2023 (10) TMI 1550 - AT - Income Tax

Order rectified under Section 254 to reassess applicability of HC/SC precedents, and Section 68 addition on share application money

M/s. M.A. Projects (P) Ltd Versus Dy. Commissioner of Income Tax, Central Circle-03, New Delhi

ITAT DELHI recalled its earlier order by way of rectification u/s 254 for the limited purpose of determining the applicability of relevant HC and SC ... Rectification application u/s 254 - decision of Hon’ble Jurisdictional High Court relied upon by the assessee had not been considered by the tribunal and whether the decision of NRA Iron & Steel [2019 (3) TMI 323 - SUPREME COURT] had been correctly applied while passing the appellate order - Addition u/s 68 - share application money received - HELD THAT:- In our considered opinion and respectfully following the decisions of Saurashtra Kutch Stock Exchange Ltd [2008 (9) TMI 11 - SUPREME COURT] and Honda Siel Products [2007 (11) TMI 8 - SUPREME COURT] we are inclined to recall the order passed by the tribunal [2019 (8) TMI 1851 - ITAT DELHI] only for the limited purpose of applicability of the decision of Gangeshwari Metal P Ltd[2013 (1) TMI 624 - DELHI HIGH COURT] and NRA Iron & Steel [2019 (3) TMI 323 - SUPREME COURT] to the facts of the instant case. Registry is directed to fix the main appeal for hearing on 29.11.2023 after issuing notices to both the parties. Miscellaneous application of the assessee is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Appellate Tribunal has power under section 254(2) of the Income-tax Act to recall/rectify its earlier order where it omitted to consider a binding decision of the jurisdictional High Court or Supreme Court relied upon by a party. 2. Whether non-consideration of a binding constitutional/high-court or Supreme Court decision in the Tribunal's order constitutes a 'mistake apparent from record' warranting rectification under section 254(2), as distinct from an attempt to re-open merits of the appeal. 3. Whether the Tribunal's power under section 254(2) is curtailed or ousted by subsequent pronouncements of the Supreme Court (as argued by Revenue), specifically whether a decision holding limitations on revisiting merits prevents rectification for mistakes apparent from record. 4. Whether the omission to consider a precedent relied upon in the original proceedings (including matters raised in the paper book) and other similar clerical or adjudicatory oversights fall within the scope of rectification under section 254(2). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Tribunal's power under section 254(2) to recall/rectify where binding higher-court decisions were not considered Legal framework: Section 254(2) confers power on the Appellate Tribunal to rectify any mistake apparent from record; this power has been interpreted analogous to civil procedural provisions permitting correction of obvious errors. Precedent treatment: The Tribunal followed Supreme Court authority holding that non-consideration of binding decisions of the jurisdictional High Court or Supreme Court constitutes a mistake apparent from record and is rectifiable. The Tribunal contrasted that line with later Supreme Court pronouncements relied upon by Revenue but noted those later pronouncements did not expressly overrule earlier decisions recognizing rectification power in such circumstances. Interpretation and reasoning: The Court held that when a party had specifically relied upon a jurisdictional High Court decision in the appeal (via paper book and oral submission) and the Tribunal's order fails to notice or adjudicate that reliance, the omission is a patent error. Allowing such omission to remain unrectified would produce prejudice and undermine judicial correctness. The Tribunal reasoned that its function under section 254(2) is limited to correcting such apparent mistakes and not to re-decide merits on the plea for reconsideration; hence recall is competent where the omission is evident on the face of the record. Ratio vs. Obiter: Ratio - The Tribunal's order holds as binding principle that omission to consider a binding jurisdictional High Court/Supreme Court decision relied upon in the appeal amounts to a mistake apparent from record and is amenable to rectification under section 254(2). Obiter - ancillary references to various fact patterns in the reproduced Hyderabad Bench order serve as illustrative support. Conclusions: The Tribunal may recall/rectify its order under section 254(2) where it has failed to consider a binding higher-court decision relied upon by a party, provided the mistake is apparent from the record and the remedy does not entail re-adjudication on merits beyond correction of the omission. Issue 2 - Distinction between errors of merits and mistakes apparent from record Legal framework: Section 254(2) is confined to correcting mistakes apparent from record; it is not a vehicle for re-opening appeals to reconsider merits except insofar as an apparent error has caused prejudice. Precedent treatment: The Tribunal relied on Supreme Court jurisprudence distinguishing 'mistake apparent from record' from hotly debatable issues; it also relied on authorities holding that errors such as reliance on wrong provisions, failure to deal with arguments raised, or omission to consider binding law are rectifiable. Interpretation and reasoning: The Tribunal emphasized the test: the simplicity of the mistake, not the complexity of the issue, determines rectifiability. Where an order manifests a glaring, obvious or patent omission (for example, failure to consider a binding precedent or wrong statutory provision being applied), such errors are corrigible without delving into merits. Conversely, where the issue is debatable on merits, rectification is inappropriate. The Tribunal applied this test and found the omission to consider the jurisdictional High Court decision to be a patent error rather than a merits dispute. Ratio vs. Obiter: Ratio - A clear, patent omission to consider binding precedent or to apply the correct legal provision is a mistake apparent from the record and is rectifiable under section 254(2). Obiter - Examples and catalogue of prior decisions cited by the Hyderabad Bench and reproduced in the order illustrate categories of rectifiable mistakes. Conclusions: The Tribunal will exercise section 254(2) powers to correct patent omissions or legal errors on the face of the record but will refrain from re-litigation of merits; the present omission qualified for rectification under that test. Issue 3 - Effect of subsequent Supreme Court pronouncements (reliance on later decisions limiting revisiting merits) Legal framework: Binding precedent controls; a later Supreme Court decision that confines the scope of section 254(2) remedies could limit Tribunal power, but such effect depends on the later decision's scope and whether it overrules earlier authorities recognizing rectification for omissions of binding decisions. Precedent treatment: Revenue relied on a later Supreme Court decision said to restrict the Tribunal's power to recall earlier orders. The Tribunal examined that authority and concluded it did not overrule earlier Supreme Court precedents (including the Saurashtra Kutch line and Honda Siel authority) that treated non-consideration of higher-court decisions as rectifiable. The Tribunal also noted co-ordinate bench decisions (Hyderabad) interpreting the later decision as not depriving Tribunals of section 254(2) rectification power for mistakes apparent from record. Interpretation and reasoning: The Tribunal distinguished between revisiting merits and correcting apparent mistakes; it interpreted the later decision as emphasizing that section 254(2) is not a mechanism to reopen detailed merits, but it did not negate rectification where an obvious error or omission exists. Given that the later decision did not expressly overrule the earlier line, the Tribunal respectfully followed the earlier authorities and related Bench decisions allowing rectification in the face of such omissions. Ratio vs. Obiter: Ratio - Where a later higher authority does not explicitly overrule prior holdings that omissions of binding precedent are apparent mistakes, the Tribunal may continue to rectify such mistakes under section 254(2). Obiter - Observations on the interplay of different Supreme Court decisions and co-ordinate bench rulings are explanatory. Conclusions: The Tribunal's power to rectify under section 254(2) remains available to correct patent omissions of binding law; a later Supreme Court pronouncement that limits revisiting merits does not, absent explicit overruling, extinguish the rectification power in such cases. Issue 4 - Scope of rectifiable omissions: failure to consider paper-book authorities and similar adjudicatory oversights Legal framework: An applicant may invoke section 254(2) where the Tribunal's order contains obvious errors such as failure to deal with points specifically raised, misapplication of statutory provisions, reliance on inapplicable precedents, or omission to consider binding decisions placed before the Tribunal. Precedent treatment: The Tribunal reproduced and relied upon multiple authorities illustrating that omissions like failure to consider paper-book authorities, reliance on wrong provisions, or non-adjudication of preliminary maintainability objections have been held to be mistakes apparent from record and rectifiable. Interpretation and reasoning: The Tribunal applied those principles to the facts: the assessee had placed reliance on a jurisdictional High Court decision in the paper book and at hearing; the Tribunal's order did not address that reliance. That omission amounted to an adjudicatory oversight (a patent mistake) rather than an arguable merits determination. The Tribunal therefore limited recall to correcting that omission and ordered rehearing on merits after issuance of notices. Ratio vs. Obiter: Ratio - Omission to adjudicate points or authorities expressly relied upon in the appeal record, including those presented in a paper book, is a rectifiable mistake under section 254(2). Obiter - The listing of illustrative categories of rectifiable mistakes from other decisions serves as guidance but is not exhaustive. Conclusions: The Tribunal allowed the miscellaneous application, recalling its earlier order solely to consider the applicability of the cited jurisdictional High Court and Supreme Court decisions to the facts; the matter was directed to be re-listed for fresh hearing on merits after notice, thereby preserving proper adjudicatory process without re-opening merits beyond the rectification scope.