Miscellaneous Application ("MA") before the Income Tax Appellate Tribunal ("ITAT")

Section 254 of the Income Tax Act, 1961("the Act")

254 (2) The Appellate Tribunal may, at any time within 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 Assessing Officer.

Mistake apparent from the record

• The expression ‘mistake apparent from the record’ has not been defined in the Act and no strait-jacket formula can be adopted for determining whether an order made under section 254(1) suffers from a mistake apparent from the record warranting its rectification under section 254(2).

• The contours of this phrase have, therefore, been shaped over time through judicial interpretation.

• Now we will look into various judicial precedents where the above term has been defined.

Mistake apparent from the record

Smt. Baljeet Jolly v. CIT, [2001] 250 ITR 113 (Delhi)

'Mistake' means to take or understand wrongly or inaccurately; to make an error in interpreting; it is an error; a fault, a misunderstanding, a misconception. 'Apparent' means visible; capable of being seen; easily seen; obviously; plain.

Express Newspapers Ltd. v. DCIT, [2010] 320 ITR 12 (Madras)

'Mistake' in general means to take or understand wrongly or inaccurately; to make an error in interpreting; it is an error; a fault, a misunderstanding, a misconception. Mistake in taxation laws has a special significance. It is mostly subjective and the dividing line is thin. 'Apparent' means visible, capable of being seen, easily seen, obvious plain, open to view, evident, appears, appearing as real and true, conspicuous, manifest, seeming. The plain meaning of the word 'apparent' is that it must be something which appears to be ex-facie and incapable of argument and debate. If such a 'mistake apparent on the face of record' is brought to the notice, section 254(2) empowers the Tribunal to amend the order passed u/s 254(1).

Mistake apparent from the record

Laxmi Electronic Corpn. Ltd. v. CIT, [1991] 188 ITR 398 (Allahabad)

The expression 'record' in the phrase 'mistake apparent from the record' in section 254(2) of the Act does not mean only the judgment. The record means the record before the Tribunal. Failure to deal with a preliminary objection of the nature concerned certainly amounts to a mistake apparent from the record.

Asstt. CIT v. Sesa Goa Ltd., [2013] 40 taxmann.com 80 (Panaji - Trib.)

The word 'record' means the entire record consisting of not only grounds of appeal and the case laws relied on and referred to before the Tribunal, but also the contentions, pleas and arguments raised by the parties before the Tribunal. The word 'record' has not been defined under section 254(2) or under section 2 so as to restrict its meaning only to the grounds of appeal decided in the order of the Tribunal.

Karan & Co. v. ITAT, [2002] 253 ITR 131 (Delhi)

Mistake is an ordinary word, but in taxation laws, it has a special significance. It is not an arithmetical or clerical error alone that comes within its purview. It comprehends errors which, after a judicious probe into the record from which it is supposed to emanate, are discerned. The word "mistake" is inherently indefinite in scope, as what may be mistake for one may not be mistake for another. It is mostly subjective and the dividing line in border areas is thin. It is something which a duly and judiciously instructed mind can find out from the record.

Mistake apparent from the record

Grounds on which the MA can be filed

Mistake in not considering material already on record

Honda Siel Power Products Ltd. v. CIT, [2007] 165 Taxman 307 (SC)

Tribunal was justified in exercising its powers u/s 254(2) when it was pointed out to Tribunal that judgment of co-ordinate Bench was placed before Tribunal when original order came to be passed but it had committed a mistake in not considering the aforesaid judgement.

Asstt. CIT v. Saurashtra Kutch Stock Exchange Ltd., [2008] 305 ITR 227 (SC)

Non-consideration of a decision of jurisdictional High Court or of Supreme Court by Tribunal is a 'mistake apparent from record'.

Material not disclosed to Assessee but considered by Tribunal

CIT v. S.S. Gupta, [2002] 257 ITR 440 (Rajasthan)

There was mistake apparent on face of record in Tribunal's order inasmuch as a finding of fact against assessee had been reached on basis of material which was conveyed to Tribunal after hearing was over and, thus, Tribunal inadvertently took into consideration such information which was never disclosed to assessee and without affording any opportunity to him to explain information.

Ground of appeal not adjudicated by the Tribunal

It is a well-established principle that every ground of appeal raised before the Hon'ble Tribunal has to be duly considered and adjudicated upon in the course of disposal of the appeal. In a situation where a particular ground, though specifically raised, has inadvertently remained unadjudicated in the final order of the Tribunal, such non-adjudication constitutes a mistake apparent from record. This is because the omission strikes at the very root of the appellate proceedings, as the order cannot be said to be complete without addressing each of the grounds urged by the Assessee.

Territorial jurisdiction

CIT(E) Chandigarh v. Baba Amarnath Educational Society, [2019] 412 ITR 234 (Punjab & Haryana)

Where a particular Bench of Tribunal did not possess territorial jurisdiction to hear and decide appeal, order passed by it constituted an error apparent from record and same could not be ignored merely on ground that issue of jurisdiction was not raised at time of hearing of appeal.

Clerical/arithmetical mistakes

• A clerical, typographical, or arithmetical error in the order of the Hon'ble Tribunal also qualifies as a 'mistake apparent from record' within the meaning of section 254(2).

• By way of illustration, if in the operative part of the order, a wrong assessment year or incorrect assessment order number has been inadvertently recorded, or if there is an error in the computation of figures such as the amount of disallowance or relief granted, the same constitutes a mistake apparent on record.

Instances which are not considered to be mistakes apparent on record

Material not produced on record

CIT v. Suman Tea & Plywood Industries (P.) Ltd., [1997] 226 ITR 34 (Calcutta)

If a document is not taken into consideration by the lower authorities and is not produced before the Tribunal, when it considered the matter and passed the order, it cannot be said that the order of the Tribunal contains a mistake since it does not discuss such document. Similarly, if a plea founded on a document is not at all raised before the Tribunal, it cannot be said that the order of the Tribunal contains an error apparent on the record.

Absence of adequate reasons

Popular Engg. Co. v. ITAT, [2001] 119 TAXMAN 51 (PUNJ. & HAR.)

• The absence of adequate reasons in an order passed u/s 254(1) cannot per se be regarded as a mistake apparent within the meaning of section 254(2).

• In a given case, it may be quite legitimate for the appellate or revisional authority to approve the reasons recorded by the lower authority instead of independently recording its own reasons on a particular issue and the order passed by such appellate authority or revisional authority cannot be invalidated on the ground of absence of independent reasons.

Debatable issue

• It is a well-settled proposition of law that a MA cannot be entertained by the Tribunal on a debatable issue. The jurisdiction under section 254(2) is limited only to rectifying mistakes which are glaring, obvious, and self-evident from the record.

Who can file a Miscellaneous Application?

Assessee or the Income Tax Department both can file a Miscellaneous Application.

Timeline to file MA

MA must be filed within 6 months from the end of the month in which the ITAT order was passed.

Let’s understand this with an example:

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Golden Times Services (P.) Ltd. v. DCIT, [2020] 422 ITR 102 (Delhi),

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• The words 'six months from the end of the month in which the order was passed' therefore, cannot be given a narrow and restrictive interpretation.

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• A person who is aggrieved or concerned with an order would legitimately be expected to exercise his rights conferred by the provision and unless the order is communicated or is known to him, either actually or constructively, he would not be in a position to avail such a remedy.

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• The limitation would begin to run when the affected person has the knowledge of the decision. The date when the order was passed cannot be solely determined by referring to the date when the same was signed by the Tribunal.

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Condonation of delay

• There is no provision under section 254(2) to entertain the MA received after the expiry of prescribed time limit.

• The time-limit to make rectification under section 254(2) applies to both suo motu action of the Tribunal as well as to action taken on request of the parties

• The IT Act specifically incorporates condonation provisions wherever the legislature intends to permit such relief. For example, under section 253(5), an Assessee is allowed to file an appeal before the ITAT if there exists a sufficient cause for not filing the same within the prescribed time limit.

• Some of the judgements in this regard are:

a)Ram Baburao Salve v. AO, [2024] 162 taxmann.com 354 (Bombay)

b)Rahul Jee & Co. (P.) Ltd. v. ACIT, [2009] 120 ITD 481 (ITAT Delhi)

c)Agni Briquette (P.) Ltd. v. ACIT, [2012] 22 taxmann.com 158 (ITAT Ahd.)

Proviso to section 254(2)

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.

Steps to file MA

Prepare Application

An application has to be prepared mentioning the grounds on account of which MA has been filed

Attach Supporting Documents

• In case there is some factual error in the ITAT order, then an affidavit of the Assessee can be annexed along with

application.

• Copy of the ITAT order has to be annexed along with application that is in challenge.

Pay Required Fee

Challan of Rs. 50 has to be paid and annexed along with application.

File the Application

• The signed copy of the application can be filed online at the e-filing portal of the ITAT.

The same can be accessed at https://itat.gov.in/efiling

• Alternatively, at present, the ITAT also allows to file the MA physically at the ITAT Registry.

Await Hearing Notice

Thereafter, the hearing notice will be received on the registered email ID at the ITAT Portal.

Listing of the MA

As a matter of established practice, such applications are specifically listed for hearing on Fridays. Therefore, whenever an MA is filed, the parties can expect it to be scheduled only on a Friday and not on the other regular working days.

Possible Outcomes of MA

Outcome 1- Rejection

If the Miscellaneous Application is rejected, the original order of the ITAT continues to remain in force and retains its validity.

Outcome 2- Acceptance

Acceptance of the MA means the Tribunal has acknowledged that a mistake apparent from record may exist, and the matter will be heard and decided afresh—but only to the extent of rectifying that mistake.

Power to Review

The power of rectification vested in the Tribunal cannot be exercised as a means to review or re-examine its own order, particularly when the facts and legal grounds have already been duly considered and adjudicated upon in the original order.

Case Study: Limits of Rectification Power

CIT v. Reliance Telecom Ltd., [2021] 133 taxmann.com 41 (SC)

Facts of the case:

1

The Assessee-company entered into a supply contract with a non-resident company. It filed an application under section 195 before the AO to make payment to the non-resident company for purchase of software without deducting TDS.

2

The Assessee contended that said non-resident company had no Permanent Establishment (PE) in India and in terms of the DTAA between India and Sweden & USA, no tax was to be deducted in India on same.

3

The AO rejected the Assessee's application on grounds that consideration for software licensing constituted royalty under section 9(1)(vi) and was liable to be taxed in India and, accordingly, Assessee was directed to deduct tax at source at rate of 10 per cent on said royalty payment.

Case Study: Reliance Telecom (Continued)

4

On appeal, the Commissioner (Appeals) passed an order in favour of the assessee.

5

On further appeal, the Tribunal upheld the order passed by the Assessing Officer on grounds that payments made for purchase of software were in nature of royalty and tax at source was to be deducted on such payment.

6

The Assessee filed a miscellaneous application for rectification under section 254(2) before the Tribunal. The Tribunal recalled its original order and passed an order in favour of the Assessee.

7

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The revenue filed a writ petition against order of the Tribunal on miscellaneous application. The High Court dismissed said writ petition.

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Thereafter, the revenue approached SC

Findings of the Hon'ble SC:

While allowing the application under section 254(2) and recalling its earlier order, it appears that the Tribunal has re-heard the entire appeal on merits as if the Tribunal was deciding the appeal against the order passed by the Commissioner (Appeals).

The powers under section 254(2) are only to rectify/correct any mistake apparent from the record.

In the instant case, a detailed order was passed by the Tribunal when it originally passed an order, by which the Tribunal held in favour of the revenue.

If the Assessee was of the opinion that the order passed by the Tribunal was erroneous, either on facts or in law, in that case, the only remedy available to the Assessee was to prefer the appeal before the High Court.

Therefore, as such, the order passed by the Tribunal recalling its earlier order is beyond the scope and ambit of the powers of the Tribunal conferred under section 254(2).

Thank You

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Regards

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CA(Dr.)(hc) Amarbir Singh Walia

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(8699836225)