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November 29, 2022

Limitation of 4 years u/s 154 for Rectification is applicable for Intimation issued by CPC

by CA Shivam Jaiswal in Income Tax

Limitation of 4 years u/s 154 for Rectification is applicable for Intimation issued by CPC

FACTS AND ISSUE OF THE CASE

The legal grounds raised by the assessee before ITAT are as under:

“1. The Learned Commissioner of Income Tax (Appeals) failed to appreciate that the time limitation laid down under Section 154(7) applies only to amendment of any “order passed” referred to in Section 154(1)(a) and not to amendment of any intimation or deemed intimation under sub-section (1) of Section 143(1) referred to in Section 154(1) (b) and, therefore, erred in dismissing the appeal stating that the rectification application is beyond the date of limitation.

Without prejudice to Ground No. 1, the Learned Commissioner of Income Tax (Appeals) is not justified in not adjudicating on the ground of appeal for allowance of credit for surcharge and education cess totaling to Rs. 2,82,548/- while computing MAT set off under Section 115JAA.

Without prejudice to Ground No. 1, the Learned Commissioner of Income Tax (Appeals) IS not justified in not adjudicating on the ground of appeal opposing increase in interest under Sections 234B and 234C by Rs. 42,803/-.

For these grounds and for such other grounds that may be adduced at the time of hearing of the appeal, the issues raised in this appeal may be considered”.

In this  regard,  the  learned  AR  submitted  that  it  was the case of the assessee that the learned  CIT  (A)  dismissed  the appeal of the assessee on the ground that no rectification order is permissible  to  be  passed  under  Income  Tax  Act  1961  after passage of 4 years from the date of passing of  the  order  under section 154(7). The learned  AR  drew  our  attention  to  the intimation issued by the Department in  this  regard,  which  was issued under section 143(1) of the Act . It was submitted by the learned AR that in  law,  there  is  a  distinction  between  the intimation  u/s  143(1)  and  the  assessment  order  passed  u/s 143(3) of the Act. The restriction under section 154(7) was only provided against the assessment order and it is not applicable to intimation. Our attention  was  drawn  to  provisions  of  section  154 of the I.T. Act, 1961 which reads as under:

Rectification of mistake.

54154.55[(1) With a view to rectifying any mistake apparent from the record56 an income-tax authority referred to in section 116 may,—

(a) amend any order56 passed by it under the provisions of this Act ;
57[(b) amend any intimation or deemed intimation under sub-section (1) of section 143;]]
58[(c) amend any intimation under sub-section (1) of section 200A;]
59[(d) amend any intimation under sub-section (1) of section 206CB.]

60[(1A) Where any matter61 has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.]

Subject to the other provisions of this section, the authority concerned—

(a) may make an amendment under sub-section (1) of its own motion, and
(b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee 62[or by the deductor] 63[or by the collector], and where the authority concerned is the 64[***] 65[Commissioner (Appeals)], by the 66[Assessing] Officer also.

An amendment, which has the effect of enhancing an assessment68 or reducing a refund or otherwise increasing the liability of the assessee 69[or the deductor] 70[or the collector], shall not be made under this section unless the authority concerned has given notice to the assessee 69[or the deductor] 70[or the collector] of its intention so to do and has allowed the assessee 69[or the deductor] 70[or the collector] a reasonable opportunity of being heard.

Where an amendment is made under this section, an order shall be passed in writing by the income-tax authority concerned

.

71[(5) Where any such amendment has the effect of reducing the assessment or otherwise reducing the liability of the assessee or the deductor 72[or the collector], the Assessing Officer shall make any refund which may be due to such assessee or the deductor 72[or the collector].]

Where any such amendment has the effect of enhancing the assessment73 or reducing a refund 74[already made or otherwise increasing the liability of the assessee or the deductor 75[or the collector], the Assessing Officer shall serve on the assessee or the deductor 75[or the collector], as the case may be] a notice of demand in the prescribed form specifying the sum payable76, and such notice of demand shall be deemed to be issued under section 156 and the provisions of this Act shall apply accordingly.

Save as otherwise provided in section 155 or sub-section (4) of section 18677 no amendment under this section shall be made after the expiry of four years 78[from the end of the financial year in which the order79 sought to be amended was passed.]

80[(8) Without prejudice to the provisions of sub-section (7), where an application for amendment under this section is made by the assessee 81[or by the deductor] 82[or by the collector] on or after the 1st day of June, 2001 to an income-tax authority referred to in sub- section (1), the authority shall pass an order, within a period of six months from the end of the month in which the application is received by it,—

(a) making the amendment; or
(b) refusing to allow the claim.]

The learned AR further submitted that the Hon’ble Supreme Court in the case of Rajesh Javari Stock Brokers (P) Ltd reported in (2007) 161 Taxmann 316 had categorically culled out the distinction between the intimation and the  assessment order observed by tribunal

He accordingly submitted that the learned CIT  (A) is not justified in dismissing the appeal of the assessee.

On the other hand, the learned DR submitted that the period of limitation provided u/s 154 of the Act is only  for rectification and the order passed by the learned CIT (A) is correct as the  application  for  rectification  was  passed  beyond  the  period of 4 years. The learned  DR  also  submitted  that  if  by  the  logic  of the  assessee,  the  intimation  is  not  an  order,  then  no  appeal should lie against the intimation before the learned CIT (A).

Observation of court

We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee.Tribunal find the  learned CIT (A) order has observed as under:

“ The Decision:

The appeal originates from the order of the CPC dated 27.03.2017 pertaining to the rectification request filed by the appellant on 08.03.2017, with regard to the order of CPC in order no. CPC/1112/16/11 12874011 dated 28.01.2012. The order of the CPC pertains to A.Y. 2011- 12, the return of which was filed on30.11.2011.

The order was passed in F.Y. 2011-12, the rectification of the same has to be filed within four years i.e., till 3Ist March, 2016, whereas the rectification application was filed on 06.03.2017. Therefore, the date of rectification application itself is out of time as per the provisions of section 154(7) of the Income Tax Act wherein the Amendment to the order of CPC dated 28.01.2012 can only be made before the expiry of four years from the end of the Financial Year in which the order has been passed. Therefore, the rectification application itself is out of time. Therefore, there is no cause of appeal on an infructuous application. In view of the same, the appeal is dismissed accordingly and the ground No.1 and the consequent grounds 2 and 3 are dismissed”.

From  a  perusal  of  the  above,  it  is  abundantly  clear that the learned CIT (A) relied upon section 154(7)  of  the  Act  to deny rectification of the order passed by the CPC u/s 143(1) of  the Act. The rectification of a mistake apparent from the record  is required to be made by the  Income Tax Authorities  u/s 154 of  the Act either suo moto  or  on  the  application  of  assessee.  The limitation for rectification of the  apparent  mistake  has  been provided by the Act for a period of 4 years u/s 154(7) of the Act.

The learned AR submitted during the course of argument that the plenary literal interpretation is required to be given to the statute in the case of unambiguity. However, we disagree with the interpretation as canvased by the learned AR for the assessee. In a recent decision the Hon’ble Supreme Court in the case of Eera vs. State (Govt. of NCT of Delhi)  reported  in (2017) 15 SCC 133 has laid down the parameters of creative interpretation. The sum and substance of the creative interpretation was that literal interpretation is to be avoided if it leads to an absurdity. The interpreting authority is required to think what was the purpose for which the  statute  was  enacted and shall keep think like a legislature and find  out  what  the statute wanted to correct/address the issues. After understanding the statute in the above manner the  statute  is  to  interpretated and decide the issue. Thus tribunal observed as under

It is thus clear on a reading of English, U.S., Australian and our own Supreme Court judgments that the ‘Lakshman Rekha’ has in fact been extended to move away from the strictly literal rule of interpretation back to the rule of the old English case of Heydon, where the Court must have recourse to the purpose, object, text, and context of a particular provision before arriving at a judicial result. In fact, the wheel has turned full circle. It started out by the rule as stated in 1584 in Heydon’s case, which was then way laid by the literal interpretation rule laid down by the Privy Council and the House of Lords in the mid 1800s, and has come back to restate the rule somewhat in terms of what was most felicitously put over 400 years ago in Heydon’s case.”

Conclusion

In the present  case, if we look into the purpose, object, text, and context of section 154(7) ,then it would be clear that the purpose of providing limitation of 4 years was to give certainties and finality to the order passed by the CPC/A.O. If  we  read  that the limitation provided under section 154(7) is not be available in the case of passing of any intimation to rectify the order,  then chaos would happen , and unlimited power would be available to the Assessing Officer/CPC to rectify the mistake even after  the lapse of 4 years. In the light of the above,  we are of the  opinion that limitation for rectification under 154(7) is 4years even for intimation also.In the result, appeal filed by the assessee is dismissed.

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