1976 (12) TMI 3 - SC - Income Tax

When the assessee was prevented from appearing before the High Court on account of sufficient reasons, the High Court has inherent power to recall its earlier order and dispose off the reference on merit

Summary

Issues:
- Application for rehearing a reference under section 66(1) of the Indian Income-tax Act, 1922.
- High Court's power to recall an order and dispose of the reference on merits.
- Interpretation of the term "functus officio" in the context of court orders.
- Inherent power of the High Court to recall orders for the ends of justice.
- Comparison of decisions by different High Courts on recalling orders.

Analysis:

The case involved an appeal against the Rajasthan High Court's order that it was functus officio to entertain an application for rehearing a reference under section 66(1) of the Indian Income-tax Act, 1922. The appellant, a soapstone business, failed to appear and file necessary documents due to a clerk's mistake. The High Court declined to answer the reference, leading to the appellant's application for rehearing being dismissed. The Supreme Court considered the issue of whether the High Court had the power to recall its order and dispose of the reference on merits despite the initial non-appearance of the appellant.

The Supreme Court highlighted that a party's non-appearance at a hearing could have various reasons, and if sufficient cause is shown post the court's order, the court has inherent power to recall the order and address the reference on merits. The court rejected the notion that once an order is passed due to non-appearance, the court becomes helpless. It emphasized that courts have the power to prevent miscarriage of justice and abuse of process. The judgment emphasized that courts can recall orders in the absence of express prohibition, ensuring justice prevails in appropriate cases.

The Supreme Court referred to a decision by the Calcutta High Court and the Allahabad High Court on recalling orders. It disagreed with the Allahabad High Court's view that an order returning a reference unanswered cannot be recalled. The Supreme Court stressed that in cases where there is no express prohibition, courts should not hesitate to exercise their inherent power to recall orders and ensure the reference is disposed of on merits. The appellant's diligence in approaching the court and showing sufficient cause for non-appearance were crucial factors in the Supreme Court's decision to allow the appeal, set aside the High Court's order, and remand the case for answering the questions referred on merits.

In conclusion, the Supreme Court held that the High Court was not functus officio in entertaining the application for rehearing the reference and had the inherent power to recall its order for the ends of justice. The judgment emphasized the importance of ensuring justice prevails and preventing miscarriage of justice in cases where sufficient cause is shown for non-appearance.