S.254(2)- rectification of orders of ITAT – issues of limitation practical aspects.

S.254(2)- rectification of orders of ITAT – issues of limitation practical aspects.

Relevant portion of provision about rectification with highlights added by author is given below:

Orders of Appellate Tribunal.

254. (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.

(1A) 1[****]

(2) The Appellate Tribunal may, at any time within 12[six months from the end of the month in which the order was passed] 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 2[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 :

3[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.]

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Observations:

S.254 concerns about orders of Tribunal. Such order can be original order on appeal vide sub-section (1) and  suo moto order  for rectification of original  order  and rectification order on an application by assessee or the Assessing officer.

Overall limitation for passing rectification order by Tribunal:

Sub-section 2 analysed:

(2) The Appellate Tribunal may, at any time within 12[six months from the end of the month in which the order was passed] 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 2[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 :

Analysis of first limb:

In first limb related to suo moto ( at its own)  rectification order word used is ‘may’ this means that it is not mandatory  for Tribunal to pass rectification order at its own.

The limitation provided is very short  that is within six month from end of month in which the order was passed  . For example, order passed in month of January say on 1st January  can be rectified at any time from 1st January to 31st July of the same year. This is irrespective of service of order of Tribunal on assessee or the AO.

However,  in case the order of rectification will have  adverse impact on  assessee then, Tribunal  shall have  to give notice and provide reasonable opportunity to assessee in this regard to hear him that is the assessee can make objection as to alleged mistake  is not a mistake at all or the mistake is not apparent from records.

On reading of section, it also appears that Tribunal is not required to give any notice to AO/ revenue even if rectification will adversely effect  the revenue. However, to comply with principal of natural justice, Tribunal will do well to give notice to the revenue and provide opportunity of hearing  before passing any adverse order affecting revenue adversely.

Secon limb- rectification of request of parties( assessee and .or AO)

“ …. and shall make such amendment if the mistake is brought to its notice by the assessee or the 2[Assessing] Officer …..”

Unquote

It can be that either or both parties find mistakes apparent from record. In that case assessee as well AO can make rectification petition. In case of assessee he has to pay a fees of Rs.50/- but AO is not required to pay such fees.

Such applications are classified as ‘Miscellaneous Application’ in short MA on the portal of ITAT and are also numbers as MA   and tagged with original appeal from which is  arising  and are known or described as MA  no.  arising from …..ITA no ….

Overall limit is for passing order:

On plain reading of section, it appears that overall limit to pass an order of rectification is six month from the end of month in which the order was passed. One view is possible that the Tribunal cannot pass order after such six months.  Therefore, it will be on safe side for Assessee and the AO to make rectification petition as soon as order of Tribunal is pronounced and is available on website of ITAT. This will ensure that Tribunal can also pass order within limitation of six months.

However, as a matter of practice, and reading of judgments including on aspect of condonation of delay it is considered that if assessee or AO makes an application within six months, then Tribunal can consider such application. There seems no dispute raised in this regard. However, if a dispute is raised by any party or Tribunal, then on principal of strict interpretation it can be held that for rectification overall limitation is six months from end of month in which the original order was passed and Tribunal has no power to pass any order of rectification after lapse of such six months limitation.