Facts of the Case

The appellants, namely Ambience Hotels & Resorts Pvt. Ltd. and Ambience Developers & Infrastructure Pvt. Ltd., challenged orders passed by the Income Tax Appellate Tribunal by filing appeals before the Delhi High Court. During the pendency of these appeals, the assessees also moved applications before the ITAT under Section 254(2) of the Income Tax Act seeking rectification of certain alleged mistakes in the Tribunal’s order.

When this development was brought to the notice of the High Court, the Court examined whether the pending rectification applications affected the maintainability of the appeals before it.

Issues Involved

  1. Whether an appeal before the High Court against an ITAT order is maintainable when rectification proceedings under Section 254(2) are pending before the Tribunal?
  2. Whether the High Court should adjudicate the appeal before the Tribunal disposes of the rectification application?
  3. Whether parties retain the right to challenge the rectified order before the High Court subsequently?

Petitioner’s Arguments

  • The appellants had challenged the ITAT order on substantial grounds requiring judicial consideration by the High Court.
  • The filing of rectification applications before the Tribunal was for correction of specific mistakes and should not prejudice their appellate rights.
  • The assessees sought preservation of their legal rights and contentions against the impugned order.

Respondent’s Arguments

  • Since rectification proceedings under Section 254(2) were pending before the ITAT, the impugned order was not in its final operative form.
  • Entertaining the appeals at that stage would be premature.
  • The proper course would be to await the Tribunal’s decision on rectification.

Court Findings / Court Order

The Delhi High Court observed that once the assessees themselves had invoked the rectification jurisdiction of the ITAT under Section 254(2), the appeals pending before the High Court could not be treated as maintainable at that stage.

The Court held that if, after disposal of the rectification applications, the assessees remained aggrieved and their grievances survived, they would be at liberty to approach the High Court through appropriate legal proceedings.

Accordingly, the appeals were disposed of, while expressly reserving all rights and contentions relating to the correctness of the Tribunal’s order.

Important Clarification / Legal Principle

  • Filing a rectification application under Section 254(2) before the ITAT may render an existing High Court appeal against the same order premature.
  • The High Court can decline to entertain such appeal until rectification proceedings conclude.
  • The right to challenge the rectified or final order remains preserved.
  • This ruling reinforces procedural discipline in tax litigation and avoids parallel adjudication.

Sections Involved

  • Section 254(2), Income Tax Act, 1961 – Rectification of mistakes by the Income Tax Appellate Tribunal (ITAT)
  • Section 260A, Income Tax Act, 1961 – Appeal to High Court against ITAT orders

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:8735-DB/SRB18122017ITA8762017_143502.pdf

Top of Form

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.