2004 (5) TMI 231 - AT - Income Tax

Powers Of Rectification - Time Limit - determine the scope of the Tribunal's power to rectify a mistake beyond four years time limit as contained in section 254(2) of the Act - HELD THAT - The assessee contended that the assessments had already become barred by limitation u/s 149 as on 1-4-1989 for which the relevant period of limitation was four years or seven years depending upon the quantum of liability to tax. There was an amendment in section 150 lifting an embargo for period of limitation to enable the reopening the assessment not only on the basis of order passed in proceedings under the IT Act but also on the basis of an order of the court in any proceedings under any law. This provision was prospective and in that context the Supreme Court in the case of Mysore Minerals Ltd. v. CIT 1999 (9) TMI 1 - SUPREME COURT held that the amendment did not enable the authorities to reopen assessments which had become final due to the bar of limitation prior to April 1, 1989 and this position was equally applicable to re-assessments proposed on the basis of orders passed under the IT Act or under any other law. The court held that the provisions of a fiscal statute, more particularly, one regulating the period of limitation, must receive a strict construction. The law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigants for an indefinite period on future unforeseen events. Proceedings which had attained finality under existing law due to bar of limitation cannot be held to be open for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings which had already concluded and attained finality. In these circumstances, when a period of limitation of four years is provided under section 254(2) for rectifying an order, no rectification can be made after that period on the principle of equity and justice or on the basis of theory that justice should be done, even if heaven falls, as in our opinion, even period of limitation is part of the jurisprudence and cannot be brushed aside or ignored to grant relief on the prayer of the assessee or revenue after the expiry of said period of four years. Similarly, in the case of S.P. Gupta 1981 (12) TMI 165 - SUPREME COURT the Supreme Court held that obvious omission can be made up by suitable interpretation but the court cannot supply supposed deficiencies as in that case instead or declaring the Law, would be making laws. The Tribunal's decision to condone the delay and proceed with rectification was influenced by a desire to do justice, but this approach contradicts established legal principles. The Miscellaneous Application filed by the assessee is dismissed as it is barred by the four-year limitation period. The Tribunal must adhere to the statutory time limits to maintain the integrity and finality of legal proceedings.

Summary

Issues Involved:
1. Scope of Tribunal's power to rectify a mistake beyond the four-year time limit u/s 254(2) of the IT Act, 1961.
2. Whether the four-year limitation applies to rectification requests made by either party or only to suo moto rectifications by the Tribunal.

Issue 1: Scope of Tribunal's Power to Rectify Mistakes Beyond Four Years

The Special Bench was constituted u/s 252(5) of the IT Act, 1961, to determine the scope of the Tribunal's power to rectify a mistake beyond the four-year time limit as contained in section 254(2) of the Act. The relevant facts are that the assessee's appeal in ITA No. 5972/Ahd./1991 was disposed of on 28-4-1997, and an application for rectification was made on 11-4-2002, beyond the four-year limit. The Tribunal directed a hearing on the question of limitation, which led to the constitution of the Special Bench.

Issue 2: Applicability of Four-Year Limitation to Rectification Requests

The learned counsel for the appellant argued that section 254(2) provides for two situations: (1) Suo moto rectification by the Tribunal within four years, and (2) Rectification upon application by either party without a time limit. Reliance was placed on the Nagpur Bench's decision in Bhillai Engg. Corpn. Ltd. v. Dy. CIT and the Gujarat High Court's decision in Asstt. CIT v. Saurashtra Kutch Stock Exchange Ltd. The counsel argued that the absence of specific words like "within a like period" in section 254(2) indicates no time limit for rectification upon application by either party.

Conversely, the learned DR argued that the four-year limitation applies to both suo moto rectifications and those requested by parties. He cited multiple ITAT decisions supporting this view and emphasized that the law of limitation is integral to the justice system. The DR contended that extending the limitation period would disrupt judicial discipline and finality of cases, contrary to legislative intent.

Tribunal's Analysis and Conclusion

Upon reviewing section 254(2), the Tribunal found that the provision envisages two situations for rectification: (a) Suo moto by the Tribunal, and (b) Upon application by either party. Both situations are subject to a four-year limitation period. The Tribunal held that the word "shall" in situation (b) makes rectification mandatory upon application, but the activity of rectification remains the same as in situation (a) and is subject to the same four-year limitation.

The Tribunal rejected the Nagpur Bench's interpretation that the four-year limit applies only to suo moto rectifications. The Tribunal emphasized that allowing unlimited time for rectification upon application would lead to chaos and undermine the finality of orders. The Tribunal also noted that similar rectification provisions in other statutes, such as the Central Excise Act and Customs Act, explicitly include a four-year limitation.

The Tribunal concluded that the four-year limitation applies to both suo moto rectifications and those requested by parties. Consequently, the Miscellaneous Application filed by the assessee on 11-4-2002 for rectifying the order dated 28-4-1997 was barred by limitation and dismissed.

Final Decision

The Tribunal held that no rectification could be made beyond the four-year period specified in section 254(2) of the IT Act, 1961. The Miscellaneous Application of the assessee was dismissed as time-barred.