2020 (2) TMI 129 - HC - Income Tax

Rectification u/s 254 - period of limitation of 6 months - order recalled beyond the then prescribed period - HELD THAT - Tribunal is vested with the power to rectify any mistake apparent from the record to amend any order passed by it under sub-section (1) of Section 254 at any time within six months from the end of the month in which the order was passed, provided the mistake is brought to its notice by the assessee or by the Assessing Officer. The use of the expression may in the aforesaid provision is clearly indicative of the legislative intent that the limitation period of six months from the end of the month in which the order was passed is not to be construed in such a manner that there can not be any extension of time beyond the said period of six months. This is so because the assessee or the AO can only bring the mistake to the notice of the Tribunal. The assessee or the AO has no control over the Tribunal. For one reason or the other, the Tribunal may not be in a position to pass the order under Section 254(2). For the inability of the Tribunal to pass such an order within the period provided, neither the assessee nor the revenue should suffer. What therefore becomes relevant is that the assessee or the Assessing Officer should bring the mistake to the notice of the Tribunal within the limitation period. On a conjoint reading of the two provisions, there appears to be no contradiction between Section 254(2) of the Act and Rule 24 of the Rules as extracted above. Both the provisions can be and should be read harmoniously to advance the objective that a decision on merit should be avoided in the absence of the aggrieved litigant. It is an established principle of natural justice that a litigant should be heard before a decision is taken. By the said order Tribunal has recalled the ex-parte order and fixed the appeal for hearing afresh, which has been filed by none else than the assessee. Ultimately, what the Tribunal has done is only to provide an opportunity of hearing to the assessee. No prejudice has been caused to the revenue by such order of the Tribunal. Having regard to the discussions made above and on due consideration, we are of the view that the challenge made by the revenue in this writ petition is misconceived. Consequently we find no merit in the writ petition.

Summary

Issues:
Challenge to the legality and correctness of the order passed by the Income Tax Appellate Tribunal for the assessment year 2006-07, recalling an earlier order and directing a fresh hearing.

Analysis:

1. The petition was filed by the Principal Commissioner of Income Tax-7, Mumbai, challenging the order passed by the Income Tax Appellate Tribunal, Mumbai, recalling an earlier order for the assessment year 2006-07. The Tribunal had dismissed the appeal in an ex-parte order on 10th January, 2018, due to the absence of the assessee during the hearing.

2. The Tribunal later received an application from the assessee for a recall of the order, which was registered as MA No.483/M/2018. After hearing both parties, the Tribunal passed an order on 1st February, 2019, recalling the earlier order and fixing the appeal for a fresh hearing on merit.

3. The petitioner argued that the Tribunal's order was passed under Section 254(2) of the Income Tax Act, which provides a time limit of six months from the end of the month in which the order was passed for rectifying any apparent mistake. The petitioner contended that the Tribunal did not dispose of the application within the prescribed limitation period, making the order unsustainable.

4. The respondent, on the other hand, argued that the Tribunal invoked its inherent power of procedural review to pass the order, which is acknowledged by the Supreme Court. The respondent highlighted that the limitation period was extended to six months from the end of the month by the Finance Act, 2016.

5. The Court analyzed Section 254(2) of the Act, which allows the Tribunal to rectify any mistake within six months from the order's passing, upon being notified by the assessee or the Assessing Officer. The Court emphasized that the expression "may" in the provision indicates that the limitation period can be extended beyond six months if the mistake is brought to the Tribunal's notice within the stipulated time.

6. Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963, empowers the Tribunal to recall an ex-parte order if there was sufficient cause for non-appearance by the appellant, without specifying a time limit. The Court harmoniously interpreted Section 254(2) and Rule 24 to ensure that decisions are not made in the absence of the aggrieved party, aligning with the principles of natural justice.

7. Referring to previous judgments, the Court affirmed that orders can be recalled beyond the prescribed period, provided the application is made within the limitation period. In the present case, the Tribunal's decision to recall the ex-parte order and allow a fresh hearing did not cause prejudice to the revenue.

8. Consequently, the Court dismissed the writ petition, finding no merit in the challenge raised by the revenue, and declined to award costs in the matter.