2012 (6) TMI 39 - HC - Income Tax

Overruling decision applies retrospectively, allowing revision of earlier order under s.254 and upholding rectification under s.271(1)

LAKSHMI SUGAR MILLS CO. LTD. AND ORS. Versus COMMISSIONER OF INCOME TAX & ANR.

HC upheld revision of the Tribunal's order under s.254, finding that a later Supreme Court decision that overruled an earlier authority operates ... Legality of revision of order of Tribunal u/s 254 on ground of retrospective overruling - Penalty imposed u/s 271(1) if returned income is a loss - Revenue contended that order of Tribunal had been based entirely on the decision of the Supreme Court in Virtual Soft Systems Ltd (2007 (2) TMI 147 - SUPREME COURT] and the latter decision had been subsequently overruled by a larger Bench of the Supreme Court in Gold Coin (2008 (8) TMI 5 - SUPREME COURT] there was a mistake apparent on the face of the record - Held that:- Judicial decision acts retrospectively. Judges do not make law they only discover or find the law. Thus, where a decision of the Supreme Court overrules an earlier decision, the views expressed in the later decision would have to be regarded as having always been the law. The overruling is, therefore, retrospective. In present case, Supreme Court decision in Gold Coin has to be regarded as the law as it existed when the order was passed by Tribunal, there is a clear mistake apparent from the record. Only limitation for correcting the mistake is that imposed by the provisions of Section 254(2) itself and that is only with respect to time. Since, application for rectification having been made in time, the order of the Tribunal recalling its earlier order cannot be faulted. Issues:Challenge against order of Income Tax Appellate Tribunal based on subsequent overruling of Supreme Court decision. Application for recall of order under Section 254(2) of Income Tax Act. Consideration of mistake apparent on the face of the record. Retrospective effect of overruling by Supreme Court. Interpretation of Section 254(2) regarding rectification of mistakes.Analysis:The judgment concerns a writ petition challenging the order of the Income Tax Appellate Tribunal, Delhi, based on subsequent overruling of a Supreme Court decision. The Tribunal's original order, following the Virtual Soft Systems Ltd. case, was recalled due to the Supreme Court's decision in Gold Coin Health Food Pvt. Ltd. The Revenue filed an application under Section 254(2) seeking rectification, claiming a mistake apparent on the record due to the change in legal position. The Tribunal, in its impugned order, recalled the original order to decide the appeals on merits.The petitioners argued that the Tribunal's original decision was based on the law as declared by the Supreme Court at that time and should not be considered a mistake. However, the Supreme Court's retrospective view on judicial decisions was cited, emphasizing that subsequent decisions clarify the correct legal position. The Gujarat High Court's ruling highlighted that non-consideration of a jurisdictional High Court's judgment constitutes a mistake apparent from the record, irrespective of the timing of the judgment.The judgment delves into the concept of retrospective overruling, emphasizing that the Tribunal's decision following the Virtual Soft Systems Ltd. case, later overruled by Gold Coin, was contrary to the law as declared by the Supreme Court. The application for rectification was deemed timely under Section 254(2), considering the four-year limit from the date of the order. The judgment concludes that the Tribunal's decision to recall its earlier order was justified, as the mistake was apparent on the face of the record, and the petition was dismissed with no costs, affirming the rectification process under the Income Tax Act.