Assistant Commnr., Income Tax, Rajkot vs Saurashtra Kutch Stock Exchange Ltd

2. Shortly stated the facts of the case are that Saurashtra Kutch Stock Exchange Ltd.- respondent herein is an assessee under the Income Tax Act, 1961 (hereinafter referred to as `the Act'). It is a Company registered under Section 25 of the Companies Act, 1956. The assessee is a `Stock Exchange' duly recognized under the Securities Contracts (Regulation) Act, 1956. As a `Stock Exchange', it is a `charitable institution' entitled to exemption under Sections 11 and 12 of the Act from payment of income-tax. The assessee, therefore, made an application on February 10, 1992 for registration under Section 12A of the Act. The Commissioner of Income Tax, Rajkot registered 3 it on July 8, 1996. The assessee filed its return of income on October 29, 1996 for the assessment year 1996-97 declaring its total taxable income as `Nil', claiming exemption under Section 11 of the Act although the assessee had not been registered under Section 12A of the Act. The return was processed under sub-section (1)(a) of Section 143 of the Act. On November 7, 1997, a notice was issued to the assessee by the Commissioner of Income Tax under Section 154 of the Act to show cause why exemption granted under Section 11 of the Act should not be withdrawn. The assessee replied to the said notice and asserted that in accordance with Section 12A of the Act, the trust had made an application for registration and, hence, it was entitled to exemption under Section 11 of the Act. Meanwhile, the Commissioner of Income Tax on February 20, 1998 granted registration to the assessee on condition that the eligibility regarding exemption under Section 11 of the Act would be 4 examined by the Assessing Officer for each assessment year.

4. Being aggrieved by the said order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Rajkot. The Commissioner, vide his order dated February 28, 2000, rejected all the contentions of the assessee and held that the assessee was not entitled to exemption.

5. The assessee challenged the decision of the Commissioner of Income Tax by filing further appeal before the Income Tax Appellate Tribunal, Rajkot. The Tribunal, however, held that the authorities were right in not granting exemption and in holding the assessee liable to pay tax. Accordingly, it dismissed the appeal on October 27, 2000.

6. On November 13, 2000, the assessee filed Miscellaneous Application under sub- section (2) of Section 254 of the Act in the Tribunal to rectify the error committed by the Tribunal in the decision rendered by it in appeal. The Tribunal, by an order dated September 5, 2001, allowed the application and held that there was a `mistake apparent from the record' which required rectification. Accordingly, it recalled its earlier order passed in appeal on October 27, 2000. For allowing the application, the Tribunal relied upon a decision rendered by the High Court of Gujarat in Hiralal Bhagwati v. Commissioner of Income Tax, (2000) 246 ITR 188 as also in Suhrid Geigy Limited v. Commissioner of Surtax, Gujarat, (1999) 237 ITR 834.

7. Dissatisfied with the order passed by the Tribunal in Miscellaneous Application, rectifying a `mistake apparent from record' and recalling its earlier order, the Revenue filed a writ petition which, as stated above, was 6 dismissed by the High Court. Hence, the present appeal.

8. On December 19, 2003, notice was issued by this Court and in the meantime, further proceedings before the Tribunal were stayed. Leave was granted on February 16, 2004 and stay was ordered to continue. On February 25, 2008, a Bench presided over by Hon'ble the Chief Justice of India ordered the Registry to list the appeal for final hearing during summer vacation. Accordingly, the matter has been placed before us.

14. The question which fell for consideration before the Income Tax Authorities related to exemption in favour of `trust'. The issue came up for consideration before the High 1 Court of Gujarat in Hiralal Bhagwati whether a `trust' was entitled to exemption from payment of tax under the Act. The High Court held that the `trust' could claim such exemption. All authorities under the Act, including the Tribunal, were bound by the said decision. Unfortunately, however, the attention of the Court was not invited to the said decision at the time when the case of the assessee was considered and orders were passed under the Act. Subsequently, however, the assessee came to know about the said judgment and hence an application under Section 254 (2) was filed bringing it to the notice of the Tribunal. There was thus a `mistake apparent from the record' and the Tribunal was bound to recall its earlier order which has been done. No illegality can be said to have been committed by the Tribunal in allowing the application and in recalling the order and no grievance can be made against such action of the Tribunal. Moreover, no prejudice had been caused to the 1 Revenue inasmuch as the Tribunal has not allowed the appeal filed by the assessee nor quashed an order of assessment. It merely recalled the earlier order in the light of a decision of the High Court of Gujarat. The order of the Tribunal, therefore, was strictly in accordance with law.

18. By the impugned order passed by the Tribunal and confirmed by the High Court, the 1 Income Tax Appellate Tribunal has merely recalled its earlier order passed in appeal and directed the Registry to fix the case for re- hearing. The matter will now be heard again on merits. The said order is challenged by the Revenue in this Court. The assessee has no grievance against the impugned order. In our opinion, therefore, it would not be appropriate for this Court to decide the second question which has been raised by the parties; viz. whether on merits, the assessee is or is not entitled to exemption from payment of tax under Section 11 of the Act. We, therefore, refrain from expressing any opinion on the second question.

(i) It enables the Tribunal at any time within four years from the date of the order to amend any order passed under sub-section (1) with a view to rectify any mistake apparent from the record; and

30. The main question, therefore, is: What is a `mistake apparent from the record'? Now, a similar expression `error apparent on the face of the record' came up for consideration before courts while exercising certiorari jurisdiction under Articles 32 and 226 of the Constitution. In T.S. Balaram v. Volkart Brothers, Bombay, (1971) 2 SCC 526, this Court held that "any mistake apparent from the record" is undoubtedly 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". It was, however, conceded in all leading cases that it is very difficult to define an "error apparent on the face of the record" precisely, scientifically and with certainty.

(emphasis supplied)

(emphasis supplied) 2

37. In our judgment, therefore, a patent, manifest and self-evident error which does not require elaborate discussion of evidence or argument to establish it, can be said to be an error apparent on the face of the record and can be corrected while exercising certiorari jurisdiction. An error cannot be said to be apparent on the face of the record if one has to travel beyond the record to see whether the judgment is correct or not. An error apparent on the face of the record means an error which strikes on mere looking and does not need long- drawn-out process of reasoning on points where there may conceivably be two opinions. Such error should not require any extraneous matter to show its incorrectness. To put it differently, it should be so manifest and clear that no Court would permit it to remain on record. If the view accepted by the Court in the original judgment is one of the possible views, the case cannot be said to be covered by an error apparent on the face of the record. 2

45. Rectification of an order stems from the fundamental principle that justice is above all. It is exercised to remove the error and to disturb the finality.

47. In the present case, according to the assessee, the Tribunal decided the matter on October 27, 2000. Hiralal Bhagwati was decided few months prior to that decision, but it was not brought to the attention of the Tribunal. In our opinion, in the circumstances, the Tribunal has not committed any error of law or of jurisdiction in exercising power under sub- section (2) of Section 254 of the Act and in rectifying "mistake apparent from the record". Since no error was committed by the Tribunal in rectifying the mistake, the High Court was not wrong in confirming the said order. Both the orders, therefore, in our opinion, are strictly in consonance with law and no interference is called for.

48. For the foregoing reasons, in our view, no case has been made out to interfere with the order passed by the Income Tax Appellate Tribunal, Ahmedabad and confirmed by the High Court of Gujarat. The appeal deserves to be dismissed and is accordingly dismissed. On the facts and in the circumstances of the case, however, the parties are ordered to bear their own costs.

49. Before parting, we may state that we have not stated anything on the merits of the matter. As indicated earlier, the assessee has not approached this Court. Only the Revenue has challenged the order passed under Section 254 (2) of the Act. The Tribunal, in view of the order of rectification, has directed the Registry to fix the matter for re-hearing and as such the appeal will be heard on merits. We, therefore, clarify that we may not be understood to have expressed any opinion one way or the other so far as exemption from 3 payment of tax claimed by the assessee is concerned. As and when the Tribunal will hear the matter, it will decide on its own merit without being influenced by any observations made by it in the impugned order or in the order of the High Court or in this judgment.

50. Ordered accordingly.