2021 (7) TMI 403 - AT - Income Tax

Rectification u/s 254 - notice under section 143(2) - HELD THAT - The scope of the provisions of section 254(2) is very limited and only those errors which are apparent or arithmetical can only be rectified. The scope of provisions of section 254(2) of the Act has been repeatedly examined by the Hon'ble Apex Court and various High Courts and it was held that the Tribunal can rectify only those mistakes which are arithmetical or clerical or apparent in its order. The Tribunal has no jurisdiction to review its own order in the garb of rectification. It was also held that if the Tribunal commits an error of judgement, that error cannot be rectified under the provisions of section 254(2) as the Tribunal is not empowered by the statute to review its own order. Similar views have also been expressed by CIT Vs. Prahlad Rai Todi 2001 (7) TMI 111 - GAUHATI HIGH COURT by holding that A bare look at section 254(2) will show that this section gives the power to rectify any mistake apparent from the record and not to amend any order passed by it and to make such amendment if the mistake is brought to its notice by the Assessing Officer or the assessee. So, when we speak of amendment or rectifying the mistake, the earlier order can never be recalled by the Tribunal. The earlier order must hold the field and the mistake can be rectified or amended can be made to the order. The Tribunal cannot, in law and facts, recall and destroy its final order as a whole with a view to rectify the same order under section 254(2) of the Act. The action of the Tribunal actually amounts to review of its earlier order and that power to review is not available to the Tribunal. No merit in this Miscellaneous Application of the Department, as no error apparent in the order of the Tribunal is pointed out. The ld. D.R. has tried to dispute the findings of the Tribunal and is seeking a review of the order of the Tribunal, which is not permissible under section 254(2)

Summary

Issues Involved:
1. Service of Notice under Section 143(2) of the Income Tax Act.
2. Applicability of Section 292BB of the Income Tax Act.
3. Scope of Rectification under Section 254(2) of the Income Tax Act.

Detailed Analysis:

1. Service of Notice under Section 143(2) of the Income Tax Act:
The primary issue raised by the assessee was the non-service of notice under Section 143(2) of the Income Tax Act. The Tribunal observed that the notice dated 28/8/2015 was served on Abdul Wahid and not on the assessee or his agent. The Tribunal referenced the case "Harsingar Gutkha (P.) Ltd. vs. CIT," where it was held that the service of notice within the stipulated period is mandatory. In the absence of such service, the assessment proceedings are deemed to have ended. Consequently, the Tribunal quashed the entire proceedings, holding them null and void.

2. Applicability of Section 292BB of the Income Tax Act:
The Revenue contended that the Tribunal failed to consider the provisions of Section 292BB of the Act, which states that if an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served. The Tribunal, however, did not find this argument persuasive, noting that the Department did not raise this objection during the initial arguments.

3. Scope of Rectification under Section 254(2) of the Income Tax Act:
The Department filed a Miscellaneous Application for rectification under Section 254(2), arguing that the Tribunal's order contained mistakes. The Tribunal emphasized that the scope of Section 254(2) is limited to rectifying apparent mistakes, which are clerical or arithmetical in nature. It cannot be used to review or reappraise the case. The Tribunal cited several judgments, including "CIT Vs. Vardhman Spinning" and "CIT Vs. Suman Tea and Plywood Industries (P) Ltd.," which clarified that rectification cannot be equated with a review. The Tribunal concluded that the Department's application was essentially a request for a review, which is not permissible under the statute.

Conclusion:
The Tribunal dismissed the Miscellaneous Application filed by the Department, reaffirming that no notice under Section 143(2) was served on the assessee, and the proceedings were correctly quashed. The Tribunal also reiterated that it does not have the jurisdiction to review its own orders under the guise of rectification as per Section 254(2) of the Act. The order was pronounced in the open court on 01/06/2021.