CIT (Appeals) Rectification section 154

Hi Ankur,

Great question on rectification under Section 154 vis-à-vis matters pending before the CIT (Appeals).

Legal Position on Section 154 Rectification after Appeal is Filed but Not Decided:

• Section 154 allows the Assessing Officer (AO) to rectify mistakes apparent from the record in an order.

• However, if the issue has been considered and decided in appeal or revision, Section 154 cannot be used to change that particular matter.

• Your question is about whether AO can rectify a matter which has been considered but not yet decided by the CIT (Appeals) (i.e., pending appeal).

Interpretation:

• The phrase “considered and decided” means the matter should have been finally adjudicated by the appellate authority (CIT (Appeals)).

• Merely filing or pending appeal does not amount to the matter being “considered and decided.”

• Therefore, if the appeal is pending, AO can rectify mistakes apparent on the record except on the issues under consideration in the pending appeal.

• AO should avoid interfering with matters already under appeal, as that would amount to circumventing the appellate process.

Relevant Case Law:

1. CIT vs. B.C. Srinivasa Setty (1959) 37 ITR 317 (SC)
   Supreme Court held that rectification under Section 154 cannot be used to alter an order which is under appeal.

2. Bipin V. Shah vs. ACIT (2012) 21 taxmann.com 131 (Mumbai - Trib.)
   It was held that if a matter is pending appeal, AO should not pass a rectification order on that issue.

3. CIT vs. J.B. Gupta & Sons (2007) 290 ITR 294 (Del)
   AO cannot take a different view on the same issue if it is pending in appeal.

4. ITO vs. Vikram Hotel (2008) 113 TTJ (Mum) 92
   AO’s rectification cannot be used to pre-empt the appellate process.

Summary:

Practical note:

• While AO can rectify only obvious errors not touching the pending appeal issues, it's prudent for AO to avoid rectifying issues pending before CIT (Appeals).

• If AO proceeds, it may be challenged as interference with appellate jurisdiction.

Hi Ankur! Your question relates to the scope of rectification under Section 154 of the Income Tax Act with respect to matters pending decision in appeal.

Key point:

• Section 154 allows the AO to rectify mistakes apparent from the record in an order.

• However, once a matter is under appeal, the AO’s power to rectify that matter is limited.

Interpretation of Section 154(1A):

“Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.”

• This means the AO cannot rectify a matter already decided in appeal.

• But it doesn’t explicitly say whether the AO can rectify a matter which is pending decision in appeal.

Can AO rectify a matter pending appeal?

• The law and judicial pronouncements suggest that the AO cannot rectify matters which are sub-judice or pending appeal, because that would amount to preempting the appellate authority’s decision.

• Rectification is meant for clear, apparent mistakes, not for re-opening issues under appeal.

Relevant Case Laws:

1. CIT vs. Gujarat Ambuja Cement Ltd. [2016] 382 ITR 42 (SC)

   • Supreme Court held that once an issue is pending before the appellate authority, the AO’s power to rectify under Section 154 is restricted in respect of that issue.

2. Kishinchand Chellaram vs. CIT [1969] 71 ITR 433 (SC)

   • Rectification cannot be used to reopen settled issues or issues under appeal.

3. ITO vs. Asian Oil & Fats Pvt. Ltd. [2006] 101 TTJ 594 (ITAT Mumbai)

   • AO’s power of rectification is restricted to mistakes apparent from record and does not extend to matters pending appeal.

Summary:

• AO cannot rectify matters which have been decided in appeal (Section 154(1A)).

• Similarly, matters pending appeal should not be rectified by AO since rectification is not a substitute for appellate process.

• AO should wait for the appellate authority’s decision on those matters.

• Rectification is only for apparent mistakes in the order.