JUDGMENT
K.L. Manjunath , J.
1. The appeal is by the assessee questioning the order passed by the Income Tax Appellate Tribunal, Bangalore Bench in Misc.Petition No. 122/Bang/99 dt.31.7.2003 raising the following substantial question of law:
1. Whether the Tribunal has power to rectify the order passed on merits in an appeal filed by the assessee four years thereafter invoking Section 254(2) of the Income Tax Act?
2. We have heard the learned Counsel for both the parties.
3. It is not in dispute that the revenue had filed an appeal before the Income Tax Appellate Tribunal in ITA No. 1325/Bang/1990, being aggrieved by the order passed by the Commissioner of Income Tax (appeals). The appeal filed by the revenue came to be dismissed by the Income Tax Appellate Tribunal by up-holding the order passed by the Commissioner of Income Tax (Appeals) on 6.4.1998. Thereafter the revenue obtained permission from the Commissioner of Income Tax (Central) Bangalore on 19.9.2002 to file a Miscellaneous Petition under Section 254(2) of the Income Tax Act. Accordingly, a Misc. Petition was filed, which petition has been allowed on 31.7.2003 thereby the order passed by the Tribunal earlier on 6.4.1998 was set aside and the order of the Tribunal was modified allowing the appeal of the revenue. This order is called in question in this appeal.
4. According to Mr. Shankar, the Tribunal has committed a serious error in allowing the Misc. petition filed by the revenue which was filed beyond 4 years. According to him under Sub-section (2) of Section 254 a rectification order can be passed by the Tribunal within 4 years from the passing of the original order and therefore the Tribunal should have rejected the application as barred by limitation.
5. In this background we have to examine whether the Misc. Petition filed by the revenue was barred by limitation or not. Section 254(2) of the I.T. Act reads as hereunder:
254(2) The Appellate Tribunal may at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it 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:
6. It is clear from Sub-section (2) of Section 254 of the I.T. Act that the Tribunal has powers to pass an order within 4 years either to rectify any mistake apparent from the record or amend any order passed by it under Sub-section (1) and shall make such amendment if the mistake is brought to its notice by the assessee or by the Assessing Officer.
7. In this case, it is not in dispute that the appeal filed by the revenue was dismissed on merits on 6.4.1998 by the Tribunal.
8. It is also not in dispute that the Commissioner of Income Tax has granted approval to file a Misc. Petition on 20th August 2002 and thereafter a Misc. Petition under Section 254 of the I.T. Act has been filed for rectification. As a matter of fact as on the date of filing the application by the revenue for rectification of the order, as it is barred by time and the Tribunal should have rejected the application only on the ground that the application was barred by limitation. Instead of doing so, the Tribunal has entertained a time barred application and passed an order on 31.7.2003 beyond 5 years 3 months contrary to the provision of Sub-section (2) of Section 254 of the I.T.Act. When Tribunal cannot pass an order beyond 4 years from the date of the original order, the question of entertaining a petition for rectification beyond 4 years will not arise at all. Therefore, the question has to be answered in favour of the assessee.
9. Accordingly, we allow this appeal. The order passed by the Tribunal in Misc. Petition No. 122/Bang/1999 arising out of the order passed in ITA 1325/Bang/90 is hereby dismissed. The original order passed by the Tribunal shall stand as it is.