The Amendment Under Section 254(2) In Respect Of Time Limit Of Six Months For Rectification Is Prospective And Applicable To The Orders Passed After 01.06.2016.
At present, as per section 254(2) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), the Appellate Tribunal may, at any time within six months from the end of the month in which the order was passed (substituted for “four years from the date of the order” by the Finance Act, 2016, w.e.f. 1-6-2016), 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 Assessing Officer. It has been provided that an amendment which 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.
Recently, in Lucent Technologies GRL LLC, (Since merged with Alcatel Lucent USA Inc) vs. ADIT (International Taxation) [MA No.411/Mum/2016 to 414/Mum/2016 (Arising out of ITA No.7001/Mum/2010) (A.Y.2003-04), decided on 09/10/2017], briefly, miscellaneous applications were filed by the assessee seeking rectification of mistake apparent on the record in the order dated 06/09/2013 passed by the Tribunal while disposing of bunch of appeals filed by the Department.
It was argued by learned AR that similar miscellaneous application filed by Reliance Communication Ltd., had been allowed by the Tribunal vide its order dated 18/11/2016. It was also brought to notice that assessee was also party in the order passed by the Tribunal dated 06/09/2013 alongwith Reliance Communication Ltd.
Learned DR fairly agreed that issue was covered by the order of the Tribunal dated 18/11/2016, however, he contended that ITAT had no power under the Act to consider miscellaneous application in so far as section 254(2) of the Act was amended w.e.f. 01/06/2016 whereby power of ITAT to consider mistake apparent from record was restricted to six months from the end of month in which the order was passed. As per learned DR the order in respect of which miscellaneous applications were preferred were passed on 06/09/2013 whereas these miscellaneous applications had been preferred in December 2016 i.e., after amendment, hence ITAT had no power under the Act to consider the miscellaneous applications.
Learned DR further contended that since these miscellaneous applications were not pending as on 01/06/2016, it cannot be said that assessee had any vested right.
It was further contended by learned AR that that the amendment by the Finance Act, 2016 with effect from 01 June 2016 reducing the time limit prescribed under section 254(2) of the Act to 6 months from the end of the month in which the Order sought to be rectified is passed is not applicable in the present case.
The learned Members of the Mumbai, ITAT held that right to appeal which includes right to file rectification application arises at the time of passing the original order and such right can only be taken away when there is a retrospective amendment. The amendment so brought in under section 254(2) of the Act is prospective and applicable to the orders passed after 01/06/2016, and not the orders passed prior to 01/06/2016. Undisputedly in the instant case the order of Tribunal sought to be rectified was dated 06/09/2013 which is much prior to the date of amendment. Accordingly, amended provisions of section 254(2) of the Act limiting the period of filing rectification application within a period of six months is not applicable to the instant case.
It was clear that the Co-ordinate Bench relied on by learned DR had not considered the decision of the Apex Court in the case of K. Raveendranathan Nair vs. CIT (in Civil Appeal No. 3131 of 2006) holding that right to appeal being a substantive right gets crystalized at the time of passing of the original order unless the same is taken away by retrospective amendment. Respectfully following the proposition of law laid down by Hon’ble Supreme Court, the learned Members of the Mumbai, ITAT held that we do not find any justification in declining the rectification application which was filed within the prescribed time limit prevailing prior to amendment brought in section 254(2) of the Act w.e.f. 01/06/2016, on merits the miscellaneous applications have to be allowed in view of the decision of the ITAT in the case of Reliance Communication Ltd. and Others vs. DCIT (in MA No. 143/M/2014 & Ors). This Order of the ITAT has subsequently also been approved by the Bombay High Court in the case of CIT vs. ITAT & Ors [in WP (L) No. 708 of 2017].