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Judgment
ORDER
PER SUDHIR KUMAR, JUDICIAL MEMBER:
This appeal by the assessee is directed against the rectification order of the National Faceless Appeal Centre (NFAC) Delhi [hereinafter referred to as “Ld. NFAC)”] vide order dated 11-07-2024 pertaining to A.Y. 2016-17.
The assessee raised the following grounds in the appeal:
1.That the impugned rectification order dated 11-07-2024 passed u/s 154 r.w.s. 250 of the Income-tax Act, 1961 is bad in law void ab initio and liable to be quashed as no notice or opportunity of being heard was issued to the appellant before passing the said order in gross violation of the principles of natural justice.
2.That the learned Commissioner of Income Tax (Appeals) erred in law in passing the rectification order without issuing a mandatory show case notice to the appellant despite the rectification resulting in enhancement of income and withdrawal of relief already granted vide appellate order dated 21-06-2023.
3.That the Learned CIT(A) exceeded jurisdiction under section 154 of the Act by reviewing recalling and reversing his own concluded appellate order dated 21-06-2023 which is impermissible in law as rectification powers cannot be exercised to change a debatable issue or take a different view.
4.That the Learned CIT(A) erred in holding that interest received under section 28 of the Land Acquisition Act, 1894 is taxable under section 56(2) (viii) of the Income -tax Act ignoring binding judgements of the Hon’ble Supreme Court holding that such interest is part of compensation and a capital receipt.
5.That the Learned CIT(A) failed to appreciate that interest awarded under section 28 of the Land Acquisition Act is an accretion to compensation and forms part of enhanced compensation as conclusively held by the Hon’ble Supreme Court in CIT v. Ghanshyam (HUF) (2009) 315ITR 1 and CIT v. Govindbhai Mamaiya (2014) 367 ITR 498. 6.That the Learned CIT(A) erred mechanically applying section 56(2) (viii) and 57(iv) of the Act without first establishing that the receipt in question is “income” whereas the receipt under section 28 of the Land Acquisition Act is a capital receipt outside the scope of section 56.
7.That the Learned CIT(A) failed to consider that the issue involved is highly debatable covered by multiple judicial pronouncements of the Hon’ble Supreme Court and High Courts and therefore outside the scope of rectification under section 154.
8.That the Learned CIT(A) erred in law in disregarding the principle of consistency as on identical facts the appellant’s appeal for A.Y.2015-16 was decided in favour of the appellant and had attained finality.
9.That the impugned rectification order is arbitrary without jurisdiction contrary to law and liable to be quashed.
10.That the appellant craves leave to add amend alter or withdraw any ground of appeal at or before the time of hearing.
The appeal is time barred by 574 days. In the condonation application the assessee stated that the appeal should have filed within 60 days but filed 574 days of delay. He stated that appeal could not filed within time because the order was not served on the correct email. The department had sent the order on email ID [email protected] which belongs to the former chartered Accountant. The order was never served on the correct email ID [email protected]. In the support of the application the assessee has also filed affidavit. The assessee has shown the sufficient cause not to file the appeal within time. We find merit of the contention of the assessee, and condoned the delay in filing the appeal and admit the same for adjudication on merits.
The brief facts of the case are that the assessee had filed his return of income for the A.Y.2016-17 on 29-07-2016 declaring total income of Rs.14,02,380/-/-. The return of income was processed u/s 143(1) of the Act. Thereafter the assessee filed a rectification application before the AO under section 154 of the Act claiming that the entire interest income of Rs.13,01,911/- received in compulsory Land Acquisition should be treated as exempt income. The Assessing Officer vide order dated 22-07-2019 partially allowed the application. Being aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who vide order dated 21-06-2023 decided the appeal in favour of the assessee and allowed the entire sum of Rs.13,01,911/- as exempt income. Subsequently, the Assessing Officer filed a rectification application under section 154 of the Act which was allowed by the Ld. CIT(A) vide the impugned order dated 11-07-2024. The Ld. CIT(A) has directed the Assessing Officer to allow a sum of Rs.6,50,956/- under section 57(4) of the Act and reduce such amount from the total income of the assessee and not to allow the entire sum of Rs. 13,01,911/- as exempt income. Being aggrieved the order the assessee is in appeal before us.
The Ld. AR of the assessee submitted that the order has been passed without issuing any notice or opportunity of being heard. He further submitted that as per section 154(3) of the Act an opportunity of being heard shall be given to the assessee before making any amendment. He also submitted that section 154 of the Act empowers an authority to rectify any mistake apparent from the record. The section 154 of the Act cannot be used as a tool to re-examine, review, recall or reverse the order. In the case of GKN Drivshafts (India) Ltd. V.ITO (2003) 259ITR 19(SC) the Hon’ble Supreme Court held that assessee must be given a reasonable opportunity of being heard before an order adversely affecting him is passed. The Ld. DR relied upon the order of the lower authorities.
We have heard both the sides and perused the material available on record. It is evident from the order of the Ld. CIT(A) that no notice was issued to the assessee before passing the order which was the mandatory requirement as per the section 154(3) of the Act. The impugned order was passed exparte without intimating the assessee. The order passes without fulfilled the mandatory requirement is void ab initio and liable to be set aside.
The Ld. AR of the assessee submitted that section 154 of the Act empowers an authority to rectify any ‘mistake’ apparent from the record. The power under section 154 is limited and confined to rectifying a patent and glaring error on face of the record. In the present case, a detailed order was passed by the Ld. CIT(A) on 21.06.2023, by which the Ld. CIT(A), held in favour of the assessee. The appellate authority has no jurisdiction to review or recall its own order under the grab of rectification. Therefore, the said order could not have been rectified by the Ld. CIT(A) in exercise of powers under Section 154 of the Act. If the Revenue was of the opinion that the order passed by the Ld. CIT(A) was erroneous, either on facts or in law, in that case, the only remedy available to the Revenue was to prefer the appeal before the ITAT. Therefore, as such, the order dated 11-07-2024 passed by the Ld. CIT(A) rectified its earlier order dated 21.06.2023 which has been passed in exercise of powers under Section 154 of the Act is beyond the scope and ambit of the powers of the Ld. CIT(A), conferred under Section 154 of the Act. Therefore, the order passed by the Ld. CIT(A) dated 11.07.2024 rectified its earlier order dated 21.06.2023 is unsustainable. The impugned order passed by the Ld. CIT(A) dated 11-07-2024 is set aside.
In the result, the appeal of the assessee is allowed.