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TMI Blog2010 (8) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... here the legal substantiality of an order passed under Section 254(2) of the Income Tax Act, 1961 is called in question on the foundation that the order would not come within the ambit and sweep of 'every order as engrafted under the provision meant for appeal‟. At that juncture, the learned counsel for the revenue had commended to the decisions in Visvas Promoters (P) Ltd. v. Income Tax Appellate Tribunal & Anr. (2009) 226 CTR (Madras) 638, Chem Amit v. Assistant Commissioner of Income Tax (2005) 272 ITR 397 (Bombay) and Shaw Wallace & Co. Ltd. v. Income Tax Appellate Tribunal & Others, [1999] 240 ITR 579 (Calcutta). 3. Mr. Mehta, the learned counsel for the assessee-appellant, had drawn inspiration from L. Sohanraj and Others v. Deputy Commissioner of Income Tax and Anr. (Kar.) (No.1) [2003] 260 ITR 147 (Karnataka), Deputy Commissioner of Income Tax v. H.V. Shantharam [2003] 260 ITR 156 (Karnataka) and Jagdish Chandra and Sons v. ITAT & Another, [2005] 266 ITR 165 (Allahabad). 4. The Division Bench scanned the anatomy of Section 254 as well as Section 260A and referred to the decisions of various High Courts, took note of the fact that this Court had entertained appeals i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee, has referred us to the Objects and Reasons to highlight why Section 260A was incorporated in the Statute book. Quite apart from the same, the learned counsel has drawn inspiration from a Division Bench decision of this Court in Rahulijee and Company P. Ltd. v. ITAT & Ors., 323 ITR 327 and the authorities in L. Sohanraj (supra), H.V. Shantharam (supra) and Jagdish Chandra (supra). 8. Mrs. Prem Lata Bansal, learned counsel for the revenue, submitted that sub-section (4) of Section 260A has to be taken into consideration while interpreting the provision of Section 260A in entirety so that it will be quite clear that an appeal would lie. Be it noted, such a submission has been canvassed by Mrs. Prem Lata Bansal as she thought it apposite to assist the Court to put the controversy to rest. 9. To appreciate the rivalised submissions raised at the Bar, it is seemly to refer to Section 260A of the Act which reads as follows: "Appeal to High Court 260A (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, before the date of establishment of the National Tax Tribunal, if the High Court is satisfied that the case involves a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer: Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard: Provided further that any application filed by the assessee in this sub-section on or after the 1st day of October, 1998, shall be accompanied by a fee of fifty rupees. (2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) of section 253 or sub-section (2) of section 253: Provided that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce under s.256 of the IT Act, 1961, could be made from the order of the Appellate Tribunal passed on the application for rectification under Section 254(2). That was so held by the Supreme Court in the light of the language of s.256 which empowered the assessee and the Revenue to "require the Tribunal to refer to the High Court any question of law arising out of an order passed under s.254". Sec.254 comprises two sub-sections. Sub-S.(1) of s.254 provides that the Tribunal may pass such order on an appeal as it thinks fit after giving both the parties to the appeal an opportunity of being heard. Sub-s.(2) of s.254 permits the Tribunal to rectify any mistake apparent from the record and amend any order passed under sub-s.(1) within four years from the date of the order. The expression employed in s.260A that provides for an appeal to the High Court is materially different from the expression used in s.256 that empowers the assessee and the Revenue to require the Tribunal to refer to the High Court any question of law. As already noticed above, in s.256 the expression used is, "require the Tribunal to refer to the High Court any question of law arising out of an order passed under s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing with regard to the maintainability of the appeal under Section 260A of the Act, opined that if an order under Section 254 takes the shape of modifying the main order by way of amendment or rectification, the original order to some extent and then both the orders can jointly be appealable but an order of recall is clearly not appealable. 12. In Visvas Promoters (P) Ltd. (supra), a learned Single Judge of the Madras High Court, after referring to the decision in Chem Amit (supra), has held thus: "Therefore, the term, 'every order' referred to in s.260A, apart from being qualified as one involving substantial question of law, would mean an order which finally disposes of the rights of the parties in controversy. In cases where an application for rectification is made and an order passed under s.254(2) of the Act by merely rejecting such application, it does not decide the substantial issue involved between the parties, since the issue has already been decided under s.254(1) of the Act by the Tribunal and if the application is filed subsequently under s.254(2) by way of miscellaneous petition for rectification of mistake within the period of limitation, viz., 4 years an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication under Section 254(2). We think it fruitful to reproduce the passage dealing with the same: "The scope and ambit of an application of section 254(2) is very limited. The same is restricted to rectification of mistakes apparent from the record. We shall first deal with the question of the power of the Tribunal to recall an order in its entirety. Recalling the entire order obviously would mean passing of a fresh order. That does not appear to be the legislative intent. The order passed by the Tribunal under Section 254(1) is the effective order so far as the appeal is concerned. Any order passed under section 254(2) either allowing amendment or refusing to amend gets merged with the original order passed. The order as amended or remaining unamended is the effective order for all practical purposes. The same continues to be an order under section 254(1). That is the final order in the appeal. An order under section 254(2) does not have existence de hors the order under section 254(1). Recalling of the order is not permissible under section 254(2). Recalling of an order automatically necessitates rehearing and re-adjudication of the entire subject matter of appeal. The dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit and may be either preliminary or final; but it is a formal expression of an adjudication by the Court. Any alteration in this formal expression shall undoubtedly be a decree; but in the case of a clerical correction, this formal expression of an adjudication of the conclusive determination of the rights of the parties is not at all varied, and there is no modification and/or alteration of the decree as expressed by the Court...." 20. A Full Bench of Orissa High Court in Dinamani Debi v. Paramananda Choudhury & Anr., AIR 1980 Orissa 177 opined as follows: "11. An order of remand under Section 151, C.P.C. is appealable only when it amounts to a decree. Where the order of remand merely sets aside the decree of the trial Court and does not itself decide any of the points raised for determination and does not determine the rights of the parties with regard to any of the matters in controversy in the suit, it cannot amount to a decree and must be treated as an order. The mere fact that the order reverses the decree of the trial Court and deprives a party of the valuable right it had acquired thereunder would not make an order of remand a "decree", unless that order itself determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inclined to agree with the view expressed by the High Court of Bombay, Calcutta, Punjab & Haryana, Allahabad and Madras that when an order under Section 254(2) is amended, both the main order as well as the amended order would be amenable to appeal. As far as the view taken by the Karnataka High Court is concerned, it is noticeable that a plea of alternative remedy was raised and that was not accepted and the Division Bench of the Karnataka High Court concurred with the view taken by the learned Single Judge. Therefore, with utmost reasons, we are unable to agree with the view expressed by the Karnataka High Court. 23. In view of our foregoing analysis, we proceed to record our conclusions in seriatim: (i) An order passed under Section 254(2) recalling an order in entirety would not be amenable to appeal under Section 260A of the Act. (ii) An order rejecting the application under Section 254(2) is not appealable. (iii) If an order is passed under Section 254(2) amending the order passed in appeal, the same can be assailed in further appeal on substantial question of law. 24. At this juncture, Mr. Mehta submitted that if the assessee is not in a position to prefer an appeal, he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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