2009 (9) TMI 563 - HC - Income Tax

Power of Tribunal - Whether on the facts and in the circumstances of the case the Income-tax Appellate Tribunal had inherent powers to review its earlier order to recall the same and to order that the appeal be heard de novo ? Held that- under section 254(2) of the Income Tax Act 1961. The Tribunal has power to rectify mistake which are apparent on the record. If the mistake go to the root of the matter it is the discretion of the Tribunal to correct the mistake in the facts of the order or the operative portion of the order or hear the appeal de novo.

Summary

Issues:
1. Interpretation of the power of the Income-tax Appellate Tribunal to rectify mistakes in its order under section 254(2) of the Income-tax Act, 1961.
2. Determination of whether the Tribunal can recall its own order and direct a de novo hearing in certain circumstances.
3. Analysis of the Tribunal's discretion in correcting mistakes that go to the root of the matter in an appeal.

The judgment by the High Court of Allahabad involved the interpretation of the power of the Income-tax Appellate Tribunal under section 254(2) of the Income-tax Act, 1961. The Tribunal had dismissed the Department's appeal, and the respondent subsequently filed an application pointing out factual mistakes in the Tribunal's order. The Tribunal, upon confirming the mistakes, recalled its earlier order and directed a de novo hearing on the merits. The Department argued against the necessity of a de novo hearing, but the Tribunal exercised its discretion to correct the errors. The High Court held that under section 254(2), the Tribunal has the authority to rectify mistakes apparent on the record. If the errors are fundamental, the Tribunal can choose to correct them in the existing order or opt for a fresh hearing. In this case, as the mistakes were significant, the Tribunal's decision to conduct a de novo hearing was within its jurisdiction. Therefore, the questions referred to the Court were answered in favor of the assessee and against the Revenue, with no order as to costs.

This judgment clarifies that the Income-tax Appellate Tribunal has the power under section 254(2) of the Income-tax Act to rectify errors in its orders. The Tribunal's discretion to decide whether to correct mistakes within the existing order or order a fresh hearing is crucial when errors are substantial and go to the root of the matter. In this case, the Tribunal's decision to conduct a de novo hearing after confirming significant mistakes was deemed valid by the High Court. The judgment emphasizes the importance of ensuring the accuracy and integrity of decisions by allowing for corrections when necessary, even if it involves revisiting the case through a fresh hearing.