2024 (6) TMI 67 - AT - Income Tax

AO cannot benefit from statutory breach when failing to dispose section 154 rectification within six months

ITAT Delhi held that when AO failed to dispose of a section 154 rectification application within the statutory six-month period under section 154(8), the ... Rectification of mistake - Maintainability of application u/s 154 beyond period of limitation - AO had failed to discharge his statutory duty in passing the order disposing the application filed under section 154 - whether appealable order u/s 246A? - HELD THAT:- Section 154(8) of the Act provides that any application filed under section 154 of the Act shall be disposed of within the six months from the end of the month in which such application is received by the AO. Therefore, the issuance of an order disposing the application filed under section 154 of the Act is absolutely necessary. Since no order as per provisions of section 154(8) of the Act was ever passed by the AO, therefore, the appellant/assessee was not aware about the fate of its application filed under section 154 of the Act before the AO on 10.11.2014. When the fate of the same came to its notice vide the communication/order dated 04.7.2020 of the AO, then it filed the appeal before the CIT(A). The Act does not provide any recourse to the assessee when the AO failed to dispose of any application filed under section 154 of the Act within the statutory time limit. Since the AO had failed to discharge his statutory duty in passing the order disposing the application filed under section 154 of the Act on 10.11.2014, therefore we are of the view that the assessee is justified in raising this issue before the Appellate Authority as this is the only recourse available to it. The law is very well settled that if there is a breach of a statutory obligation, then a person committed such breach cannot be permitted to take advantage of such situation, so as to prejudice the interest of the effected person. As per the Circular No.4 dated 20.06.2012, the CBDT has authorized its subordinates to make appropriate corrections in the figures of disputed arrear demands after due verification and reconciliation and examining the merits of the case by way of rectification, irrespective of the fact that the period of limitation of four years as provided u/s. 154(7) of the Act has elapsed. We are of the considered opinion that neither the assessee’s application filed under section 154 of the Act on 10.11.2014 was disposed of nor the consequential effect to the order dated 04.01.2013 of the CIT(A) was given on or before the communication/order dated 04.07.2020. Hence, drawing of the inference by the appellant/ assessee that the communication/order dated 04.07.2020 are nothing but refusal to admit its claim under section 154 of the Act is not misplaced. The grievance of the assessee is well-founded. We therefore, direct the AO to entertain the said application filed before him under section 154 of the Act on 10.11.2014 and dispose it off as per law after verification of records. Issues:1. Appeal challenging the order of the Commissioner of Income Tax (Appeals) dismissing the appellant/assessee's appeal.2. Determining whether the communication/order dated 04.07.2020 of the Assessing Officer to the Range Head is an appealable order under section 246A of the Income Tax Act, 1961.Analysis:1. The appellant/assessee appealed against the order of the Commissioner of Income Tax (Appeals) dated 13.03.2023, which dismissed the appeal on the grounds that the order under section 154 of the Income Tax Act, 1961, against which the appeal was filed, was an internal correspondence between the Assessing Officer and the Range Head, and therefore not appealable before the Commissioner. The main issue was whether this dismissal was justified. The appellant/assessee's case for the Assessment Year 1991-92 was scrutinized, and the assessment was completed under section 143(3) of the Act, resulting in a final income determination of Rs. 8,81,580. The appellant/assessee raised concerns regarding the quantum of refunds, interest calculations, and adjustments against partners' demands. The subsequent application under section 154 of the Act filed by the appellant/assessee was not disposed of within the statutory time period, leading to further grievances and appeals. The CIT(A) dismissed the appeal based on the nature of the communication/order dated 04.07.2020 from the Assessing Officer to the Range Head.2. The arguments presented by both parties focused on the validity and implications of the communication/order dated 04.07.2020. The appellant/assessee contended that the order passed by the Assessing Officer in 2011 could not address the application filed in 2014, and emphasized the need for proper disposal of the application under section 154 of the Act. The appellant/assessee also highlighted the failure of the Assessing Officer to provide a timely response, leading to the appeal before the Commissioner. The appellant/assessee's position was supported by legal provisions and circulars allowing rectification applications to be considered even after statutory time limits have passed.3. The Tribunal, after considering the arguments and relevant legal provisions, found in favor of the appellant/assessee. It noted that the Assessing Officer had not disposed of the application filed under section 154 of the Act within the required timeframe, leaving the appellant/assessee with no recourse but to appeal. The Tribunal highlighted the importance of upholding statutory obligations and ensuring proper redressal for the appellant/assessee, especially in a case dating back to 1991-92. Referring to circulars allowing for post-limitation rectifications, the Tribunal directed the Assessing Officer to entertain and dispose of the application filed in 2014 in accordance with the law.4. In conclusion, the Tribunal allowed the appeal, emphasizing the appellant/assessee's justified grievance and the necessity for the Assessing Officer to address the pending application under section 154 of the Act. The decision aimed to uphold fairness and compliance with statutory requirements, ensuring proper resolution of the long-standing tax assessment issues.---