2004 (2) TMI 36 - HC - Income Tax

Whether, Tribunal exceeded its jurisdiction by recalling the entire order on an application u/s 254(2) and in passing the impugned order? - we are of the view that the power to rectify a mistake u/s 254(2) cannot be used for recalling the entire order. No power of review has been given to the Tribunal under the Income-tax Act. Thus, what it cannot do directly cannot be allowed to be done indirectly. If the assessee was aggrieved, it was open for him to approach the appropriate forum but the Tribunal could not have reviewed the entire judgment delivered by it earlier in the garb of exercising its power u/s 254(2). Accordingly, the answer is required to be given in favour of the Revenue and against the assessee.

Summary

Issues:
1. Whether the Income-tax Appellate Tribunal exceeded its jurisdiction by recalling the entire order on an application under section 254(2) and passing the impugned order?

Analysis:
The High Court of Delhi considered a case where the Income-tax Appellate Tribunal recalled the entire order on an application under section 254(2) of the Income-tax Act, 1961, and passed a fresh order. The Tribunal had initially decided the appeal at the instance of the assessee by an order dated November 13, 2000. Subsequently, the assessee submitted an application for rectification of a mistake under section 254(2), which the Tribunal allowed, leading to the recall of the original order and the issuance of a new decision on May 21, 2002.

The court highlighted the provisions of section 254(2), emphasizing that the power to amend an order under this section is limited to rectifying mistakes apparent from the record. The court referred to previous decisions to explain that the Tribunal's power under section 254(2) does not extend to recalling the entire order and passing a fresh decision. The court cited the case of Ms. Deeksha Suri v. ITAT [1998] and Karan and Co. v. ITAT [2002] to support the limited scope of rectification under section 254(2).

The court reiterated that the power to rectify a mistake under section 254(2) does not include the authority to recall the entire order, as that would essentially amount to a review of the entire judgment, which is not permissible under the Income-tax Act. The judgment emphasized that what the Tribunal cannot do directly, cannot be allowed to be done indirectly. Therefore, the court held in favor of the Revenue and against the assessee, stating that the power under section 254(2) cannot be used for recalling the entire order.

The court concluded that the subsequent order passed by the Tribunal, which recalled the original order, would have no effect following their decision. The assessee was granted the liberty to prefer an appeal challenging the original order of the Tribunal dated November 13, 2000, in accordance with the law.