2024 (1) TMI 802 - HC - Income Tax

Rectification u/s 254 allowed by ITAT - maintainability of Department appeals filed against relief given by CIT(A) - as argued Tribunal by allowing the Miscellaneous Application has gone into the merits of the case which is beyond its jurisdiction - Income Tax Department has preferred an application u/s 254(2) with Rule 13 of the Income Tax Appellate Tribunal Rules, 2007 mainly contending that the assessment order was passed pursuant to seizure of cash by the CBI and intimation of the same was sent to the department and the monetary limits prescribed in Para 3 of the said circular will not apply and appeal will be filed inspite of the low tax effect. Whether the learned Income Tax Tribunal committed illegality in allowing the Miscellaneous Application exercising its power conferred under Section 254(2) of the Income Tax Act? HELD THAT - In the present facts Tribunal vide its order while dismissing the appeal has taken into consideration the circular dated 11.07.2018 but has not taken into consideration when the said circular was amended on 20.07.2018 and subsequently Clause 10(e) has been inserted which clearly provides that if addition is based on information received from external sources in the nature of law enforcement agencies such as CBI/ED/DRI/SFIO/Directorate General of G.S.T. Intelligence (DGGI). The adverse judgment relating to the said issues will be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect. The assessment order passed by the Assessing Authority clearly provides that the undisclosed income belonging to the assessee is as per the investigation of C.B.I. thus, the learned Tribunal has not committed any illegality or irregularity in allowing the Miscellaneous Application filed by the Revenue. The order passed by the Income Tax Tribunal allowing the application is in accordance with the judgment passed by the Hon'ble Supreme Court in case of T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay vs M/s Vokart Brothers, Bombay 1971 (8) TMI 3 - SUPREME COURT Tribunal has not committed any illegality in allowing the Miscellaneous Application vide its order dated 19.10.2023 as there is apparent on the face of the record which can very well be rectified by the Tribunal while exercising the power under Section 254(2) of the Income Tax Act. The judgment cited by the learned counsel for the petitioner in case of Reliance Telecom Ltd. 2021 (12) TMI 211 - SUPREME COURT the Hon ble Supreme Court has held that the power conferred under Section 254(2) of the Act is akin to the Order 47 Rule 1 of the C.P.C. while considering the application u/s 254(2) Tribunal is not required to revisit the earlier order and go into the details of merits. The powers u/s 254(2) of the Act are only to rectify/correct any mistake apparent from the record.

Summary

Issues Involved:
1. Legality of the ITAT's order recalling its previous order.
2. Jurisdiction and power under Section 254(2) of the Income Tax Act.
3. Applicability of CBDT Circular No. 3/2018 and its amendment.

Summary:

Legality of the ITAT's Order Recalling its Previous Order:
The petitioner challenged the order of the ITAT dated 19.10.2023, which recalled its earlier order dated 17.01.2019. The ITAT had allowed the miscellaneous application filed by the Revenue, citing that the case was covered by the exception under clause 10(e) of CBDT's Circular No. 3/2018. The original assessment added Rs. 45,00,000 as undisclosed income based on CBI investigation, which the petitioner failed to refute with documentary evidence.

Jurisdiction and Power under Section 254(2) of the Income Tax Act:
The petitioner argued that the ITAT transgressed its jurisdiction under Section 254(2) by going into the merits of the case, which is beyond its scope. The petitioner relied on the Supreme Court's judgment in Commissioner of Income Tax vs Reliance Telecom Limited, which held that the ITAT's power under Section 254(2) is limited to rectifying mistakes apparent from the record and does not extend to revisiting the merits of the case.

Applicability of CBDT Circular No. 3/2018 and its Amendment:
The Revenue contended that the ITAT's dismissal of the appeal on 17.01.2019 did not consider the amendment to CBDT Circular No. 3/2018, which was already in effect. The amendment specified that appeals involving information from law enforcement agencies like CBI are to be contested on merits, irrespective of the tax effect. The ITAT's order allowing the miscellaneous application was in line with this amendment, correcting an apparent mistake on the record.

Court's Analysis and Conclusion:
The Court held that the ITAT did not commit any illegality in allowing the miscellaneous application as the mistake was apparent on the face of the record. The ITAT's order was consistent with the Supreme Court's judgments in cases like T.S. Balaram v. Volkart Brothers and Commissioner of Income Tax vs Hero Cycles Pvt. Ltd., which clarified that rectification under Section 254(2) is permissible for patent and self-evident errors. The Court dismissed the writ petition, affirming that the ITAT acted within its jurisdiction under Section 254(2).

Conclusion:
The writ petition was dismissed, upholding the ITAT's order that corrected an apparent mistake by considering the amended CBDT Circular No. 3/2018. The ITAT's action was within its jurisdiction under Section 254(2) of the Income Tax Act.