2008 (9) TMI 11 - SC - Income Tax

Stock Exchange - HC uphold the order of Tribunal that there was a mistake apparent from the record in its order of denying exemption to assessee u/s 11 as charitable trust - Tribunal directed the Registry to fix the matter for re-hearing & as such the appeal will be heard on merits - As and when the Tribunal will hear the matter, it will decide the case on its own merit without being influenced by any observations made by it in the impugned order or in the order of the HC or in this judgment

Summary

Issues Involved:
1. Whether the Income Tax Appellate Tribunal was correct in exercising power under Section 254(2) of the Income Tax Act on the ground of a 'mistake apparent from the record'.
2. Whether on merits, the assessee is entitled to exemption as claimed.

Issue-Wise Detailed Analysis:

1. Exercise of Power under Section 254(2) of the Income Tax Act:

The primary issue was whether the Tribunal was right in using its powers under Section 254(2) of the Income Tax Act to rectify a 'mistake apparent from the record.' The Tribunal had initially dismissed the assessee's appeal but later recalled its order, citing a mistake apparent from the record due to non-consideration of a relevant decision by the High Court of Gujarat in Hiralal Bhagwati v. Commissioner of Income Tax. The Tribunal's decision to recall its order was challenged by the Revenue.

The Supreme Court upheld the Tribunal's decision, stating that non-consideration of a decision of the Jurisdictional Court (High Court of Gujarat) or the Supreme Court could indeed be considered a 'mistake apparent from the record.' This mistake warranted rectification under Section 254(2). The Court emphasized that a judicial decision acts retrospectively and that judges do not make law but discover the correct law, which has always been the same.

The Court also discussed the nature of 'mistake apparent from the record,' noting that it must be a patent, manifest, and self-evident error that does not require elaborate discussion or argument. The error should be so clear that no court would permit it to remain on record.

2. Entitlement to Exemption on Merits:

Although the second issue concerned whether the assessee was entitled to exemption from payment of tax under Section 11 of the Act, the Supreme Court refrained from expressing any opinion on this matter. The Court noted that the Tribunal had merely recalled its earlier order and directed the Registry to fix the case for re-hearing. Therefore, the matter would be heard again on merits by the Tribunal.

The Supreme Court clarified that it had not expressed any opinion on the merits of the exemption claim and that the Tribunal should decide the matter independently, without being influenced by the observations made in the impugned order, the High Court's order, or the Supreme Court's judgment.

Conclusion:

The Supreme Court dismissed the appeal filed by the Revenue, upholding the Tribunal's decision to rectify the mistake apparent from the record and the High Court's confirmation of this decision. The Court emphasized that justice is above all and that rectification of an order is exercised to remove errors and ensure justice. The matter regarding the exemption claim would be re-heard by the Tribunal on its merits.