Gujarat H.C : Rectification application under section 254 filed within period of four years from actual receipt of judgment and order sought to be reviewed, should be admitted for consideration

High Court Of Gujarat

Peterplast Synthetics (P.) Ltd. vs. ACIT

Assessment Year : 1996-97

Section : 254

M.R. Shah And R.P. Dholaria, JJ.

Special Civil Application No. 13504 Of 2013

November 12, 2013

JUDGMENT

M.R. Shah, J. – Shri Manish Bhatt, learned Counsel waives service of notice of rule on behalf of the respondents.

2. In the facts and circumstances of the case and with the consent of the learned advocates appearing on behalf of the respective parties, the present petition is taken up for final hearing today.

3. By way of this petition under Article 226 of the Constitution of India the petitioner-assessee has prayed for an appropriate writ, order or direction quashing and setting aside the impugned order passed by the Income Tax Appellate Tribunal, Ahmedabad ‘B’ Bench, Ahmedabad (hereinafter referred to as ‘ITAT’) dated 03/05/2013 in M.A. No. 104/Ahd/2012 by which the tribunal has dismissed the said application on the ground that the same is barred by limitation as provided under Section 252(2) of the Income Tax Act.

4. The facts leading to the present Special Civil Application, which are relevant/necessary for determination, in nutshell are as under;

5. Being aggrieved and dissatisfied with the order passed by the CIT(A) for the Assessment Year 1996-97, the petitioner-assessee preferred appeal before the ITAT and vide impugned judgment and order dated 20/02/2007 the ITAT dismissed the appeal, being ITA No. 2116/Ahd/2003. The said order of the ITAT was received by the petitioner-assessee on 19/11/2008. After receiving the order, the petitioner-assessee preferred Miscellaneous Application/rectification application against the judgment and order dated 20/02/2007 before the ITAT on 09/05/2012 i.e. after a period of three years, six months and twenty days from the date of receipt of the judgment and order passed by ITAT dated 20/02/2007 in ITA No. 2116/Ahd/2003.The said rectification application/miscellaneous application has been dismissed by the ITAT by the impugned order on the ground that the same is barred by the law of limitation as provided under Section 252(2) of the Income Tax Act by observing that from the date of the order passed by ITAT i.e. 20/02/2007 the rectification application has been submitted after a period of four years. Being aggrieved and dissatisfied with the impugned order passed by the ITAT in dismissing the rectification application/miscellaneous application on the ground that the same is barred by limitation i.e. beyond the period of four years from the date of passing of the judgment and order passed by the ITAT, the petitioner-assessee has preferred the present Special Civil Application under Article 226 of the Constitution of India.

6. Shri Manish J. Shah, learned advocate appearing on behalf of the petitioner has vehemently submitted that the ITAT has materially erred in rejecting the rectification application/miscellaneous application on the ground that the same is barred by law of limitation i.e. beyond the period of four years. It is submitted that as such the rectification application/miscellaneous application was submitted by the petitioner-assessee within a period of four years from the date of receipt of the judgment and order passed by the ITAT. It is submitted that the ITAT has materially erred in considering the starting point of limitation in submitting the rectification application/miscellaneous application from the date of the order passed by the ITAT and not from the date of receipt of the judgment and order passed by the ITAT.

6.1 Shri Manish J. Shah, learned advocate appearing on behalf of the petitioner-assessee has heavily relied upon the following decisions of the Hon’ble Supreme Court, Bombay High Court as well as this Court.

(i)D. Saibaba v. Bar Council of India [2003] 6 SCC 186;

(ii)Petlad Bulakhidas Mills Co. Ltd. v. Raj Singh [1959] 37 ITR 264 (Bom.);

(iii)Sree Ayyanar Spg. and Wvg. Mills Ltd. v. CIT [2008] 301 ITR 434/171 Taxman 498 (SC);

(iv)the unreported decision of this Court in the case of Vadilal Industries Ltd. v. Union of India 2006 (197) ELT 160 (Guj.).

6.2 Shri Manish Shah, learned advocate appearing on behalf of the petitioner-assessee relying upon the decision of this Court in the case of Vadilal Industries Ltd. (supra) has submitted that with respect to the analogous provisions in the Central Excise Act, it is held by the Division Bench of this Court that the starting point of limitation to prefer the rectification application would be from the date of receipt of the order, which is sought to be reviewed/rectified and not from the actual date of the order. Making the above submissions, it is requested to allow the present Special Civil Application and quash and set aside the impugned order passed by the ITAT and direct the ITAT to decide and dispose of the rectification application/miscellaneous application submitted by the petitioner-assessee in accordance with law and on its own merits.

6.3 Shri Manish Bhatt, learned Counsel has appeared on behalf of the respondent-revenue. At the outset, it is required to be noted that he is not in position to dispute the proposition of law laid down by the Hon’ble Supreme Court as well as this Court in the aforesaid decisions to the fact that the starting point of limitation to prefer the rectification application/miscellaneous application would be the date on which the petitioner-assessee received the copy of the order of the tribunal, which is sought to be reviewed. However has requested to dismiss the present Special Civil Application considering the conduct on the part of the petitioner-assessee i.e. of preferring the rectification application/miscellaneous application after a period of three years and six months from the date of receipt of the judgment and order passed by the ITAT. It is submitted that considering the aforesaid conduct on the part of the petitioner-assessee, more particularly, when admittedly the petitioner-assessee received the order passed by the ITAT, which was sought to be reviewed, on 19/11/2008 and the petitioner-assessee submitted the Miscellaneous Application on 09/05/2012 i.e. after a period of three years and six months, it is requested that this Court may not exercise the discretion in favour of the petitioner under Article 226 of the Constitution of India.

7. Heard Shri Manish J. Shah, learned advocate appearing on behalf of the petitioner-assessee and Shri Manish Bhatt, learned Counsel appearing on behalf of the respondent- revenue.

7.1 The short question, which is posed for consideration of this Court is, whether the period of limitation to submit/prefer the rectification application under Section 254(2) of the Income Tax Act would commence from the judgment and order passed by the tribunal, which is sought to be reviewed or the date on which the petitioner-assessee actually received the judgment and order passed by the tribunal, which is sought to be reviewed/rectified?”

8. As observed by the Hon’ble Supreme Court in the case of Sree Ayyanar Spg. and Wvg. Mills Ltd. (supra), Section 254(2) of the Income Tax Act is in two parts. Under the first part, the appellate tribunal may, at any time, within four years from the date of the order, rectify any mistake apparent from the record and amend any order passed by it under Sub Section (1). Under the second part of Section 254(2), the reference is to the amendment of the order passed by the tribunal under Sub Section (1) when the mistake is brought to its notice by the assessee or the Assessing Officer. It is observed that therefore, in short, the first part of Section 254(2) refers to the suo motu exercise of the power of rectification by the tribunal whereas the second part refers to rectification and amendment on an application being made by the Assessing Officer or the assessee pointing out the mistake apparent from the record. In the present case, it is the assessee, who submitted the application before the tribunal and, therefore, the application for rectification was required to be made within a period of four years. In the present case, the tribunal passed the judgment and order on 20/02/2007, which is sought to be rectified, which has been admittedly received by the assessee on 19/11/2008. The petitioner-assessee preferred the application on 09/05/2012 i.e. after a period of three years, six months and twenty days from the date of receipt of the judgment and order passed by the tribunal dated 20/02/2007, however, beyond the period of four years from the actual date of the judgment and order passed by the tribunal i.e. 20/02/2007. The tribunal has rejected the said Miscellaneous Application solely on the ground that the said application has been preferred beyond the period of four years from the date of the judgment and order passed by the tribunal i.e. 20/02/2007. On the other hand, it is the case on behalf of the petitioner-assessee that the tribunal ought to have considered the starting point of limitation from 19/11/2008 i.e. from the date of actual receipt of the judgment and order passed by the tribunal, which is sought to be reviewed.

9. Under the circumstances, the short question, which is posed for consideration of this Court is, what will be the date of commencement of the period of limitation of four years as provided under Section 254(2) of the Income Tax Act? i.e. Whether to consider the date of the judgment and order passed by the tribunal, which is sought to be reviewed or the actual date of the judgment and order received by the assessee?

10. In the case of Petlad Bulakhidas Mills Co. Ltd. (supra) while considering the expression “order” in Section 33A(2) of the Income Tax Act, the Bombay High Court has held that the expression “order” in Section 33A(2) of the Income Tax Act means an order of which the party affected has actual or constructive notice. In the said decision, the Bombay High Court has observed and held as under;

“What we have to decide is what is the meaning to be attached to the word “order” used in the expression “from the date of the order”. If “order” means a unilateral arriving at a decision by the Appellate Assistant Commissioner without the person affected having any knowledge of that decision, then undoubtedly limitation would begin to run from the date when the Appellate Assistant Commissioner chooses to pass the order. In this view of the case, the Appellate Assistant Commissioner may make the order, put it in a drawer, forget about it, and if a year has passed after it the right of the assessee to go in revision would be barred. Now that seems to us to be an entirely untenable contention. If the Legislature gave the right of revision to the assessee under Section 33A it was an effective right and if the Legislature provided a period of limitation that period must equally be an effective period. When we say “effective” what we mean is that the whole period must be permitted to the person affected by the order within which he can prefer the application for revision. The assessee should know that he has a year’s time within which to make up his mind whether he should apply for revision or not. If Mr. Joshi’s contention were to be accepted, we would be driven to this extraordinary conclusion that the period of limitation provided by the Legislature could be cut down by the action of the Appellate Assistant Commissioner. The Appellate Assistant Commissioner could at his sweet will determine what the period of limitation was. He need not promulgate the order for a month, two months, or six months, and the period of limitation would depend upon when he chose to intimate to the party affected the nature of his order. Surely that could not have been the intention of the Legislature.”

It is further observed by the Bombay High Court in the said decision that the right of appeal is given to an assessee against the order, and that right of appeal can only be effectively exercised if the party affected has knowledge of that order.

10.1 While dealing with the provision of limitation for filing review/reference/appeal in the Advocates Act, 1961, more particularly, Section 48AA , which provides that the review petition can be filed within a period of sixty days from the date of the order, the Hon’ble Supreme Court in the case of D. Saibaba (Supra) has held that the words “from the date of that order” must be construed as meaning the date of communication or knowledge of the order to the review. In paragraph 9 to 14 the Hon’ble Supreme Court has observed and held as under;

“9. So far as the commencement of the period of limitation for filing the review petition is concerned we are clearly of the opinion that the expression “the date of that order” as occurring in Section 48-AA has to be construed as meaning the date of communication or knowledge of the order to the review petitioner. Where the law provides a remedy to a person, the provision has to be so construed in case of ambiguity as to make availing of the remedy practical and the exercise of power conferred on the authority meaningful and effective. A construction which would render the provision nugatory ought to be avoided. True, the process of interpretation cannot be utilized for implanting a heart into a dead provision; however, the power to construe a provision of law can always be so exercised as to give throb to a sinking heart.

10. An identical point came up for the consideration of this Court in Raja Harish Chandra Raj Singh V. Dy. Land Acquisition Officer. Section 18 of the Land Acquisition Act, 1894 contemplates an application seeking reference to the Court being filed within six months from the date of the Collector’s award. It was held that “the date of the award” cannot be determined solely by reference to the time when the award is signed by the Collector or delivered by him in his office. It must involve the consideration of the question as to when it was known to the party concerned either actually or constructively. If that be the true position, then placing a literal and mechanical construction on the words “the date of the award” occurring in the relevant section would not be appropriate. It is fair and just that a decision is communicated to the party whose rights will ultimately be affected or who will be affected by the decision. The knowledge, either actual or constructive, of the party affected by such a decision, is an essential element which must be satisfied before the decision can be brought into force. Thus construed, the making of the award cannot consist merely of the physical act of writing an award or signing it or even filing it in the office of the Collector; it must involve the communication of the said award to the party concerned either actually or constructively. A literal or mechanical way of construing the words “from the date of the Collector’s award” was held to be unreasonable. The Court assigned a practical meaning to the expression by holding it as meaning the date when the award is either communicated to the party or is known by him either actually or constructively.

11. The view taken in Raja Harish Chandra Raj Singh case by a two Judge Bench of this Court was affirmed by a three Judge Bench of this Court in State of Punjab v. Qaisar Jehan Begum. This Court added that the knowledge of the award does not mean a mere knowledge of the fact that an award has been made; the knowledge must relate to the essential contents of the award.

12. In Asstt. Transport Commissioner v. Nand Singh the question of limitation for filing an appeal under Section 15 of the U.P. Motor Vehicles Taxation Act, 1935 came up for the consideration of this Court. It provides for an appeal being preferred “within thirty days from the date of such order”. The taxation officer passed an order on 20/10/1964 / 24/10/1964 which was received by the person aggrieved on 29/10/1964. The appeal filed by him was within thirty days – the prescribed period of limitation, calculated from 29/10/1964, but beyond thirty days of 24/10/1964. It was held that the effective date for calculating the period of limitation was 29/10/1964 and not 24/10/1964.

13. In Raj Kumar Dey v. Tarapada Dey this Court pressed into service two legal maxims guiding and assisting the court while resolving an issue as to calculation of the period of limitation prescribed, namely, (i) the law does not compel a man to do that which he could not possibly perform, and (ii) an act of the court shall prejudice no man. These principles support the view taken by us hereinabove. Any view to the contrary would lead to an absurdity and anomaly. An order may be passed without the knowledge of anyone except its author, maybe kept in the file and consigned to the record room or the file may lie unattended, unwittingly or by carelessness. In either case, the remedy against the order would be lost by limitation though the person aggrieved or affected does not even know what order has been passed. Such an interpretation cannot be countenanced.

14. How can a person concerned or a person aggrieved be expected to exercise the right of review conferred by the provision unless the order is communicated to or is known to him either actually or constructively? The words “the date of that order”, therefore, mean and must be construed as meaning the date of communication or knowledge, actual or constructive, of the order sought to be reviewed.”

10.2 Identical question came to be considered by the Division Bench of this Court in the case of Vadilal Industries Ltd. (Supra), however dealing with the similar analogous provision under the Central Excise Act i.e Section 35C(2) of the Central Excise Act. In the said decision, the Division Bench of this Court has held that the rectification application can be made within a period of six months from the date of receipt of the order, which is sought to be reviewed. While holding so in paragraph nos. 15 and 16 the Division Bench has observed and held as under;

“15. There is another angle from which the matter can be approached. It is only the party to the appeal who finds that the order contains a mistake apparent from the record and is aggrieved by such mistake, would be in a position to move an application seeking rectification of the order. Therefore also, unless and until a party to the appeal is in a position to go through and study the order it would be possible, nor can it be envisaged, that a party can claim to be aggrieved by the mistake apparent from the record. Hence, even on this count the period of limitation has to be read and understood so as to mean from the date of the receipt of the order.

16. Therefore, the action of the Technical Officer to return the papers of ROM Application without even placing the same before the Bench concerned is not only bad in law, but is not supported by the provisions of the Act.”

11. In view of the above, the ITAT has committed a grave error in dismissing the rectification application on the ground that the same is barred by limitation. From the date of receipt of the impugned judgment and order passed by the tribunal, which is sought to be reviewed, it can be seen that the rectification application has been submitted within the period of four years from the date of actual receipt of the judgment and order and, therefore, it is to be held that the same is within the period of limitation as per Section 254(2) of the Income Tax Act. Under the circumstances, the impugned order passed by the ITAT cannot be sustained.

12. Now so far as the submission made by Shri Manish Bhatt, learned Counsel appearing on behalf of the revenue not to exercise the discretionary power under Article 226 of the Constitution of India submitting that looking to the conduct on the part of the petitioner-assessee, more particularly, when admittedly the petitioner-assessee received the order passed by the tribunal, which was sought to be reviewed on 19/11/2008 and the petitioner-assessee submitted the MA on 09/05/2012 after a period of three years and six months and there is no explanation whatsoever with respect to the period between 19/11/2008 and 09/05/2012 is concerned and to dismiss the present Special Civil Application on the aforesaid ground is concerned, the aforesaid cannot be accepted. At the outset, it is required to be noted that the statute has conferred the right in favour of the petitioner-assessee or even the revenue to prefer the rectification application within a period of four years and, therefore, even if the rectification application/miscellaneous application is submitted on the last day of completion of four years from the date of receipt of the order, which is sought to be reviewed, the same is required to be decided on merits and in such a situation the petitioner-assessee is not required to give any explanation for the period between actual date of receipt of the judgment and order, which is sought to be reviewed and the date on which the Miscellaneous Application is submitted provided such a rectification application is submitted within a period of four years from the date of actual receipt of the order of the tribunal, which is sought to be reviewed.

13. Under the circumstances on the aforesaid ground the rectification application/miscellaneous application cannot be rejected and/or the petition is not required to be dismissed. Once it is found that the rectification application under Section 254(2) of the Income Tax Act has been submitted within a period of four years from the date of actual receipt of the judgment and order passed by the tribunal, which is sought to be reviewed, the petitioner is entitled to the relief as prayed for.

14. In view of the above and for the reasons stated hereinabove, the petition succeeds. The impugned order passed by the ITAT dated 03/05/2013 in M.A. No. 104/Ahd/2012 is hereby quashed and set aside and it is held that the rectification application/miscellaneous application submitted by the petitioner-assessee before the ITAT was within the period of limitation as provided under Section 254(2) of the Income Tax Act and the matter is now remanded to the ITAT to decide the rectification application/miscellaneous application submitted by the petitioner-assessee in accordance with law and on its own merits. Rule is made absolute to the aforesaid extent. No order as to costs.

[Citation : 364 ITR 16]