TMI BlogLonger limitation means a substantive right which cannot be curtailed by amendment- amendment reducing limitation to file petitions or appeals should be considered prospective onlyX X X X Extracts X X X X X X X X Extracts X X X X ..... Longer limitation means a substantive right which cannot be curtailed by amendment- amendment reducing limitation to file petitions or appeals should be considered prospective only - By: - CA DEV KUMAR KOTHARI - Income Tax - Dated:- 12-9-2017 - - Provision- section 254 of Income tax Act 1961 regarding order and rectification of order by Tribunal. Summary: As discussed in detail in this article, as per provisions there is no limitation provided for making an application by the AO and assessee before the Tribunal for rectification of order of Tribunal passed u/s 254(1) . Therefore there cannot be a limitation for passing order u/s 254(2) when an application is made. The limitation prescribed is thus for rectification by Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal at its own. Even if a view be taken that there is overall limitation, for passing of order u/s 254(2), then the reduced limitation of six months ( as against four years earlier) should be applied prospectively only and not retrospectively. One more possible view is that revised limitation w.e.f. 1 st June 2016 can be applied only in relation to orders for assessment years beginning after that date that is for and from assessment year 2017-18. This is because to point out a mistake and to get order rectified, is a substantive right of the AO and assessee and such right cannot be removed, curtailed or impaired retrospectively. General: Under various laws certain rights are conferred upon parties concerned with matters under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law. For example: (a) right to appeal before various appellate authorities , Tribunal or Court, (b) right to prefer petition for revision before revisionary authority, (c) right to prefer petition for rectification of orders passed by any authority, Tribunal or Court for rectification of mistake apparent from records or/ from records / on face of records etc. In case in any particular law, there is no such remedy, then remedy can be explored under general law. Limitations are provided for filing appeals, petitions etc . Whenever a limitation is intended for filing of any appeal, application petition etc. before any authority, Tribunal or Court limitation period is prescribed for filing. A limitation is not and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be imposed for disposal of an appeal , petition or application, unless an appeal, petition or application has been filed. This is because concerned authority or court has to pass an order on appeal, petition or application. Therefore, limitation to dispose of or decide upon any application, petition or appeal can start only after the same has been filed. We find limitations provided for filing appeal , petition etc. before CIT(A), CIT, ITAT, High Courts and the Supreme Court Scope of the article : In this article limited aspect about applicability of limitation for rectification in case of application by assessee or the AO is discussed. In this regard we find that there is no change in situation due to recent amendme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt made in S. 254(2) . Vide THE FINANCE ACT, 2016 sub-section (2) of S. 254 was amended w.e.f . 1st day of June, 2016. By this amendment limitation for suo moto rectification by ITAT, as stated in first part of sub-section has been reduced to six month from the end of month in which order was passed whereas earlier limitation was four years from the date of the order . In this article an attempt is made to find out whether the limitation is only in respect of rectification by ITAT at its own and limitation is not applicable in case an application is made by any party to the appeal that is Revenue (AO) and Assessee and in such a situation Tribunal is required to rectify the order to remove mistake apparent from records a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd make the order as per law. Relevant portion for present study of S. 254 as amended, reads as follows (with highlights added for easy analysis): Orders of Appellate Tribunal. 254. (1) The Appellate Tribunal may , after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit . (2) The Appellate Tribunal may, at any time within 12 [six months from the end of the month in which the order was passed] with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the 2 [Assessing] Officer: Provided that an amendment which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard : ------------------------------- Notes :- 12. Substituted vide THE FINANCE ACT, 2016 w.e.f . 1st day of June, 2016, before it was read as, four years from the date of the order Limitation is only for rectification by Tribunal at its own: The first limb of provision is analyzed : From provision (with highlights added) Remarks of author The Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal may, The word may shows discretionary power. In practice we find rare cases of rectification orders passed by Tribunal at its own. at any time within 12 [six months from the end of the month in which the order was passed ] The language indicate that the limitation is only for suo moto rectification by Tribunal. This is because many times the order may not come to knowledge of assessee or AO within such limitation and even if it is known more time is generally required to make petition because a rectification is possible based on binding judgments which may be expected by assessee or AO. Even otherwise, a period of 45-60 days is generally required in service of notice fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m date of order with a view to rectifying any mistake apparent from the record, The Tribunal has to decide whether there is a mistake apparent from record or not. It is also a ground reality that human being do not want to recognize own mistakes, Even when mistake is pointed out by parties, chances of recognition of mistake and its rectification are much less. amend any order passed by it under sub-section (1), If Tribunal come to conclusion that there is a mistake apparent from records, it may amend order passed by it under section 254(1) Therefore, there seems very limited scope and possibilities of passing of orders by Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal at its own. Nature of limitation in section 254(2), in first part is limitation for passing of an order by Tribunal. The amended limitation starts from the end of the month in which order is passed u/s 254(1), earlier limitation was four years from the date of the order. Such limitations can naturally be for suo moto orders by Tribunal. Because in case of limitation on parties, there can be limitation for filing of petition and not for order to be passed by Tribunal. Suppose a party apply for rectification but for any reason Tribunal does not pass an order on it, then it cannot be said that limitation has expired, because it is mandatory for Tribunal to pass an order on rectification petition and for mistake or omission of Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal party to appeal should not suffer. Therefore, on reading of first limb of S.254(1) it is clear that the limitation laid down is only for order to be passed by tribunal at its own. Whether, limitation apply to orders passed on or after 1 st June,2016 ?: If we consider that the provision, for suo moto rectification provision is a procedural provision, then we find that it is a provision to cast a duty upon Tribunal, and it cannot be said to be a vested substantive right, then possible view is that the limitation prescribed in first limb of S.254(1), for suo moto rectification by Tribunal can be applied to orders passed on or after 1 st June 2016. In respect of orders passed before that date, a possible view is that Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal can pass order u/s 254(2) within a period of six months from the effective date of amendment that is by 31 st December 2016. This is because before that the limitation was four years which has been reduced to six month. If six months limitation be applied to orders passed before 1 st June 2016, then there cannot be rectification for orders passed before 1 st January,2016. This cannot be intended. Therefore for orders passed before 1 st January 2016 , for which four years limitation has not lapsed and which were amenable to rectification , the limitation can be considered till 31 st December,2016. Whether, limitation apply to orders for AY 2017-18 onwards ?: Another possible view is that the limitation should apply to appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l orders in relation to any assessment year which will began on or after 1 st June, 2016 that is from assessment year 2017-18 and not for any earlier assessment year. Provision for rectification by Tribunal when an application is made : The second limb of provision is analyzed: From provision (with highlights added) Remarks of author , and The use of a comma and word and means that a different category begins shall use of word shall shows mandatory requirement make such amendment Such indicates amendment of order u/s 254(1) to rectify mistake apparent from records. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the mistake is brought to its notice by The condition is that parties to appeal that is the AO or assessee have to bring the mistake to the notice of Tribunal. This is to be by way of a petition. Any other party has no specific right to make such petition. the assessee or the 2 [Assessing] Officer: Equal opportunity has been given to the AO and assessee who are generally parties in appeal and are actually affected parties in tax matters. On above analysis, it is clear that there is no limitation for making an application by AO or assessee. Whenever an application is made, it is mandatory for Tribunal to rectify the order, if the mistake is recti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fiable. In this regard it is worth to mention that whenever a limitation period is intended for making any appeal, application, it is specifically provided. For example for filing an appeal before CIT(A), ITAT, High Court and the Supreme Court, limitations are provided. Limitation for making an application u/s 264 for revision is provided. But there is no such limitation provided for making a rectification petition u/s 254(2). We also find that when a limitation is provided, then power to condone delay is also generally provided. In case of rectification petition u/s 254(2) there is no time limit provided for filing of petition, therefore there is no specific provision for condonation of delay. This also goes to suggest that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no time limit for making application by AO and assessee and there is no time limit for disposal of such petition by ITAT. Substantive provision: A right to point out a mistake and to make an application for rectification of mistake and right to get order rectified, is a substantial right vested in the AO and assessee who were party in the appeal. The right vest on the day of order passed u/s 254(1) , and can be exercised at any time, as apparently there is no limitation for making an application. The law conferred this right and therefore, an amendment cannot be made to take away or impair such right retrospectively. First of all, as discussed above, in case of mistake to be rectified on an application by AO or assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, there is no limitation. Even if limitation of four years (up to 31 st may, 2016) and six months from 1 st June, 2016 be considered as applicable to AO and assessee, then the amended reduced time available cannot be applied to order passed before 1 st June 2016. Furthermore, in case of application by AO and assessee, service of order can only be starting point for limitation, if any. We find delays in service for many reason. Even if we take webhosting of orders on website of ITAT, we find that there are delayed webhosting of order and many orders are not at all webhosted. Therefore, starting point of limitation as last day of month in which order was passed, clearly suggest that the limitation is not for rectification covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second limb of S.254(2) that is on application by AO and assessee. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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