TaxTMI 
TaxTMI 
2006 (12) TMI 120
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the time limit of four years specified under section 254(2)?" 2.1. The facts in brief are the assessment for the assessment year 1989-90 was completed on February 27, 1992, on a total income of Rs. 26,24,137 based on book profit under section 115J of the Act amounting to Rs. 45,92,240 in respect of transitional previous year of 21 months. 2.2. On the question of debiting additional depreciation relating to earlier years which was due on account of adopting written down value method in place of straight-line method permitted under the company law, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) challenging the computation of profit under section 115J. The Commissioner of Income-tax (Appeals) upheld the order of the Assessing Officer holding that the depreciation relating to earlier assessment years should not be adjusted as it would distort the profit of the current year. 2.3. On further appeal by the assessee, the Appellate Tribunal held that there was no finding on the issue whether the book profit shown by the assessee is in conformity with the provisions of the Companies Act and what is required to be taxed under section 115J of the Act is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer, thereafter, has the limited power of making increases and reductions as provided for in the Explanation to section 115J. The Assessing Officer does not have the jurisdiction to go behind the net profits shown in the profit and loss account except to the extent provided in the Explanation. The use of the words 'in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act' in section 115J was made for the limited purpose of empowering the Assessing Officer to rely upon the authentic statement of accounts of the company. While so looking into the accounts of the company, the Assessing Officer has to accept the authenticity of the accounts with reference to the provisions of the Companies Act, which obligate the company to maintain its accounts in a manner provided by that Act and the same to be scrutinised and certified by statutory auditors and approved by the company in general meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom the date of the original order. She has further stated that when the statute prescribes outer time-limit, it may not be proper for this court to go beyond the same. On the other hand, placing reliance on the decision of the Rajasthan High Court in Harshvardhan. Chemicals and Minerals Ltd. v. Union of India [2002] 256 ITR 767, learned counsel appearing for the assessee contended that if the application is made within the period of four years, the Tribunal is bound to decide the application on merits and not on the ground of limitation. He has also contended that when the Circular No. 68, dated November 17, 1971, provides that a mistake arising as a result of subsequent interpretation of law by the Supreme Court would constitute a mistake apparent from the record, in the light of subsequent decision of the Supreme Court in Apollo Tyres Ltd.'s case [2002] 255 ITR 273 (SC), the Tribunal was correct in recalling its earlier order. We have given our careful consideration to the submissions made on behalf of the appellant as well as the respondent/assessee. The point involved in this appeal revolves on the scope and ambit of section 254(2) of the Act and hence, it is profitab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....notice by the assessee or the 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. 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." Section 254(2) has got two limbs: (i) the Appellate Tribunal may, at any time, within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1); and (ii) shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer. The first limb of section 254(2) enables the Tribunal to rectify its own order suo motu as provided in section 154(2)(a), even though the words, "of its own motion" as found in section 154(2) are not found in the first limb of section 254(2). The second ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e arising as a result of subsequent interpretation of law by the Supreme Court would constitute a mistake apparent from the records, and probably, on the basis of which the assessee approached the Appellate Tribunal for rectification in the light of the decision of the apex court in Apollo Tyres Ltd.'s case [2002] 255 ITR 273. It is not in dispute that as per Circular No. 68, dated November 17, 1971, the assessee is entitled to approach the Appellate Tribunal for rectification of mistake apparent from the record, in view of interpretation of law by the Supreme Court in Apollo Tyres Ltd.'s case [2002] 255 ITR 273, but when section 254(2) provides an outer time-limit of four years, it is hot open to the Appellate Tribunal to rectify such a mistake beyond the period of four years and the Appellate Tribunal should have passed the order of rectification within the outer time-limit of four years. Because, section 154(8), which was inserted with effect from June 1, 2001, contemplates that the authority shall pass an order of rectification of mistake within a period of six months from the end of the month in which the application is received. The said period of six weeks, as rightly conten....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ision, viz., 254(2) of the Act, which is plain and unambiguous, which would otherwise extend the outer-limit prescribed therein. In this view of the matter, we are of the considered opinion that the order passed by the Appellate Tribunal beyond the period of four years is nothing but a nullity. Furthermore, the power under section 254(2) of the Act, intended to rectify an error apparent from the record, is not remedial in nature, but it is rectifiable in nature in the sense that it is to rectify a mistake committed in an order which is apparent and not to provide a remedy to the aggrieved party whether it is the assessee or the Revenue. The power in respect of remedial action has to be exercised within the time-limit prescribed and such period cannot be elastically extended by the court. Similarly, the power to rectify an mistake apparent from the record should also be exercised by the income-tax authorities in the same manner. Otherwise, it would amount to conferring enormous power on the income-tax authority or the Tribunal under one pretext or the other. It is true that there is no provision in section 254, similar to section 154(8), which contemplates the income-tax autho....