INCOME TAX ACT, 1961

Appeal (Tribunal)- Rectification under section 254(2)-Review of earlier order

Assessee was carrying on the business of real estate and it had undertaken construction of four housing projects. The construction of flats had been done in respect of two projects. Some of flats were measuring less than 1500 sq. ft. and it claimed deduction under section 80-IB(10). AO was of view that assessee was not entitled to deduction in respect of those two projects, since all the flats were not of the specified size. The CIT (A) granted deduction under section 80-IB(10). But Tribunal restored the order of AO. Assessee filed application to Tribunal and contended that while passing the impugned order, Tribunal had not referred to the decision of the Co-ordinate Bench of the Kolkata Tribunal and also the judgment of the Calcutta High Court wherein in respect of the residential units of less than 1500 sq. ft. deduction under section 80-IB(10) was granted , thus, order passed by Tribunal was liable to be rectified under section 254(2). Tribunal disallowed on the ground that the entire issue had been dealt with in detail in the earlier order and by filing the said application assessee wanted to review the earlier order.

Held: The procedure to be followed by the Tribunal is contemplated under section 225, in which it is stated that the Benches may be constituted by the President of the Tribunal from amongst its members. As against the orders of the Tribunal passed in appeal, a further appeal lies to the High Court, on the High Court being satisfied that the case involves a substantial question of law under section 260A(1). [Para 11]

While passing the orders, Tribunal has the powers to decide the issue in the main appeal by giving an opportunity of being heard to both the parties as per section 254(1) and in cases where the Tribunal has passed final orders under the above said section 254(1), within four years or thereafter, if there is a mistake apparent on record, the same can be rectified by way of making amendment to the order. [Para 12]

In this case, order was passed after the original appeal was disposed of and within four years under section 254(2). However, in the impugned order, Tribunal had come to a conclusion that there was no mistake apparent on record to rectify and what was called by the assessee was to review the decision of the Tribunal, which was not permissible under the Act. [Para 13]

In cases where an application for rectification is made and an order is passed under section 254(2) by merely rejecting such an application, it does not decide the substantial issue involved between the parties, since the issue has already been decided under section 254(1) by Tribunal. If the application is filed subsequently under section 254(2) by way of miscellaneous petition for rectification of mistake within the period of limitation, viz., four years and the same is rejected, it would only make the original order passed by the ITAT as final and if at all there is any substantial question of law that may arise or any right of the parties is finally decided by the ITAT, the same can be only under the orders passed as per section 254(1). Therefore, such order cannot be construed as any order referred to under section 260A to enable the aggrieved party to file an appeal before the High Court. [Para 15]