2018 (3) TMI 966 - HC - Income Tax

Review of settlement to order passed u/s 245D(4) - application for rectification of the typographical errors under Section 245D(6B) - Held that - Once an order has been passed under Section 245D(4) of the Act, it is a final order settling the dispute between the parties. The provisions of the rectification of the order passed u/s 245D(4) is permissible u/s 245D(6B) only to rectify mistakes apparent from the record. Any issue which is debatable or which would requires re consideration of an issue which has already been decided, would fall out side the scope of a rectification application under Section 245D(6B). In the present case, the minority view, in fact, has upheld the review of order dated 27th June, 2016 passed under Section 245 D(4) of the Act by the order dated 27th July, 2016. This even without considering the scope of an application filed under Section 245D(6B). If the view taken by the minority member of the Commission is accepted, we fear, that then there would be no finality reached to an order passed by the Commission under Section 245D(4). This for the reason that application for rectification would be made under Section 245D(6B) to correct a final order passed under Section 245D(4) of the Act even though it is outside the scope of rectification. This would defeat the entire object and purpose of Chapter XIX A of the Act viz expeditious settlement of dispute between the assessee and State so as to reduce litigation and collect taxes at the earliest. In case, any party is aggrieved by an order passed under Section 245D(4) and the same is bad because it is contrary to the Act or in breach of principal of natural justice or suffer from a flaw in the decision making process, only then it is open to the party concerned to challenge the same before the High Court under Article 226 of the Constitution of India (see Jyotendrasinhji v/s. S. I. Tripathi (1993 (4) TMI 1 - SUPREME Court). Rectification application under Section 245D(6B) of the Act is not a remedy to correct a final order by reviewing it. The jurisdiction under Section 245D(6B) of the Act can only be exercised if the order contains an error which is apparent from the record. In these facts, we see no merit in the Petition.

Summary

Issues:
1. Challenge to the order passed by the Settlement Commission under Section 245 D(6B) of the Income Tax Act, 1961.
2. Validity of rectification of typographical errors in the order dated 27th June, 2016.
3. Correctness of rectification application under Section 245D(6B) seeking to restore the figures of returned income.
4. Jurisdictional scope of rectification application under Section 245D(6B) of the Act.

Issue 1: Challenge to the Settlement Commission's Order
The High Court considered a petition challenging the order passed by the Settlement Commission under Section 245 D(6B) of the Income Tax Act, 1961. The impugned order allowed the application of the Respondent-Assessee seeking a partial recall of the earlier order, which was a split verdict by a majority of 2:1 members of the Commission.

Issue 2: Validity of Rectification of Typographical Errors
The Respondent filed an application for rectification of typographical errors in the order dated 27th June, 2016, under Section 245D(6B) of the Act. The Commission corrected the disclosed income without a personal hearing, leading to a discrepancy in the declared income. This prompted another application seeking restoration of the original figures of returned income.

Issue 3: Correctness of Rectification Application
The Commission, after hearing the parties, allowed the application by a majority view, emphasizing that the rectification made in the earlier order was a mistake. The difference in income arose due to a claim for deduction under Section 80-IA, which was a debatable issue not subject to rectification under Section 245D(6B).

Issue 4: Jurisdictional Scope of Rectification Application
The Tribunal deliberated on the jurisdictional aspect of rectification under Section 245D(6B) of the Act. The majority view found the rectification in the earlier order to be improper and passed without hearing the parties, thus withdrawing it to ensure justice. The minority view upheld the review of the order without considering the scope of the rectification application, highlighting the need for finality in settlement orders.

The High Court clarified that challenging an order under Section 245D(4) of the Act is permissible if it violates statutory provisions or principles of natural justice. However, rectification under Section 245D(6B) is limited to correcting errors apparent from the record. The Court emphasized that rectification is not a remedy for reviewing a final order. Ultimately, the Writ Petition was dismissed, underscoring the importance of maintaining the sanctity of settlement orders and the limited scope of rectification applications.