Facts of the Case

The present appeals were filed by the Revenue challenging orders of the Income Tax Appellate Tribunal (ITAT). The core issue arose from the Tribunal entertaining and deciding applications filed by the assessee under Section 254(2) of the Income Tax Act, 1961 beyond the prescribed statutory period of six months.

The amendment introducing the six-month limitation period under Section 254(2) came into effect from 1st June 2016. The ITAT, however, passed orders restoring the appeals for fresh hearing despite the alleged expiry of this time limit.

Issues Involved

  1. Whether the ITAT is empowered to decide an application under Section 254(2) beyond the statutory time limit of six months.
  2. Whether such delayed rectification orders passed by ITAT are legally sustainable.

Petitioner’s Arguments (Revenue)

  • The Revenue contended that the ITAT exceeded its jurisdiction by deciding rectification applications beyond the prescribed six-month limitation period under Section 254(2).
  • It was argued that the statutory time limit is mandatory, and any order passed beyond such limitation is invalid in law.

Respondent’s Arguments (Assessee)

  • The assessee submitted that subsequent developments had taken place after the ITAT’s impugned order.
  • It was pointed out that the appeals restored by the ITAT had already been heard and orders were reserved.
  • Therefore, interference by the High Court at this stage would be unnecessary and impractical.

Court’s Findings / Order

  • The Delhi High Court observed that subsequent developments—namely, that the appeals had already been reheard and orders reserved—made it inappropriate to interfere in the matter.
  • The Court declined to adjudicate the legal question regarding the limitation under Section 254(2) in the present case.
  • Importantly, the Court left the question of law open for consideration in an appropriate future case.
  • Accordingly, all appeals filed by the Revenue were dismissed with no order as to costs.

Important Clarification

  • The High Court did not decide whether ITAT can pass orders beyond the six-month limitation under Section 254(2).
  • The issue remains unsettled and open, making this case significant for future litigation on the scope and limitation of rectification powers of ITAT.

Sections Involved

  • Section 254(2), Income Tax Act, 1961 – Rectification of mistakes by ITAT (with six-month limitation post amendment effective 01.06.2016)

 Link to download the order -

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

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