2023 (8) TMI 1080 - HC - Income Tax

Rectification of mistake - scope and ambit of power of the Appellate Tribunal vested u/s 254(2) to rectify palpable mistake - Dismisal of appeal on low tax effect - HELD THAT - Only palpable errors which do not require detailed inquiry are amenable to power of rectification. Rectification is a power which is comparatively restrictive than the power of review. In the instant case, the stand of Revenue was accepted by the Tribunal by holding that appeal was wrongly dismissed u/s 268A(1) r.w.s. 268A(4) of IT Act, after holding that palpable error had crept in, inasmuch as Tribunal failing to see that appeals filed could not have been dismissed by Tribunal merely on the ground that financial implication involved is below 50 lacs especially when subject matter fell within the exception Clause 10(c) of CBDT Instruction No.03/2018 dated 11.07.2018 r/w Instruction No.17/2019 dated 08.08.2019, that the audit objection has been accepted. The fact, that Tribunal missed seeing this obvious and palpable mistake was certainly a cause giving rise to rectification and; therefore, this Court has no hesitation to hold that the power of rectification exercised by Tribunal u/s 254(2) of the IT Act was well within the bounds of law. Whether the documentary proof regarding acceptance of audit objection was on record of the Tribunal or not? - If not, then it s effect ? - This Court called the record of the Tribunal and perused the same. In both these records in original, this Court did not find any audit objection or its acceptance on record. Tribunal is a judicial body and; therefore, need to adhere to all the principles of natural justice which are codified in the Income Tax Act before deciding a case. In the instant case, it is not clear from the record as to whether the relevant documents being produced by the Revenue contains the foundational documents to support the ground that the case fell within the exception Clause 10(c) of CBDT Instruction No.03/2018, dated 11.07.2018 r/w Instruction No.17/2019 dated 08.08.2019. In view of above, this Court has no manner of doubt that the first question as regards jurisdictional purviews of power of rectification is concerned, the same is decided against the Assessee but the other substantial questions of law as aforesaid are decided in favour of the Assessee.

Summary

Issues involved:
The judgment involves the interpretation of the power of rectification under Section 254(2) of the Income Tax Act, 1961, specifically in the context of a final order passed by the Income Tax Appellate Tribunal. The key issues include whether the Tribunal can entertain a rectification application without pointing out a specific mistake in the order, whether the revenue can seek rectification on grounds not raised during the original hearing, whether the Tribunal can rely on documents not presented during the original hearing, and whether the Tribunal has the authority to call for fresh documents during rectification proceedings.

Scope of Power of Appellate Tribunal for Rectification:
The court examined the jurisdictional purview of the Appellate Tribunal under Section 254(2) of the IT Act in light of relevant legal precedents. It was established that rectification is limited to correcting obvious and patent mistakes, not debatable points of law. The court cited the Apex Court's decision in T.S. Balaram vs. Volkart Brothers to emphasize the requirement of rectifying mistakes apparent on the face of the record. Additionally, the court referenced Commissioner of Income Tax vs. Reliance Telecom Ltd. to highlight that the Tribunal's powers under Section 254(2) are restricted to rectifying mistakes without revisiting the entire appeal on merits.

Documentary Proof and Rectification:
The court addressed the issue of whether documentary proof regarding the acceptance of an audit objection was on record and its impact. Upon examining the Tribunal's records, the court did not find the audit objection or its acceptance. However, the Revenue presented additional submissions including documents claimed to be the audit objection and its acceptance. The court refrained from determining the relevance of these documents and left it to the Tribunal to consider, emphasizing the Tribunal's obligation to adhere to principles of natural justice and examine foundational documents before making a decision.

Decision:
The court held that the power of rectification exercised by the Tribunal was within the bounds of the law, as a palpable mistake had indeed occurred. While the first question regarding the jurisdictional purviews of rectification was decided against the Assessee, other substantial questions of law were decided in favor of the Assessee. Consequently, the court allowed the Assessee's appeal, setting aside the Tribunal's order and remanding the matter for reconsideration on the specified issue. The records were directed to be returned to the ITAT, and no costs were awarded in the matter.