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2021 (12) TMI 211 - SC - Income TaxRectification u/s 254 - HELD THAT - Merely because the Revenue might have in detail gone into the merits of the case before the ITAT and merely because the parties might have filed detailed submissions, it does not confer jurisdiction upon the ITAT to pass the order de hors Section 254(2) of the Act. As observed hereinabove, the powers under Section 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that. Even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers it may pass an order recalling its earlier order which is an erroneous order, cannot be accepted. As observed hereinabove, if the order passed by the ITAT was erroneous on merits, in that case, the remedy available to the Assessee was to prefer an appeal before the High Court, which in fact was filed by the Assessee before the High Court, but later on the Assessee withdrew the same in the instant case.
Issues:
1. Validity of the order passed by the ITAT recalling its earlier order under Section 254(2) of the Income Tax Act. 2. Jurisdiction of the ITAT to re-hear the appeal on merits while exercising powers under Section 254(2) of the Act. 3. Applicability of the powers under Section 254(2) of the Act to rectify mistakes apparent from the record only. 4. Review of the High Court's decision on the ITAT's order recall and the jurisdiction of the ITAT. Issue 1: Validity of the ITAT's Order Recall The Supreme Court examined the ITAT's order recalling its earlier decision dated 06.09.2013 and concluded that the ITAT's action was beyond the scope of powers under Section 254(2) of the Act. The Court emphasized that the ITAT's powers under this provision are limited to rectifying mistakes apparent from the record and not to re-hear the entire appeal on merits. The Court held that the ITAT's recall of its earlier order was unsustainable and should have been set aside by the High Court. Issue 2: Jurisdiction of the ITAT to Re-Hear on Merits The Court reiterated that the ITAT's jurisdiction under Section 254(2) of the Act is akin to correcting mistakes apparent from the record and not to delve into the merits of the case afresh. It emphasized that if the ITAT's order was deemed erroneous, the appropriate remedy was to appeal to the High Court. The Court found that the ITAT's re-hearing of the appeal on merits was beyond its prescribed powers. Issue 3: Application of Section 254(2) of the Act The Court clarified that the powers under Section 254(2) of the Act are intended to correct mistakes evident from the record and not to reassess the merits of the case. It highlighted that the ITAT's authority is akin to Order XLVII Rule 1 CPC, and it should not revisit its earlier order in detail while exercising these powers. Issue 4: Review of High Court's Decision The Supreme Court scrutinized the High Court's judgment, noting that the High Court's reasoning for dismissing the writ petitions was flawed. It held that detailed submissions and a thorough examination of the case before the ITAT did not empower the ITAT to pass an order beyond the scope of Section 254(2) of the Act. The Court quashed the High Court's decision and reinstated the original orders passed by the ITAT in favor of the Revenue. In conclusion, the Supreme Court allowed both appeals, setting aside the High Court's decision and the ITAT's order recalling its earlier decision. It directed the Assessee to refile appeals before the High Court against the original ITAT orders within six weeks for a fresh decision on merits, without objections on limitation.
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