2010 (2) TMI 53 - HC - Income Tax

Penalty u/s 271(1)(c) Rectification of an order - Non discloser of income - While completing the assessment for the assessment year 1982-83 in respect of the assessee s production of a Tamil picture titled Ananda Ragam , the assessing officer opined that the assessee concealed with the particulars of income and furnished inaccurate particulars of income, particularly the non-disclosure of Rs.3,00,000/- received as royalty resulting in reduction/evasion of tax. Hence a show cause notice read with Section 271(1)(c) of the Act was issued to the assessee. After considering the objections and after giving sufficient opportunity, the assessing officer quantified the penalty in a sum of Rs.2,21,320/- - Tribunal deleted the penalty in an order of rectification - held that - . Once an application seeking for rectification is disposed of, be it the revenue or the assessee, if aggrieved, should have the recourse to the provisions of appeal before this Court and either of them cannot invoke the provisions of Section 254(2) by filing another application for rectification which, in our view, cannot be entertained under that section. We may also observe that on the facts of this case, by the subsequent order of rectification, the original order of the Tribunal itself is sought to be rectified, which resulted in the deletion of the penalty levied under Section 271(1)(c) of the Act. Order of ITAT deletion of penalty by rectifying its order reversed decided in favor of revenue.

Summary

Issues:
1. Entitlement of the Tribunal to entertain a second application for rectification of its order.
2. Validity of the order cancelling the penalty under Section 271(1)(c) based on a second Miscellaneous Petition.
3. Barred by the period of limitation prescribed under Section 254(2) of the Income Tax Act.

Entitlement of the Tribunal to entertain a second application for rectification of its order:
The core issue in this appeal revolves around whether the Appellate Tribunal, under Section 254(2) of the Income Tax Act, can entertain an application seeking rectification of its order for the second time after a similar application was rejected earlier. The Tribunal is empowered to rectify any mistake apparent from the record within four years from the date of the order. In this case, the assessee had previously filed an application for rectification which was rejected. The Court opined that once an order for rectification is passed and merges with the original order, filing another application for rectification may not be permissible. Allowing multiple rectification applications would lead to a review of the earlier order, a power not vested in the Tribunal under Section 254 of the Act. The finality of orders is crucial, and parties aggrieved by such orders should seek recourse through appeal rather than filing repeated rectification applications.

Validity of the order cancelling the penalty under Section 271(1)(c) based on a second Miscellaneous Petition:
The case involves an assessment where the assessing officer found the assessee to have concealed income and furnished inaccurate particulars, resulting in a penalty under Section 271(1)(c) of the Act. The Tribunal initially dismissed a rectification application by the assessee related to the payment of royalty. Subsequently, the assessee filed another Miscellaneous Petition pointing out factual discrepancies in the main appeal's disposal, which was allowed by the Tribunal. The revenue challenged this order, questioning the validity of cancelling the penalty based on the second Miscellaneous Petition. The Court emphasized that the power for rectification should not be repeatedly invoked, especially when an order merges with the original order of the Tribunal. The subsequent rectification, in this case, sought to rectify the original order, resulting in the deletion of the penalty levied under Section 271(1)(c) of the Act.

Barred by the period of limitation prescribed under Section 254(2) of the Income Tax Act:
The order cancelling the penalty under Section 271(1)(c) was based on a second Miscellaneous Petition filed by the assessee. The revenue contended that the Tribunal exceeded its jurisdiction by entertaining the second application for rectification beyond the prescribed period of limitation under Section 254(2) of the Income Tax Act. The Court highlighted that the provision allows rectification of mistakes apparent from the record within four years from the date of the order. The subsequent rectification application, filed after the rejection of a similar application earlier, raised concerns regarding the validity of the order cancelling the penalty. The Court ultimately allowed the tax case appeal in favor of the revenue, emphasizing the importance of adhering to the statutory limitations and the finality of orders in such matters.