2013 (12) TMI 73 - HC - Income Tax

Rectification of mistake - Held that - Following Commissioner Of Income-Tax Versus Stellar Investment Limited 1991 (4) TMI 100 - DELHI High Court - The Tribunal does not have power to review its judgment under Section 254 (2) of the Act, which authorises the Tribunal to only correct its mistakes. If a particular case has been decided incorrectly or some error has crept in, which does not require any debate and such error is apparent on the face of the record, such mistake can be corrected in exercise of power under Section 254 (2) of the Act - Decided in favour of revenue.

Summary

Issues:
- Rectification under Section 254(2) of the Income Tax Act, 1961
- Reversal of own decision by the Income Tax Appellate Tribunal
- Scope of power of review under Section 254(2) of the Act

Rectification under Section 254(2) of the Income Tax Act, 1961:
The appeal arose from an order passed by the ITAT allowing rectification under Section 254(2) of the Income Tax Act, 1961 for the assessment year 1989-90. The Tribunal rectified its order which initially treated contributions to share capital as unexplained credit under Section 68 of the Act. The Tribunal, relying on a previous judgment, held that even if the contributors were not genuine, the amount could not be added as income of the assessee but had to be added to the income of the contributors. The Tribunal's decision was based on the premise that the persons who contributed the amount for share allotment were assessees, and the contribution, even if not genuine, had to be added to their income. The Tribunal's decision to allow rectification was influenced by a specific judgment, and the application was granted on this basis.

Reversal of own decision by the Income Tax Appellate Tribunal:
The main contention raised in the appeal was whether the ITAT was correct in reversing its own decision passed on merits earlier. The appellant argued that the ITAT does not have the power to review its judgment under Section 254(2) of the Act, which only authorizes correction of mistakes. Citing precedents, it was emphasized that if an error is apparent on the face of the record and does not require debate, it can be corrected under Section 254(2). On the other hand, the respondent contended that ignorance of a Supreme Court judgment covering the issue constitutes a mistake that can be corrected under Section 154 of the Act. The respondent referred to a specific case where the Court held that ignorance of a relevant judgment amounts to a mistake that can be rectified.

Scope of power of review under Section 254(2) of the Act:
The Court analyzed the scope of the power of review under Section 254(2) of the Act in light of conflicting arguments presented by the appellant and the respondent. The Court noted that the issue was covered by a judgment of the Supreme Court, and the Tribunal's reversal of its finding on the genuineness of investors amounted to a review of its earlier judgment. It was concluded that the Tribunal did not have the authority to review its own decision under Section 254(2) of the Act. The judgment was rendered in favor of the revenue and against the assessee, resulting in the allowance of the income tax appeal and setting aside the ITAT's order dated 29th June, 2001.