2007 (12) TMI 107 - HC - Income Tax

It is clear from sec. 254 (2) IT Act that the Tribunal has powers to pass an order within 4 years either to rectify any mistake apparent from the record or amend any order passed by it under sub-section (1) - when the Tribunal cannot pass an order beyond 4 years from the date of the original order, the question of entertaining a petition for rectification beyond 4 years will not arise at all Tribunal rectification order in favour of revenue is set aside assessee s appeal allowed

Summary

Issues:
1. Whether the Tribunal has the power to rectify the order passed on the merits in an appeal filed by the assessee four years thereafter invoking section 254(2) of the Income-tax Act, 1961?

Analysis:
The appeal in question was filed by the assessee challenging the order passed by the Tribunal, Bangalore Bench. The Tribunal had dismissed the Revenue's appeal on April 6, 1998, which was filed against the order passed by the Commissioner of Income-tax (Appeals). Subsequently, the Revenue obtained permission to file a miscellaneous petition under section 254(2) of the Income-tax Act on September 19, 2002. The miscellaneous petition was allowed on July 31, 2003, setting aside the original order and modifying it in favor of the Revenue. The main contention raised by the assessee was that the Tribunal erred in allowing the miscellaneous petition filed by the Revenue, which was beyond the four-year limitation period as prescribed under section 254(2) of the Income-tax Act.

The key issue revolved around the interpretation of section 254(2) of the Income-tax Act, which empowers the Appellate Tribunal to rectify any mistake apparent from the record within four years from the date of the original order. The provision also specifies that an amendment enhancing an assessment or increasing the liability of the assessee cannot be made without giving notice and an opportunity to be heard. In this case, it was undisputed that the appeal was dismissed on the merits on April 6, 1998, and the miscellaneous petition was filed beyond the four-year limit. The Commissioner of Income-tax had approved the filing of the petition on August 20, 2002. The Tribunal entertained the time-barred application and passed an order on July 31, 2003, which was beyond the stipulated four-year period, contrary to the provisions of section 254(2) of the Income-tax Act.

The Court held that since the Tribunal cannot pass an order beyond four years from the original order, the application for rectification filed beyond this period should have been rejected. Therefore, the Court ruled in favor of the assessee, allowing the appeal and dismissing the order passed in the miscellaneous petition. The original order of the Tribunal was upheld, emphasizing the importance of adhering to statutory limitations and procedural requirements in such matters.