2004 (7) TMI 77 - HC - Income Tax

Tribunal Overreach: High Court Corrects Legal Error, Affirms Waiver of Interest

The High Court found that the Tribunal's failure to acknowledge the finality of the March 17, 1989, order was a clear error on the face of the record. The ... Rectification u/s 254(2) – finality of the appellate order - error apparent on the face of the record - assessee/appellant submitted a return under the amnesty scheme and offered the gratuity liability on the basis of actuarial certification for taxation – by an order dated March 17, 1989, the CIT (Appeals) held that no interest can be charged either u/s 139(8) or u/s 215 in a reassessment made u/s 147 - According to assessee, the finality of the order dated March 17, 1989, was completely overlooked and omitted to be considered - Mistake sought to be corrected is attributable to the Tribunal's misconception and error or omission to note that the order dated March 17, 1989, has reached the finality and was no more open to interference in an appeal preferred against an order attempting to give effect to the order dated March 17,1989, since attained finality - Impugned Tribunal’s order dated March 30, 2000, passed on the application for rectification is hereby set aside only to the extent it had rejected the prayer of the assessee with regard to waiver of interest. Issues Involved:1. Finality of the order dated March 17, 1989.2. Scope of rectification under section 254(2) of the Income-tax Act, 1961.3. Jurisdiction of the Tribunal in relation to the order dated March 17, 1989.Issue-wise Detailed Analysis:1. Finality of the Order Dated March 17, 1989:The appellant's returns for the years 1981-82 and 1982-83 were initially assessed under section 143(3)/144B. Later, under the amnesty scheme, the appellant submitted returns including gratuity liability based on actuarial certification. The assessments were completed under sections 143(3)/231/147, and interest was charged under sections 139(8) and 215. The Commissioner of Income-tax (Appeals) ruled on March 17, 1989, that no interest could be charged under these sections in a reassessment under section 147. This order became final as no appeal was filed against it. The Tribunal, in its order dated April 9, 1999, failed to consider this finality, which was a critical oversight.2. Scope of Rectification Under Section 254(2):The appellant contended that the Tribunal's omission to consider the finality of the March 17, 1989, order constituted an error apparent on the face of the record, rectifiable under section 254(2). The Tribunal's jurisdiction under section 254(2) is confined to correcting mistakes that are obvious and patent. The appellant cited various cases, including Neeta S. Shah v. CIT and Bata India Ltd. v. Deputy CIT, to argue that the Tribunal must rectify errors that result from its own mistakes or omissions. The Tribunal's failure to acknowledge the finality of the March 17, 1989, order was such an error.3. Jurisdiction of the Tribunal in Relation to the Order Dated March 17, 1989:The Tribunal's jurisdiction was limited to determining whether the Assessing Officer had correctly given effect to the final order dated March 17, 1989. The Tribunal could not reopen or interfere with this final order. The Tribunal's decision to reverse the Commissioner of Income-tax (Appeals)'s order, which had waived the interest, was beyond its jurisdiction. The Tribunal's failure to recognize the finality of the March 17, 1989, order and its assumption of jurisdiction to interfere with it was a mistake apparent on the face of the record.Conclusion:The High Court concluded that the Tribunal's omission to consider the finality of the March 17, 1989, order was an error apparent on the face of the record, rectifiable under section 254(2). The Tribunal had no jurisdiction to reopen or interfere with the final order. The appeal succeeded, and the impugned order dated March 30, 2000, was set aside to the extent it rejected the waiver of interest. The order dated April 9, 1989, was rectified to affirm the Commissioner of Income-tax (Appeals)'s order dated August 19, 1993, waiving the interest for the assessment years 1981-82 and 1982-83.Order:The appeal is allowed. The impugned order dated March 30, 2000, is set aside regarding the waiver of interest. The rectification incorporating the assessment years 1981-82 and 1982-83 remains effective. The order dated April 9, 1989, is rectified to affirm the waiver of interest as per the order dated August 19, 1993.R.N. Sinha J.: Agreed.