1996 (2) TMI 18 - HC - Income Tax

Summary

Issues involved: Application under s. 256(2) of the IT Act, 1961 for referring questions of law for the assessment year 1986-87.

Issue 1: Tribunal's decision to recall order for fresh hearing
The assessee was assessed as an individual, with the AO disallowing a payment under s. 40A of the IT Act, 1961. The CIT(A) later deleted the addition, but the Tribunal reversed this decision based on the provisions of s. 40A(3) to curb tax evasion. A miscellaneous application was filed by the assessee for reconsideration, leading the Tribunal to recall the earlier order for a fresh hearing. The application for reference under s. 256(1) was rejected, stating no referable question of law arose.

Issue 2: Jurisdiction of Tribunal to review its order
The Tribunal's power to review its order was questioned, with reference to the judgment in Shew Paper Exchange vs. ITO. The Supreme Court's stance on review powers was highlighted, emphasizing that unless expressly conferred by statute, no inherent power of review exists. The case law illustrated the distinction between review and rectification, with s. 254(2) and s. 154 providing for rectification of mistakes apparent from the record.

Issue 3: Rectification of mistake under s. 254(2) and s. 154
Various High Court decisions were cited to support the Tribunal's power of rectification under s. 254(2) and s. 154. The principle of rectification based on a mistaken assumption in the earlier order was emphasized. The Tribunal's action was deemed as rectification to bring the order in conformity with the law and circular of the Department, not as a review. The importance of rectification for justice and fair play was underscored, ensuring errors of law are corrected.

Conclusion:
The Court rejected the application for reference, affirming that the Tribunal's action fell within the scope of s. 154 and s. 254(2) for rectification, not review. The decision was based on legal policy to correct mistakes on the record and uphold principles of justice and fairness. Both judges concurred with this decision.