Facts of the Case:

The petitioner, T.C. Sood, a resident of New Delhi, was subject to a search under Section 132 of the Income Tax Act, 1961, on 13th May 2003. Following the search, a notice under Section 158BC was issued to declare undisclosed income. The petitioner filed a return showing nil undisclosed income. The Assessing Officer, after examining the seized material, passed an assessment order for the block period 1.4.1997 to 13.5.2003, determining undisclosed income of Rs.7,27,400/- and levying tax accordingly.

The petitioner appealed against various additions related to cash, fixed deposits, and other bank deposits. The CIT(Appeals) dismissed the appeal. Subsequently, the petitioner appealed to the Income Tax Appellate Tribunal (ITAT), which partially allowed the appeal, adjusting certain amounts but confirming most additions. The petitioner then filed an application under Section 254(2) seeking rectification of apparent mistakes regarding fixed deposit receipts.

Issues Involved:

  1. Whether the Tribunal committed a mistake apparent on record under Section 254(2) regarding fixed deposits.
  2. Whether the petitioner could rely on post-hearing bank certificates to rectify alleged discrepancies.
  3. Whether remitting the matter to the Assessing Officer for fresh consideration is justified in the interest of justice.

Petitioner’s Arguments:

  • Alleged discrepancies in fixed deposit numbers between the panchnama and supporting documents were not apparent errors but administrative differences (printed serial vs bank-assigned number).
  • Certificates obtained from Canara Bank and Punjab National Bank post-hearing would clarify the discrepancies.
  • The petitioner did not have the opportunity to explain these discrepancies during the Tribunal hearing.
  • No prejudice would be caused to Revenue if the Assessing Officer examined the certificates and reconsidered the assessment 

Respondent’s Arguments:

  • Tribunal correctly rejected the petitioner’s application under Section 254(2).
  • Documents submitted post-hearing could not be considered for apparent mistake rectification.
  • The application amounted to a review of the Tribunal’s order, which is not permitted under Section 254(2).
  • The petitioner had sufficient opportunity to submit documents during the hearing.

Court Findings / Order:

  • The Delhi High Court found merit in the petitioner’s contention that the discrepancy could not have been explained during the Tribunal hearing.
  • The Court observed no prejudice would be caused to Revenue if the matter is restored for fresh consideration.
  • The writ petition was allowed, and the matter was remitted to the Assessing Officer for due consideration of the documents submitted through the petitioner’s Miscellaneous Application.
  • Petition succeeded; the Tribunal order was partially set aside for reconsideration.

Important Clarifications:

  • Section 158BC: Deals with block assessments of undisclosed income following search operations.
  • Section 254(2): Allows rectification of apparent mistakes in Tribunal orders; does not permit substantive review.
  • Certificates issued by banks post-hearing can be considered for remittance if due diligence could not reveal discrepancies earlier.
  • The principle of natural justice was applied: a petitioner cannot be penalized for discrepancies discovered only after Tribunal orders.

 Sections Involved

  • Section 158BC [Block Assessment]: Lays down the procedure for searching, detecting, and assessing undisclosed income for a block period (in this case, 1.4.1997 to 13.5.2003) following a search operation under Section 132.
  • Section 254(2) [Rectification of Mistakes]: Empowers the Income Tax Appellate Tribunal (ITAT) to amend its own order to rectify any "mistake apparent from the record" within a specified time limit. It strictly prohibits a substantive review of the order under the guise of rectification.

Link to download the order: https://delhihighcourt.nic.in/app/case_number_pdf/2012:DHC:6927-DB/RVE21112012CW16872012.pdf

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