1981 (4) TMI 128 - AT - Income Tax

Summary

Issues:
1. Jurisdiction of the AAC to rectify the order under Section 154.
2. Applicability of Section 249(4) to appeals for the assessment years 1974-75 and 1975-76.
3. Power to rectify an order under Section 249.
4. Permissibility of rectification on a debatable question of law.

Analysis:

1. The first issue revolves around the jurisdiction of the AAC to rectify the order under Section 154. The AAC initially admitted the appeals and disposed of them on merits. However, the ITO moved an application for rectification, which the AAC dismissed. Subsequently, the AAC held that he had jurisdiction to rectify the order based on a mistake apparent from the record. The Tribunal, considering certain rulings, found that the AAC did not have the power to rectify the final order passed on merits under Section 250, as there was no mistake apparent from the record and Section 154 does not allow rectification of an order under Section 249.

2. The second issue pertains to the applicability of Section 249(4) to appeals for the assessment years 1974-75 and 1975-76. The AAC had admitted the appeals without considering the applicability of Section 249(4), which requires the payment of tax due or advance tax before filing an appeal. The Tribunal highlighted that the critical date for the accrual of the right of appeal is the date of the notice under Section 143(2). The Tribunal also discussed conflicting opinions on the applicability of Section 249(4) to appeals filed after October 1, 1975, emphasizing the need for a factual investigation into the service of notices.

3. The third issue addresses the power to rectify an order under Section 249. The Tribunal cited a ruling by the Allahabad High Court, stating that the AAC does not have the power of rectification under Section 154 for an order passed under Section 249(3). It clarified that rectification can be done for orders passed under Section 250, which are final orders passed on merits after the appeal has been admitted. The Tribunal concluded that the AAC erred in holding that he could rectify the final order passed on merits under Section 250 in this case.

4. The final issue discusses the permissibility of rectification on a debatable question of law. Citing the Supreme Court's decision in Volkart Brothers, the Tribunal emphasized that rectification is not permissible on a debatable question of law. Considering the highly disputable nature of the question regarding the applicability of Section 249(4) to the appeals in question, the Tribunal held that the AAC erred in canceling the orders and restored the original order passed by the AAC on September 11, 1979, for both years.

In conclusion, the Tribunal allowed both appeals, canceled the subsequent orders of the AAC, and restored the original order passed on September 11, 1979, highlighting the importance of adhering to procedural requirements and the limitations on the power to rectify orders under specific sections of the Income Tax Act, 1961.