9911796707
TMI Blog1990 (2) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... e, if at all, could be brought to assessment only under the head "Business". By order dated August 22, 1988, the Income-tax Appellate Tribunal partly allowed the petitioner's appeal. The petitioner thereafter filed a miscellaneous application under section 254(2) before the Income-tax Tribunal, inter alia, contending that the first two contentions which had been raised by it had not been decided by the Tribunal. It was averred that the order dated August 22, 1988, contains a mistake apparent from the record and that, therefore, the said order should be recalled and the appeal be adjudicated upon de novo. Lastly, it was submitted that a hearing on the petition may be granted. The petitioner then received a communication dated December 6, 1988, from the Assistant Registrar of the Tribunal. In this letter, it was stated that after due consideration of the petitioner's application, the Bench had passed the following order: "See (S. C.) and gone through the order under reference. There is no mistake apparent from record. All arguments were duly considered and dealt with in the order. The application is not maintainable. Rejected summarily, in limine." The petitioner then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of section 254(2), no hearing is contemplated and that, therefore, the Tribunal was right in passing the impugned order. In order to appreciate the aforesaid controversy, it is necessary to refer to some of the provisions of the Act relating to the hearing of appeals by the Income-tax Appellate Tribunal. The Tribunal is constituted under section 252 of the Act. Section 253 enables the assessee as well as the Income-tax Officer to file a second appeal to the Tribunal. Thereafter, section 254 provides for orders being passed by the Tribunal. The said section reads as follows : "254. Orders of Appellate Tribunal.-(1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such order thereon, as it thinks fit. (2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer : Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case, we are not concerned with the circumstances under which an order under section 254(2) can be passed. No arguments have been addressed on the question as to what is the meaning of the words "rectifying any mistake apparent from the record" occurring in section 254(2) and, therefore, we do not propose to go into this question. All that we have to consider is whether the proviso to section 254(2) limits the hearing to be provided only to a case which has the effect of enhancing an assessment or reducing a refund or increasing the liability of the assessee. An assessee or an Income-tax Officer can require the Tribunal to pass orders under section 254(2). Ordinarily, this would be done when either of the parties, or in a particular case, even both of them, move applications before the Tribunal. When an application is filed by an assessee for rectification of a mistake, the said application may either be dismissed or allowed. If the application is dismissed, it would mean that no modification is made by the Tribunal in its order passed under section 254(1). On the other hand, when an application filed by an assessee is allowed, it may have the effect of reducing its tax lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal may also, suo motu, without any application by the assessee or the Revenue, rectify its order passed under section 254(1) which may also be to the prejudice of the Revenue. The principles of natural justice would, in our opinion, require an opportunity to be granted to the Revenue before any such suo motu action is taken by the Tribunal. Another situation may arise where the Department moves an application under section 254(2) which may be partly allowed by the Tribunal. It would not stand to reason that, by applying the proviso to section 254(2), an opportunity to be heard is granted to the assessee, because, by partly allowing the Department's application, the tax liability of the assessee may be adversely affected, but the applicant himself, namely, the Income-tax Officer, is not heard. In our opinion, principles of natural justice have to be read into the provisions of section 254(2). Any order which is passed under section 254(2) especially when it has the effect of varying the tax liability should be passed only after affording an opportunity, to both the sides, of being heard. The proviso to section 254(2) does not detract from the principles of natural justic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly the applicant. Similarly, when the Tribunal wants to suo motu rectify any mistake, it must, in consonance with the principles of natural justice, hear both the parties before passing an order under section 254(2). Whenever any application is filed under section 254(2) either by an assessee or by an Income-tax Officer, it requires the Tribunal to apply its mind and pass a judicial order. An application filed under section 254(2) would, ordinarily, contain the grounds on which the review is sought. In consonance with the principles of natural justice, the Tribunal should, in our opinion, decide the application by a speaking order. It may not be necessary for the Tribunal to give a detailed judgment but, while deciding the application, it should at least briefly indicate the reasons for the decision it arrives at. Even if the application is dismissed, without issuing notice to the respondent, the Tribunal, which exercises its power under section 254(2) of the Income-tax Act, ought to indicate the grounds while rejecting an application. Similarly, cogent reasons have to be given, if an application for rectification is allowed, wholly or in part. In view of the aforesaid discu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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