In a significant legal analysis, the Court delves into the jurisdiction of the ITAT in recalling orders, emphasizing the limitations of powers under Section 254(2) of the Act. The quashing of the High Court’s judgment and the reinstatement of the original orders by the ITAT highlights the importance of staying within statutory boundaries when rectifying decisions. This ruling clarifies the boundaries of the ITAT’s authority and underscores the need for adherence to legal procedures. #LegalCase #HighCourt #TaxLaw
Facts
- The Revenue appealed before the Commissioner of Income Tax (Appeals) after the ITAT passed a detailed judgment on 06.09.2013.
- The Assessee filed a miscellaneous application for rectification under Section 254(2) of the Act against the ITAT’s order dated 06.09.2013.
- Simultaneously, the Assessee also filed an appeal before the High Court against the ITAT order dated 06.09.2013.
- The High Court of Bombay dismissed the writ petitions preferred by the Revenue and confirmed the ITAT’s order in Miscellaneous Application Nos. 261/M/2014 and 419/M/2013, dated 18.11.2016.
- The present appeals were filed by the Revenue against the High Court’s judgment in Writ Petition No 1432/2017 and Writ Petition No. 1406/2017.
- The facts leading to the appeals in the case of M/s Reliance Telecom Limited are outlined for convenience.
- Assessee entered into a Supply Contract with Ericsson A.B. for purchase of software without TDS.
- Assessee’s application under Section 195(2) of the Act was rejected by the Assessing Officer.
- Assessing Officer held that consideration for software licensing is taxable in India and directed 10% tax deduction as royalty.
- ITAT allowed Assessee’s miscellaneous application under Section 254(2) of the Act and recalled its original order.
- Revenue filed a writ petition against ITAT’s decision, which was dismissed by the High Court.
- Assessee withdrew appeal before High Court after ITAT’s order recalling the earlier decision.
- Revenue has approached the present Court through the present appeal.
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Analysis
- The ITAT recalled its earlier order dated 06.09.2013, which was in favor of the Revenue, in a subsequent order dated 18.11.2016.
- The powers under Section 254(2) of the Act are limited to rectifying mistakes apparent from the record.
- Recalling an order on the grounds of it being erroneous on merits was not within the scope of Section 254(2) powers.
- If an order is deemed erroneous, the remedy lies in filing an appeal before the High Court.
- The High Court’s dismissal of writ petitions challenging the ITAT’s order was based on incorrect reasoning.
- The ITAT does not have jurisdiction to pass orders beyond the scope of Section 254(2) powers.
- The Resolution Professional for the respondent-assessee in corporate insolvency resolution process was heard.
- Any appeal against the original order dated 06.09.2013 can be filed within six weeks, without limitation objections.
- The appeals are allowed with no order as to costs.
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Decision
- The impugned judgment and order passed by the High Court and the order passed by the ITAT dated 18.11.2016 are quashed and set aside.
- The original orders passed by the ITAT dated 06.09.2013 in the appeals preferred by the Revenue are restored.
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Case Title: COMMISSIONER OF INCOME TAX (IT)4 Vs. M/S. RELIANCE TELECOM LTD. (2021 INSC 815)
Case Number: C.A. No.-007110-007110 / 2021
