2008 (5) TMI 22 - SC - Income Tax

Section 254(2) deals with the powers of Tribunal to rectify mistakes - second part of section 254(2), refers to rectification on an application being made by the AO or by assessee pointing out the mistake apparent from the record - Once the assessee has moved the application within 4 years from the date of appeal, the Tribunal cannot reject that application on the ground that four years have lapsed , which includes the period of pendency of the application before the Tribunal

Summary

Issues: Scope of Section 254(2) of the Income Tax Act, 1961; Interpretation of powers of the Tribunal in rectifying mistakes apparent from the record.

Scope of Section 254(2) of the Income Tax Act, 1961:
The case involved the interpretation of Section 254(2) of the Income Tax Act, 1961, regarding the powers of the Tribunal in rectifying mistakes apparent from the record. The controversy arose when the Tribunal allowed rectification beyond four years, leading to an appeal to the High Court challenging the Tribunal's decision. The High Court held that the Tribunal had no power to rectify mistakes after four years, solely based on the limitation specified in Section 254(2). However, the Supreme Court analyzed the provisions of Section 254(2) and concluded that the Tribunal could rectify mistakes within four years, whether on its own or upon application by the assessee or Assessing Officer.

Interpretation of powers of the Tribunal in rectifying mistakes apparent from the record:
The Supreme Court delved into the two parts of Section 254(2) to clarify the Tribunal's powers in rectifying mistakes. The first part allows the Tribunal to rectify any mistake within four years from the date of the order, whether on its own or upon application. The second part pertains to rectification and amendment upon application by the assessee or Assessing Officer pointing out the mistake. In this case, the rectification application was filed within four years, and the delay in disposal was attributed to the Tribunal. The Court disagreed with the High Court's ruling that the application could not be entertained beyond four years, citing a similar judgment by the Rajasthan High Court. The Supreme Court set aside the High Court's judgment and remanded the case for a fresh decision, emphasizing that all contentions on merits were to be considered by the High Court.

In conclusion, the Supreme Court's judgment clarified the scope of Section 254(2) of the Income Tax Act, 1961, and affirmed the Tribunal's authority to rectify mistakes within four years from the date of the order. The decision highlighted the importance of timely disposal of rectification applications and directed the High Court to reconsider the case on its merits, leaving all contentions open for further examination.