2013 (4) TMI 912 - HC - Income Tax

Summary

Issues Involved:
1. Rejection of the Department's application to recall the Tribunal's order.
2. Allegations of fraud in obtaining the Tribunal's order.
3. Tribunal's jurisdiction and inherent powers to recall its orders in case of fraud.
4. Validity of the Certificate issued under the Kar Vivad Samadhan Scheme.

Issue-wise Detailed Analysis:

1. Rejection of the Department's Application to Recall the Tribunal's Order:

The Commissioner of Income-tax, Bangalore, was aggrieved by the rejection of an application filed by the Department for recalling the Tribunal's order. The Department's application was based on the claim that the Tribunal's order was obtained through fraudulent means, specifically through an affidavit filed by an employee of the respondent.

2. Allegations of Fraud in Obtaining the Tribunal's Order:

The Department contended that a fraud was played on the Tribunal by the respondent, who filed an affidavit to condone the delay in filing an appeal. The Department supported its allegations with statements recorded under section 131 of the Act and relied heavily on the Supreme Court's judgment in United India Insurance Co. Ltd. v. Rajendra Singh, which addresses the issue of fraud on the court and the remedy in such situations. The Tribunal, however, dismissed the Department's application without adequately addressing the allegations of fraud or referring to the Supreme Court's judgment.

3. Tribunal's Jurisdiction and Inherent Powers to Recall its Orders in Case of Fraud:

The judgment highlighted that the Tribunal, as an adjudicating body under the Income-tax Act, has inherent powers to rectify or recall its orders in exceptional cases, such as when an order is obtained by fraud. The judgment referenced several precedents, including the Punjab High Court's ruling in V. Venkataraman v. Controller of Estate Duty and the Allahabad High Court's ruling in ITO v. S.B. Singar Singh & Sons, which established that judicial bodies have the inherent jurisdiction to rectify wrongs committed by themselves, even in the absence of express statutory powers.

4. Validity of the Certificate Issued Under the Kar Vivad Samadhan Scheme:

The respondent argued that the Certificate issued under the Kar Vivad Samadhan Scheme had become final and binding, and therefore, recalling the Tribunal's order would serve no useful purpose. However, the judgment emphasized that the validity of the Certificate could only be assessed after addressing the allegations of fraud. The Tribunal's failure to consider the implications of fraud and its effects on judicial proceedings was criticized.

Conclusion:

The judgment concluded that the Tribunal had failed to exercise its powers appropriately by not addressing the allegations of fraud and not considering the relevant legal precedents. The Tribunal's order was set aside, and the matter was remitted back to the Tribunal for fresh consideration. The Tribunal was directed to afford a reasonable opportunity to both parties to substantiate and rebut the allegations. Additionally, costs were imposed on the respondents for their omission and commission, quantified at Rs. 5,000, payable to the Prime Minister's Relief Fund.