2004 (7) TMI 42 - HC - Income Tax

Tribunal Rectifies Errors under Income-tax Act: High Court Clarifies

Commissioner of Income-Tax Versus Mool Chand Shyam Lal.

The High Court clarified that the Tribunal's action was a rectification of errors, permissible under section 254(2) of the Income-tax Act, 1961. The ... Review vis-a-vis Rectification - 'Whether, Tribunal was justified in reviewing its earlier order?' - present one is one of such cases where the Tribunal had incorrectly recorded certain factual aspect in its order which, upon an application being made, it had deleted such portion and restored the appeal to its file to be decided afresh. The Tribunal cannot be said to have committed any illegality as the mistake was apparent on the face of the record which falls within the provisions of section 254(2) - In view of the foregoing discussion we answer the aforesaid question of law referred to us by observing that the case was not of review but of a rectification Issues:1. Review of earlier order by the Tribunal under the Income-tax Act, 1961.Detailed Analysis:The case involved a question referred by the Income-tax Appellate Tribunal, Delhi, to the High Court regarding the justification of reviewing its earlier order under the Income-tax Act, 1961. The dispute arose from an assessment year where the Income-tax Officer disallowed a sum claimed under the 'stores account' by the assessee, estimating it as capital expenditure. The Appellate Assistant Commissioner upheld this addition, leading to an appeal before the Tribunal. The Tribunal, after considering the arguments and evidence, upheld the addition of Rs. 25,000, emphasizing that the expenditure was of capital nature based on the facts presented. Subsequently, the assessee filed a miscellaneous application challenging the order, alleging factual inaccuracies. The Tribunal, upon review, recalled its order for fresh disposal, acknowledging the errors in its previous decision.The main contention raised during the proceedings was whether the Tribunal had the authority to review its order under the Income-tax Act, as there was no explicit provision allowing for such a review. The learned counsel for the Revenue argued that the Tribunal's power was limited to rectification under section 254(2) of the Act and not review. Citing legal precedents, including a Division Bench decision and Supreme Court rulings, it was established that a quasi-judicial authority like the Tribunal could not review its own order unless specifically empowered by the statute. However, the Tribunal could rectify mistakes falling within the provisions of section 254(2) if errors were apparent on the record. In this case, the Tribunal's correction of factual inaccuracies through a fresh disposal was deemed a rectification rather than a review, aligning with the permissible scope of its powers under the Act.In conclusion, the High Court clarified that the Tribunal's action was not a review but a rectification of errors, permissible under section 254(2) of the Income-tax Act, 1961. The reference question regarding the review of the earlier order was answered in light of the distinction between review and rectification. The judgment disposed of the reference, with each party bearing its own costs, thereby settling the issue raised before the Court.