2001 (8) TMI 107 - HC - Income Tax

Summary

Issues Involved:
1. Whether the ITAT was correct in holding that certain errors apparent from the record, amenable to rectification, had crept in the original order.
2. Whether the ITAT was justified in recalling the original appellate order and drawing a different finding without a change in facts or issues.

Summary:

Issue 1: Errors Apparent from Record
The Tribunal, in its order u/s 254(2), recalled its earlier order in ITA No. 551/Hyd/1986, determining that errors apparent from the record had crept into the original order. The Tribunal identified three fundamental factual errors: overlooking provisions in the contract for the return of cylinders, clear entries in the books of account by way of depreciation, and clear provisions in clause 13 regarding the refund of security deposits. The Tribunal thus held that these errors were amenable to rectification.

Issue 2: Justification for Recalling the Original Order
The Commissioner of Income-tax contested the Tribunal's decision, arguing that the Tribunal, by recalling its original order, effectively reviewed its own decision, a power not conferred by the Act. The Tribunal had previously rejected two miscellaneous petitions on similar grounds, and the third petition sought the same relief. The High Court found merit in the Revenue's contention, stating that the Tribunal's order recalling its decision was tantamount to a review, which is not permissible unless explicitly provided by statute.

Legal Provisions and Precedents:
The judgment discusses sections 254 and 256 of the Income-tax Act. Section 254(2) allows the Tribunal to rectify any mistake apparent from the record within four years of the order. Section 256 empowers the assessee or the Commissioner to require the Tribunal to refer any question of law arising out of its order to the High Court. The court referenced several precedents, including the Supreme Court's judgment in Durga Engineering and Foundry Works [2000] 245 ITR 272, which emphasized that a reference can be made to the High Court on a question of law arising from any order of the Tribunal, including those under section 254(2).

Conclusion:
The High Court held that the Tribunal's order recalling its earlier decision was prejudicial to the Revenue and tantamount to reviewing its own order, which is not permissible. The court thus answered the question in favor of the Revenue and against the assessee, stating that the Tribunal erred in law by allowing the third miscellaneous petition and recalling its original order.