2017 (1) TMI 1242 - HC - Income Tax

Rejection of rectification application - order passed under Section 254(1) was passed beyond the period of 90 days from the date of conclusion of its hearing - it records that administrative clearance had been taken to pass such an order beyond the period of 90 days - Held that - We are unable to comprehend the meaning of Administrative clearance in the face of Rule 34 (5)(c) read with Rule 34(8) of the Tribunal Rules. It is clear that the above provisions mandate the Tribunal to pronounce its order at the very latest on or before the 90th day, after the conclusion of the hearing. In fact, this Court in Shivsagar Veg. Restaurant (2008 (11) TMI 64 - HIGH COURT BOMBAY ) after referring to various decisions of the Apex Court directed the President of the Tribunal to frame guidelines to prevent delay in delivery of orders/judgments. It also directed all the revisional and appellate authorities (including Tribunal) under the Act to decide the matters heard by them within a period of three months from the date of the conclusion of the hearing. This is further compounded by the fact that the submission of the petitioner in respect of the entire issue being covered by orders of coordinate benches was according to the petitioner, lost sight of while passing the order dated 3rd February, 2016. In the above view, the impugned order rejecting rectification application has not considered the aforesaid Rules and the binding decisions of this Court. Therefore on the aforesaid ground alone, the impugned order is not sustainable.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal under Article 226 of the Constitution of India - Dismissal of rectification application under Section 254(2) of the Income Tax Act, 1961 for A.Y. 2009-10.

Analysis:
The petitioner challenged the order passed by the Income Tax Appellate Tribunal (Tribunal) under Section 254(2) of the Income Tax Act, 1961, which dismissed the rectification application related to the order dated 3rd February, 2016. The petitioner raised two main grievances before the Tribunal and the High Court. Firstly, the order of 3rd February, 2016 was passed beyond the stipulated 90-day period after the conclusion of the appeal hearing, violating Rule 34(5)(c) of the Tribunal Rules and a previous decision of the High Court. The delay was argued to have prejudiced the parties as relevant decisions were ignored. Secondly, a subsequent judgment by the jurisdictional High Court favored the petitioner, indicating a need for rectification based on the principle established in ACIT v/s. Saurashtra Kutch Stock Exchange Ltd. The Tribunal's order did not dispute the delay in passing the initial order and mentioned "administrative clearance" as the reason for the delay, a term not defined or explained adequately. The High Court found this justification inadequate, emphasizing the mandatory nature of pronouncing orders within 90 days as per the Tribunal Rules and previous directives by the High Court to prevent delays in delivering judgments. The failure to consider these rules and precedents rendered the Tribunal's order unsustainable.

The High Court further noted that the Tribunal did not address the second issue of rectification based on the subsequent favorable judgment by the jurisdictional High Court. Since the first issue warranted setting aside the impugned order and remanding the matter to the Tribunal for reconsideration, the High Court directed the Tribunal to also address the rectification application in light of the relevant legal principles established by previous court decisions. The High Court ultimately set aside the impugned order and instructed the Tribunal to reevaluate the petitioner's application for rectification in accordance with the law, keeping all contentions open. The petition was disposed of accordingly, with no order as to costs.