Madras High Court
M/S.Devaraj & Others vs The Income Tax Officer on 27 November, 2025
2025:MHC:2714
TCA Nos.319 of 2016 and 538 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on : 13.11.2025
Pronounced on : 27.11.2025
CORAM
THE HONOURABLE MR. MANINDRA MOHAN SHRIVASTAVA,
CHIEF JUSTICE
AND
THE HONOURABLE MR.JUSTICE G.ARUL MURUGAN
TCA Nos.319 of 2016 and 538 of 2021
M/s.Devaraj & Others,
688, Trunk Road,
Ponnamalle,
Chennai - 600 056. .. Appellant
[in both TCAs]
Vs
The Income Tax Officer,
Company Ward-I,
1st Floor, 63, Race Course Road,
Coimbatore - 641 018. .. Respondent
[in both TCAs]
Prayer in TCA No.319 of 2016: Appeal under Section 260A of the
Income Tax Act, 1961 against the order dated 19.06.2015 passed in
M.P.No.175/Mds/2014 on the file of the Income Tax Appellate Tribunal,
‘A’ Bench, Chennai.
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Prayer in TCA No.538 of 2021: Appeal under Section 260A of the
Income Tax Act, 1961 against the order dated 26.03.2013 passed in
M.P.No.31/Mds/2012 on the file of Income Tax Appellate Tribunal, 'A'
Bench, Chennai.
For Appellant : Mr.A.S.Sriraman
[in both TCAs] for Mr.S.Sridhar
For Respondent : Mrs.V.Pushpa
[in both TCAs] Senior Standing Counsel
COMMON JUDGMENT
(Judgment of the Court was delivered by G.Arul Murugan, J.)
TCA No.538 of 2021 is filed by the assessee challenging the
order of the Income Tax Appellate Tribunal, ‘A’ Bench, Chennai
(hereinafter referred to as “ITAT”) dated 26.03.2013 in
M.P.No.31/Mds/2012 under section 254(2) of the Income Tax Act,
1961 [hereinafter referred to as “the Act”]. TCA No.319 of 2016 is also
filed by the assessee challenging the order of ITAT, dated 19.06.2015
in M.P.No.175/Mds/2014 under section 254(2) of the Act, seeking to
reconsider the order passed by ITAT dated 26.03.2013.
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2. The issue involves several rectification proceedings initiated
by both the revenue and the assessee, creating much confusions. For
better appreciation and understanding, short facts are culled out as
under:-
2.1. A scheme to provide dhotis and sarees for the poor was
formulated by the Tamil Nadu State Government. Tamil Nadu Textile
Corporation (TNTC), a state subsidiary, was entrusted with the
responsibility of procuring them. A large scam erupted in the scheme,
which led to a search being conducted by the Income Tax Department
in the premises of TNTC. During the search proceedings, details of
various third parties, including the appellant, pertaining to some
transactions were found out, which resulted in the initiation of
proceedings under Section 158BD of the Act. Pursuant to the notice
issued to the assessee, a return of income was filed on 21.02.1997
declaring undisclosed income of Rs.1,23,01,430/-. A revised return
was filed on 11.08.1997 admitting the income of Rs.1,44,59,230/-.
The assessment was completed under section 143(3), fixing a total
undisclosed income of Rs.9,25,52,290/-.
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2.2. The assessee filed appeal before the ITAT challenging the
block assessment and by order dated 28.01.2005, ITAT set aside the
block assessment and remanded the case back to the assessing
authority. Pursuant to the remand, the Assessing Officer [in short
“AO”] completed the assessment under Section 143(3) on 27.03.2006,
fixing a total undisclosed income of Rs.6,17,00,860/-.
2.3. The AO held that the Association of Persons 'AOP' consisted
of only three individuals, including the appellant, who were doing
business independently, either in their names or other individuals. The
block assessment was for the period from 1987-88 to 1996-97. The
AO allowed 1/3rd of the income to be deducted towards expenses
observing that since the assessee was involved in the business of
supplying uniform cloth, he could not have earned 120% profit.
Therefore, a sum equal to 1/3rd of the total income computed in the
original assessment order was allowed as expenditure and thereby
fixed a total income at Rs.6,17,00,860/-.
2.4. The block assessment made by the AO in the remand was
again challenged by the assessee before the ITAT. The Tribunal, by
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order dated 21.09.2011, on finding that since the transactions of the
assessee were clandestine and unlawful, held that it is not possible to
compare the case of the assessee to that of a normal business carried
on. The profit rate of 2.5% disclosed by the assessee might be
acceptable only to a wholesale dealer carrying on the business in a
lawful manner. The Tribunal considering the 1/3rd deduction towards
expenditure being allowed and the income determined
Rs.6,17,00,860/- works out to a profit ratio of 8%, however, came to
the conclusion that the profit percentage of 8% may be applicable for
an assessee who deals in general textiles, but when the
appellant/assessee is a supplier of uniform clothes in a government
scheme it may be excessive.
2.5. The Tribunal thereby allowed the appeal in part by
modifying the rate of profit from 8% to 5%. In effect, the Tribunal, on
a detailed consideration of the issues on merits, had concluded that
the assessment order, by giving a deduction of 1/3rd of the amount
towards expenditure, which works out to a profit ratio of 8%, would be
excessive in view of the facts of the present case and had thereby
granted the relief to the extent that the profit ratio would be calculated
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at 5%.
2.6. The assessee filed a rectification application in
M.A.No.1/(Mds)/2012 under section 254(2) seeking a clarification as to
whether the 5% profit ratio as directed by the Tribunal would be
adopted on the gross turnover or not. The Tribunal, by order dated
09.03.2012, disposed of the application by clarifying that 5% profit
ratio suggested by the Tribunal would obviously relate to gross
turnover. Though it was only a clarification that the profit ratio would
be on the gross turnover, still the revenue filed an appeal and
challenged the same in T.C.A.No.251 of 2013.
2.7. Thereafter, the revenue also filed a rectification petition in
M.P.No.31(Mds)/2012 under section 254(2). The Tribunal reappraised
the materials and observed that on an erroneous presumption that the
income in the remand assessment by the AO has been determined by
applying gross profit rate of 8%, whereas, the AO has reduced the
original income by 1/3rd in a lump sum and had not adopted different
rates for different items, concluded that the Tribunal has overruled
crucial points and therefore the mistake has to be rectified.
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2.8. On finding so, the Tribunal, by order dated 26.03.2013,
determined the estimated income in the hands of the assessee afresh
and modified the income of the assessee at 50% of the income
determined in the original assessment. In effect, when the AO had
granted 1/3rd deduction in the gross income towards expenses, which
was originally modified by the Tribunal by reducing the profit ratio
from 8% to 5%, in the rectification order the Tribunal determined the
income at 50% of the original assessment. Though the revenue
succeeded, still challenging the rectification order dated 26.03.2013,
the revenue filed appeal in TCA No.810 of 2013 and assessee also filed
TCA No.538 of 2021.
2.9. The assessee further filed a rectification petition under
section 254(2) in M.P.No.175/Mds/2014 praying for reconsideration of
the order dated 26.03.2013. The Tribunal, by order dated 19.06.2015,
dismissed the petition holding that the jurisdiction of the Tribunal
under section 254(2) is only to rectify an error apparent on the face of
the record. Challenging the order dated 19.06.2015 of the ITAT, the
assessee preferred TCA No.319 of 2016.
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2.10. The appeals filed by the revenue in TCA No.251 of 2013
and TCA No.810 of 2013, challenging the two rectification orders dated
09.03.2012 and 26.03.2013 came to be dismissed by the order of this
Court dated 29.06.2015, on the ground that since the main order of
ITAT dated 21.09.2011 itself is challenged by the revenue in TCA
No.114 of 2015, the orders in the Miscellaneous Petitions had become
infructuous.
2.11. It is to be noted that TCA No.114 of 2015 filed by the
revenue challenging the final order of ITAT dated 21.09.2011, which
was admitted and pending, was withdrawn by the revenue on account
of low tax effect and as such, TCA No.114 of 2015 was dismissed by
this Court on 27.08.2019. Thereby, the present two appeals filed by
the assessee alone survive for consideration.
3. Tax Appeals have been admitted, by framing the following
substantial questions of law;
TCA No.319 of 2016:-
“(i) Whether the Appellate Tribunal is correct in law in not
interfering/not accepting the plea to restore the original
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order passed by them even after the acceptance of limited
scope of the power vested in Section 254(2) of the Act,
which power was admittedly exceeded in the order passed
earlier in M.P.No.31 of 2012 dated 26.03.2013 in
reviewing the original order dated 21.09.2011 ?
(ii) Whether the Appellate Tribunal is correct in law in
interfering with the original order passed by them in the
rectification proceedings initiated by the Revenue under
Section 254(2) of the Act, which interference resulted in
the enhancement of the taxable total income as well as
challenged even by the Revenue in the pending tax case
appeal in T.C.A.No.114 of 2015 ? and
(iii) Whether the Appellate Tribunal is correct in law in
passing the rectification order even though the review of
the original order within the scope of Section 254(2) of the
Act is not permissible legally as well as admittedly ?”
TCA No.538 of 2021:-
“(i) Whether the Appellate Tribunal is correct in law in
interfering with the original order passed by them in the
rectification proceedings initiated by the Revenue under
Section 254(2) of the Act, which interference resulted in
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the enhancement of the taxable total income as well as
challenged even by the Revenue in the pending tax case
appeal in T.C.A.No.114 of 2015 ? and
(ii) Whether the Appellate Tribunal is correct in law in
passing the rectification order even though the review of
the original order within the scope of Section 254(2) of the
Act is not permissible legally as well as admittedly ?”
4. Heard Mr.A.S.Sriraman, learned counsel for the assessee and
Mrs.V.Pushpa, learned Senior Standing Counsel for the Income Tax
Department.
5. The point that arise for consideration in these appeals is as to
whether the Tribunal was right in modifying the orders passed, by
exercising the power under section 254(2) of the Act.
6. For easy reference, Section 254(2) of the Act, is extracted
hereunder:-
“254(2). The Appellate Tribunal may, at any time within
[six months from the end of the month in which the order
was passed], with a view to rectifying any mistake
apparent from the record, amend any order passed by it
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under sub-section (1), and shall make such amendment if
the mistake is brought to its notice by the assessee or the
[Assessing] Officer:
Provided that an amendment which has the effect of
enhancing an assessment or reducing a refund or
otherwise increasing the liability of the assessee, shall
not be made under this sub-section unless the
Appellate Tribunal has given notice to the assessee of
its intention to do so and has allowed the assessee a
reasonable opportunity of being heard:
[Provided further that any application filed by the
assessee in this sub-section on or after the 1st day of
October, 1998, shall be accompanied by a fee of fifty
rupees.]
.....”
7. In exercise of the powers conferred on the Tribunal under
section 254(2), the Tribunal may amend any order passed under
section 254(1) only to the limited extent of rectifying any mistake that
is apparent on the face of the record. The Tribunal cannot sit in appeal
over its own decision while exercising the power under section 254(2)
and any error which is apparent on the face of the record that does not
require a detailed reasoning is alone to be looked into and corrected.
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8. The Hon'ble Supreme Court considered the scope of the
Tribunal under Section 254(2), in the case of Commissioner of
Income-tax Vs. Reliance Telecom Ltd. reported in [2021] 133
taxmann.com 41 and held that the powers of Tribunal under section
254(2) of the Act are akin to Order 47 Rule 1 of CPC. The Tribunal,
while exercising the power under section 254(2) of the act, cannot re-
visit its earlier order by going into the merits but is confined only to
rectify or correct any mistake apparent on the record. An erroneous
order can only be challenged in the appeal and the same cannot be
considered in exercising the power of review.
9. The relevant portion of the abovesaid decision is extracted
hereunder:-
“3.2. Having gone through both the orders passed by the
ITAT, we are of the opinion that the order passed by the
ITAT dated 18-11-2016 recalling its earlier order dated 6-
9-2013 is beyond the scope and ambit of the powers under
Section 254(2) of the Act. While allowing the application
under Section 254(2) of the Act and recalling its earlier
order dated 6-9-2013, it appears that the ITAT has re-
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heard the entire appeal on merits as if the ITAT was
deciding the appeal against the order passed by the C.I.T.
In exercise of powers under Section 254(2) of the Act, the
Appellate Tribunal may amend any order passed by it
under sub-section (1) of Section 254 of the Act with a view
to rectifying any mistake apparent from the record only.
Therefore, the powers under Section 254(2) of the Act are
akin to Order XLVII Rule 1 CPC. While considering the
application under Section 254(2) of the Act, the Appellate
Tribunal is not required to re-visit its earlier order and to
go into detail on merits. The powers under Section 254(2)
of the Act are only to rectify/correct any mistake apparent
from the record.
4. In the present case, a detailed order was passed by the
ITAT when it passed an order on 6-9-2013, by which the
ITAT held in favour of the Revenue. Therefore, the said
order could not have been recalled by the Appellate
Tribunal in exercise of powers under Section 254(2) of the
Act. If the assessee was of the opinion that the order
passed by the ITAT was erroneous, either on facts or in
law, in that case, the only remedy available to the
Assessee was to prefer the appeal before the High Court,
which as such was already filed by the Assessee before the
High Court, which the Assessee withdrew after the order
passed by the ITAT dated 18-11-2016 recalling its earlier
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order dated 6-9-2013. Therefore, as such, the order
passed by the ITAT recalling its earlier order dated 6-9-
2013 which has been passed in exercise of powers under
Section 254(2) of the Act is beyond the scope and ambit of
the powers of the Appellate Tribunal conferred under
Section 254(2) of the Act. Therefore, the order passed by
the ITAT dated 18-11-2016 recalling its earlier order
dated 6-9-2013 is unsustainable, which ought to have
been set aside by the High Court.”
10. Further, a Division Bench of this Court in the case of
Express Newspapers Ltd. Vs. Deputy Commissioner of Income-
tax reported in (2010) 320 ITR 12 (Madras), considered the scope
of the Tribunal while exercising the power under section 254(2), by
considering several decisions rendered by the Hon'ble Supreme Court
and the High Courts. The court held that amendment of an order does
not mean obliteration of the order originally passed and its substitution
by a new order. Mere existence of a mistake or error would not per se
render the order amenable for rectification, but such a mistake must
be one which must be manifest on the face of the record.
11. The relevant portion of the decision reads as under:-
“9. The scope and amplitude of section 254(2) and
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the analogous provision of section 154 of the Act have
been considered by a catena of decisions of the Apex Court
and other High Courts. The uniform opinion of the Courts
of superior jurisdiction is that a patent, manifest and self-
evident error which does not require elaborate discussion
of evidence or argument to establish it, can be said to be
an error apparent on the face of the record and can be
corrected under section 254(2). An error cannot be said to
be apparent on the face of the record if one has to travel
beyond the record to see whether the judgment is correct
or not. An error apparent on the record means an error
which strikes one on mere looking and does not need a
long drawn out process of reasoning on points on which
there may be conceivably two opinions. The error should
not require any extraneous matter to show its
incorrectness. To put it differently, it should be so manifest
and clear that no court would permit it to remain on
record. If the view accepted by the court in the original
judgment is one of possible views, the case cannot be said
to be covered by an error apparent on the face of the
record. Section 254(2) specifically empowers the Tribunal
to amend at any time within four years from the date of an
order, any order passed by it under section 254(1) with a
view to rectify any mistake apparent from the record
either suo motu or on an application. In order to attract
the application of section 254(2), the mistake must exist
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and the same must be apparent from the record. The
expression “mistake apparent from the records” contained
in sections 154 and 254(2) has wider content than the
expression “error apparent on the face of the record”
occurring in Order 47 Rule 1 of CPC. The restrictions on
the power of review under Order 47 Rule 1 of CPC do not
hold good in the cases of sections 254(2) and 154 of the
Act. Section 254(2) does not confer power on the Tribunal
to review its earlier order. Under the grab of rectification
of mistake it is not possible for a party to take further
chance of re-arguing the appeal already decided. What can
be rectified under section 254(2) is a mistake which is
apparent and patent. The mistake has to be such for which
no elaborate reasons or enquiry is necessary. Where two
opinions are possible then it cannot be said to be a
mistake apparent on the record. When prejudice resulting
from an order is attributable to the Tribunal's mistake,
error or omission, it is its bounden duty to set it right. The
purpose behind the enactment of section 254(2) of the Act
to amend any order passed under sub-section (1), if any
mistake apparent from the record is brought to the notice
of the Tribunal, is based on the fundamental principle that
no party appearing before the Tribunal, be it an assessee
or the Department, should suffer on account of any
mistake committed by the Tribunal. This fundamental
principle has nothing to do with the inherent power of the
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Tribunal. If prejudice has resulted to the party, which
prejudice is attributable to the Tribunal's mistake, error or
omission and which error is a manifest error, then the
Tribunal would be justified in rectifying its mistake.
Rectification can be made only when a glaring mistake of
fact or law committed by the officer passing the order
becomes apparent from the record. The rectification is not
possible if the question is debatable. A point which was not
examined on facts or in law cannot be dealt with as a
mistake apparent from the record. No error can be said to
be apparent on the face of the record if it is not manifest
or self evident and requires an examination or argument to
establish it. Where without any elaborate argument one
could point to the error and say here is a substantial point
of law which stares one in the face, and there could
reasonably be no two opinions entertained about it, is a
clear case of error apparent on the face of the record. Vide
Asst. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2008]
305 ITR 227 (SC), Honda Siel Power Products Ltd. v. CIT
[2007] 295 ITR 466 (SC), Hari Vishnu Kamath v. Syed
Ahmad Ishaque [1955] 1 SCR 1104, CIT v. Keshri Metal
(P.) Ltd. [1999] 237 ITR 165 (SC), Deva Metal Power (P.)
Ltd. v. CIT 2008 (2) SCC 439, CIT v. Hero Cycles (P.) Ltd.
[1997] 228 ITR 463 (SC), Satyanarayan Laxminarayan
Hegde v. Mallik Arjun Bhavanappa Tirumale [1960] 1 SCR
890, Thungabhadra Industries Ltd. v. Government of
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Andhra Pradesh Rep. by the Dy. CCT AIR 1964 SC 1372,
Batuk K. Viyas v. Surat Borough Municipality ILR 1953
Bom. 191, Umma Salma (K.T.M.S.) v. CIT [1983] 144 ITR
890 (Mad), Kil Kotagiri Tea & Coffee Estates Co. Ltd. v.
ITAT [1988] 174 ITR 579 (Ker), CIT v. R.Chelladurai
[1979] 118 ITR 108 (Mad.), State of Tamil Nadu v.
Thakorebhai & Bros. [1983] 52 STC 104 (Mad.), Jainarain
Jeevraj v. CIT [1980] 121 ITR 358 (Raj.), CIT v.
Vardhaman Spg. [1997] 226 ITR 296 (Punj. &Har.), Bata
India Ltd. v. Dy. CIT [1996] 217 ITR 871 (Cal.) and CIT v.
Prahlad Rai Todi [2001] 251 ITR 833 (Gau.).
10. From the various judgments of the Supreme
Court above referred to and other High Courts, it is clear
that the Tribunal's power under section 254(2) is not to
review its earlier order but only to amend it with a view to
rectify any mistake apparent from the record. What can be
termed as “mistake apparent ?”. “Mistake” in general
means to take or understand wrongly or inaccurately; to
make an error in interpreting; it is an error; a fault, a
misunderstanding, a misconception. Mistake in taxation
laws has a special significance. It is mostly subjective and
the dividing line is thin and indiscernible. “Apparent”
means visible, capable of being seen, easily seen, obvious
plain, open to view, evident, appears, appearing as real
and true, conspicuous, manifest, seeming. The plain
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meaning of the word “apparent” is that it must be
something which appears to be ex-facie and incapable of
argument and debate. If such a “mistake apparent on the
face of record” is brought to the notice, section 254(2)
empowers the Tribunal to amend the order passed under
section 254(1). Amendment of an order-does not mean
obliteration of the order originally passed and its
substitution by a new order. What is mistake apparent on
the face of the record or where does a mistake cease to be
mere mistake, and become mistake apparent on the face
of the record is rather difficult to define precisely,
scientifically and with certainty. An element of
indefiniteness inherent in its very nature and it must be
discernible from the facts of each case by judiciously
trained mind. Mere existence of a mistake or error would
not per se render the order amenable for rectification, but
such a mistake must be one which must be manifest on
the face of the record.”
12. In view of the above, it is clear that the Tribunal, while
exercising the power of rectification under section 254(2), does not sit
in appeal over its own order and further, the scope of rectification is
not an appeal in disguise. An erroneous order can only be challenged
before the appellate court and it cannot be a subject matter of
rectification, as the Tribunal is not exercising the appellate jurisdiction
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while considering the rectification petition under section 254(2).
13. When the power under section 254(2) is akin to Order 47
Rule 1 of CPC, the scope and ambit of rectification/review could be
only within the contours provided under the provision. When the
provision only allows for rectification for any errors apparent on the
face of the record, the mistake should be discernible on the face of the
record without requiring any elaborate enquiry or reasoning. In the
garb of rectification, the issue cannot be readjudicated and a fresh
order cannot be passed effacing the original order, which is clearly
impermissible.
14. In the instant case, pursuant to a remand, the block
assessment order came to be passed under section 143(3) on
27.03.2006, fixing an undisclosed income of Rs.6,17,00,860/-. The AO
concluded that only a realistic estimate of net profit could be resorted
to and an appropriate allowance of expenditure could be given based
on the preponderance of probabilities. The assessee not being a
regular trader, the likely realisation of profits higher than the normal
levels cannot be ruled out. In such circumstances, the AO came to the
conclusion that the assessee could not have earned 120% profit on the
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sale of uniform cloth, had as such allowed 1/3 rd of the total income
computed in the original assessment order towards probable expenses.
Thereby, a sum of Rs.3,08,50,430/- was allowed as expenses towards
the total income of the original assessment at Rs.9,25,51,290/- and
the income was estimated at Rs.6,17,00,860/-.
15. On appeal by the assessee, ITAT had considered the appeal
on merits. The Tribunal rejected the claim of the assessee that the
profit rate of 2.5% as disclosed by similar wholesale dealers could be
considered. The Tribunal held that since the accounts of the assessee
was not credible and were clandestine and involved unlawful business,
the 2.5% profit ratio as suggested cannot be accepted. The Tribunal
took note of the fact that the AO had admitted that the profit ratio of
120% adopted in the original assessment was excessive and the AO
granted deduction of 1/3rd towards the expenditure.
16. The income determined by the AO in the remand assessment
worked out to a profit rate of 8%. The Tribunal came to the conclusion
that in the normal case of an assessee dealing in general textiles, the
profit percentage of 8% could be reasonable, but however, since the
appellant/assessee was mainly dealing in supplying uniform clothes
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under the government scheme, the Tribunal concluded that 8% profit
rate could be excessive and partly allowed the appeal and modified the
profit ratio from 8% to 5%.
17. After the final orders were passed by the Tribunal on
21.09.2011, three rectification applications came to be filed, two by
the assessee and one by the revenue. In the first rectification
application filed by the assessee, the Tribunal, by order dated
09.03.2012, only clarified that 5% profit rate directed by the Tribunal
was on the gross turnover, which is based on the assessment order.
The Tribunal was within its jurisdiction to make such a clarification in
the rectification proceedings, which did not tinker with any portion of
the order. However, in the second rectification petition filed by the
revenue in M.P.No.31(Mds)/2012, the Tribunal, by order dated
26.03.2013, allowed the rectification petition by reappraising the
materials that had already been considered in the final order dated
21.09.2011.
18. The Tribunal, on reappreciation came to the conclusion that
the earlier decision on 21.09.2011 was a mistake and a different
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TCA Nos.319 of 2016 and 538 of 2021
approach ought to have been taken. The Tribunal records that in view
of the crucial point having been overlooked by the Tribunal, they are
duty bound to rectify the mistake and as such, the direction by fixing
the profit rate at 5% is recalled and vacated. By doing so, the Tribunal
proceeded to determine the estimated income in the hands of the
assessee afresh. Completely effacing the order dated 21.09.2011, the
Tribunal concluded that 1/3rd deduction given by the AO in the
assessment order was not justifiable and therefore, modified the
income of the assessee at 50% of the income determined in the
original assessment.
19. In our considered opinion, the rectification order dated
26.03.2013 by ITAT is erroneous, perverse and clearly exceeding its
jurisdiction. In fact, the Tribunal, while considering the petition under
section 254(2), had exercised the power of the appellate jurisdiction,
which is impermissible and the order of the Tribunal is patently illegal
and beyond its powers conferred under section 254(2).
20. When once the Tribunal had partly allowed the appeal by
order dated 21.09.2011 and had directed the adoption of 5% profit
ratio by modifying the assessment order, the Tribunal was not within
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TCA Nos.319 of 2016 and 538 of 2021
its power to readjudicate the issues. The rectification order dated
26.03.2013 being perverse and in excess of the jurisdiction is
unsustainable and it is accordingly set aside.
21. Insofar as the third rectification petition filed by the assessee
in M.P.No.175/Mds/2014, seeks for reconsideration of the order dated
26.03.2013, the same was rejected by the Tribunal, which is
challenged in T.C.A.No.319 of 2016. In view of the above conclusion
setting aside the order dated 26.03.2013, nothing remains to be
decided in TCA No.319 of 2016. However, it is surprising to note that
while dismissing the rectification petition by the assessee in seeking to
reconsider the order dated 26.03.2013, the Tribunal had held that it
does not have power to review its earlier order under section 254(2) of
the Act and the jurisdiction of the Tribunal is restricted only to rectify
the error which is apparent on the face of the record. The Tribunal
concluded that the issue raised by the assessee could be examined
only by an appellate court by exercising the jurisdiction under section
260A of the act.
22. In view of the clear finding given by the Tribunal in
dismissing the rectification petition, the same procedure and logic
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TCA Nos.319 of 2016 and 538 of 2021
ought to have been applied to the rectification petition filed by the
revenue. But the Tribunal proceeded to reappraise the issue on merits
and passed a fresh order recalling the earlier order.
23. In view of the conclusions arrived at in setting aside the
rectification order dated 26.03.2013, the order dated 21.09.2011
passed by ITAT, is restored. The appeal filed by the revenue
challenging the order dated 21.09.2011 in TCA No.114 of 2015 having
been dismissed by this Court on 27.08.2019, in view of the withdrawal
of the appeal by the revenue on the ground of low tax effect, the order
of the Tribunal dated 21.09.2011 attains finality.
24. In view of the above deliberations, the substantial
questions of law in TCA No.538 of 2021 are answered in favour
of the assessee and against the revenue. Accordingly, TCA No.538
of 2021 stands allowed and TCA No.319 of 2016 stands dismissed.
There shall be no order as to costs.
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TCA Nos.319 of 2016 and 538 of 2021
(MANINDRA MOHAN SHRIVASTAVA, CJ.) (G.ARUL MURUGAN, J.)
27.11.2025
Index : Yes
Neutral Citation : Yes
sri
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TCA Nos.319 of 2016 and 538 of 2021
To
1.The Assistant Registrar,
Income Tax Appellate Tribunal,
Chennai.
2.The Income Tax Officer,
Company Ward-I,
1st Floor, 63, Race Course Road,
Coimbatore - 641 018.
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TCA Nos.319 of 2016 and 538 of 2021
THE HON'BLE CHIEF JUSTICE
AND
G.ARUL MURUGAN,J.
sri
Pre-Delivery Common Judgment made in
TCA Nos.319 of 2016 and 538 of 2021
27.11.2025
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