2008 (4) TMI 225 - HC - Income Tax

Tribunals order while deciding the question of carry forward of business losses, caused prejudice to assessee in tribunal s order mistake as apparent on record - hence Tribunal was justified in entertaining the application made by the assessee under section 254(2) seeking rectification of mistake tribunal was justified in acknowledging and rectifying the mistake by invoking its powers u/s 254

Summary

Issues:
1. Justifiability of the Income-tax Appellate Tribunal's decision to entertain an application under section 254(2) of the Income-tax Act.
2. Determination of whether a mistake apparent from the record existed to recall the original appellate order.

Analysis:

Issue 1:
The appeal under section 260A of the Income-tax Act, 1961 was filed by the Revenue against the order of the Income-tax Appellate Tribunal (ITAT) dated March 31, 2004. The ITAT had allowed the application filed by the assessee under section 254(2) of the Act, leading to the appeal. The substantial questions of law raised for consideration were whether the ITAT was justified in entertaining the application made by the assessee under section 254(2) and whether a case was made out for recalling the well-reasoned orders passed on the merits. The facts of the case involved the assessee's business of manufacturing automobile tyre-tubes and fabric, the assessment period being 1990-91. The Assessing Officer made additions to the return filed by the assessee, which led to an appeal before the Commissioner of Income-tax (Appeals) and subsequently to the ITAT.

Issue 2:
The primary contention raised by the Revenue was that the ITAT could not review its own order under section 254(2) as there was no provision permitting such a review. The Revenue relied on decisions of the Rajasthan High Court and a decision of the High Court of Madhya Pradesh to support this argument. However, the assessee argued that the ITAT rightly recalled its order based on an error apparent from the record, as allowed under section 254(2). The ITAT, after considering the submissions and relevant precedents, concluded that there was no quarrel with the settled principles of law and that the order impugned was not a result of a review. It emphasized that section 254(2) empowers the ITAT to rectify any mistake apparent from the record, provided it is brought to notice within four years from the date of the order. The ITAT referred to the Supreme Court decision in Honda Siel Power Products Ltd. v. CIT to support its interpretation of the law.

In conclusion, the High Court upheld the decision of the ITAT, stating that the Tribunal was justified in invoking its powers under section 254 to rectify a mistake apparent on the record. The Court found no grounds to take a different view than the Tribunal and answered both questions in favor of the assessee and against the Revenue. The Court also emphasized the importance of using temperate language and self-restraint in judicial or quasi-judicial proceedings.