2022 (5) TMI 1690 - AT - Income Tax

s.254(2) invoked to recall earlier order for apparent mistake, correcting misapplication and granting assessee relief

GVPR Engineers Limited Versus The Asst. Commissioner of Income Tax, Circle 2 (2), Hyderabad.

ITAT HYDERABAD (AT) allowed the assessee's M.As and recalled its earlier order of 23.11.2021, finding a mistake apparent on the face of the record. The ... Revision u/s 254 - mistake apparent on the face of the record - Non considering earlier coordinate-bench decisions - HELD THAT:- Once there are binding decisions in the case of assessee for A.Ys. 2004-05 to 2012-13, then it is required to be followed by the Tribunal and if the Tribunal on a mistaken belief had not followed the decisions, then it can be said that it is a ‘mistake apparent on the face of the record’ and in view of the above facts and circumstances, discussions and after following the decisions cited supra, in our view, Tribunal has committed a ‘mistake apparat on the face of the record’ and therefore, the order passed by the Tribunal [2021 (11) TMI 1225 - ITAT HYDERABAD] is required to be recalled. We accordingly, allow the M.A.s filed by the assessee. Contention of Revenue with regard to the terms of decision of hon’ble Supreme Court in the case of Reliance Telecom Ltd. [2021 (12) TMI 211 - SUPREME COURT] in our view, the said decision is binding on all the Tribunals as well as the courts below. However, on perusal of the said decision, it is abundantly clear that the Tribunal cannot revisit its earlier order and go into details on merits. However, the hon’ble Supreme Court in the case of Reliance Telecom Ltd (supra) has categorically held that the Tribunal has power to rectify any mistake apparent from the record only and further it held that the powers under Section 254(2) of the Act are akin to Order XLVII Rule 1 CP and the Tribunal is not required to re-visit its earlier order and to go into detail on merits and the powers u/s 254(2) of the Act are only to rectify/correct any mistake apparent from the record. However, in our view there is a distinction between erroneous order passed on merits and an order passed on account of mistake apparent from the record. In the present Tribunal’s order dt.23.11.2021, the Tribunal had committed various mistakes as mentioned in foregoing paras, however it can be summarized as under: (i) The Tribunal has not followed the earlier decisions in the case of assessee; (ii) The Tribunal had by mistake mentioned that the previous bench(es) has not considered the Explanation to section 80IA while deciding the case in respect of the assessee; (iii) The Tribunal has not adjudicated the facts in the present case; (iv) The Tribunal has relied upon the decision of M/s. NEC NCC MAYTAS – JV Vs. DCIT [2021 (5) TMI 1008 - ITAT HYDERABAD] without bringing on record how the said decision is applicable in the facts of the present case and; (v) The Tribunal committed mistake by not considering the order passed by PCIT u/s 263 of the Act and subsequent order giving effect passed by the Assessing Officer for A.Y. 2011-12 and 2012-13. In our considered opinion, the Tribunal has power to rectify any mistake apparent on the face of the record and the hon’ble Supreme Court in the case of Honda Siel Power Products Ltd [2007 (11) TMI 8 - SUPREME COURT] held that when there was a mistake, error or omission on part of the Tribunal, then it is the duty of Tribunal to set it right. In the present case, since the facts have not been adjudicated, which have not been denied by the Revenue and therefore, there are mistakes apparent from record. It is settled position of law that the mistakes of the Court should not harm any person. Respectfully following the decisions of Honda Siel Power Products Ltd. [2007 (11) TMI 8 - SUPREME COURT] and Cumbum Co-operative Town Bank Limited [2022 (5) TMI 1689 - ITAT HYDERABAD] we are of the opinion that the assessee has made out the case for recalling of the order. Accordingly, we recall the impugned order [2021 (11) TMI 1225 - ITAT HYDERABAD] 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the Appellate Tribunal may recall/rectify its order under section 254(2) of the Act on account of a 'mistake apparent from the record' where it is alleged the Tribunal failed to follow or consider binding earlier coordinate-bench decisions in the assessee's own case. 2. Whether non-consideration or mis-statement regarding the scope/consideration of the Explanation to section 80IA by prior Tribunal benches in the assessee's own case constitutes a mistake apparent from the record rectifiable under section 254(2). 3. Whether the Tribunal's reliance on a later adverse precedential decision without recording reasons and without adjudicating material factual grounds pleaded by the assessee amounts to a mistake apparent from the record. 4. Whether omission to adjudicate relevant factual contentions (including overlapping client facts and developer status of certain contracts) is a mistake apparent from the record allowing recall under section 254(2), as distinct from an erroneous merits decision. 5. Whether the Tribunal exceeded or properly exercised the scope of powers under section 254(2) in light of precedents delineating the limits of rectification (including the distinction between review and rectification). 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Power to recall under section 254(2) where Tribunal allegedly failed to follow earlier coordinate-bench decisions Legal framework: Section 254(2) empowers the Appellate Tribunal to amend any order passed by it under sub-section (1) for rectifying any mistake apparent from the record only; powers are akin to Order XLVII Rule 1 CPC and limited to correction of patent/obvious errors, not full rehearing or review. Precedent Treatment: The Tribunal considered authoritative statements limiting section 254(2) to rectification (Reliance Telecom et al.), and also decisions allowing rectification where a material precedent/point on record was overlooked (Honda Siel and other authorities distinguishing manifest errors from debatable points). Interpretation and reasoning: The Tribunal distinguished between an erroneous merits decision and an error apparent from the record. It held that when there are binding coordinate-bench decisions in favour of a party for earlier assessment years, failure to follow those later decisions without explanation can be a mistake apparent from the record because it causes prejudice and conflicts with the rule of precedent. The Tribunal found that it had followed only the 2010-11 bench decision adverse to the assessee and overlooked or failed to follow subsequent orders (2011-12 and 2012-13) and earlier favorable orders (2004-05 to 2009-10), thereby committing a palpable mistake. Ratio vs. Obiter: Ratio - where a Tribunal order is inconsistent with binding coordinate-bench decisions in the same litigant's prior years, and that inconsistency is shown on the record without need for re-appraisal of facts, such inconsistency may constitute a mistake apparent from the record rectifiable under s.254(2). Obiter - general observations about the limits of rectification powers in other factual permutations. Conclusions: The Tribunal concluded that the failure to follow the coordinate-bench decisions and absence of reasons for selecting a single adverse precedent amounted to a mistake apparent from the record; rectification was permissible and the impugned order was recalled for rehearing on merits. Issue 2 - Non-consideration or mis-statement regarding the Explanation to section 80IA as a rectifiable mistake Legal framework: Deduction under section 80IA(4) and the inserted Explanation (post-amendments) which excludes mere works contracts; interpretation of eligibility depends on whether contracts evidence development/operation/maintenance or mere works contracting. Precedent Treatment: Coordinate-bench orders in the assessee's earlier years had engaged with the scope of the Explanation (notably para-28 to 30 of the 2012 order) and directed remand/adjudication on pro-rata segregation where contracts contained design, development, O&M, liability periods. Later bench decisions distinguishing earlier orders were also on record. Interpretation and reasoning: The impugned order contained an incorrect factual statement that preceding benches had not considered the Explanation to section 80IA. The Tribunal held that the 2012 coordinate-bench decision did consider the Explanation extensively; therefore the impugned record contained a palpable mis-statement. Because the mis-statement is demonstrable from the record and goes to the proper application of precedent, it is a mistake apparent from the record rectifiable under section 254(2). Ratio vs. Obiter: Ratio - an express, demonstrable mis-statement on whether earlier coordinate-bench decisions considered a statutory Explanation is a mistake apparent from the record that may be corrected under s.254(2). Obiter - broader commentary on legislative intent and explanatory memoranda. Conclusions: The Tribunal treated the mis-statement as an apparent mistake, warranting recall of the impugned order and re-hearing to ensure coordinate-bench precedents and the Explanation are correctly applied. Issue 3 - Reliance on a later adverse precedent without factual application and omission to adjudicate assessee's factual grounds Legal framework: Tribunal must adjudicate issues raised and indicate reasons when selecting or distinguishing precedents; omission to consider material facts pleaded by a party can amount to an apparent error if demonstrable from the record. Precedent Treatment: Authorities indicate rectification is available where the Tribunal failed to consider a contention on record or relied on the wrong legal provision; however rectification is not available to re-argue merits or revisit debatable points. Interpretation and reasoning: The Tribunal found that the impugned order relied on an adverse decision (NEC NCC MAYTAS-JV) without explaining applicability to the present facts and without adjudicating material factual grounds (e.g., overlapping clients, developer status, maintenance/warranty distinctions). Since the Tribunal did not record factual findings adjudicating those grounds and revenue did not dispute omission, the failure amounted to a mistake apparent from the record because it deprived the assessee of adjudication on those pleaded facts and produced inconsistency with earlier coordinate-bench directions. Ratio vs. Obiter: Ratio - where a Tribunal relies on an adverse precedent without applying its reasoning to the material facts on record and fails to adjudicate pleaded factual grounds, such omission can constitute a mistake apparent from the record under s.254(2). Obiter - commentary on when reliance on subsequent precedent is permissible. Conclusions: The Tribunal held the reliance without factual foundation and the non-adjudication of issues were rectifiable errors; recall and re-hearing were directed so the factual grounds may be considered on merits. Issue 4 - Distinction between erroneous merits decision and mistake apparent from record; admissibility of Rectification where facts were not adjudicated Legal framework: Section 254(2) limited to mistakes apparent from the record; review/re-hearing is not permissible; however omission to adjudicate a material contention already on record may be an apparent mistake where prejudice results and where no adequate alternative remedy is effective (e.g., low tax effect precluding HC appeal). Precedent Treatment: The Tribunal balanced Reliance Telecom (restrictive) against Honda Siel and other authorities permitting rectification where a mistake by the Tribunal (omission/overlook) caused prejudice; recognized tests distinguishing debatable legal errors from patent omissions/mis-statements. Interpretation and reasoning: The Tribunal concluded there is a distinction between decisions that are simply erroneous on merits (not rectifiable) and those where the Tribunal committed an identifiable mistake (failure to follow binding coordinate decisions, mis-statement about prior reasoning, failure to adjudicate issues) demonstrable from the record without a re-appraisal of facts. Given the series of coordinate-bench decisions and consequent administrative orders (PCIT, AO consequential orders), the Tribunal considered rectification appropriate to prevent prejudice and to preserve consistency of precedent. Ratio vs. Obiter: Ratio - omission to adjudicate material contentions and demonstrable disregard/mis-statement of binding coordinate-bench precedents constitute mistakes apparent from the record and are amenable to correction under s.254(2). Obiter - policy observations regarding appealability and practical consequences of tax-effect thresholds. Conclusions: The Tribunal allowed rectification under s.254(2) and ordered recall for re-hearing on merits, finding that the impugned order suffered from mistakes apparent from the record distinct from a mere merits dispute. Issue 5 - Remedies and consequential directions Legal framework: Where rectification is allowed under s.254(2), the Tribunal may amend/recall its order and remit for fresh adjudication consistent with corrected application of law and precedent. Precedent Treatment: Tribunal relied on authorities permitting recall where mistake is patent and where prejudice would otherwise result; recognized limits imposed by Supreme Court on re-hearing under s.254(2) but read those limits as permitting correction of patent errors and omissions. Interpretation and reasoning: Given findings of multiple apparent mistakes (non-following/badly distinguished precedents, mis-statements about prior consideration of the Explanation, failure to adjudicate factual grounds, unexplained reliance on an adverse decision), the Tribunal found recall and re-hearing appropriate and ordered registry to fix the matter for adjudication on merits. Ratio vs. Obiter: Ratio - where an appeal order contains multiple demonstrable mistakes apparent from the record affecting adjudication and consistency with coordinate-bench precedent, the Tribunal may recall the order under s.254(2) and direct re-hearing; Obiter - procedural observations on re-hearing timetable and interplay with pending appeals to higher courts. Conclusions: The Tribunal allowed the miscellaneous applications, recalled the impugned order, and directed re-hearing of the appeals on merits to adjudicate the issues (including applicability of section 80IA(4) and the Explanation) after proper consideration of the coordinate-bench precedents and factual contentions.