2020 (3) TMI 790 - HC - Income Tax

Rectification u/s 254 - A mistake which is apparent from the record or not - non-consideration of an issue by the ITAT - HELD THAT - It was not the case of the respondent - assessee that it was a mistake apparent from the record which was required to be rectified. As discussed above, all mistakes cannot be rectified under Section 254(2) of the Act. Only a mistake which is apparent from the record can be rectified under the said provision. Even according to the Tribunal, the decision given by it in the appeal was correct but because the Coordinate Bench decision was not mentioned or discussed, the entire order was recalled and the appeal was directed to be heard afresh. When on the one hand the Tribunal says that its decision was correct, we fail to understand why and how the Tribunal had recalled the said correct order. Firstly, if the order was correct, there was no reason or necessity for recalling such correct order. The Tribunal had come to the conclusion that non-consideration of the Co-ordinate Bench decision was a mistake apparent from the record. As already pointed out above, there was no averment in the miscellaneous application by the respondent / assessee that it had pointed out or argued the Co-ordinate Bench decision relating to the block assessment during hearing of the appeal and that the Tribunal did not consider the same. Thirdly, we are of the view that having regard to the order passed by the Tribunal in the quantum appeal, no prejudice has been caused to the respondent / assessee. All that the Tribunal had done was to restore the matter to the file of the assessing officer for a fresh decision in accordance with law in which the respondent / assessee would have ample opportunity to place all the materials at its command before the assessing officer for consideration. Tribunal was not justified in passing the impugned order dated 05.01.2009. Accordingly, the said order is hereby set aside and quashed.

Issues Involved:
1. Validity of the Tribunal's order recalling its previous order.
2. Interpretation of Section 254(2) of the Income Tax Act.
3. Whether the Tribunal has the power to recall its order in entirety.
4. Delay in filing the writ petition.

Detailed Analysis:

1. Validity of the Tribunal's Order Recalling its Previous Order:
The petitioner sought the quashing of the Tribunal's order dated 05.01.2009, which recalled its earlier order dated 30.04.2008. The Tribunal had initially set aside the first appellate authority's order and remanded the matter back to the assessing officer. However, the respondent filed a miscellaneous application for recall, contending that the Tribunal did not consider a relevant Co-ordinate Bench decision. The Tribunal allowed this application, leading to the present writ petition.

2. Interpretation of Section 254(2) of the Income Tax Act:
Section 254(2) allows the Tribunal to rectify any mistake apparent from the record within six months from the end of the month in which the order was passed. The key expressions here are "rectifying any mistake apparent from the record" and "amend any order passed by it." The Supreme Court in Honda Siel Power Products Ltd. and Saurashtra Kutch Stock Exchange Ltd. clarified that this power is to ensure no party suffers due to a mistake by the Tribunal. However, it is not to be confused with the power of review.

3. Whether the Tribunal has the Power to Recall its Order in Entirety:
The Tribunal's power to recall its order in entirety under Section 254(2) was contested. The petitioner argued that the Tribunal could only rectify apparent mistakes, not recall orders entirely. The respondent cited the Full Bench decision of the Delhi High Court in Lachman Dass Bhatia Hingwala (P.) Ltd., which held that the Tribunal could recall its order if a manifest error caused prejudice to a party. The Court noted that the Tribunal's decision must be tested against the principles laid down in Honda Siel Power Products Ltd. and Saurashtra Kutch Stock Exchange Ltd.

4. Delay in Filing the Writ Petition:
The respondent raised a preliminary objection regarding the delay in filing the writ petition. The impugned order was passed on 05.01.2009, and the writ petition was filed on 20.08.2009. The Court held that the law of limitation does not strictly apply to writ proceedings, and an eight-month delay was not unreasonable. Moreover, the Court had already admitted the writ petition, implying satisfaction with its timely filing.

Conclusion:
The Court found that the Tribunal's decision to recall its order was not justified. The Tribunal had acknowledged that its original decision was correct but recalled it due to non-consideration of the Co-ordinate Bench decision. The Court noted that the miscellaneous application did not specify that the Co-ordinate Bench decision was argued during the appeal hearing. Furthermore, the Tribunal's order did not cause prejudice to the respondent, as the matter was merely remanded for fresh consideration, allowing the respondent to present all relevant materials. Consequently, the Tribunal's order dated 05.01.2009 was set aside and quashed, and the writ petition was disposed of with no costs.

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