Section 254(2) allows only rectification, not full recall; recall lies only under ITAT Rule 24 ex parte

HC held that the scope of section 254(2) is confined to rectification of mistakes apparent from the record and does not extend to recalling an order in entirety, which would amount to a fresh adjudication beyond legislative intent. The effective appellate order remains the one passed under section 254(1), with any rectification order merging into it and having no independent existence. Recalling is permissible only under rule 24 of the ITAT Rules in ex parte situations, not under section 254(2). As the Tribunal exceeded its jurisdiction by recalling its earlier order on penalty relating to inflated salary and wage claims, the impugned miscellaneous order was quashed and the writ petition allowed.

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Issues Involved:
The legality of the Income-tax Appellate Tribunal's decision to recall its order under section 254(2) of the Income-tax Act, 1961 in a case involving disallowance of expenditure claimed by the assessee and imposition of penalty under section 271(1)(c).

Background Facts:
The assessee, a company, was assessed for the assessment year 1980-81 and claimed payment of Rs. 2,26,039 under the head "Salary and wages". The Assessing Officer disallowed Rs. 78,500 due to lack of details on payments to temporary workers. The Commissioner of Income-tax (Appeals) upheld the disallowance to Rs. 52,000 and cancelled the penalty imposed. The Tribunal later reversed these decisions based on non-production of relevant documents and lack of supporting material.

Tribunal's Decision and Recall:
The Tribunal recalled its order based on the assessee's application under section 254(2), citing mistakes in non-production of documents and lack of specifying penalty computation rate. The Revenue challenged this recall, arguing that the Tribunal exceeded its powers under section 254(2).

Legal Analysis:
The High Court analyzed the limited scope of section 254(2) for rectifying mistakes apparent from the record. It emphasized that recalling an order under section 254(2) is impermissible and only allowed in specific circumstances as per the Income-tax (Appellate Tribunal) Rules, 1963. The Court found that the Tribunal's decision to recall the order was not justified as the documents were indeed not produced by the assessee, as evidenced by the letter dated October 27, 1981.

Conclusion:
The High Court held that the Tribunal was not justified in recalling its order under section 254(2) and quashed the order in Miscellaneous Application No. 14/CTK of 1990. The writ application was successful, and no costs were awarded.

Separate Judgment:
Justice S. K. Mohanty concurred with the decision.

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