2021 (1) TMI 244 - HC - Income Tax

Rectification u/s 254 - Assessment u/s 153C - ITAT refused to admit additional ground - additional ground raised is only with respect to the satisfaction required to be recorded under Section 153C, which could have been verified on a perusal of the assessment records - HELD THAT - Having found that the recording of satisfaction by the AO of the searched person is mandatory; which is the question of law, what remained was only to call for the records of the assessment proceedings of the appellant and peruse the same to find out the satisfaction recorded before transmitting the files to the AO of the appellant. We are hence satisfied that the ground necessarily has to be admitted and the Tribunal committed a mistake in refusing the admission of such ground. We hence set aside the impugned order and direct the Tribunal to call for the assessment proceedings from the Department and ensure that the satisfaction is recorded u/s 153C by the AO of the persons searched. Here we have to observe that if at all a question of law is raised from the original order in appeal, it can only be one against refusal of the Tribunal to admit the additional ground. If the High Court finds it in favour of the assessee then what remains is only the examination of records. The Tribunal has found; which cannot be otherwise, that the satisfaction has to be recorded as per the statutory provision. What remained was only examination of the records; which refusal makes it an error apparent from the face of the record. There can arise no contrary or conflicting opinion on this since the interpretation of the provision, as to the satisfaction being mandatory is crystal clear. We fail to understand what evidence requires to be produced by the assessee to substantiate their ground. The Tribunals should be more pragmatic and the recording of the satisfaction could have been verified with lesser effort than that involved in making copious extracts from the original order; in the order impugned. Matter restored before the tribunal.

Summary

Issues Involved:
1. Whether an appeal under Section 260A of the Income Tax Act, 1961 is maintainable against the rejection of an application under Section 254(2) of the I.T. Act.
2. Whether the Tribunal's refusal to admit an additional ground constitutes a mistake apparent from the face of the record, warranting rectification under Section 254(2) of the I.T. Act.

Detailed Analysis:

1. Maintainability of Appeal under Section 260A:

The core issue is whether an appeal can be filed under Section 260A against the rejection of a rectification application under Section 254(2). The judgment references multiple precedents, including Chem Amit v. Assistant Commissioner of Income-Tax, which clarifies that Section 260A allows appeals only from orders passed in appeal by the Appellate Tribunal, not from orders rejecting rectification applications. The judgment underscores the distinction between the language used in Section 256 (which allows references to the High Court on any question of law arising out of an order under Section 254) and Section 260A (which confines appeals to orders passed in appeal). The court concludes that an appeal under Section 260A is not maintainable against an order rejecting a rectification application, thus allowing the writ jurisdiction to be invoked.

2. Tribunal's Refusal to Admit Additional Ground:

The second issue concerns whether the Tribunal's refusal to admit an additional ground due to non-production of evidence by the assessee constitutes a mistake apparent from the face of the record. The Tribunal had rejected the additional ground related to the mandatory satisfaction required under Section 153C, arguing that the assessee did not produce evidence. The court, however, notes that the satisfaction required under Section 153C could have been verified from the assessment records, and no additional evidence from the assessee was necessary. The court finds that the Tribunal's refusal to admit the additional ground was a mistake apparent from the face of the record, as it involved a question of law that did not require further evidence but merely a verification of existing records.

Conclusion:

The court allows the appeal, setting aside the judgment of the learned Single Judge and the Tribunal's order in the rectification application. The rectification application is allowed, and the appeal before the Tribunal is restored to the extent of admitting the additional ground. The Tribunal is directed to call for the assessment records from the Department and verify the mandatory satisfaction under Section 153C. The court emphasizes that the Tribunals should adopt a pragmatic approach and that the refusal to admit the additional ground was an error apparent from the face of the record. No order on costs is made.