2025 (5) TMI 890 - AT - Income Tax

Rectification u/s 254 - sole basis of the assessee s plea is that the Tribunal ought to have remanded the matter to the AO instead of the CIT(A) which according to the assessee constitutes a mistake apparent from record - HELD THAT - In our considered view this contention cannot be sustained under the limited scope of section 254(2) which empowers the Tribunal only to rectify errors that are self-evident patent and manifest from the record. A review or reconsideration of reasoning or conclusion reached in the appellate order cannot be undertaken in the garb of rectification. The Bench in para 5 and 7 of the order has already recorded a categorical finding that the appeal before the CIT(A) was dismissed in limine without deciding the grounds on merits and that there was no speaking order passed on any of the grounds of appeal. This decision was taken after appreciating the entirety of facts rival contentions and legal framework. It cannot be said that there is any mistake apparent from record in arriving at such a conclusion. In the guise of this Miscellaneous Application the assessee essentially seeks a review of the decision rendered on merits. It is settled law that section 254(2) does not vest the Tribunal with power to review or re-appreciate evidence or arguments with a view to arrive at a different conclusion. We find no merit in the present application.

Summary

The primary legal issue considered in this judgment is whether the Appellate Tribunal committed a mistake apparent from the record in its order dated 25.03.2025 by restoring the matter to the Commissioner of Income Tax (Appeals) [CIT(A)] instead of remanding it to the Assessing Officer (AO), thereby warranting rectification under section 254(2) of the Income Tax Act, 1961.

Another related issue is the scope and ambit of the power of rectification under section 254(2) of the Income Tax Act, particularly whether it permits review or reconsideration of the Tribunal's findings on merits or re-appreciation of evidence.

These issues are intertwined with the procedural propriety of the appellate process, specifically the appropriateness of remanding the matter to the CIT(A) rather than the AO, and the adequacy of opportunity granted to the assessee during the assessment proceedings.

Regarding the first issue, the relevant legal framework includes section 254(2) of the Income Tax Act, which empowers the Tribunal to rectify any mistake apparent from the record. The Tribunal's interpretation of this provision emphasizes that the power to rectify is limited to correcting errors that are self-evident, patent, and manifest, and does not extend to reviewing or re-evaluating the merits of the case or the reasoning underlying its prior order.

Precedents consistently hold that rectification under section 254(2) is not a substitute for an appeal or review and cannot be used to re-open or re-assess the findings of fact or law already concluded by the Tribunal.

The Court's reasoning highlights that the Tribunal had already considered the factual matrix and submissions before it, and had recorded a categorical finding that the CIT(A) had dismissed the appeal in limine without adjudicating the grounds on merit. This was after appreciating the entire record and legal framework. Therefore, directing the matter to the CIT(A) for fresh adjudication was a legally sound and procedurally appropriate course.

The key evidence and findings include the record that the CIT(A) did not pass a speaking order on the grounds of appeal, and that the assessee was given opportunities during assessment proceedings but failed to respond within the permitted time. The Tribunal's decision to restore the matter to the CIT(A) was based on these facts and the procedural context, rather than on any error apparent from the record.

In applying the law to the facts, the Tribunal concluded that the assessee's plea to remand the matter to the AO instead of the CIT(A) amounted to a request for review of the Tribunal's earlier order and re-appreciation of evidence, which is impermissible under section 254(2). The Tribunal emphasized that rectification is not a vehicle for altering the substantive conclusions or for re-examining the reasoning of the appellate order.

The competing arguments were treated with due consideration. The assessee argued that remand to the AO was necessary because the additions were made without adequate opportunity and disregarded submitted documents, thus constituting a mistake apparent from record. The Revenue countered that sufficient opportunity was afforded, and the CIT(A) has coterminous powers with the AO, including the ability to call for remand reports under Rule 46A of the Income Tax Rules, 1962, making the Tribunal's direction legally and procedurally sound.

The Tribunal sided with the Revenue, finding no mistake apparent from record in restoring the matter to the CIT(A). It rejected the assessee's contention as an impermissible attempt to review the Tribunal's order under the guise of rectification.

The Tribunal's conclusion was that the Miscellaneous Application lacked merit and no grounds existed to invoke section 254(2) for rectification. Consequently, the application was dismissed.

Significant holdings from this judgment include the clear articulation of the limited scope of section 254(2) of the Income Tax Act. The Tribunal stated that the power to rectify "is limited to correcting errors that are self-evident, patent, and manifest from the record" and "does not vest the Tribunal with power to review or re-appreciate evidence or arguments with a view to arrive at a different conclusion."

Another core principle established is that the Tribunal's direction to restore the matter to the CIT(A) is legally sustainable and procedurally appropriate where the appellate authority had dismissed the appeal without adjudicating the grounds on merits, and the CIT(A) possesses coterminous powers with the AO, including the ability to seek remand reports.

Finally, the Tribunal reaffirmed that a Miscellaneous Application under section 254(2) is not a substitute for an appeal or review and cannot be used to challenge the Tribunal's decision on substantive grounds or to seek re-examination of the facts or legal conclusions.