2007 (5) TMI 295 - AT - Income Tax

Summary

Issues:
Appeal against decision of CIT(A) on rectification by AO under s. 154 r/w s. 271(1)(c) of IT Act, 1961 - Whether rectification order by AO is barred by limitation.

Analysis:
The appeal was filed by the assessee against the decision of CIT(A) regarding a rectification order passed by the Assessing Officer (AO) under section 154 read with section 271(1)(c) of the Income Tax Act, 1961. The main grievance of the assessee was that the rectification order by the AO was time-barred. The penalty was initially imposed for the assessment year 1998-99 but was rectified by the AO to be for the assessment year 1997-98. The CIT(A) upheld the rectification order and stated that the clerical mistake was protected by section 292B of the Act. The assessee contended that the rectification order was passed outside the time limit available to the AO, thus rendering the penalty time-barred. The argument was based on the date of the rectification order being considered as the date of the penalty order. However, the Tribunal found this argument to be fallacious.

The Tribunal referred to a judgment of the Madras High Court and emphasized that the date of the rectification order cannot be equated with the date of the original order for the purpose of computing time limits for imposing penalties. The Tribunal highlighted that the observations made in the judgment were being misinterpreted and applied out of context. It was clarified that a subsequent rectification order passed outside the time limit does not render the original order time-barred. Upholding the contentions of the assessee would lead to an absurd interpretation of the law, making the provisions of section 154 meaningless.

The Tribunal concluded that the grievance of the assessee was not sustainable in law and on the facts of the case. It was emphasized that the validity of the penalty order was not under dispute in the appeal, and the rectification order was passed within the time limit specified under section 154. Therefore, the Tribunal rejected the appeal and declined to interfere in the matter, ultimately dismissing the appeal.