)) IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 1247 of 2002 For Approval and Signature: Hon'ble MR.JUSTICE A.R.DAVE and Hon'ble MR.JUSTICE D.A.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- ASSISTANT COMMISSIONER OF INCOME TAX Versus SAURASHTRA KUTH STOCK EXCHANGE LTD. -------------------------------------------------------------- Appearance: MR PRANAV G DESAI for Petitioner No. 1 MR SN SOPARKAR FOR MRS SWATI SOPARKAR for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE A.R.DAVE and MR.JUSTICE D.A.MEHTA Date of decision:31/03/2003 CAV. JUDGEMENT (Per : MR.JUSTICE D.A.MEHTA) 1. This is a petition filed under Articles 226 and 227 of the Constitution of India against the order dated 05/09/2001 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench 'C', Ahmedabad (Tribunal) in Misc. Application No.31/Rajkot/2000 under Section 254(2) of the Income Tax Act,1961 (hereinafter referred to as 'the Act'). The petitioner is the Assistant Commissioner of Income Tax, Circle I, Rajkot having jurisdiction to assess the respondent assessee i.e. Saurashtra Kutch Stock Exchange Limited. 2. The assessee returned Nil income on 29.10.1996 for assessment year 1996-97 seeking exemption under section 11 of the Act. Before the assessment was finalized on 3/2/1999 under section 143(3) of the Act, the assessee was granted certificate of registration dated 20/02/1998 under section 12A of the Act by the Commissioner of Income Tax, Rajkot. The assessing officer vide assessment order dated 03/02/1999 rejected the claim for exemption under section 11 of the Act. 3. The assessee went in appeal before the Commissioner of Income Tax (Appeal) I, Rajkot. However, on 28/02/2000 the C.I.T.(Appeal) confirmed the order of the assessing officer denying exemption under section 11 of the Act. The assessee preferred Second Appeal before the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot which came to be registered as ITA No.69/Rajkot/2000. The Tribunal for the reasons stated in its order dated 27/10/2000 confirmed the orders of the assessing officer and C.I.T. (Appeal). 4. The assessee filed a Misc. Application dated 13/11/2000 seeking rectification of the aforesaid order dated 27.10.2000. In the said Misc.Application various mistakes of facts and law were pointed out. One of the principal contention raised in the Misc.Application was that the applicant assessee had relied upon a decision of this Court in the case of Hiralal Bhagwati Vs. C.I.T., copy whereof had been placed at page nos.268 to 278 in Paper Book No.3 submitted before the Tribunal during the course of hearing and the said decision of jurisdictional High Court, though binding on the Tribunal, had not been considered or even referred to by the Tribunal. Another factual error raised in the Misc.Application pertained to the aspect of prohibition as to declaration of dividend provided by the articles of the assessee/stock exchange, despite which according to the assessee, the Tribunal had held that it was permissible to the assessee to distribute whole or part of its income by way of dividend amongst member shareholders. The assessee therefore prayed that the order dated 27/10/2000 required rectification and for this purpose said order may be recalled and the Tribunal restore the appeal for fresh disposal after hearing both the sides. 5. It is pertinent to note that by the time aforesaid Misc. Application dated 13/11/2000 was filed, the Members constituting Rajkot Bench of the Tribunal stood transferred and hence at Rajkot no Bench of the Tribunal was functioning. Misc. Application was fixed on 20/12/2000 at Rajkot when the assessee sought adjournment. Next hearing was fixed on 28/02/2001 at Ahmedabad when the petitioner sought adjournment. This fixation at Ahmedabad took place because in absence of Bench being available at Rajkot the Vice President of the Tribunal had transferred the said Misc.Application from Rajkot Bench to Ahmedabad Bench. Thereafter, the said Misc.Application was posted for hearing on 30/03/2001 but due to non availability of the Bench at Ahmedabad the matter stood adjourned. Ultimately the said Misc. Application was posted for hearing on 25/05/2001 and the same was fully heard by the Bench to which the said Misc. Application was assigned. 6. On 05/09/2001 the Tribunal passed the order on the Misc. Application holding that as there was a mistake apparent from the record the order of the Tribunal dated 27.10.2000 was recalled and the Registry was directed to refix the case for fresh disposal. It is this order which is under challenge in the present petition. 7. Mr.P.G.Desai, learned Counsel appearing on behalf of the petitioner contended that : [a] The Tribunal had wrongly exercised jurisdiction under section 254 (2) of the Act; [b] Section 254(2) of the Act only permitted amendment of an order with a view to rectifying a mistake apparent from the record, and the said provision did not permit review in the guise of rectification; [c] The Tribunal was a creature of statute as could be seen from provision of section 252 of the Act and hence it could not go beyond the powers granted under the Act; [d] Under section 254(4) of the Act the order passed by the Tribunal in appeal was final and by purported exercise under section 254(2) of the Act such finality could not be disturbed; [e] There was no mistake in the order dated 27/10/2000, and alternatively there was no mistake apparent from record; [f] The appeal was heard by the Rajkot Bench of the Tribunal while the Misc.Application was heard and disposed off by order dated 05/09/2001, by Ahmedabad Bench "C" despite the fact that Rajkot Bench had in the meantime started functioning from 28/05/2001; [g] The Tribunal did not have power to recall its order as could be seen from the provisions of Rules 24 and 34A of the Income Tax Appellate Tribunal Rules,1963 (The Tribunal Rules); [h] Though the assessee might have cited judgment of jurisdictional High Court at the time of hearing of the appeal, unless it was shown that the said judgment was applicable to the facts of the case, it could not be stated that it was binding precedent which would require the Tribunal to exercise power under section 254(2) of the Act; [i] Under Section 254(2) of the Act the Tribunal cannot obliterate its earlier findings/reasonings/order and though the order may change i.e. outcome or conclusion may change, original order cannot be wiped out or substituted; [j] The judgment in the case of Hiralal Bhagwati (supra) was not dealing with the controversy which was there before the Tribunal and the observations on which the assessee placed reliance were per in curiam and thus did not give jurisdiction to the Tribunal to exercise power of rectification; [k] There was a contrary decision of this Court in the case of Shantagauri Ramniklal Trust and others Vs.CIT, reported in 239 ITR 528(Gujarat) and hence there were debatable questions of law; [l] It was settled that once there were debatable issues there was no mistake apparent on the record. 8. Mr.S.N.Soparkar, learned Senior Counsel appearing on behalf of respondent assessee submitted that the position in law was well settled that the decision of jurisdictional High Court, if not taken into consideration by an authority, would constitute an apparent mistake and the Tribunal had rightly exercised power of rectification :- [a] That there was no conflict between the decision in case of Hiralal Bhagwati (supra) and Shantagauri Ramniklal (supra); [b] That once a mistake was shown to have occurred it would constitute a valid reason to recall the order, regardless of the fact that the mistake had been caused by a party; [c] That the argument regarding hearing of the Misc.Application by Ahmedabad Bench and not by Rajkot Bench was not available to the petitioner as Vice President had, in his administrative capacity, as authorised by Rules passed the order transferring Misc. Application from Rajkot Bench to Ahmedabad Bench; that the petitioner had not only not raised any objection but had participated in the hearing of the Misc.Application before the Ahmedabad Bench; [d] That Rule 34A of the Tribunal Rules itself provided for posting Rectification Application for hearing; [e] That various judgments regarding review jurisdiction relied on by the petitioner were not applicable on the facts of the case; [f] That whether an order was required to be recalled or not before rectification could be made would depend on the facts of the case and the issue involved; [g] That the Tribunal in the impugned order dated 05/09/2001 had posted the appeal for rehearing and no prejudice had been caused to the petitioner by the said order and no vested right could be claimed by the petitioner. 9. The parties before us are at ad idem that the Tribunal has jurisdiction to rectify but it has no jurisdiction or power to review its own order. There is no dispute as regards the well settled proposition that power of review is not an inherent power and must be conferred by law, either specifically or by necessary implication. The only point wherein the parties joined the issue is whether there is a mistake apparent from record and if yes, what should be the procedure or modality to be adopted by the Tribunal for rectifying the said mistake. 10. Section 252 of the Act states that the Central Government shall constitute an Appellate Tribunal consisting of as many judicial and accountant members as it thinks fit to exercise the powers and discharge the functions conferred on the Appellate Tribunal by the Act. Section 254 of the Act is a provision relating to orders of Appellate Tribunal. Section 255 of the Act regulates procedure of the Tribunal. Sub-section (1) of Section 255 of the Act lays down that the powers and functions of the Tribunal be exercised and discharged by Benches constituted by the President of the Appellate Tribunal. A Bench of the Tribunal shall consist of a Judicial Member and Accountant Member, however, depending on the monetary limit stipulated in sub-section (3) of Section 255 of the Act, it would be open to the President of the Tribunal or any other member authorised in this behalf by the Central Government to sit singly and dispose of the case allotted to a Bench comprising of a Single Member. Section 255(5) of the Act provides that the Tribunal shall have power to regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise of its powers or of the discharge of its functions, including the places at which the Benches shall hold their sittings. 11. In exercise of the powers conferred by sub-section (5) of Section 255 of the Act, the Tribunal has framed the Income Tax (Appellate Tribunal) Rules,1963. Rule 3 and 4 pertain to the sittings of Bench and powers of Bench respectively. A Bench is required to hold its sitting at its Head quarter or at such other place or places as may be authorised by the President. While Rule 4 provides that a Bench shall hear and determine such appeal and application made under the Act as the President may by general or special order direct. Sub-rule (2) of Rule 4 empowers the President or in his absence Senior Vice President/Vice President of the concerned Zone to transfer an appeal or application from any one of such Benches to any other. Therefore, on a conjoint reading of provision of Section 255(5) of the Act and Rules 3 and 4 of the Tribunal Rules it is apparent that the Misc.Application which was filed before the Rajkot Bench stood transferred to Ahmedabad Bench under an administrative order taking into consideration the fact that Rajkot Bench was not available. Once the Misc. Application had been validly transferred under valid and legal order of transfer by way of an administrative exigency, unless a fresh order retransferring the matter from the Ahmedabad Bench to Rajkot Bench was made it would be the Ahmedabad Bench which would be seized of the jurisdiction to hear and determine the Misc.Application. The contention of the petitioner on this count cannot be countenanced and is devoid of any merit. The petitioner not only filed his written objections to the Misc. Application but was also heard through his representative. Thus no prejudice has been suffered by the petitioner on this count. 12 Section 254 of the Act as is material for the purpose reads as under : "Orders of Appellate Tribunal. 254(1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders 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 otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard". (3) xxxx xxxx xxxx xxxx xxxx (4) Save as provided in Section 256 [or section 260A] orders passed by the Appellate Tribunal on appeal shall be final." 13. The Tribunal after hearing both the parties to the appeal is empowered to pass such orders as it thinks fit. Sub-section (2) of Section 254 of the Act, on a close reading provides for two distinct situations. Firstly, the Tribunal at any time within four years from the date of the order, may amend any order passed under sub-section (1), with a view to rectify any mistake apparent from the record. Secondly, the Tribunal shall make such amendment if the mistake is brought to its notice by the assessee or the assessing officer. Therefore, it can be seen that, the Tribunal has a discretion to rectify any mistake apparent from the record suo motu, but it is bound to amend the mistake, as is evident from the latter portion of the provision, when the mistake is brought to its notice by either party to the appeal. In both situations it is necessary that there should exist a mistake apparent from the record and the order passed under sub-section (1) of Section 254 of the Act, shall be amended with a view to rectify such a mistake. Therefore, whether the Tribunal acts on its own motion or at the behest of any party to the appeal, there must be a mistake apparent from the record which would require that the order in appeal is amended. First Proviso reproduced hereinabove specifically provides that an amendment which directly creates prejudice to the assessee in the form of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, cannot be made unless the Tribunal gives a notice of its intention to do so and allows the assessee a reasonable opportunity of being heard. Sub-section (4) of Section 254 of the Act provides that the orders passed by the Tribunal on appeal shall be final save as provided in section 256 or section 260A of the Act. It may be noted that the language employed is orders passed by the Tribunal on appeal. The order passed on appeal can be an order passed under sub-section (1) of Section 254 of the Act or it could be an order passed under sub-section (1) as amended by an order under sub-section (2) of Section 254 of the Act. In both the situations an order would none the less remain an order on appeal. 14. As already seen hereinbefore, the Tribunal has power to rectify the mistake apparent from the record in two situations. One is on its motion and the other is on an application being made by a party before it. It cannot be contended that if a Tribunal is given power to rectify its own mistake on its own motion, that power excludes the power to rectify the same mistake at the instance of a party or when the attention of the Tribunal is drawn to the said mistake by a party to the appeal. The power to rectify on its own motion is a larger power than the power to rectify on the application of a party. When the statute confers a power on Tribunal to make an order on the application of a party it is limited to rectification of the mistakes pointed out in the application made by the party. But when the Tribunal exercises power to rectify without an application at the behest of a party it is doing something which it can do on its own motion viz. it exercises wider power, larger power of rectifying a mistake suo motu. Once the Tribunal's attention is invited to a mistake apparent from the record by a party, it would be open to the Tribunal to also exercise its power to rectify suo motu, which may be in relation to the same mistake or another mistake. 15. The contention of the petitioner to the effect that the order made under sub-section (1) of Section 254 of the Act has to be treated as final and cannot be disturbed under section 254(2) of the Act in light of provision of Section 254(4) of the Act is therefore misconceived. There is no dispute that an order on appeal attains finality unless and until disturbed or modified as provided by the statute. However, an order on appeal would take within its sweep an order made under sub-section (1) as well as an order made under sub-section (1) as rectified under sub-section (2) of Section 254 of the Act. 16. It has to be borne in mind that the Act is a statute providing for levy and collection of tax. In case a party before the Tribunal invites attention of the Tribunal that a point or a contention which is material for determining the amount of tax payable (which may be NIL in a given case) has not been considered by the Tribunal, it would certainly constitute a mistake apparent from the record within the meaning of Section 254(2) of the Act. The term 'record' in the provision takes within its sweep the entire record before the Tribunal. The provisions of section 254(2) could not be construed in a manner which would produce an anomaly or otherwise produce an irrational or illogical result. It is one of the basic principles and a legal policy that when there is a provision for rectification of a mistake apparent from the record, that power should be allowed to be exercised for correcting mistake and/or error from the record and if the Tribunal feels that the Tribunal has committed an error of law, it would be against the concept of justice and fair play and also against the principle of legal policy not to allow the Tribunal to exercise such power. 17. The proposition that a contention raised but not dealt with by the Tribunal should be held to have been negatived is correct only upto a stage. Once a party brings to the notice of the Tribunal that an important point or contention raised by the party has not been dealt with it would be within jurisdiction and powers of the Tribunal to decide whether the same constitutes a mistake apparent from the record and thereafter, if necessary, reopen the appeal. Such a power is inherent in the Tribunal, as a party has suffered prejudice due to a lapse on part of the Tribunal and not an account of any fault of such a party. An act of the Tribunal should not prejudice a party so as to force the party into unwarranted litigation. 18. The principle which forms the basis for undertaking review of an order or judgment would be equally applicable in cases of exercise of powers of rectification. The principle is : "18. Justice is a virtue which transcends all barriers. Neither the rules of procedure nor technicalities of law can stand in its way. The order of the Court should not be prejudicial to anyone. Rule of stare decisis is adhered for consistency but it is not as inflexible in Administrative Law as in Public Law. Even the law bends before justice. Entire concept of writ jurisdiction exercised by the higher courts is founded on equity and fairness. If the Court finds that the order was passed under a mistake and it would not have exercised the jurisdiction but for the erroneous assumption which in fact did not exist and its perpetration shall result in miscarriage of justice then it cannot on any principle be precluded from rectifying the error. Mistake is accepted as valid reason to recall an order. Difference lies in the nature of mistake and scope of rectification, depending on if it is of fact or law. But the root from which the power flows is the anxiety to avoid injustice. It is either statutory or inherent. The latter is available where the mistake is of the Court. In Administrative Law the scope is still wider. Technicalities apart if the Court is satisfied of the injustice then it is its constitutional and legal obligation to set it right by recalling its order. Here as explained, the Bench of which one of us (Sahai, J.) was a member did commit an error in placing all the stipendiary graduates in the scale of First Division Assistants due to State's failure to bring correct facts on record. But that obviously cannot stand in the way of the Court correcting its mistake. Such inequitable consequences as have surfaced now due to vague affidavit filed by the State cannot be permitted to continue". xxx xxx xxx xxx "Rectification of an order thus stems from the fundamental principle that justice is above all. It is exercised to remove the error and not for disturbing finality." (S.Nagaraj and others Vs. State of Karnataka and Another, 1993 Supp.(4) SCC 595 at page 618-19) 19. As can be seen from a catena of judgments the relevant factors or conditions for assumption of jurisdiction to review or rectify are the same. In both, the respective language which has come up for interpretation is : for review - "error apparent on face of record", and for rectification - "mistake apparent from the record". The only distinguishing feature being the difference, if any, between the term "error" and "mistake". In the case of T.S. Balaram, Income Tax Officer Vs. Volkart Brothers and others, 82 ITR 50, the Apex Court has observed thus : "The power of the officers in section 154 of the Income Tax Act, 1961, to correct 'any mistake apparent from the record' is undoubetedly not more than that of the High Court to entertain a writ petition on the basis of an 'error apparent on the face of the record'". The provisions of Sections 154 and 254(2) of the Act, Section 35 of The Indian Income-tax Act,1922, Section 35 of The Wealth-tax Act,1957 and Section 13 of The Companies (Profits) Surtax Act,1964 are pari materia. 20. Though the Supreme Court and various High Courts have sought to lay down precisely what is a mistake apparent from the record or an error apparent on face of the record it has been difficult to provide a definite comprehensive definition. Various factors like : mistake/error should be self-evident, should not be debatable, should not be arrived at after long drawn out process of reasoning, etc., are more easily stated. It is the applicability to the facts and circumstances