2010 (12) TMI 105 - HC - Income Tax

ITAT can rectify orders under Section 254(2) for justice.

M/s LACHMAN DASS BHATIA HINGWALA (P.) LTD Versus ASSISTANT COMMISSIONER OF INCOME TAX

M/s LACHMAN DASS BHATIA HINGWALA (P.) LTD Versus ASSISTANT COMMISSIONER OF INCOME TAX - [2011] 330 ITR 243 (Delhi), 2016 (344) E.L.T. 875 (Del.) Issues Involved:1. Whether the Income Tax Appellate Tribunal (ITAT) has the power to recall an order in its entirety under Section 254(2) of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Tribunal's Power to Recall an Order Under Section 254(2) of the Income Tax Act, 1961:The primary issue before the court was whether the ITAT possesses the authority to recall its order entirely under Section 254(2) of the Income Tax Act, 1961. This section allows the Tribunal to rectify any mistake apparent from the record within four years from the date of the order.Arguments from Petitioners:- The petitioners, represented by Mr. R.M. Mehta, argued that the Tribunal does not have the power to recall an order under Section 254(2). They cited several precedents including *K.L. Bhatia*, *Deeksha Suri*, *Karan and Co.*, *J.N. Sahni*, *Vichtra Construction P. Ltd.*, *Om Prakash Bhola*, *Honda Siel Power Products Ltd.*, *Ras Bihari Bansal*, and *Perfetti Van Melle India P. Ltd.*, which supported the view that the Tribunal cannot recall its order under this section. They also contended that the Supreme Court decision in *Honda Siel Power Products Ltd.* did not establish a precedent for the Tribunal having the power of total recall, as the issue was neither raised nor argued.Arguments from Respondents:- Mr. Deepak Chopra, representing the revenue, argued that *Honda Siel Power Products Ltd.* is an authority for the proposition that the Tribunal has the power to recall an order. He emphasized the distinction between the Tribunal's jurisdiction and the exercise of that jurisdiction, arguing that the Tribunal's power to recall should be seen as a matter of jurisdiction. He cited cases from other High Courts that supported the Tribunal's power to recall, including *Champa Lal Chopra*, *U.P. Shoe Industries*, and *Mithalal Ashok Kumar*.Court's Analysis:- The court examined Section 254(2) of the Act, which allows the Tribunal to amend any order to rectify a mistake apparent from the record. The court noted that previous decisions, such as *K.L. Bhatia*, *Deeksha Suri*, and *Karan and Co.*, held that the Tribunal does not have inherent power of review and cannot recall its order on merits.Precedents and Legal Principles:- The court referred to the Supreme Court's decision in *Honda Siel Power Products Ltd.*, which emphasized that the purpose of Section 254(2) is to ensure that no party suffers due to a mistake by the Tribunal. The Supreme Court held that rectification is permissible to correct a manifest error that causes prejudice to a party, distinguishing it from a review or rehearing.Conclusion:- The court concluded that the Tribunal, under certain circumstances, can recall its order in entirety under Section 254(2) if it is to rectify a manifest error that causes prejudice. This power is not equivalent to a review but is meant to correct mistakes to ensure justice. The court held that the decisions in *K.L. Bhatia*, *Deeksha Suri*, *Karan and Co.*, and similar cases, which stated that the Tribunal cannot recall its order in entirety, do not reflect the correct legal position in light of the Supreme Court's judgment in *Honda Siel Power Products Ltd.*.Final Judgement:- The court answered the reference by affirming that the ITAT has the power to recall its order in entirety under Section 254(2) if it is to rectify a manifest error that causes prejudice, aligning with the principles laid down by the Supreme Court in *Honda Siel Power Products Ltd.* and *Saurashtra Kutch Stock Exchange Ltd.*. The writ petitions were directed to be listed before the appropriate Division Bench for further proceedings.