Facts of the Case

The Revenue filed appeals before the Delhi High Court challenging orders passed by the ITAT under Section 254(2), whereby the Tribunal had allowed rectification applications and restored the appeals for fresh hearing.

The grievance of the Revenue was that such rectification orders were passed beyond the statutory limitation period of six months as prescribed under the amended provisions of Section 254(2).

Issues Involved

  1. Whether ITAT can pass an order under Section 254(2) beyond six months from the date of the original order.
  2. Whether such delayed rectification orders are legally sustainable.

Petitioner’s Arguments (Revenue)

  • The ITAT exceeded its jurisdiction by entertaining and deciding rectification applications beyond the statutory time limit of six months.
  • The amendment to Section 254(2), effective from 01 June 2016, mandates strict adherence to the limitation period.
  • Any order passed beyond this period is without authority of law and liable to be set aside.

Respondent’s Arguments (Assessee)

  • After the ITAT passed the rectification order restoring the appeals, the matters were reheard and orders had already been reserved.
  • Given the subsequent developments, interference by the High Court would be unnecessary and impractical.
  • The issue had become academic in the present context.

Court Findings / Order

  • The Delhi High Court noted that after the ITAT passed the impugned rectification orders, the appeals had already been reheard and orders were reserved.
  • Considering these subsequent developments, the Court declined to interfere in the matter.
  • The legal question regarding limitation under Section 254(2) was left open for adjudication in an appropriate case.
  • Accordingly, all appeals were dismissed with no costs.

Important Clarification

  • The Court did not decide the substantive legal issue regarding whether ITAT can pass rectification orders beyond six months.
  • The question of law remains open and unresolved, preserving its applicability for future litigation.
  • The decision is therefore fact-specific and not a binding precedent on the limitation issue.

Sections Involved

  • Section 254(2) of the Income Tax Act, 1961 (Rectification of Mistake by ITAT)
  • Amendment effective from 01 June 2016 (Time limit of 6 months)

 Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2019:DHC:7412-DB/SMD06082019ITA3362019_163419.pdf

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