Without recalling earlier order, fresh rectification order u/s 154 can not be passed
In a recent judgment, Allahabad High Court has quashed second rectification order u/s 154 which was passed without recalling the earlier order passed u/s 154
ABCAUS Case Law Citation:
4409 (2025) (02) abcaus.in HC
In the instant case, the appellant assessee filed writ petition challenging the rectification order passed u/s 154 of the Income Tax Act, 1961 (‘the Act’) alongwith notice under Section 148 and the order passed under Section 148A(d) of the Act.
It was submitted that though notice was issued to the petitioner under Section 148A(b) of the Act, however, being unaware in absence of physical notice, it could not respond to the said notice, which resulted in passing of the order under Section 148A(d) of the Act whereby, the AO on the basis of information in Form 26AS Statement opined that income had escaped assessment for the relevant Assessment Year and a notice under Section 148 of the Act was issued.
It was further submitted that on receipt of the notice, the petitioner moved a rectification application under Section 154 of the Act inter-alia indicating purported mistake apparent on the face of record in relation to certain items indicated in the notice under Section 148A(b) of the Act and the order passed under Section 148A(d) of the Act. Though the rectification application remained pending despite reminder, the AO proceeded ahead with the proceedings pursuant to the notice issued under Section 148 of the Act.
The Revenue submitted that once the application filed by the petitioner under Section 154 of the Act is pending before the AO, the same would be decided in accordance with law and therefore, no interference by this Court at this stage in the order under Section 148A(d) of the Act and notice under Section 148 of the Act was required.
The Hon’ble High Court opined that when an application under Section 154 of the Act was admittedly pending for more than four months for consideration before the authority and the petitioner had given reminder also, it was incumbent on the authority to have passed the appropriate order on the said application in a reasonable time.
The Hon’ble High Court keeping open the other issues disposed of the Petition by directing the Revenue to decide the pending application filed by the petitioner under Section 154 of the Act within a period of four weeks and only after deciding the said pending application, the authority shall proceed pursuant to the notice under Section 148 of the Act.
In second round of litigation, the assessee filed second Writ Petition and contended that rectification order passed under Section 154 of the Act, after direction by the High Court, was wholly laconic and did not deal with any of the aspects raised in the said application.
However, on the next hearing, the Revenue produced a fresh order passed u/s 154 of the Act rejecting the application of the assessee. It was further observed that in view of that the order was being passed taking into consideration the directions given by the High Court and for that reason, no opportunity of hearing was given by the Revenue to the assessee.
The Hon’ble High Court observed that the procedure said to be adopted by the Revenue, was not known to jurisprudence of any nature. When already application under Section 154 of the Act had been decided prior, without recalling the said order, a fresh order could not have been passed. Further, there was no direction to pass a fresh order and the High Court on the pervious occasion only noted the contention in its order pertaining to the order being laconic and there was no direction to pass a fresh order and the indications made that as the order was being passed on the directions of the Court, no opportunity of hearing was required is, to say the least, most unwarranted and factually incorrect. Neither there was any direction nor the requirement of providing opportunity before passing a fresh order stood obviated only on account of filing of the writ petition before this Court.
In the overall fact situation of the case, the Hon’ble High Court opined that apparently the challenge laid in the writ petition regarding the first rectification order being laconic, stood admitted and, therefore, the said order cannot be sustained and was accordingly quashed.
Regarding the second rectification order, the Hon’ble High Court opined that the same having been passed without recalling the earlier order and in violation of principles of natural justice, also cannot be sustained. Consequently, it was also quashed.
The Revenue was directed the AO to provide opportunity of hearing to the petitioner and thereafter pass a fresh order on application under Section 154 of the Act in accordance with law.
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