2021 (4) TMI 417 - HC - Income Tax

Rectification u/s 254 - non consideration of the Judgment of the Hon'ble Bombay High Court - HELD THAT - On a reading of section 254(2), it is clear that the Tribunal, with a view to rectify any mistake apparent from the record, may amend the order. In the case on hand, the non consideration of the Judgment of the Hon'ble Bombay High Court cannot be construed as mistake as contemplated under section 254(2) . When the Tribunal has no jurisdiction to review the order passed by them, the remedy open to the assessee is to file an appeal against the order, if they are aggrieved over the same. The order passed by the Tribunal is beyond the scope of section 254(2). In these circumstances, the Tribunal should not have allowed the Miscellaneous Application.The questions of law raised in this appeal are decided in favour of the appellant-Revenue.

Summary

Issues:
Challenging order in M.A.No.22/Mds/2011 in I.T.A.No.1599/Mds/2009 for Assessment Year 2005-2006 by Revenue. Tribunal's decision on Rule 8D disallowance under section 14A. Tribunal's allowance of Miscellaneous Application by assessee. Interpretation of section 254(2) of Income Tax Act.

Analysis:
The case involved the Revenue challenging an order in M.A.No.22/Mds/2011 in I.T.A.No.1599/Mds/2009 for the Assessment Year 2005-2006. The assessee's return was scrutinized, and various issues were raised, including advances to a subsidiary company without interest and disallowance under section 14A. The Commissioner of Income Tax (Appeals) allowed the appeal, leading to the Revenue's appeal before the Income Tax Appellate Tribunal. The Tribunal dismissed the appeal on Rule 8D disallowance under section 14A, but the issue was sent back to the Assessing Officer for further computation. The assessee filed a Miscellaneous Application stating Rule 8D was not applicable for the assessment year, citing the Bombay High Court's judgment. The Tribunal allowed the Miscellaneous Application, prompting the Revenue's appeal.

The substantial questions of law raised included whether the Tribunal's decision on the Miscellaneous Application was beyond its power under section 254 of the Income Tax Act. The Senior Standing Counsel for the appellant argued that the Tribunal exceeded its jurisdiction by expunging a portion of the order, as section 254(2) only allows amendment for apparent mistakes. The Court noted that the non-consideration of the Bombay High Court's judgment was not a mistake under section 254(2) and that the Tribunal's action went beyond its review jurisdiction. The Court held that if aggrieved, the proper remedy for the assessee was to appeal, not for the Tribunal to amend its order. Consequently, the Tribunal's decision to allow the Miscellaneous Application was set aside, and the appeal was decided in favor of the Revenue.

In conclusion, the High Court allowed the Tax Case Appeal, setting aside the Tribunal's decision on the Miscellaneous Application. The Court emphasized the limitations of the Tribunal's power under section 254(2) of the Income Tax Act and upheld the appeal in favor of the Revenue, highlighting the importance of following proper legal procedures and remedies in tax matters.