2023 (5) TMI 1208 - AT - Income Tax

Rectification u/s 154 - apparent mistake in the order passed by the AO in the year 2009 - whether after finalization of the assessment proceedings up to the level of the Tribunal and after dismissing the M.A. can assessee file an application under section 154 before the AO on the same issue? - HELD THAT - Whether the income tax authorities mentioned u/s 116 can rectify any mistake in its order which is though not apparent but will have any effect of setting aside the order passed by the superior authorities. No doubt that the income tax authority can rectify any apparent mistake in its order however, when the order of the AO, has been upheld by the ld.CIT(A) and thereafter by the Tribunal, in that eventuality, AO is denuded from rectifying any such mistake, as it would lead to giving unbridled power to AO/ ld.CIT(A) to unsettled the settled position of fact and law and will lead to chaos and anarchy. In the present case, after the Tribunal had dismissed the appeal of the assessee on merit, AO has rightly dismissed the rectification application filed by the assessee as the AO was duty bound to implement the order passed by the Tribunal. After approval of the order without modification by the superior authority, the order of the lower authority ceases to exist. The order of the Tribunal/superior authority passed by it can only be modified, set aside and annulled by process known to law. Admittedly, the Tribunal has neither recalled its order nor an appeal has been preferred against the order passed by the Tribunal before the hon ble High Court. Order passed by the Tribunal has attained finality and is required to be executed / enforced by the Assessing Officer. We cannot subscribe the view of the ld. AR that by rectification, the alleged jurisdictional issue can be looked into by the Assessing Officer or ld.CIT(A) thereby annulling the entire assessment proceedings, more particularly, when the assessment proceedings have already attained finality by virtue of the order of the Tribunal. There cannot be two contradictory orders of the Tribunal one by upholding the assessment and other quashing the assessment based on the jurisdictional error. A mistake which can be rectified is required to be apparent and should be known to the Assessing Officer without any in-depth analysis. The Hon'ble Supreme Court in the case of Volkart Brothers 1971 (8) TMI 3 - SUPREME COURT had elaborately discussed the scope of section 154 , hence the mistake pointed by the assessee can not be said to be apparent in nature. Examining the issue either from the prospective of finality of the first order or from the scope of section 154, we allow the appeal of Revenue and accordingly, the appeal of the Revenue is allowed.

Summary

Issues Involved:

1. Validity of assessment under section 153A without a search under section 132.
2. Applicability of section 153C for assessment of income of persons other than the person searched.
3. Scope and applicability of section 154 for rectification of mistakes.
4. Jurisdictional issues and their impact on the assessment and subsequent proceedings.

Summary:

1. Validity of Assessment under Section 153A:

The Tribunal examined whether the assessment under section 153A was valid when the HUF was not searched under section 132. The CIT(A) had annulled the assessment, holding it as "bad in law" due to the absence of a search warrant against the HUF. The Tribunal upheld the CIT(A)'s decision, stating that "notice under section 153A can be issued only to a person against whom a search under section 132 has been initiated." Since the search was conducted on the individual and not the HUF, the notice under section 153A to the HUF was invalid.

2. Applicability of Section 153C:

The Tribunal discussed whether section 153C could be applied in this case. The CIT(A) had noted that no incriminating documents were found during the search that pertained to the HUF. Therefore, the CIT(A) concluded that "the contingency of issuing notice under section 153C to the HUF would not arise." The Tribunal agreed, stating that "no document, much less an incriminating document, was found or seized in the course of the search," thus section 153C was not applicable.

3. Scope and Applicability of Section 154:

The Tribunal analyzed whether the issues raised by the assessee could be rectified under section 154. The CIT(A) had granted partial relief, holding that "an issue relating to jurisdiction can be raised at any time." The Tribunal, however, emphasized that "the power of rectification under section 154 is limited to mistakes apparent from the record." It referenced multiple judgments, including those from the Supreme Court, to conclude that the issues raised by the assessee were debatable and not apparent mistakes. Thus, the Tribunal held that the Assessing Officer was correct in dismissing the rectification applications under section 154.

4. Jurisdictional Issues:

The Tribunal considered the argument that jurisdictional defects could be raised at any stage. The CIT(A) had relied on various judgments to support this view. However, the Tribunal noted that the assessment had already been confirmed by the CIT(A) and the Tribunal, and no appeal was filed before the High Court. It stated that "the order of the Tribunal has attained finality and is required to be executed/enforced by the Assessing Officer." The Tribunal concluded that the Assessing Officer could not annul the assessment based on jurisdictional issues through section 154 proceedings.

Conclusion:

The Tribunal allowed the Revenue's appeals, holding that the CIT(A) erred in annulling the assessment under section 153A and in granting relief under section 154. The Tribunal emphasized that the issues raised were not apparent mistakes and that the assessment had attained finality. Consequently, the cross-objections filed by the assessee were dismissed.