2001 (7) TMI 15 - HC - Income Tax

Tribunal's Power to Rectify Errors Upheld: Income from Firms Not Clubbed with Individual's Income

The Court upheld the Income-tax Appellate Tribunal's decision to recall its order regarding the clubbing of income from firms with an individual's income. ... Appeal To Appellate Tribunal - Once the conclusion is reached that there exists a mistake apparent on the face of the record, the Tribunal has the necessary power to rectify its order and for eliminating such mistake, the only order which the Tribunal could have passed was the one which it has passed namely recalling its order and consequently placing the appeals and rehearing on the subject of clubbing. - In this connection, we may usefully refer to a Bench decision of the Bombay High Court in Blue Star Engineering Co. (Bombay) Pvt. Ltd. v. CIT, wherein the court said: - 'Under section 154, the power to rectify the error must extend to the elimination of the error, even though the error may be such as to go to the root of order and its elimination may result in the whole order falling to the ground.' - We accordingly find no merit in this appeal. The appeal is dismissed. Issues:Challenge to order of Income-tax Appellate Tribunal regarding clubbing of income from firms with individual's income.Analysis:The respondent, an individual and partner in seven firms, challenged an order of the Income-tax Appellate Tribunal where the income of the firms was clubbed with the individual's income as the firms were deemed benami for the individual. The Tribunal relied on a letter indicating the firms were assessed at nil income for certain assessment years. The individual argued that the assessment of the firms was pending, and the letter was received after the appeal hearing, not disclosed to them, leading to a mistake in the Tribunal's findings.The Tribunal, upon realizing the mistake in considering post-hearing information without notifying the individual, recalled its order on the clubbing issue. The Revenue contended that the Tribunal erred in recalling its order based on the same facts. However, the Court found that the Tribunal rectifying the mistake by recalling the order was justified as the information considered post-hearing without notice to the individual vitiated the original order.Referring to a Bombay High Court decision, the Court emphasized the Tribunal's power to rectify errors, even if it affects the entire order. Consequently, the Court upheld the Tribunal's decision to recall the order and rehear the appeals on the clubbing issue. The appeal challenging the Tribunal's order was dismissed, affirming the Tribunal's authority to rectify mistakes and recall orders based on erroneous information.