2006 (10) TMI 67 - HC - Income Tax

Authority - Tribunal recall its earlier decision to rectify mistake without construed as a mistake apparent on the record - Held that tribunal has no power to recall and review order

Issues Involved:
1. Application of Section 254(2) of the Income-tax Act, 1961.
2. Scope of rectification vs. review by the Income-tax Appellate Tribunal (ITAT).
3. Interpretation of "mistake apparent from the record."
4. Jurisdiction and powers of the Tribunal under Section 254(2).
5. Procedural requirements for rectification.

Detailed Analysis:

1. Application of Section 254(2) of the Income-tax Act, 1961:
The Tribunal allowed the respondent-assessee's application under Section 254(2) of the Income-tax Act, 1961, to rectify its earlier order dated April 2, 2002. The Tribunal reconsidered and allowed grounds Nos. 2 and 3 of the respective ITA Nos. 5544/Delhi/96 and 5545/Delhi/96. The Tribunal's power to rectify mistakes apparent from the record within four years from the date of the order is central to this issue.

2. Scope of Rectification vs. Review by the ITAT:
The principal ground of the Revenue's appeal is that the Tribunal, under the guise of rectification, effectively reviewed its earlier order, which is beyond its powers under Section 254(2). The court emphasized that the power to rectify a mistake is not equivalent to a power to review or recall the order. Rectification is a subset of the larger concept of review but cannot result in the recall and review of the order sought to be rectified. The court cited several precedents, including CIT v. K. L. Bhatia and Ms. Deeksha Suri v. ITAT, to underline that the Tribunal cannot rehear a case on merits under the guise of rectification.

3. Interpretation of "Mistake Apparent from the Record":
The court discussed the meaning of "mistake apparent from the record" and distinguished it from "mistake on the face of the record." It noted that the expression in Section 254(2) is broader and allows the Tribunal to look into the entire record. However, the mistake must be evident and not require elaborate arguments to establish. The court referred to various judgments, including CIT v. ITAT and CIT v. Vichtra Construction P. Ltd., to support this interpretation.

4. Jurisdiction and Powers of the Tribunal under Section 254(2):
The court reiterated that the Tribunal's power under Section 254(2) is limited to rectifying mistakes apparent from the record and does not extend to recalling or reviewing its orders. The court cited the decision in J. N. Sahni v. ITAT, which clarified that the Tribunal does not have an inherent power of review and cannot recall its order under the guise of rectification. The court also referred to the decision in CIT v. ITAT, which held that the Tribunal's power is limited to correcting mistakes and does not allow for a rehearing of the appeal.

5. Procedural Requirements for Rectification:
The court noted that for the Tribunal to exercise its power under Section 254(2), the application must be made within four years from the date of the order, and there must be a mistake apparent from the record. If the amendment sought increases the liability of the assessee, the Tribunal must give prior notice to the assessee and allow a reasonable opportunity to be heard. The court emphasized that the power to rectify a mistake should not be used to disturb the finality of the order, as highlighted in the Supreme Court's observation in S. Nagaraj v. State of Karnataka.

Conclusion:
The court concluded that the Tribunal's order dated September 10, 2003, which recalled and reversed its earlier decision on grounds Nos. 2 and 3, was impermissible and unsustainable in law. The court set aside the impugned order, reiterating that neither the recall of the entire order nor the recall of individual grounds is permissible under the guise of "rectification." The appeal was allowed with no order as to costs.

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