2002 (3) TMI 11 - HC - Income Tax

Appeal To Appellate Tribunal, Powers Of Tribunal, Power To Rectify Mistakes - In the instant case, the Tribunal granted rectification and posted the case for rehearing, having admitted that its order has proceeded on the assumption of wrong facts. In our view, in the facts of the case, the Tribunal was justified in correcting the manifest error. The learned single judge has committed an error in interfering with a well justified order, without looking into the real controversy involved. Consequently, we allow the appeal and set aside the judgment of the learned single judge and dismiss the writ petition.

Summary

Issues:
1. Rectification of mistake under section 254(2) of the Income-tax Act, 1961.

Analysis:
The case involved an appeal against the judgment of a single judge regarding the rectification of a mistake under section 254(2) of the Income-tax Act, 1961. The respondent, an assessee, filed an application for rectification, pointing out errors in the assessment process. The Tribunal agreed with the assessee that there were factual mistakes and decided to recall the order for rehearing. However, the single judge set aside the Tribunal's decision, stating that sub-section (2) of section 254 does not empower the Tribunal to review its own order and recall it entirely.

The main contention revolved around the interpretation of sub-section (2) of section 254 of the Act. The appellant argued that the Tribunal, while rectifying mistakes, should also consider whether the circumstances warrant recalling the order due to apparent mistakes. On the other hand, the Revenue contended that sub-section (2) does not allow the recall of the entire order in the name of rectification. The court examined the scope of sub-section (2) and emphasized that rectification is limited to correcting mistakes apparent from the record. While the power of rectification normally does not extend to recalling the entire order, in cases where factual mistakes are significant, recalling the order for rehearing may be justified.

The court referred to precedents to support its interpretation. In CIT v. Mithalal Ashok Kumar, the Madhya Pradesh High Court allowed rectification when an apparent mistake was found in the order. The court applied the provisions of the Civil Procedure Code and upheld the rectification based on Supreme Court decisions. Similarly, the Allahabad High Court in CIT v. U.P. Shoe Industries held that the Tribunal can rectify mistakes by recalling the entire order if there is an apparent mistake. In the present case, the Tribunal's decision to grant rectification and rehearing was deemed justified due to the significant factual errors in the original order.

Ultimately, the court allowed the appeal, set aside the single judge's judgment, and dismissed the writ petition. The Tribunal's order for rehearing was restored, emphasizing the importance of correcting manifest errors in the interest of justice.