2009 (11) TMI 48 - HC - Income Tax

Readjudication of an order u/s 254(2) rectification of mistake - Unaccounted stock - The assessee derived income from manufacture and sale of woolen yarn and scooter and declared loss for the year in question but the Assessing Officer added unaccounted stock pledged with the bank and not accounted for in the books of account, as undiclosed income. The addition was partly upheld by the CIT (A). The Tribunal, vide its order dated 18.3.1976, restored the addition. . The assessee filed an application under Section 254 (2) for rectification of order dated 18.3.1976. The said application was dismissed by order dated 12.7.1977 holding that there was no mistake apparent on the record and points raised were of argumentative nature - After 9 months, second application under Section 254 (2) was made which was almost similar to the application earlier made and dismissed on 12.7.1977. The said application was accepted, vide order dated 31.3.1979 and reversing the view earlier taken by the Tribunal, addition made by the Assistant Appellate Commissioner was upheld. - held that - the Tribunal could not have readjudicated the matter under Section 254 (2). - There is no express power of review conferred on the Tribunal - Tribunal was not justified in recalling its previous finding restoring the addition, more so when an application for the same relief had been earlier dismissed

Summary

Issues:
1. Interpretation of Section 254(2) of the Income Tax Act regarding rectification of errors.
2. Tribunal's authority to readjudicate a matter after dismissal of a previous application on the same issue.

Analysis:
1. The case involved questions of law referred by the Income-tax Appellate Tribunal regarding the rectification of an order dated 18.3.1976. The Tribunal had initially restored an addition to the assessee's income, which was later challenged through applications under Section 254(2) of the Act. The Tribunal, in its subsequent order, reversed its earlier decision and set aside the additions, leading to a dispute over the Tribunal's authority to re-adjudicate the matter under the said provision.

2. The Tribunal's decision to entertain a second application under Section 254(2) was contested by the revenue, arguing that the scope of rectification is limited to correcting errors on the face of the record and not to re-adjudicate issues. Legal precedents were cited to support this argument. On the other hand, the assessee contended that the Tribunal was justified in reconsidering the matter to prevent injustice due to the earlier omission. The key issue was whether the Tribunal had the power to readjudicate a matter, especially after a previous application on the same issue had been dismissed.

3. The Court held that a statutory authority cannot exercise a power of review unless expressly conferred by law. Citing relevant judgments, the Court emphasized that the scope of review does not extend to rehearing a case on merits. The Tribunal's power under Section 254(2) is limited to correcting errors apparent on the face of the record and not to be discovered through a lengthy process of reasoning. Therefore, the Tribunal was deemed unjustified in recalling its previous finding and reversing the decision on merits, especially after a similar relief application had been dismissed earlier.

4. Ultimately, the Court answered the referred questions in favor of the revenue and against the assessee, concluding that the Tribunal's decision to readjudicate the matter was not justified. The judgment highlighted the limitations of the Tribunal's power under Section 254(2) and the importance of adhering to legal principles governing the rectification of errors in judicial decisions.

5. The judgment, delivered by Hon'ble Mr. Justice Adarsh Kumar Goel and Hon'ble Mr. Justice Gurdev Singh, was dated November 12, 2009, and disposed of the reference accordingly.