1986 (6) TMI 91 - AT - Income Tax

Powers And Procedure Of, Settlement Commission, Apparent From Record, Rectification Of Mistakes

Summary

Issues:
1. Whether the Income Tax Officer (ITO) was justified in rectifying an order under section 154 of the Income-tax Act, 1961 while the case was pending with the Settlement Commission.

Analysis:
The dispute in this case revolved around the ITO's authority to rectify an order under section 154 of the Income-tax Act, 1961, while the case was pending with the Settlement Commission. The department argued that the Settlement Commission's jurisdiction does not extend to matters not subject to settlement, allowing the ITO to rectify such issues. Specifically, the case involved the incorrect allowance of relief under section 80J of the Act for the sixth year, which was not permissible for the assessee. The department contended that the rectification under section 154 was valid even on merit.

On the other hand, the assessee argued that they had applied to the Settlement Commission, and the ITO proceeded with the assessment despite the pending settlement application. The assessee highlighted that the Settlement Commission's powers under section 245F(1) and (2) grant exclusive jurisdiction over assessments. They emphasized that the Settlement Commission should have authority over the assessment, and there should not be separate orders by the ITO and the Settlement Commission on the same matter.

The Tribunal analyzed the provisions of sections 245 and 153 of the Act, emphasizing the Settlement Commission's exclusive jurisdiction once an application is admitted. The Tribunal noted that there is no provision for piecemeal assessment by both the ITO and the Settlement Commission. The Tribunal also referred to Explanation 1(v) to section 153, which allows the exclusion of time if an application to the Settlement Commission is rejected, indicating that the ITO can wait for the Commission's decision before proceeding with the assessment.

Ultimately, the Tribunal held that the ITO's rectification under section 154, withdrawing the relief under section 80J, was justified as the assessee was not entitled to the relief for the sixth year. The Tribunal quashed the order of the Commissioner (Appeals) and restored the ITO's order, allowing the departmental appeal.

In conclusion, the Tribunal clarified the Settlement Commission's exclusive jurisdiction over assessments and upheld the ITO's authority to rectify orders under section 154, especially when the relief granted was found to be incorrect.