2011 (3) TMI 467 - HC - Income Tax

High Court upholds ITAT's order under Income Tax Act Section 254(2), emphasizing limited scope for order recall.

Commissioner of Income Tax (Ghaziabad) Versus Krishna Gupta & Ors

The High Court dismissed the writ petition challenging the Income Tax Appellate Tribunal's order, emphasizing the limited scope for total recall of orders ... Rectification of mistakes - 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 The best judgment assessment made for the year 1992-93 was upheld but the Tribunal upheld the decision of the Commissioner of Income Tax (Appeal) holding that gross profits should be calculated at the gross profit rate at 5% instead of 10% on the total quantum of sales - In the application under Section 254(2) of the Act, it was contended that the Assessing Officer has rightly applied gross profit rate at 10% and the said estimate was justified and well reasoned - The Tribunal in the garb of mistake cannot give fresh hearing and re-examine the merits as an appellate court - Accordingly writ petition is dismissed Issues:1. Quashing of order dated 7th December, 2007 by the Income Tax Appellate Tribunal.2. Power of the Tribunal to recall its earlier order under Section 254(2) of the Income Tax Act.3. Interpretation of the law regarding the circumstances under which the Tribunal can recall its order.4. Application of the principles of rectification of mistake apparent from the record.Analysis:1. The High Court was approached to quash the order dated 7th December, 2007 passed by the Income Tax Appellate Tribunal. The Tribunal dismissed an application under Section 254(2) of the Income Tax Act, leading to the present writ petition.2. The power of the Tribunal to recall its earlier order under Section 254(2) of the Act was a crucial issue. The petitioner contended that the impugned order could not be sustained based on a Full Bench decision that recognized the power of total recall in exceptional cases.3. The interpretation of the law regarding the circumstances under which the Tribunal can recall its order was extensively discussed. The High Court highlighted that the power to recall must be exercised rarely and only when a case for total recall is established, not for every application under Section 254(2).4. The application of the principles of rectification of mistake apparent from the record was central to the judgment. The Court emphasized that the Tribunal's power under Section 254(2) is for rectification or modification based on a mistake evident from the record, not for a fresh hearing on merits. The Tribunal cannot re-examine the case as an appellate court.In conclusion, the High Court dismissed the writ petition as it found no merit in challenging the Tribunal's order. The judgment underscores the limited scope for total recall of orders by the Tribunal and the importance of rectification based on clear mistakes apparent from the record, without delving into a re-hearing of the case on merits.