Tribunal's Rectification Order Set Aside; Court Rules in Favor of Revenue, Invalidating Actions Beyond Time Limit.

The court determined that the Tribunal's rectification of its order beyond the four-year limitation prescribed under section 254(2) of the Income-tax Act was invalid and without jurisdiction. Consequently, the rectification order and the consequential order were set aside. The court ruled in favor of the Revenue, answering the questions against the assessee, and allowed the appeal without costs.

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Issues Involved:
1. Whether the Tribunal was right in rectifying its order u/s 254 of the Income-tax Act based on a Supreme Court judgment rendered six years after the date of the order rectified.
2. Whether the Tribunal has the power or jurisdiction to rectify its order beyond the time limit of four years specified u/s 254(2).

Summary:

Issue 1: Rectification Based on Subsequent Supreme Court Judgment
The Tribunal rectified its order dated December 9, 1996, based on the Supreme Court judgment in Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273, which was rendered six years later. The Tribunal followed the ratio laid down in Apollo Tyres Ltd.'s case, where the Supreme Court held that the Assessing Officer has limited power to examine whether the books of account are certified by the authorities under the Companies Act and cannot go behind the net profits shown in the profit and loss account except as provided in the Explanation to section 115J. The Tribunal also referred to Circular No. 68, dated November 17, 1971, which states that a mistake arising from subsequent interpretation of law by the Supreme Court constitutes a mistake apparent from the records. Consequently, the Tribunal allowed the rectification petition in favor of the assessee.

Issue 2: Jurisdiction to Rectify Beyond Four Years
The Revenue contended that u/s 254(2), the Tribunal must rectify any mistake within four years from the date of the order. The Tribunal's order of rectification passed beyond this period is barred by limitation. The court examined sections 154 and 254(2) of the Act, emphasizing that both sections prescribe an outer limit of four years for rectification. The court noted that the power to rectify a mistake is not remedial but rectifiable in nature and must be exercised within the prescribed time limit. The court disagreed with the Rajasthan High Court's decision in Harshvardhan Chemicals and Minerals Ltd. v. Union of India [2002] 256 ITR 767, which allowed rectification beyond four years if the application was made within the time limit. The court held that section 254(2) is clear and unambiguous, requiring rectification orders to be passed within four years.

Conclusion:
The court concluded that the Tribunal's order of rectification passed beyond the four-year period is a nullity and lacks jurisdiction. Consequently, the impugned order and the consequential order dated June 12, 2003, were set aside. The questions were answered in favor of the Revenue and against the assessee. The appeal was allowed without costs.

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