ITAT rejects rectification application under section 254(2) after counsel withdrew ground without client's claimed knowledge

The ITAT dismissed the assessee's rectification application under section 254(2). The assessee claimed their counsel withdrew Ground No. 1 without authority and was unaware of favorable precedent regarding sections 148 vs 153C. The ITAT held that the counsel had full authority to withdraw grounds based on the letter of authorization, which included compounding powers and made counsel's statements binding on the assessee. The tribunal found contradictions in the assessee's claims and ruled that allowing such rectifications would create dangerous precedent enabling parties to strategically withdraw grounds then seek rectification if other grounds fail.

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Issues Involved:

1. Alleged mistakes in the ITAT's order regarding the non-pressing of Ground No. 1 by the assessee's counsel.
2. The applicability of Section 148 versus Section 153C of the Income-tax Act, 1961.
3. Authorization of the counsel to withdraw or not press the grounds of appeal.

Issue-wise Detailed Analysis:

1. Alleged Mistakes in the ITAT's Order Regarding Non-pressing of Ground No. 1:

The assessee filed a Miscellaneous Application under Section 254(2) of the Income-tax Act, 1961, seeking rectification of the ITAT's order, which dismissed the assessee's appeal on the grounds that it was not pressed. The assessee claimed that the decision to not press Ground No. 1 was taken by the erstwhile counsel to expedite the disposal of the appeal due to time constraints indicated by the ITAT. The assessee argued that this constituted a mistake apparent from the record, warranting rectification.

The ITAT, however, found this claim unconvincing. It noted that the usual procedure is to address legal grounds first, and it was unusual for the counsel to skip Ground No. 1 and argue other grounds first. The ITAT emphasized that even if the case was adjourned, the bench was functioning in both physical and virtual modes, and there was no reason for the counsel to withdraw the ground, thereby harming the client's interests. The tribunal concluded that the claim of withdrawal to expedite the hearing was not credible.

2. Applicability of Section 148 versus Section 153C:

The assessee contended that the ITAT was unaware of a prior decision by a Co-ordinate Bench, which held that proceedings under Section 148 based on information from a third-party search were invalid, and Section 153C should have been applied. The assessee argued that had this decision been known, a different course of action might have been pursued.

The ITAT dismissed this argument, noting that it was the responsibility of the assessee and their counsel to bring relevant decisions to the tribunal's attention. The tribunal also highlighted that the issue of Section 148 versus Section 153C was not raised before the CIT(A), and the existing ground was confined to Section 148. The tribunal found no merit in the claim that unawareness of the decision constituted a mistake apparent from the record.

3. Authorization of Counsel to Withdraw or Not Press Grounds:

The assessee argued that the counsel lacked authorization to withdraw Ground No. 1, and the tribunal's acceptance of the withdrawal constituted a mistake. The ITAT examined the "Letter of Authority" given to the counsel, which was broad and included the power "to compound matters wherever necessary." The tribunal interpreted this as sufficient authorization for the counsel to withdraw grounds. It noted that the counsel's statement in open court, indicating the ground was not pressed, was binding on the assessee.

The tribunal rejected the assessee's reliance on case law, distinguishing the facts of those cases from the present situation where only one ground was withdrawn, not the entire appeal. The ITAT concluded that the counsel acted within their authority, and there was no mistake in the tribunal's acceptance of the withdrawal.

Conclusion:

The ITAT dismissed the Miscellaneous Application, finding no merit in the claims of mistakes apparent from the record. The tribunal emphasized that accepting non-pressing of grounds as mistakes could undermine judicial proceedings and should not be entertained. The order was pronounced in open court on November 30, 2023.

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