Miscellaneous Application for Rectification Under Section 254

Miscellaneous Application for Rectification Under Section 254 Dismissed as No Error Found in Tribunal Stay Order

Issue

Whether a Miscellaneous Application under Section 254(2) for rectification can be entertained to direct a refund or impose costs when the assessee points out no mistake apparent from the record in the Tribunal’s original stay order.

Facts

The assessee filed a Miscellaneous Application under Section 254 seeking rectification of a stay order passed by the Income Tax Appellate Tribunal (ITAT) for AY 2023-24.
The assessee asserted that the Assessing Officer recovered ₹205.90 crores towards tax demand despite being informed of the Tribunal’s stay on recovery.
The assessee contended that the Revenue took no steps to restore status quo ante or make restitution regarding the recovered amount.
In its application, the assessee prayed for directions for an immediate refund of the sums recovered during the stay period and the imposition of exemplary costs on the Revenue.
During the proceedings, the Revenue assured the Tribunal that they were already in the process of granting the refund to the assessee.
The assessee did not point out any error or mistake apparent from the record in the original stay order passed by the Tribunal.

Decision

Absence of Mistake Apparent from Record: The scope of Section 254(2) is strictly limited to rectifying mistakes apparent from the record in an order passed by the Tribunal.
Dismissal of Application: Since the assessee failed to point out any error or defect in the underlying stay order itself, the Miscellaneous Application filed for rectification was dismissed.
Outcome: Decided in favor of the Revenue.

Key Takeaways

Scope of Rectification Powers: Section 254(2) can only be invoked to correct an error or mistake apparent from the record in the Tribunal’s order, not to seek fresh directions or remedies for post-order administrative non-compliance.
Appropriate Legal Remedy: Grievances regarding the Revenue’s non-compliance or enforcement actions during a stay period must be pursued through appropriate compliance proceedings, writ petitions, or enforcement applications rather than a rectification application.

HIGH COURT OF GUJARAT

Iron Build Systems (P.) ltd.

Assistant Commissioner of Income-tax

BHARGAV D. KARIA and Pranav Trivedi, JJ.

R/TAX APPEAL NO. 694 of 2022^†

JULY 14, 2026

Tushar Hemani and Ms Vaibhavi K Parikh for the Appellant. Rutvij R Patel for the Respondent.

ORDER

Bhargav D. Karia, J.- Heard learned Senior Advocate Mr. Tushar Hemani for learned advocate Ms.Vaibhavi K. Parikh for the appellant and learned Senior Standing Counsel Mr. Rutvij R. Patel for the respondent.

2. This appeal is filed under section 260A of the Income Tax Act, 1961 (For short “the Act”) by the appellant assessee challenging the judgment and order dated 21.02.2022 passed by the Income Tax Appellate Tribunal, Ahmedabad (For short “the Tribunal”) in Ironbuild Systems (P.) Ltd.v. DCIT [IT Appeal No. 1399 (Ahd.) of 2016, dated 21-2-2022] for Assessment Year 20092010 by proposing the following questions of law:

“(i) Whether in the facts and under the circumstances of the case, the Income Tax Appellate Tribunal was right in law in not condoning the delay in filing appeal?

(ii) Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in not adjudicating upon but at the same time confirming the action of the Respondent on merits in making addition of Rs.33,61,451/- being part of the creditors u/s. 68 of the Act?

(iii) Whether in the facts and under the circumstances of the case, the decision of the Income Tax Appellate Tribunal is perverse in as much as:

(a) the decision does not contain and deal with any of the arguments advanced on behalf of the appellant at all;

(b) the decision upheld the order of the CIT(A) on merits on one hand and dismissed the appeal preferred by the appellant on the other hand on the grounds of delay and

3. However, Tax Appeal is admitted for consideration of following substantial question of law only:

“(i) Whether in the facts and under the circumstances of the case, the Income Tax Appellate Tribunal was right in law in not condoning the delay in filing appeal?”

4. The appellant is a private limited company engaged in the business of manufacturing of batching and weighing systems and automation in material handling equipments. The appellant filed its return of income for Assessment Year 2009-2010 on 30.09.2009 declaring total income of Rs.22,65,759/-

5. Thereafter assessment order dated 29.12.2011 was passed under section 143(3) of the Act assessing total income at Rs.39,290/-, making addition of Rs.62,73,534/- on account of bogus purchases and expenses and difference in closing balance in case of certain creditors. Penalty proceedings were also initiated by the Assessing Officer.

6. Being aggrieved, the assessee preferred an appeal before the CIT(Appeals) who partly allowed the appeal vide order dated 6.3.2014. The appellant being aggrieved by order of CIT(Appeals) preferred an appeal before the Tribunal being ITR No.1399/Ahd/2016 with a delay of 712 days.

7. The appeal filed by the appellant was accompanied by affidavit of Shri Sarath Rajendraprasad, Director of the appellant company to justify the sufficient cause to condone delay as under:

I, Sarath Rajendraprasad Nair, S/o. Shri Rajendraprasad R.Nair, Director of Ironbuild Systems Pvt. Ltd., V. U. Nagar hereby declare on oath as under:

1. That I am Director in Ironbuild Systems Pvt. Ltd. V. U. Nagar.

2. That the appeal has been preferred before the Hon. CIT-Appeals against the order of Dy. Commissioner of Income Tax, Anand Circle Anand for the AY 2009-10.

3. That the appeal before the Hon. CIT-Appeals had been disposed of by the Hon. CIT-Appeals on 6.3.2014.

4. That the fact is that the order was received by the Accounts Manager Shri Prakash Mannari, who was the incharge of accounts and finance at that time.

5. That the fact is that he has left the company in the month of May-2016 and left the country for better opportunities.

6. That the fact that after receiving the recovery notices from the Income Tax Department, Anand we came to know that the appeal was disposed off by the Hon. CIT-Appeals.

7. That the appeal effect for the above order also has been given by the Hon. Dy. Commissioner of Income Tax, Anand in the month of March-2016. And after giving the appeal effect the recovery proceedings were started and we came to know that the so much demand is pending in this case.

8. The fact that we were late in filling the appeal with the Hon. ITAT, Ahmedabad, without any fault of company.

9. This is the only reason why the appellant is filling the appeal late. Therefore we request your honour to condone the delay in filling the appeal against the order of the Hon. CIT-Appeals.

We once again admit that there is no any other intention for filling the appeal on time and request your honour to condone the delay in filling the appeal.

Whatever stated above is true and correct. I am aware that doing wrong Affidavit is a crime.”

8. The Tribunal vide impugned order dated 21.02.2022 however did not condone the delay holding as under:

4. We have gone through the affidavit filed by the Director of the assessee-company. The assessee is a private limited. No doubt it has its own Accounts Manager to look after accounts and financial management. Even before the ld.CIT(A) they had engaged a Chartered Accountant to represent the case on their behalf. The reason stated in their affidavit are not convincing for the fact that the impugned order received by the then Accounts Manager in 2014 itself, but he was stated to have left company and the country in the month of May, 2016 i.e. almost about 25 months after passing of the impugned order. Further reason assigned by the assessee is that the assessee came to know disposal of the appeal by the CIT(A) only after the department initiated recovery proceedings against the assessee in March, 2016, which is also not convincing and not a reasonable cause, because the assessee being a private limited company, would have reasonable manpower back-up, and would not have left the income-tax matter unattended for such a long period. Further, it is also not explained, when the then Accounts Manager had received the impugned order. Reasonable diligence is expected, where time is essence in taxation matters. In the absence of the same, the reasons attributable by the assessee are not convincing wherein a substantial delay of 712 days in filing appeal before the Tribunal has occurred. Therefore, we cannot accept the proposition putforth by the assessee-company as good and sufficient reason to condone such delay.”

9. After arriving at the conclusion that there is no sufficient cause to condone delay, the Tribunal proceeded to examine the merits of the case and after reproducing the order of CIT(Appeals), held as under :

“8. Thus, enough opportunities were given to the assessee to prove its case both by the AO as well as by the Ld.Commissioner of Income-tax (Appeals). Further no new material or evidence is produced by the assessee before this Tribunal. The assessment year being 2010-11 no useful purpose will be served by entertaining this appeal at this point of time, wherein there is a delay of 712 days in filing of appeal. The reasons narrated by the assessee-company in its affidavit do not demonstrate sufficient cause or reasons so as to condone a huge delay of 712 days. Therefore, we decline to condone the delay in filing the appeal before the Tribunal. Thus, the appeal of assessee is dismissed in limine.”

10. Thus the Tribunal dismissed the appeal filed by the assessee on the ground of delay as well as on merits.

11. Learned Senior Advocate Mr. Tushar Hemani for the appellant submitted that the Tribunal ought to have condoned the delay and granted an opportunity of hearing to the assessee to make submission on merits.

12. It was submitted that in the affidavit filed by the Director of the assessee company, it was explained that the assessee came to know about the order passed by the CIT(Appeals) only at the time when the recovery proceedings were started when the appeal effect of the order passed by Deputy Commissioner of Income Tax, Anand in the month of March, 2016 was given by the Assessing Officer. It was also stated in the affidavit that the Accountant of the appellant left the company in the month of May, 2016 and the appellant was not aware about the order passed by the CIT(Appeals) in the year 2014 as it was not made known to the appellant by the said Accountant since he left the company.

13. It was therefore, submitted that to render substantial justice, the Tribunal ought to have condoned the delay so as to grant an opportunity to the assessee to make submissions on merits. It was submitted that the Tribunal ought not to have decided the appeal of the assessee on merits after rejecting the application to condone the delay.

14. In support of his submission, reliance was placed on the following decisions:

N. Balakrishnan v. M. Krishnamurthy (1998) 7 SCC 123.

Collector, Land Acquisition v. Mst. Katiji (SC)/(1987) 2 Supreme Court Cases 107.

Gujarat State Fertilizers & Chemical Ltd. v. CIT [2006] 283 ITR 149 (Gujarat).

Mahendra Ambalal Patel v. Dy. CIT (Gujarat).

Jayvantsinh N Vaghela v. ITO (Gujarat).

15. On the other hand, learned Senior Standing Counsel Mr. Rutvij Patel for the respondent Revenue submitted that the Tribunal has given cogent reasons to exercise its discretion for rejecting the application to condone delay in preferring the appeal filed by the assessee.

16. Learned Senior Standing Counsel Mr. Rutvij Patel invited the attention of the Court to the findings arrived at by the Tribunal that order of CIT(Appeals) was received in the year 2014 but the Accountant Manager had left the company and the company in the month of May, 2016 i.e. almost about 25 months of passing the impugned order and therefore, the reasons given by the assessee to condone the delay was not palatable and accordingly, the Tribunal has rightly declined to condone the delay. It was submitted that the Tribunal has also arrived at findings of fact by upholding the order passed by CIT(Appeals) by recording that assessment year being 2010-2011, no useful purpose would be served by entertaining the appeal when there is delay of 712 days.

17. Having heard the learned advocates for the respective parties and considering the facts of the case, it would be germane to refer to the decision of Hon’ble Apex Court in case of N. Balakrishnan (supra), wherein Hon’ble Supreme Court in the facts of the said case has succinctly laid down the criteria as to when the discretion to condone delay is required to be exercised by the appellate Court :

“9. It is axiomatic that condonation of delay is a matter of discretion of the Court. Sec.5 of the Limitation Act does not say that such discretion can be exercised only if the delay is within a certain limit. Length of delay is no matter, acceptability of the explanation is the only criterion. Sometimes delay of the shortest range may be uncondonable due to want of acceptable explanation whereas in certain other cases delay of very long range can be condoned as the explanation thereof is satisfactory. Once the Court accepts the explanation as sufficient it is the result of positive exercise of discretion and normally the superior Court should not disturb such finding, much less in revisional jurisdiction, unless the exercise of discretion was on wholly untenable grounds or arbitrary or perverse. But it is a different matter when the first Court refuses to condone the delay. In such cases, the superior court would be free to consider the cause shown for the delay afresh and it is open to such superior Court to come to its own finding even untrammeled by the conclusion of the lower Court.

10. The reason for such a different stance is thus : The primary function of a court is to adjudicate the dispute between the parties and to advance substantial justice. Time limit fixed for approaching the Court in different situations is not because on the expiry of such time a bad cause would transform into a good cause.

11. Rules of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life span for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finis litium (it is for the general welfare that a period be put to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time.

12. A court knows that refusal to condone delay would result in foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words “sufficient cause” under Sec.5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi Jain V/s. Kuntal Kumari, AIR 1969 SC 575 and State of West Bengal V/s. The Administrator, Howrah Municipality, AIR 1972 SC 749.

13. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put-forth as part of a dilatory strategy the Court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the Court should lean against acceptance of the explanation. While condoning delay the Court should not forget the opposite party altogether. It must be borne in mind that he is a loser and he too would have incurred quite a large litigation expenses. It would be a salutary guideline that when Courts condone the delay due to laches on the part of the applicant the Court shall compensate the opposite party for his loss.”

18. In view of above dictum of law and considering the facts of the case when the appellant had bona-fidely not been able to file the appeal in time, the Tribunal ought to have considered the explanation tendered by the appellant supported by the affidavit of the Director of the appellant Company to exercise discretion to condone delay as there is sufficient cause to condone delay in order to render substantial justice by providing an opportunity to the appellant to submit its case before the Tribunal on merits.

19. We therefore, quash and set aside the impugned order of the Tribunal without going into the merits of the matter by answering the substantial question of law in favour of the appellant assessee and against the Revenue and remand the matter back to the Tribunal to decide the appeal on merits after giving an opportunity of hearing to the appellant.

20. Appeal is accordingly disposed of.