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Time limit for rectifying orders
November, 03rd 2007
Rectification application cannot be refused merely on the ground that four years have elapsed since the Tribunal passed its order.

Sub-section (2) of Section 254 of the Income-Tax Act, providing for rectification of orders by the Income Tax Appellate Tribunal (ITAT), reads thus: 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 shall make such amendment if the mistake is brought to its notice by the assessee or the assessing officer.

In exercise of the power of rectification under Section 254(2), what can be corrected is an apparent error.

The order cannot be recalled on the basis of having a second opinion on the merits, as such power is not covered by the term rectification.

Applicability of time limit

The order can be rectified within a period of four years only. The time limit of four years under Section 254(2) was considered by a Special (three members) Bench of the Nagpur Tribunal in the Bhilai Engg. Corpn. Ltd vs DCIT (2002 81 ITD 282 Nagpur) case.

The facts of the case show that the assessing officer (AO) found that the registered sale deed was not executed in respect of the property till the close of the year, that is, March 31, 1991. As such, he denied depreciation claimed on the said property, which was also upheld by the first appellate authority the Commissioner of Income-Tax (Appeals).

On second appeal, the Tribunal found the assessee not to be the owner of the property for want of registration. The Supreme Court decision in the CIT vs Podar Cement (P) Ltd (1997 226 ITR 625 SC) case was relied upon to argue that for claiming depreciation, registered ownership was not essential.

But the assessees contention was not accepted on the ground that in the Podar Cement case, the apex court considered the ownership in the context of Section 22 of the Act, while the Tribunal was concerned with the ownership in the context of Section 32 of the Act.

The assessee filed a miscellaneous application and claimed that a mistake had crept into the Tribunals order in view of the the apex courts decision in the Mysore Minerals Ltd vs CIT (1999 239 ITR 775 SC) case.

The Revenue contended that since the application was filed after four years and 19 days, the delay of 19 days could not be condoned. Next, it was argued that the assessee did not have any reasonable cause in filing the belated miscellaneous application.

The Revenues contention did not find favour with the Tribunal.

According to the latter, the time limit of four years is applicable only when the Tribunal wants to rectify a mistake suo moto and not where applications are filed by the Revenue or the assessees.

Quoting sub-section (2), the Tribunal observed that after the words Tribunal may, there is coma. Thereafter, the words are at any time within four years. This suggests that the words at its own are implied. Therefore, the time limit of four years is in the context of suo moto rectification.

Where, rectification is to be done in accordance with the prayer made by either of the parties, such time limit is not that relevant.

The rendering of justice is the paramount factor in deciding cases coming up before the appellate forums. It is to be seen as to how best justice could be done. If the error is palpable, the Tribunal, in the interest of justice, can proceed with the matter and set things right.

Justice first

The Tribunal, in arriving at the above conclusion, has taken into consideration legal pragmatism and the basic tenets of law. The Tribunal has considered the dictum fiat justitia ruat et coelum (justice should be done even if the heaven falls).

The procedure should be the handmaid and not the mistress of legal justice. Cause of justice should not be subservient to the rules of procedure. The issue involved in the case before the Tribunal, prima facie, appears to be covered by the apex court decision rendered in the Mysore Minerals Ltd case.

Under Article 141 of the Constitution, any decision pronounced by the Supreme Court is a binding precedent. The law as interpreted by the apex court is the law as it always has been.

Denying the opportunity to the parties to argue the miscellaneous application on the genuine ground of procedural lapse would tantamount to denying justice. Not only that, it will prolong litigation on a point which stands adjudicated by the the apex court decision.

It has been well said, declared Lord Coke: I terest republica ut sit finis litum.

Translation loses terseness, but what the Latin phrase conveys is that law suits should not be protracted, else great oppression might be done under the colour and pretence of law.

Though in the instant case the Tribunal has said that it was condoning the delay in filing the miscellaneous application and deciding the issue on merits, the tenor of the decision indicates that as far as the assessees and the Revenue are concerned, entertainment of the rectification application cannot be refused merely on the ground that four years have elapsed since the Tribunal passed its order.

Hence, if an event happens after four years, say, a Supreme Court judgment contrary to what the Tribunal has decided or a law is made to operate retrospectively, then the Revenue or the assessee can move an application for rectification if the Tribunals decision has become final and is not sub judice.

The decision is to the effect that the time limit of four years prescribed in Section 254(2) is in the context of suo moto rectification and it has not much relevance, where rectification is to be done at the instance of either of the parties.

T. N. Pandey
(The author is a former chairman of CBDT.)
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