2010 (12) TMI 105 - HC - Income Tax

Scope of s.254(2) power to recall orders for manifest error causing prejudice; non-consideration of prior decision not jurisdictional, orders upheld

Dominant issue - scope of Section 254(2): Applying the Apex Court precedent, the Tribunal's rectification power under s.254(2) is not absolutely ... Scope and ambit of application of section 254(2) - Rectification of order - Powers of Tribunal - power to recall order - No absolute prohibition - Rule of precedent - whether non-consideration of a decision of jurisdictional court (in this case a decision of the High Court of Gujarat) or of the Supreme Court can be said to be a 'mistake apparent from the record'? - Held that:- In the present case, according to the assessee, the Tribunal decided the matter on October 27, 2000. Hiralal Bhagwati [2000 (4) TMI 14 - GUJARAT HIGH COURT] was decided a few months prior to that decision, but it was not brought to the attention of the Tribunal. In our opinion, in the circumstances, the Tribunal has not committed any error of law or of jurisdiction in exercising power under sub-section (2) of section 254 of the Act and in rectifying the 'mistake apparent from the record'. Since no error was committed by the Tribunal in rectifying the mistake, the High Court was not wrong in confirming the said order. Both the orders, therefore, in our opinion, are strictly in consonance with law and no interference is called for. We will be failing in our duty if we do not address to the submission canvassed by the petitioners that the said decision in Honda Siel Power Products Ltd. [2007 (11) TMI 8 - SUPREME COURT] has been distinguished by many High Courts as well as by the Apex Court in Saurashtra Kutch Stock Exchange Ltd.[2008 (9) TMI 11 - SUPREME COURT] and Hindustan Coca-Cola Beverages (P) Ltd. [2007 (8) TMI 12 - SUPREME COURT]. We have carefully perused the decisions rendered by the High Courts of Madras, Bombay, Karnataka and Rajasthan which have been commended to us by Mr. Mehta and we notice that the decision was distinguished on the factual score and none of the decisions have proceeded to say that it is not a precedent for the proposition that the tribunal under no circumstances can recall its own order. Thus, we proceed to state our conclusions in seriatim as follows: (A) The decision rendered in Honda Siel Power Products Ltd., (supra) by the Apex Court is an authority for the proposition that the Income-tax Appellate Tribunal under certain circumstances can recall its own order and there is no absolute prohibition. (B) In view of the law laid down in Honda Siel Power Products Ltd., (supra) by the Apex Court, the decisions rendered by this Court in K.L. Bhatia [1989 (8) TMI 43 - DELHI HIGH COURT], Deeksha Suri [1997 (5) TMI 20 - DELHI HIGH COURT], Karan and Co.[2001 (7) TMI 48 - DELHI HIGH COURT], J.N. Sahni [2002 (1) TMI 18 - DELHI HIGH COURT] and Smt. Baljeet Jolly [2000 (8) TMI 26 - DELHI HIGH COURT] which lay down the principle that the tribunal under no circumstances can recall its order in entirety do not lay down the correct statement of law. (C) Any other decision or authority which has been rendered by pressing reliance on K.L. Bhatia (supra) and the said line of decisions are also to be treated as not laying down the correct proposition of law that the tribunal has no power to recall an order passed by it in exercise of power under Section 254(2) of the Act. (D) The tribunal, while exercising the power of rectification under Section 254(2) of the Act, can recall its order in entirety if it is satisfied that prejudice has resulted to the party which is attributable to the tribunal‟s mistake, error or omission and which error is a manifest error and it has nothing to do with the doctrine or concept of inherent power of review. (E) When the justification of an order passed by the tribunal recalling its own order is assailed in a writ petition, it is required to be tested on the anvil of law laid down by the Apex Court in Honda Siel Power Products Ltd., (supra) and Saurashtra Kutch Stock Exchange Ltd. (supra). The reference is answered accordingly. The writ petitions be listed before the appropriate Division Bench. Issues: Whether the Income-tax Appellate Tribunal has power under Section 254(2) of the Income-tax Act, 1961 to recall or wholly amend an order passed by it where a mistake apparent from the record has caused prejudice to a party.Analysis: Section 254(2) permits the Tribunal, within four years, to amend an order to rectify a mistake apparent from the record; the power is aimed at preventing prejudice to parties resulting from the Tribunal's mistake, error or omission. Earlier decisions of the High Court holding that the Tribunal cannot recall its order in entirety proceeded on the premise that such a power would amount to an impermissible review or rehearing and that recall is confined to limited grounds (including Rule 24 of the ITAT Rules). The Apex Court in Honda Siel (and subsequently in Saurashtra Kutch Stock Exchange) recognised that where a manifest mistake apparent on the record causes prejudice, rectification under section 254(2) is justified and does not rest on inherent review jurisdiction. Precedential principles require reading prior decisions in context and isolating the ratio; factual distinctions may govern applicability. Applying these principles, a Tribunal may, in appropriate circumstances, recall or amend its earlier order in entirety if satisfied that a manifest mistake attributable to it has caused prejudice and rectification is necessary to do justice.Conclusion: The Tribunal has the power under Section 254(2) of the Income-tax Act, 1961 to recall or amend its order in entirety where it is satisfied that a manifest mistake apparent from the record attributable to the Tribunal has caused prejudice to a party; this does not invoke inherent review jurisdiction but is a statutory rectification power and is available to protect parties from such prejudice.