2019 (3) TMI 1729 - AT - Income Tax

Rectification u/s 254 - as contended that the CBDT in its Circular No.5/2014 has clarified that the disallowance of expenses u/s 14A of the Act would be attracted even if no exempt income is earned - HELD THAT - Revenue has challenged the said order vide this Miscellaneous Application filed u/s 254(2) of the Act raising several grounds before us as reproduced above from the application filed by the Revenue before us stating that the order was perverse and could not have been dismissed on account of low tax effect involved since it was covered under except ion specified by CBDT for dismissal on account of low tax effect and had been passed ignoring the legislative intent expressed in CBDT Circular No.5/2014 dated 11-02-14 and principal laid down in various decisions that apportionment of expenses has been to be done regardless of exempt income earned. The same we hold is not tenable in law since it is only apparent mistakes which can be rectified by way of the present proceedings and for challenging orders passed by the ITAT there is legal recourse available which definitely does not include challenging it by way of the present Miscellaneous Application under section 254(2) of the Act. The Miscellaneous Application is liable to be dismissed for the aforesaid reason.

Summary

Issues:
1. Recalling of the order passed in ITA No.656/Chd/2018 dated 01.08.2018 related to assessment year 2014-15 due to low tax effect involved as per CBDT Circular No. 3/2018.

Analysis:

Issue 1: Recalling of the order based on low tax effect
The Appellate Tribunal received a Miscellaneous Application from the Revenue seeking the recalling of the order passed in ITA No.656/Chd/2018 dated 01.08.2018 concerning the assessment year 2014-15. The appeal of the Revenue was initially dismissed due to the low tax effect involved as per the CBDT Circular No. 3/2018 dated 11.07.2018. The Revenue contended that the dismissal was in violation of the CBDT Circular as it related to the disallowance of expenses under section 14A of the Act, even if no exempt income was earned. The Revenue raised several grounds challenging the order, arguing that it was not acceptable and should be reinstated and decided on merits. However, the Tribunal found no apparent mistake in the order and dismissed the Miscellaneous Application, stating that challenging orders passed by the ITAT should follow legal recourse and not through a Miscellaneous Application under section 254(2) of the Act.

This detailed analysis addresses the issue of recalling the order based on low tax effect as per the CBDT Circular and the subsequent challenge raised by the Revenue. The Tribunal emphasized that rectification through the present proceedings is only applicable for apparent mistakes, and challenging ITAT orders should follow proper legal channels rather than through a Miscellaneous Application.