1995 (6) TMI 71 - AT - Income Tax

Being Heard, Dispose Of, High Court, Mistake Apparent From Record, Power To Rectify Mistakes, Service Of Notice

Summary

Issues Involved:

1. Rectification of Tribunal's Order
2. Maintainability of Application under Section 254(2)
3. Service of Notice and Principles of Natural Justice
4. Tribunal's Jurisdiction and Powers

Issue-wise Detailed Analysis:

1. Rectification of Tribunal's Order

The assessee sought rectification of the Tribunal's order dated 8-2-1995, arguing that the Tribunal failed to determine whether the questions proposed in the Reference Application were questions of law or fact, constituting a "patent mistake of law, apparent on record." The Tribunal acknowledged this oversight and directed that the reference application be restored, allowing parties a fresh opportunity to be heard as per rules.

2. Maintainability of Application under Section 254(2)

The Departmental Representative (D.R.) contested the maintainability of the application on several grounds, including that an application under Section 254(2) does not lie against an order passed under Section 256(1). The D.R. argued that setting aside the order under Section 256(1) would amount to reviewing or revising the original order, which is beyond the scope of Section 254(2). However, the Tribunal found force in the arguments presented by the assessee's counsel, who cited various legal provisions and case laws to assert that a mistake apparent from the record did exist and was rectifiable under Section 254(2).

3. Service of Notice and Principles of Natural Justice

The assessee's counsel argued that the service of notice was not effected as per the relevant rules, as the envelope containing the notice was returned with the report 'left.' The Tribunal agreed that the service of notice was not proper, citing Section 282 of the IT Act and various rules under the Code of Civil Procedure (CPC). The Tribunal emphasized that the right of the applicant to be heard is statutorily recognized in Rules 19 and 20 of the ITAT Rules, 1963, and that the Tribunal is under a statutory duty to allow the parties sufficient time to appear and be heard.

4. Tribunal's Jurisdiction and Powers

The Tribunal examined its jurisdiction and powers under Sections 254 and 256 of the IT Act. It concluded that the Tribunal could not dismiss an application under Section 256(1) for the absence of the applicant, as this would be a breach of the principles of natural justice. The Tribunal cited various case laws, including Supreme Court judgments, to support the view that the Tribunal has the inherent power to set aside an ex parte order to rectify a mistake apparent from the record and ensure compliance with the principles of natural justice.

Conclusion:

The Tribunal concluded that the order dismissing the application under Section 256(1) for the absence of the applicant was a nullity and constituted a mistake apparent from the record. The Tribunal directed that the reference application be restored and the parties be given a fresh opportunity to be heard, thereby rectifying the mistake under Section 254(2) of the Act.