Rectification application of assessee not to entertained in case assessee’s conduct was speculative

PCIT Vs N. R. Portfolio (Delhi High Court)

Conclusion: The conduct of the assessee was speculative, it was not an uninformed litigant; it calculatedly chose not to question the rejection of its cross objection. Instead, waited more than a year after the decision of this court (which was rendered on 21-12-2012) till the two members who decided the first ITAT orders were not available and choosing to prefer the rectification application at a convenient time, assessee no doubt technically was compliant, but stood exposed to the odium of forum shopping. Thus, ITAT order reversed with costs of Rs. 1.5 Lakh imposed on assessee.

Held: In the present case, the issue sought to be urged by assessee in the first ITAT order was in its cross objection, concerning the legality of reassessment. Undoubtedly, the validity of a reassessment notice can be a matter of substance. The merits of the additions made after considering the assessee’s contentions were deleted by the CIT (A). He however upheld the reassessment proceeding. Assessee had two courses: either appeal or cross object against that part of the order, to the ITAT. It chose the latter, when the revenue appealed to the tribunal. ITAT rejected the revenue’s appeal and also dismissed the assessee’s cross objections as infructuous. At that stage, the assessee could  have cross objected before this court, or filed independent appropriate  proceedings to protect its interest. It however was sanguine about its case on the merits; unfortunately, it did not choose to appeal or question the dismissal of its cross objections. It sought to challenge the judgment of this court reversing the ITAT (on merits of the addition) by appeal through special leave to the Supreme Court. Although the judgment of this court was rendered on 21-12-2012, it chose to approach the ITAT in 2014; that rectification application was allowed on 26-03-2015. It appeared that assessee’s claim for rectification was precluded by the doctrine of finality and not merely merger. Court was of the opinion that the conduct of assessee was speculative, it was not an uninformed litigant; it calculatedly chose not to question the rejection of its cross objection (on grounds of its having been rendered infructuous). Having waited more than a year after the decision of this court (which was rendered on 21-12-2012), it approached the ITAT in 2014. It offered no explanation why it did not seek the rectification earlier, during the pendency of the revenue’s appeal- in that event, if the ITAT had rejected its application this court would have given suitable directions. Instead, waiting for the time till the two members who decided the first ITAT orders were not available and choosing to prefer the rectification application at a convenient time, assessee no doubt technically was compliant, but stood exposed to the odium of forum shopping.  ITAT’s MA order reversed with costs of Rs. 1.5 Lakh imposed on assessee.

FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT

1. The Commissioner of Income tax (hereafter “the Revenue”) challenges an order dated 20.5.2016 (in M.A No.340/Del/2015 in ITA No. 2177/Del/2010 passed by the Income Tax Appellate Tribunal, Delhi Bench New Delhi. By that order, ITAT rejected the Revenue’s request to rectify its earlier order dated 26^th March 2015 passed in M.A No. 205/Del/2014 in ITA No. 2177/Del/2010, whereby it had rectified its earlier Order dated 22.07.2011 (passed in ITA No.2177/Del/2010, (hereafter “the first ITAT order”). The first ITAT order had been set aside by this Court (in ITA No. 134/2012, decided by judgment dated 21.12.2012). The first ITAT order had rejected revenue’s appeal. The first ITAT order had also rejected the assessee/petitioner’s cross objections, on the issue of legality of reassessment proceedings.

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