The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that a subsequent retrospective amendment to the Income-tax Act cannot, by itself, be used to recall or modify an order already passed by the Tribunal under Section 254(2) of the Income-tax Act, 1961.
The bench of Ravish Sood (Judicial Member) and Madhusudan Sawdia (Accountant Member) ruled that the power of rectification under Section 254(2) is confined to correcting a “mistake apparent from the record” existing in the order when it was passed. A subsequent legislative amendment, even if Parliament gives it retrospective effect, cannot automatically convert an otherwise valid Tribunal order into a rectifiable mistake.
The department filed Miscellaneous Applications under Section 254(2) seeking recall or modification of earlier Tribunal orders passed in three separate cases.
Buy Now: 80+ Income Tax Judgments | E-Magazine July 2026
In the principal matter concerning Assessment Year 2015-16, the Tribunal had earlier passed its order on January 16, 2026. The Revenue contended that the order contained a mistake apparent from the record because the legal position had subsequently changed with the enactment of the Finance Act, 2026.
The earlier Tribunal order had relied upon the Telangana High Court judgment in Kanakala Ravinder Reddy v. ITO & Others, under which a notice issued by the Jurisdictional Assessing Officer under Section 148 on or after the CBDT Notification dated March 29, 2022 was treated as invalid. The notice in the case before the Tribunal had been issued on April 7, 2022. Consequently, the reassessment proceedings had been quashed.
The Revenue subsequently sought recall of that decision on the ground that the Finance Act, 2026 had inserted Section 147A with retrospective effect from April 1, 2021.
The department argued that the newly inserted Section 147A altered the legal position retrospectively.
According to the department’s submission, the amended provision provided that, notwithstanding anything contained in judicial orders or Section 151A or schemes framed under it, the expression “Assessing Officer” for Sections 148 and 148A would be deemed to mean an Assessing Officer other than the National Faceless Assessment Centre or an Assessment Unit referred to in Section 144B(3).
The department contended that the Jurisdictional Assessing Officer had valid jurisdiction to issue the Section 148 notice on April 7, 2022. It therefore argued that the reassessment order should be treated as legally valid and that the Tribunal’s earlier order should be recalled.
The Revenue also pointed out that the Telangana High Court decision on which the Tribunal had relied had subsequently been challenged before the Supreme Court and the matter had been remitted to the High Court for fresh consideration following the enactment of Section 147A.
According to the Revenue, this subsequent development meant that the very judicial precedent forming the foundation of the Tribunal’s earlier decision no longer held the field.
The assessee’s representative opposed the Revenue’s applications, relying upon an earlier Hyderabad ITAT decision in DCIT v. TMEIC Industrial Systems India Pvt. Ltd.
The assessee argued that where a statutory amendment is introduced after the Tribunal has already passed its order, the later amendment cannot constitute a “mistake apparent from the record” for the purposes of Section 254(2), even if the amendment is expressly made retrospective.
The argument was that Section 254(2) does not confer a general power of review upon the Tribunal. The provision permits rectification of an apparent mistake; it does not permit a concluded order to be reopened merely because the law has subsequently changed.
The Hyderabad ITAT placed considerable emphasis on the chronology of events.
The Tribunal noted that its original order had been passed on January 16, 2026, whereas the Finance Act, 2026 received the assent of the President only on March 30, 2026.
Therefore, when the Tribunal passed the original order, Section 147A did not form part of the statute book. The Tribunal held that this fact was undisputed.
The Bench relied extensively upon its coordinate Bench decision in DCIT v. TMEIC Industrial Systems India Pvt. Ltd., where a similar attempt had been made by the Revenue to use a retrospective amendment introduced by the Finance Act, 2026 to seek rectification of an earlier Tribunal order.
In that case, the Tribunal had held that Section 254(2) requires examination of whether a mistake apparent from the record existed on the date on which the Tribunal passed the order.
A subsequent legislative amendment, even when retrospective, cannot by itself render that earlier order erroneous for purposes of Section 254(2).
The Hyderabad ITAT reiterated the distinction between rectification and review.
The Tribunal referred to the Bombay High Court’s decision in ITO v. Infantry Security & Facilities, which dealt with a similar situation involving a subsequent Supreme Court judgment.
The principle emerging from that decision, as noted by the Tribunal, was that an order cannot be rectified under Section 254(2) on the basis of a judgment of the jurisdictional High Court or Supreme Court rendered after the Tribunal had passed its original order.
The Tribunal also noted that the Revenue’s Special Leave Petition against that Bombay High Court judgment had been dismissed by the Supreme Court.
The Hyderabad Bench consequently held that the same principle applies to a subsequent statutory amendment.
If every retrospective amendment could be used to invoke Section 254(2), it would effectively allow concluded Tribunal decisions to be reopened and reviewed whenever Parliament subsequently changed the law.
The Tribunal held that such a course would go beyond the limited jurisdiction granted under Section 254(2). It also relied upon the Supreme Court decision in CIT v. Reliance Telecom Ltd., under which the power under Section 254(2) is confined to rectifying an apparent mistake and does not confer a power of review.
In that case, the department had similarly argued that the Tribunal ought to have taken into account the amendment introduced by the Finance Act, 2026 through Section 147A.
The High Court noted that the Tribunal’s order had been passed in November 2025, well before the amendment Bill was introduced in Parliament.
The High Court observed that, when the Tribunal decided the matter, binding judgments of the jurisdictional High Court governed the issue. Therefore, the Tribunal’s decision could not be regarded as contrary to the law as it existed at that time or contrary to the evidence on record.
The Revenue’s appeal was consequently rejected.
The Hyderabad ITAT found this ruling directly relevant. It observed that the High Court had specifically considered the Revenue’s argument concerning Section 147A and nevertheless concluded that an earlier Tribunal order could not be faulted for failing to apply an amendment that did not exist when the order was passed.
The department had raised a second argument based on the subsequent Supreme Court proceedings concerning the Kanakala Ravinder Reddy judgment.
The Tribunal rejected this contention as well.
It noted that the Supreme Court order relied upon by the Revenue also did not exist when the Hyderabad ITAT passed its original order on January 16, 2026.
Therefore, the subsequent Supreme Court development could not constitute a “mistake apparent from the record” in the original Tribunal order.
The Bench held that the Revenue was effectively seeking a review of the earlier Tribunal order on the basis of subsequent developments in law.
Such an exercise, according to the Tribunal, falls outside the restricted jurisdiction available under Section 254(2).
The central finding of the Hyderabad Bench was that the validity of a Tribunal order, for the purposes of Section 254(2), must be examined with reference to the law and legal position existing on the date the order was passed.
The Tribunal concluded that the subsequent insertion of Section 147A by the Finance Act, 2026 could not make an earlier order suffer from a “mistake apparent from the record” when that provision was not part of the statute at the time of the original decision.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
