IT: Power to rectify a mistake under section 254(2) cannot be used for recalling entire order
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[2013] 39 taxmann.com 156 (Hyderabad - Trib.)
IN THE ITAT HYDERABAD BENCH 'B'
Krishna Kumar D. Shah (HUF)
v.
Deputy Commissioner of Income-tax, Central Circle-2, Hyderabad*
CHANDRA POOJARI, ACCOUNTANT MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
MA NOS. 89 TO 92 (HYD.) OF 2013
IT APPEAL NOS. 1164 TO 1167 (HYD.) OF 2010
[ASSESSMENT YEARS 2006-07 TO 2007-08]
IT APPEAL NOS. 1164 TO 1167 (HYD.) OF 2010
[ASSESSMENT YEARS 2006-07 TO 2007-08]
JULY 26, 2013
Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Powers of [Power of rectification] - Assessment year 2006-07 - Whether in garb of an application for rectification under section 254(2) assessee cannot be permitted to reopen and reargue whole matter as same is beyond scope of section 254(2) - Held, yes [Para 11][In favour of revenue]
FACTS
| ■ | Assessee filed application under section 254(2) seeking rectification in order of the Tribunal by which the Tribunal dismissed the assessee's appeal holding that issue raised by it did not emanate from the order of the Commissioner (Appeals). |
HELD
| ■ | It is well-settled that statutory authority cannot exercise power of review unless such power is expressly conferred. There is no express power of review conferred on the Tribunal. Even otherwise, the scope of review does not extend to rehearing of the case on merit. [Para 7] | |
| ■ | The scope and ambit of application of section 254(2) is very limited. The same is restricted to rectification of mistakes apparent from the record. Recalling the entire order obviously would mean passing of a fresh order. That does not appear to be the legislative intent. The order passed by the Tribunal under section 254(1) is the effective order so far as the appeal is concerned. Any order passed under section 254(2) either allowing the amendment or refusing to amend gets merged with the original order passed. The order as amended or remaining unamended is the effective order for all practical purposes. An order under section 254(2) does not have existence de hors the order under section 254(1). Recalling of the order is not permissible under section 254(2). Recalling of an order automatically necessitates rehearing and readjudication of the entire subject-matter of appeal. The dispute no longer remains restricted to any mistake sought to be rectified. Power to recall an order is prescribed in terms of rule 24 of the ITAT Rules, 1963, and that too only in case where the assessee shows that it had a reasonable cause for being absent at a time when the appeal was taken up and was decided ex parte. Judged in the above background the order passed by the Tribunal is indefensible. [Para 8] | |
| ■ | The words used in section 254(2) are 'shall make such amendment, if the mistake is brought to its notice'. Clearly, if there is a mistake, then an amendment is required to be carried out in the original order to correct that particular mistake. The provision does not indicate that the Tribunal can recall the entire order and pass a fresh decision. That would amount to a review of the entire order and that is not permissible under the Act. The power to rectify a mistake under section 254(2) cannot be used for recalling the entire order. No power of review has been given to the Tribunal under the Act. Thus, what it could not do directly could not be allowed to be done indirectly. [Para 9] | |
| ■ | The scope and ambit of application under section 254(2) is as follows: |
| (a) | Firstly, the scope and ambit of application of section 254(2) is restricted to rectification of the mistakes apparent from the record. | |
| (b) | Secondly, no party appearing before the Tribunal should suffer on account of any mistake committed by the Tribunal and if the prejudice has resulted to the party, which prejudice is attributable to the Tribunal's mistake/error or omission, and which an error is a manifest error, then the Tribunal would be justified in rectifying its mistake. The 'rule of precedent' is an important aspect of legal certainty in the rule of law and principle is not obliterated by section 254(2) and non-consideration of precedent by the Tribunal causes a prejudice to the assessee. | |
| (c) | Thirdly, power to rectify a mistake is not equivalent to a power to review or recall the order sought to be rectified. | |
| (d) | Fourthly, under section 254(2) an oversight of a fact cannot constitute an apparent mistake rectifiable under the section. | |
| (e) | Fifthly, failure on the part of the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on record, although it may be an error of judgment. | |
| (f) | Sixthly, even if on the basis of a wrong conclusion the Tribunal has not allowed a claim of the party, it will not be a ground for moving an application under section 254(2). | |
| (g) | Lastly, in the garb of an application for rectification under section 254(2) the assessee cannot be permitted to reopen and reargue the whole matter as the same is beyond the scope of section 254(2). [Para 11] |
| ■ | In view of the above discussion, there is no merit in the argument of the assessee. The Tribunal cannot review its own order and the remedy lies elsewhere. There is no mistake apparent on record which warrants rectification of Tribunal's order. [Para 12] | |
| ■ | In the result, application by assessee is dismissed. [Para 13] |
CASES REFERRED TO
National Thermal Power Ltd. v. CIT [1998] 229 ITR 383 (SC) (para 4), CIT v. Pearl Woollen Mills [2011] 330 ITR 164/[2010] 191 Taxman 286 (Punj & Har.) (para 7) and CIT v. Hindustan Coca Cola Beverages (P.) Ltd. [2007] 293 ITR 163/159 Taxman 122 (Delhi) (para 10).
A.V. Raghuram for the Appellant. Dr. Shakir Hussain for the Respondent.
ORDER
Chandra Poojari, Accountant Member - The above Miscellaneous Applications (MAs) by different assessees are seeking rectification in the order of the Tribunal dated 12th July, 2012.
2. The learned AR submitted that, in the above appeals, the assessee raised a ground as under:
"Without prejudice to the above, the CIT(A) ought to have determined the market value based on records of the Registrar of Assurance."
3. The AR submitted that though the Tribunal heard the parties on this ground, dismissed the ground in para 18 of its order dated 12th July, 2012 holding as under:
"18. The assessee raised one more ground that CIT(A) ought have determined the market value based on the records of the Registrar of Assurance. We have gone through the case records. This ground does not emanates from order of the CIT(A), being so, we decline to entertain the same."
4. According to the learned AR, the Tribunal must have given clear findings instead of holding that this ground is not emanating from the order of the CIT(A). He placed reliance on the judgement of Supreme Court in the case of National Thermal Power Ltd. v. CIT [1998] 229 ITR 383.
5. The DR submitted that there is no mistake apparent on record which warrants recall of Tribunal order.
6. We have heard both the parties and perused the material on record. The argument of the AR is totally misconceived. The Tribunal considered the issue in dispute in its order and given a categorical finding that the issue does not emanate from the order of the CIT(A). Now, the assessee's counsel wants to re-argue the case for which the Tribunal has no power to review its own order.
7. It is well settled that statutory authority cannot exercise power of review unless such power is expressly conferred. There is no express power of review conferred on this Tribunal. Even otherwise, the scope of review does not extent to re-hearing of the case on merit. It is held in the case of CIT v.Pearl Woollen Mills [2011] 330 ITR 164/[2010] 191 Taxman 286 (Punj & Har.):
"Held, that the Tribunal could not readjudicate the matter under section 254(2). It is well settled that a statutory authority cannot exercise power of review unless such power is expressly conferred. There was no express power of review conferred on the Tribunal. Even otherwise, the scope of review did not extent to rehearing a case on the merits. Neither by invoking inherent power nor the principle of mistake of court not prejudicing a litigant nor by involving doctrine of incidental power, could the Tribunal reverse a decision on the merits. The 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."
8. The scope and ambit of application of section 254(2) is very limited. The same is restricted to rectification of mistakes apparent from the record. We shall first deal with the question of the power of the Tribunal to recall an order in its entirety. Recalling the entire order obviously would mean passing of a fresh order. That does not appear to be the legislative intent. The order passed by the Tribunal under s. 254(1) is the effective order so far as the appeal is concerned. Any order passed under s. 254(2) either allowing the amendment or refusing to amend gets merged with the original order passed. The order as amended or remaining un-amended is the effective order for all practical purposes. An order under s. 254(2) does not have existence de hors the order under s. 254(1). Recalling of the order is not permissible under s. 254(2). Recalling of an order automatically necessitates rehearing and re-adjudication of the entire subject-matter of appeal. The dispute no longer remains restricted to any mistake sought to be rectified. Power to recall an order is prescribed in terms of Rule 24 of the ITAT Rules, 1963, and that too only in case where the assessee shows that it had a reasonable cause for being absent at a time when the appeal was taken up and was decided ex-parte. Judged in the above background the order passed by the Tribunal is indefensible.
9. The words used in s. 254(2) are 'shall make such amendment, if the mistake is brought to its notice'. Clearly, if there is a mistake, then an amendment is required to be carried out in the original order to correct that particular mistake. The provision does not indicate that the Tribunal can recall the entire order and pass a fresh decision. That would amount to a review of the entire order and that is not permissible under the IT Act. The power to rectify a mistake under s. 254(2) cannot be used for recalling the entire order. No power of review has been given to the Tribunal under the IT Act. Thus, what it could not do directly could not be allowed to be done indirectly.
10. In the case of CIT v. Hindustan Coca Cola Beverges (P.) Ltd. [2007] 293 ITR 163/159 Taxman 122 (Delhi), their Lordships while considering the powers of the Tribunal under s. 254(2) of the IT Act, 1961 observed as under:
"Under s. 254(2) of the IT Act, 1961, the Tribunal has the power to rectify mistakes in its order. However, it is plain that the power to rectify a mistake is not equivalent to a power to review or recall the order sought to be rectified. Rectification is a species of the larger concept of review. Although it is possible that the pre-requisite for exercise of either power may be similar (a mistake apparent from the record), by its very nature the power to rectify a mistake cannot result in the recall and review of the order sought to be rectified."
11. Thus the scope and ambit of application u/s. 254(2) is as follows:
| (a) | Firstly, the scope and ambit of application of s. 254(2) of IT Act is restricted to rectification of the mistakes apparent from the record. | |
| (b) | Secondly, that no party appearing before the Tribunal should suffer on account of any mistake committed by the Tribunal and if the prejudice has resulted to the party, which prejudice is attributable to the Tribunal's mistake/error or omission, and which an error is a manifest error, then the Tribunal would be justified in rectifying its mistake. The "rule of precedent" is an important aspect of legal certainty in the rule of law and that principle is not obliterated by s. 254(2) of the Act and non-consideration of precedent by the Tribunal causes a prejudice to the assessee. | |
| (c) | Thirdly, power to rectify a mistake is not equivalent to a power to review or recall the order sought to be rectified. | |
| (d) | Fourthly, under s. 254(2) an oversight of a fact cannot constitute an apparent mistake rectifiable under the section. | |
| (e) | Fifthly, failure on the part of the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on record, although it may be an error of judgement. | |
| (f) | Sixthly, even if on the basis of a wrong conclusion the Tribunal has not allowed a claim of the party it will not be a ground for moving an application under s. 254(2) of the Act. | |
| (g) | Lastly, in the garb of an application for rectification under s. 254(2) the assessee cannot be permitted to reopen and reargue the whole matter as the same is beyond the scope of s. 254(2) of the IT Act. |
12. In view of the above discussion, we find no merit in the argument of the assessee's counsel. The Tribunal cannot review its own order and the remedy lies elsewhere. We do not find any mistake apparent on record which warrants rectification of Tribunal's order. Accordingly, the ground raised by the AR is rejected.
13. In the result, all the MAs by different assessees are dismissed.
VARSHARegards
Prarthana Jalan
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