found no basis to recall its order for A.Y. 2011-12.

3. Jurisdictional High Court's Judgment Recall and Its Impact on the Case:
The Revenue highlighted that the Punjab & Haryana High Court had recalled its judgment in Gurdas Garg's case, which was a basis for the ITAT's decision. However, the Tribunal observed that the High Court had not yet decided on the merits of the recall, and thus no adverse inference could be drawn against the assessee's case at this stage.

4. Scope and Limitations of Rectification under Section 254(2) of the Income Tax Act, 1961:
The Tribunal discussed the legal framework and judicial precedents governing rectification under Section 254(2). It emphasized that rectification is limited to correcting "mistakes apparent from the record," which do not require elaborate arguments or re-evaluation of facts. The Tribunal cited several Supreme Court and High Court judgments to underline that rectification cannot be used as a tool for review or revision of the order. It concluded that no apparent mistake existed in its order dated 31.07.2017, as the decision was based on a thorough consideration of facts and applicable judicial precedents.

Conclusion:
The Tribunal dismissed the Miscellaneous Application filed by the Revenue Department, stating that there was no mistake apparent from the record in its previous order. The ITAT confirmed that its decision was based on an independent application of mind and relevant judicial precedents, and thus did not warrant any rectification. The order was pronounced in open court on 11.09.2019.