POWERS OF INCOME TAX APPELLATE TRIBUNAL

[Mr. M. GOVINDARAJAN]

Section 253 of the Income Tax Act, 1961 provides for filing appeal against the order of lower authorities before the Income Tax Appellate Tribunal.  Section 254 provides for the issue of orders by the Appellate Tribunal.  The Income Tax (Appellate Tribunal) Rulings, 1963 gives the procedure to be adopted by the Tribunal while dealing with the appeal filed before it.  The rules gives various powers to the Tribunal.  Section 254 of the Act provides the power to the Tribunal rectify the mistake.  Rule 24 gives powers to the Tribunal to pass ex-parte order.  Rule 28 gives powers to the Tribunal to remand the case.   The various powers of the Tribunal are discussed in this article with reference to decided case laws.

Powers of rectification

 In ‘Commissioner of Income Tax V. Earnest Exports Limited’ – 2010 (2) TMI 261 - BOMBAY HIGH COURT it was held that the power of rectification under Section 254 (2) is confined to merely rectification of a mistake apparent on record.   It does not empower the Tribunal at the stage of deciding the application under Section 254 (2) to substitute its view for the view taken in the order sought to be rectified.  The Court further held that the scope of Sec. 254 (2) is only to correct the mistake errors apparent on the facts of the record and it does not contemplate giving a fresh decision on the merits by substituting the earlier view.

Second application for rectification

In ‘Commissioner of Income Tax V. Pearl Woollen’ – 2009 (11) TMI 48 - PUNJAB AND HARYANA HIGH COURT  the Tribunal has dismissed the first application for rectification against an order which had restored addition at the instance of the Department but admitted a second application and deleted the addition.   The Department questioned the validity of the second order.   The High Court held that the Tribunal cannot readjudicate the matter having once decided on the matter of rectification.   Even otherwise an application for a review of decision could not fall within the purview of powers under Section 254 of the Act.

Admitting new plea

In ‘Commissioner of Income Tax V. Hindustan Tin Works Limited’ –2009 (2) TMI 481 - Delhi High Court it was held that the Tribunal cannot entertain a new plea which had not been raised before the lower authorities.   In this case the claim of loss in purchase and redemption of units in mutual funds was not allowed on the ground that it was not the assessee’s los, but merely an accommodation entry, which was collusive and could not, therefore, be accepted as genuine.   It was during the assessee’s appeal before the Tribunal that a further question relating to Section 1 4A of the Act was sought to be raised by the Revenue unsuccessfully, though it was not raised before the lower authorities.   The High Court upheld the decision of the Tribunal.

Power to admit new questions

The Tribunal has powers to allow new questions to be raised.   But when the new question related to validity of service, it is a matter which cannot be raised for the first time before the Tribunal though the assessment related to a year earlier to the insertion of Section 292BB of the Act.  The High Court in ‘Aravali Engineer P. Limited V. Commissioner of Income Tax’ – 2010 (12) TMI 750 - PUNJAB AND HARYANA HIGH COURT  felt that the Section supports the view though not applicable during the year, since it is still a matter, which could not fall under the discretion of the Tribunal.   Probably such an argument could be shut out even on the ground that it would require examination of facts not on record.

Recall of the order

The question of recall of the order by the Tribunal may not ordinarily arise.   But where there is a mistake, which goes to the root of the matter and the mistake is best rectified by total recall of the order, it should be understood as falling within the power of the Tribunal.   In ‘Lackmann Dass Bhatia Hingwala (P) Limited V. Assistant Commissioner of Income Tax’ – 2010 (12) TMI 105 - DELHI HIGH COURT the Tribunal recalled the order at the instance of the Revenue.  The High Court held that such recall was considered justified in the facts of the case after the review of the entire case law on the subject.

In ‘K.K. Ravindran V. ITAT’ – 2010 (7) TMI 564 - Orissa High Court  the Tribunal has deleted an addition of ₹ 17 lakhs as undisclosed investment with reference to the valuation of property on the basis of District Valuation Officer’s report on the ground that the valuation was not based upon any material.   But later the Tribunal recalled the entire order on a miscellaneous petition filed by the Revenue in the view that the alternative argument for adoption of a fair value instead of what was adopted in the assessment would require consideration.   However even the issue was whether the recall would fall within the scope of Section 254.   There was no error in the face of the record.   If the Revenue was aggrieved by the order, the proper course is to file an appeal against the same.  The High Court quashed the order of the Tribunal as it was beyond the scope and ambit of Section 254.

 In ‘Commissioner of Income Tax V. Satpal Pandit & Co’ – 2010 (9) TMI 837 - Punjab and Haryana High Court  the assessment was annulled in first appeal on grounds of limitation, which was upheld by the Tribunal but reversed by the High Court.  The High Court remanded the matter to the Tribunal.  The assessee filed a petition for rectification on the ground that the assessee’s other grounds, objections to the assessment in the first appeal had not been considered.   On such objection, the order was recalled by the Tribunal and the case was posted for deciding the matters which were not considered.   The Department went in appeal against the order of recall.   The High Court pointed out that the Commissioner (Appeals) had not touched upon the additions made by the Assessing Officer, so that the issue on merits could not have been decided by the Tribunal.  The High Court felt that the order of the Tribunal recalling the order could not be interfered with, so that on revival of the appeal, justice could be done to both the parties by remitting the matter on merits also to the Commissioner (Appeals).

Power of remand

The power of remand is a necessary adjunct to the powers of an appellate authority for obtaining all the relevant information for a fast conclusion.   In ‘Commissioner of Income Tax V. Mira S. Khurana’ – 2010 (4) TMI 745 - Gujarat High Court  the gift was said to have been received from an unrelated nonresident with no supporting material as to the financial capacity of the donor with hardly any acquittance with the donor except during a short visit to Dubai with gift being ₹ 10 lakhs allegedly made with two years of such visit.  From the facts, it was held that there could be no occasion for inference that all necessary materials on record were not sufficient for a conclusion so as to require a remand.   The appeal was restored to the Tribunal for a decision after hearing the appeal.   The High Court held that the order of remand by the Tribunal was held to be unjustified.

In ‘Satnam Singh V. Commissioner of Income tax’ – 2009 (10) TMI 599 - Punjab and Haryana High Court  the Assessing Officer issued a notice under Section 148 of the Act.   Since service could not be effected in normal course, the notice was served by affixation at the last known residential address of the assessee.  Thereafter the assessment was made.   On appeal the Commissioner (Appeals) accepted the explanation of the assessee.  The Tribunal held that the affixation was not in the presence of two persons and this notice was bad.  The Tribunal remanded the matter to the Assessing Officer for passing a fresh order.   The High Court held that the Commissioner (Appeals) having set aside the reassessment on merits, the Tribunal was required to adjudicate upon the issue on the merits.   There was no justification for remanding the matter.

Power to re-open an ex-parte order

Rule 24 of Income Tax Appellate Tribunal Rules, 1963 provides for an ex-parte order for default of appearance on the part of the assessee.  Rule 24 has a proviso which requires re-opening the matter on a representation by the appellant that his non appearance was due to sufficient cause.   In ‘Devendra G. Pasal V. Assistant Commissioner of Income Tax’ – 2010 (10) TMI 256 - Gujarat High Court the assessee’s reason for non appearance was his belief that his request for posting at ensuing Baroda camp would be considered, so that there would be no need for appearance earlier.   In support of his bona fide an affidavit from a Chartered Accountant was filed and the matter was represented by an Advocate in the matter of petition for restoring the appeal.   The Tribunal declined to accept the affidavit of Chartered Accountant on the ground that no power of attorney was filed and the explanation of the Advocate was not accepted on the ground that the assessee being aware that there was no positive response for his application before the date of hearing, should have presented himself so that there was no excuse of non appearance.   The Tribunal also noted that the application for posting at Baroda had been rejected by the Vice President which was not known either to the appellant or to the Bench at the relevant time.  The High Court found that the averments made in the application for restoration have not been considered and the finding of the Tribunal is contrary to record, since it has not considered the assessee’s application for hearing at Baroda.  The High Court described the approach of the Tribunal as prompted by ‘hyper technical approach’ and directed the acceptance of misc. application restoring the appeals preferred by the appellant.

In ‘Jagjivaridas Nandlal & Co. V. ITAT’ – 2010 (10) TMI 574 - Bombay High Court  the High Court observed that the ex-parte order was passed by the Tribunal on factually wrong interference of proper service so that they had been breach of the principles of Natural Justice in passing the order without hearing the assessee and that a decision rendered behind the back of the assessee or his Advocate cannot be sustained.   The Tribunal’s order has generated litigation, which should have been avoided.

Powers restricted to issues before it

In ‘S.A. Rahim V. Commissioner of Income Tax’ – 2010 (8) TMI 624 - Andhra Pradesh High Court the High Court found that the matter decided by the Tribunal was beyond its jurisdiction on a matter which was not before it so that the orders of the Tribunal were set aside and appeals allowed.