2011 (11) TMI 416 - AT - Income Tax

Tribunal upholds decision; denies recall request under Income-tax Act Section 254(2)

The Tribunal declined to recall its order under Section 254(2) of the Income-tax Act, emphasizing that the circumstances for recall were not met as both ... Power of the Tribunal to recall or review its own order - Scope of audi alteram partem in appellate proceedings - Scope of section 254(2) of the Income tax Act and its relationship with orders under section 254(1) - Recall under rule 24 of the Income Tax Rules as remedy for ex parte disposal - Limits of recall - requirement of an obvious/patent wrong causing prejudice - Tribunal's duty to apply settled law suo motu - Final fact finding on questions of fact and resultant speaking orderPower of the Tribunal to recall or review its own order - Scope of section 254(2) of the Income tax Act and its relationship with orders under section 254(1) - Recall under rule 24 of the Income Tax Rules as remedy for ex parte disposal - Limits of recall - requirement of an obvious/patent wrong causing prejudice - Whether the Tribunal may recall and rehear an earlier order in the absence of circumstances contemplated by rule 24, or by invoking section 254(2), so as to efface an earlier order under section 254(1). - HELD THAT: - The Tribunal's power to recall its order is circumscribed. Rule 24 provides for setting aside an ex parte order where the appellant satisfies the Tribunal that there was sufficient cause for non appearance; that rule is inapplicable where both parties were heard. Section 254(2) cannot be used as a vehicle to efface an earlier order under section 254(1) and thereby re adjudicate the appeal in the absence of a patent and obvious wrong causing prejudice. A recall that amounts to a full rehearing and re adjudication of the subject matter is impermissible unless the narrow circumstances (such as those envisaged by rule 24 or an obvious/patent wrong producing prejudice) are shown. When the alleged 'wrong' and 'prejudice' themselves are debatable, recall will not lie. [Paras 3]Application for recall dismissed insofar as it sought re hearing or review beyond the narrow grounds permitted by rule 24 or for a patent obvious wrong under section 254(2).Scope of audi alteram partem in appellate proceedings - Final fact finding on questions of fact and resultant speaking order - Whether the assessee was denied a fair hearing or prejudiced by the Tribunal's procedure such as to warrant recall. - HELD THAT: - The Tribunal conducted an open hearing in the presence of both parties and afforded opportunities to state cases; delay in pronouncing a reasoned order does not, by itself, amount to denial of a fair hearing. Where the dispute is essentially factual and requires consideration of evidence and reasons, the Tribunal may record queries and give a speaking order after careful consideration. The mere assertion that queries were not posed or that the order was decided without opportunity is not established by the assessee, and the material on record does not show a denial of opportunity that would vitiate the proceeding. [Paras 3]Assessee's plea of denial of fair hearing rejected; no basis for recall on that ground.Tribunal's duty to apply settled law suo motu - Limits on complaint that case law not cited by parties was relied upon - Whether the Tribunal erred in applying or referring to case law not cited by the parties. - HELD THAT: - The Tribunal is duty bound to apply settled law relevant to the controversy even if a particular precedent was not cited by the parties; application of a party neutral legal proposition does not amount to an improper post hearing exercise. Reference to apex or High Court decisions to elucidate the legal principles governing the invoked provision (here section 69A) is appropriate and obligatory where such precedents are applicable. [Paras 3]Complaint that the Tribunal relied on case law not cited by parties is unsustainable; Tribunal properly applied settled law.Relevance of queries arising from material on record - Admissibility and role of evidence in appellate adjudication - Whether queries recorded by the Tribunal and its post hearing reasoning, arising from the material on record, prejudiced the assessee. - HELD THAT: - Queries noted in the order were drawn from the material on record and addressed gaps and inconsistencies in the assessee's explanation; the assessee failed to identify any query that was irrelevant or that could be answered from the record so as to change the outcome. For evidence to be relied upon it must be on record; adverse inferences based on counsel's answers at hearing are not a substitute for recorded evidence. The Tribunal's systematic articulation of deficiencies and reasons for its factual conclusions is a permissible part of issuing a speaking order. [Paras 3]Assessee's contention that queries caused prejudice is rejected; Tribunal rightly relied on material on record and its factual analysis.Final fact finding on questions of fact and resultant speaking order - Post hearing preparation of reasoned orders - Whether the fact that the Tribunal's order was framed after hearing (i.e., a post hearing exercise) renders it invalid. - HELD THAT: - When issues are factually complex, the process of delineating, formulating and articulating cogent findings necessarily involves post hearing deliberation and the drafting of a speaking order. Such post hearing exercise, involving consideration and application of evidence and law, is not improper and does not by itself justify recall. [Paras 3]No infirmity in Tribunal issuing a reasoned order prepared after hearing; this does not warrant recall.Final Conclusion: The miscellaneous application for recall of the Tribunal's order is dismissed; the Tribunal correctly held that recall or rehearing was not permissible on the grounds urged by the assessee and that there was no patent wrong or prejudice warranting setting aside the order. Issues Involved:1. Recall of the Tribunal's Order under Section 254(2) of the Income-tax Act.2. Alleged violation of the principles of natural justice.3. Tribunal's reliance on case law not cited by either party.4. Queries raised by the Tribunal not posed to the assessee.5. Tribunal's post-hearing exercise.Issue-wise Detailed Analysis:1. Recall of the Tribunal's Order under Section 254(2) of the Income-tax Act:The Tribunal addressed the scope of its powers to recall an order under Section 254(2) of the Income-tax Act, 1961. The Tribunal emphasized that the circumstances for exercising this power are specified in Rule 24 of the Income Tax Rules, 1963, which allows for recall only if an ex parte order was passed due to the appellant's non-appearance. In this case, both parties were heard, and thus, Rule 24 was deemed inapplicable. The Tribunal cited the case of CIT v. ITAT [1992] 196 ITR 683 (Orissa) to underline that recalling an order under Section 254(2) is impermissible unless there is a patent mistake or wrong committed by the Tribunal.2. Alleged Violation of the Principles of Natural Justice:The assessee argued that the hearing did not follow a fair procedure, claiming that the Tribunal's order was pronounced seven months after the original hearing and included post-hearing exercises. The Tribunal countered that both parties were given adequate opportunities to present their cases, and the delay was not prejudicial. The Tribunal also noted that the assessee did not point out any specific argument or fact omitted from consideration that would entitle them to rectification or recall.3. Tribunal's Reliance on Case Law Not Cited by Either Party:The assessee contended that the Tribunal relied on case law not cited by either party. The Tribunal clarified that it is duty-bound to apply established case law to settle the matter, regardless of whether it was cited by the parties. The Tribunal referenced relevant provisions and settled law to address the issues at hand, particularly the applicability of Section 69A of the Act, and found the reliance on case law to be appropriate and necessary.4. Queries Raised by the Tribunal Not Posed to the Assessee:The assessee claimed that the Tribunal raised several queries in its order that were not posed during the hearing, thereby prejudicing their case. The Tribunal responded that the queries were relevant and arose from the material on record. The Tribunal emphasized that the assessee did not point out any specific query that was irrelevant or adequately addressed by the existing material. The Tribunal's queries were deemed necessary to highlight gaps and deficiencies in the assessee's explanation.5. Tribunal's Post-Hearing Exercise:The assessee argued that the Tribunal's order was largely a post-hearing exercise. The Tribunal defended this by stating that a thorough post-hearing analysis is essential for issuing a speaking order. The Tribunal explained that detailed consideration of evidence and arguments is necessary to provide coherent and systematic findings, which cannot be completed during the hearing itself.Conclusion:The Tribunal concluded that there was no valid reason to recall its order, as the assessee's claims did not demonstrate any patent mistake or wrong that would warrant such action. The miscellaneous application filed by the assessee was dismissed.