Income Tax Appellate Tribunal's Powers to Rectify its order U/S 254 (2) of the Act

Contrary to section 253(5) of the Income Tax Act 1961, where Income Tax Appellate Tribunal (ITAT) has powers to condone delay in filing of an appeal or memorandum of cross-objections after the expiry of period provided under section 253(3) and section 253(2), have no powers to condone delay in filing rectification application after the expiry of six months (earlier four years) against the its order passed under section 254(1).

In simple words, in the case of an order passed by any tax authority which is appealable before the ITAT, the appellate authority has enough powers to condone the delay in filing the said appeal after the expiry of the prescribed period under section 253(3) and section 253 (2) subject to its satisfaction.

But once the ITAT passes order under section 254(1) the order can be modified or rectified in case rectification application is filed within a period of six months (earlier four years) for any mistake apparent from the records by the ITAT itself, or on the application filed by the appellant or the defendant.

In the case of Rahul Jee and Co. P. Ltd vs. Assistant Commissioner of Income Tax, [2009] 310 ITR (A.T.) 255 (ITAT[Del]), May 2008, the ITAT Delhi bench Noted as:

'There is no provision under section 254(2) of the Income-tax Act, 1961, to entertain a rectification application received after the expiry period of four years (now six months). Section 253(5) of the Act provides for condonation of delay, but such provisions are absent in respect of application seeking rectification of orders passed under section 245(1) of the Act.”

In the above case, ITAT confirmed various disallowances made by the lower authorities of the income tax department and penalty imposed under section 271(1) (C) for the assessment year 1988-89. Aggrieved by the order of ITAT the assessee preferred a reference application before the ITAT under section 254 (2) for rectification. The Tribunal while rejecting the reference application stated that the original order was based on findings recorded by the tribunal after appraisal of evidence and findings of the fact.

Thereafter, assessee filed the miscellaneous application twice for the review of the order but both the times the applications were dismissed by the tribunal stating that there was no provision under the income tax act requiring the Tribunal to review an order passed as a result of an appeal filed before it in case there are no mistake/mistakes apparent from the records to exercise the jurisdiction under section 254(2) of the Act.

The tribunal made it clear that an order passed based on an appeal filed before it cannot be reviewed by the tribunal, even if filed within the time prescribed under the act unless there is a mistake apparent from the records. In simple words the tribunal has no powers under section 254(2) to review its order in case there is no mistake apparent from the records even if the reference application is moved within the time prescribed (presently six months).

Yet again, the aggrieved assessee filed the third miscellaneous application after 16 years from the date of order with a plea that the Tribunal has not considered entire evidence while passing orders be it the original one or thereafter. The assessee also filed a rectification application against the order confirming the penalty under section 271(1) (C) of the act after four years from the date of order.

While dismissing both the applications the Tribunal stated as:

'That since the rectification applications seeking rectification of the Tribunal's orders confirming various disallowances and penalty imposed under section 271(1)(c) had been filed beyond the prescribed period of four years under section 254(2) of the Act and the provisions of section 5 of the Limitation Act, 1963, being not applicable to the proceedings before quasi-judicial authorities like Tribunal, the delay could not be condoned. Therefore, the applications filed by the assessee were to be dismissed as barred by limitation.”

From the above, it is now amply clear that Tribunal has no powers to condone the delay in the case of an order passed by it under section 253(1). In case aggrieved by the Tribunal's order either appellant or defendant can file an application for rectification of error apparent from the records but not beyond the prescribed period of six months (earlier four years) as Tribunal has no powers for condonation of delay.

The author is an income tax practitioner and can be reached at: dilip@rklegal.org