2011 (10) TMI 474 - HC - Income Tax

Power of Tribunal to amend order u/s 254 - Whether Tribunal can recall an order passed u/s 254(1) on an application filed by either of the party u/s 254(2) - Held that - In the orders passed u/s 254(1) if either of the party to the order u/s 254(1) makes an application for such rectification of mistakes apparent from the record the Tribunal is vested with the power to amend the order passed under sub-section (1) if it is satisfied that there is a mistake in the order which it has passed u/s 254(1). The only limitation imposed on the Tribunal is that the mistake to be rectified is a mistake borne from the record. By no stretch of imagination the said power could be exercised to review the earlier order passed. See ACIT v. C.N. Ananthram 2003 - TMI - 11343 - KARNATAKA High Court - Income Tax - Decided in favor of the assessee

Summary

Issues:
1. Interpretation of Section 254(2) of the Income-Tax Act regarding the power of the Appellate Tribunal to recall an order.

Analysis:
The judgment involves two appeals arising from the Tribunal's decision on the assessment year 2006-07 for a partnership firm engaged in the jewelry business. The Assessing Officer computed the total income, leading to appeals to the Commissioner of Income-Tax (Appeals) and eventually to the Tribunal. The Tribunal allowed the appeal in part, prompting the Revenue to file a Miscellaneous Petition for recalling the order due to irregularities. The Tribunal recalled the order entirely, dismissing the assessee's application for rectification. The main issue was whether the Tribunal had the authority to recall an order under Section 254(2) of the Act.

The Court examined Section 254 of the Income-Tax Act, emphasizing that the Tribunal can pass orders as it deems fit and rectify mistakes apparent from the record under sub-section (2). The power to amend an order is limited to rectifying mistakes evident from the record, not to review or re-hear the entire appeal. The judgment referenced a Delhi High Court case to support this interpretation, highlighting that the order under Section 254(1) is the final order in the appeal, and any amendments under Section 254(2) merge with the original order. Recalling an order necessitates rehearing the entire appeal, which is not the legislative intent. The Court set aside the Tribunal's decision, emphasizing that the power to recall an order is not granted under Section 254(2).

Consequently, the Court allowed both appeals, setting aside the impugned orders. The substantial question of law was answered in favor of the Assessee, directing the Tribunal to consider applications for rectification and pass appropriate orders based on the rectification of mistakes in the original order.