CIT (Appeals) Rectification section 154

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.