The powers under Section 254(2) of the Act are only to rectify/correct any mistake apparent from the record: Supreme Court of India

IN THE CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 7110 OF 2021 Commissioner of Income TaxM s Reliance Telecom Limited CIVIL APPEAL NO. 7111 OF 2021 Commissioner of Income TaxM s Reliance Communications Limited JUDGMENT M.R. SHAH J Feeling aggrieved and dissatisfied with the impugned common judgment and order dated 08.08.2017 passed by the High Court of Judicature at Bombay in Writ Petition No. 1432 2017 and Writ Petition No. 1406 2017 by which the High Court has dismissed the aforesaid writ petitions preferred by the Commissioner of Income TaxMumbai and has confirmed the order passed by the Income Tax Appellate Tribunal Bench at Mumbai hereinafter referred to as the ‘ITAT’) dated 18.11.2016 passed in Miscellaneous Application Nos. 261 M 2014 and 419 M 2013 by which the ITAT in exercise of powers under Section 254(2) of the Income Tax Act has recalled its earlier order dated 06.09.2013 passed in ITA No. 5096 Mum 2008 and ITA No 837 Mum 2007 the Revenue has preferred the present appeals The facts leading to the present appeals in a nutshell are as under For the sake of convenience the facts in Civil Appeal No. 71121 arising from Special Leave PetitionNo.13963 2018 in the case of M s Reliance Telecom Limitedof the Act before the Assessing Officer to make payment to the non resident company for purchase of software without TDS. It was contended by the Assessee that it was for the purchase of software and Ericsson A.B. had no permanent establishment in India and in terms of the DTAA between India and Sweden & USA the amount paid is not taxable in India 2.2 The Assessing Officer passed an order dated 12.03.2007 rejecting the Assessee’s application holding that the consideration for software licensing constituted under Section 9(1)(vi) of the Act and under Article 12(3) of the DTAA is liable to be taxed in India and accordingly directed the assessee to deduct tax at the rate of 10% as royalty 2.3 The Assessee after deducting the tax appealed before the Commissioner of Income Tax of the Act. Simultaneously the Assessee also filed the appeal before the High Court against the ITAT order dated 06.09.2013. 2.4 That vide common order dated 18.11.2016 the ITAT allowed the Assessee’s miscellaneous application filed under Section 254(2) of the Act and recalled its original order dated 06.09.2013. Immediately on passing the order dated 18.11.2016 by the ITAT recalling its earlier order dated 06.09.2013 the Assessee withdrew the appeal preferred before the High court which was against the original order dated 06.09.2013 2.5 Feeling aggrieved and dissatisfied with the order passed by the ITAT allowing the miscellaneous application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013 the Revenue preferred writ petition before the High Court. By the impugned common judgment and order the High Court has dismissed the said writ petition s. Hence the Revenue is before this Court by way of present 3. We have heard Shri Balbir Singh learned Additional Solicitor General of India appearing on behalf of the Revenue and Shri Anuj Berry learned Advocate appearing on behalf of the Resolution Professional of the respondent company. At this stage it is required to be noted that the respondent company companies respective assessees currently are undergoing corporate insolvency resolution process and the Resolution Professional is appointed. We have heard learned counsel for the Resolution Professional of the respondent 3.1 We have considered the order dated 18.11.2016 passed by the ITAT allowing the miscellaneous application in exercise of powers under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013 as well as the original order passed by the ITAT dated 06.09.2013. 3.2 Having gone through both the orders passed by the ITAT we are of the opinion that the order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013 is beyond the scope and ambit of the powers under Section 254(2) of the Act. While allowing the application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013 it appears that the ITAT has re heard the entire appeal on merits as if the ITAT was deciding the appeal against the order passed by the C.I.T. In exercise of powers under Section 254(2) of the Act the Appellate Tribunal may amend any order passed by it under sub section 1) of Section 254 of the Act with a view to rectifying any mistake apparent from the record only. Therefore the powers under Section 254(2) of the Act are akin to Order XLVII Rule 1 CPC. While considering the application under Section 254(2) of the Act the Appellate Tribunal is not required to re visit its earlier order and to go into detail on merits The powers under Section 254(2) of the Act are only to rectify correct any mistake apparent from the record In the present case a detailed order was passed by the ITAT when it passed an order on 06.09.2013 by which the ITAT held in favour of the Revenue. Therefore the said order could not have been recalled by the Appellate Tribunal in exercise of powers under Section 254(2) of the Act If the Assessee was of the opinion that the order passed by the ITAT was erroneous either on facts or in law in that case the only remedy available to the Assessee was to prefer the appeal before the High Court which as such was already filed by the Assessee before the High Court which the Assessee withdrew after the order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013. Therefore as such the order passed by the ITAT recalling its earlier order dated 06.09.2013 which has been passed in exercise of powers under Section 254(2) of the Act is beyond the scope and ambit of the powers of the Appellate Tribunal conferred under Section 254 of the Act Therefore the order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013 is unsustainable which ought to have been set aside by the High Court From the impugned judgment and order passed by the High Court it appears that the High Court has dismissed the writ petitions by observing thatthe Revenue itself had in detail gone into merits of the case before the ITAT and the parties filed detailed submissions based on which the ITAT passed its order recalling its earlier order the Revenue had not contended that the ITAT had become functus officio after delivering its original order and that if it had to relook revisit the order it must be for limited purpose as permitted by Section 254(2) of the Act andthat the merits might have been decided erroneously but ITAT had the jurisdiction and within its powers it may pass an erroneous order and that such objections had not been raised before ITAT None of the aforesaid grounds are tenable in law. 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 In view of the above and for the reasons stated above the impugned common judgment and order passed by the High Court as well as the common order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013 deserve to be quashed and set aside and are accordingly quashed and set aside. The original orders passed by the ITAT dated 06.09.2013 passed in the respective appeals preferred by the Revenue are hereby restored Considering the fact that the Assessee had earlier preferred appeal s before the High Court challenging the original order passed by the ITAT dated 06.09.2013 which the Assessee withdrew in view of the subsequent order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013 we observe that if the Assessee s prefers prefer appeal s before the High Court against the original order dated 06.09.2013 within a period of six weeks from today the same may be decided and disposed of in accordance with law and on its their own merits and without raising any objection with respect to limitation Both the appeals are accordingly allowed in the aforesaid terms However there shall be no order as to costs NEW DELHI DECEMBER 03 2021

Summary: While considering the application under Section 254(2) of the Act, the Appellate Tribunal is not required to revisit its earlier order and to go into detail on merits. The powers under Section 254(2) of the Act are akin to Order XLVII Rule 1 CPC. In exercise of powers under Section 254(2) of the Act, the Appellate Tribunal may amend any order passed by it under sub-section (1) of Section 254 of the Act with a view to rectifying any mistake apparent from the record only. Such an observation was made by the Hon’ble Supreme Court of India before Hon’ble Justice M.R. SHAH &amp; Hon’ble Justice B.V. NAGARATHNA in the matter of Commissioner of Income Tax (IT-4) vs M/s Reliance Telecom Limited [CIVIL APPEAL NO. 7110 OF 2021] on 03.12.2021. 
The facts arising to the present appeal were that the respondent company entered into a supply contract with  Ericsson A.B. The respondent company filed an application under Section 195(2) of the Act before the Assessing Officer, to make payment to the non-resident company for the purchase of software without TDS. It was contended by the Assessee that it was for the purchase of software and Ericsson A.B. had no permanent establishment in India and in terms of the DTAA between India and Sweden &amp; USA, the amount paid is not taxable in India. The same was rejected by the Assessing Officer and directed the respondent company to deduct tax at the rate of 10% as royalty. The respondent appealed before the Commissioner of Income Tax (Appeals). The CIT vide order dated 27.05.2008 was held in favour of the respondent. Aggrieved by the said order Revenue appealed before the ITAT and by a detailed judgment and order dated 06.09.2013, the ITAT allowed the Revenue’s appeal. The respondent filed a miscellaneous application for rectification under Section 254(2) of the Act. Simultaneously, the respondent also filed the appeal before the High Court against the ITAT order dated 06.09.2013.vide common order dated 18.11.2016, the ITAT allowed the respondent’s miscellaneous application filed under Section 254(2) of the Act and recalled its original order dated 06.09.2013. Feeling aggrieved and dissatisfied with the order passed by the ITAT allowing the miscellaneous application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013, the Revenue preferred writ petition before the High Court, which the High Court dismissed. Thus, the present appeal was preferred by the Revenue.

The Hon’ble Supreme Court of India observed that “While allowing the application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013, it appears that the ITAT has re-heard the entire appeal on merits as if the ITAT was deciding the appeal against the order passed by the C.I.T. In exercise of powers under Section 254(2) of the Act, the Appellate Tribunal may amend any order passed by it under sub-section (1) of Section 254 of the Act with a view to rectifying any mistake apparent from the record only”

Furthermore, the Hon’ble Supreme Court of India held that the power under Section 254(2) of the Act is akin to Order XLVII Rule 1 CPC. the Appellate Tribunal is not required to revisit its earlier order and to go into detail on merits. The powers under Section 254(2) of the Act are only to rectify/correct any mistake apparent from the record. The only remedy available to the respondent was to prefer the appeal before the High Court.

Finally, the Hon’ble Supreme Court of India disposed of the present appeal with leave to the respondent to file afresh before the Hon’ble High Court who shall decide the matter afresh looking into the merits of the case.
Click Here To Read The Judgment.
Judgment Reviewed by: Rohan Kumar Thakur
 The facts arising to the present appeal were that the respondent company entered into a supply contract with  Ericsson A.B. The respondent company filed an application under Section 195(2) of the Act before the Assessing Officer, to make payment to the non-resident company for the purchase of software without TDS. It was contended by the Assessee that it was for the purchase of software and Ericsson A.B. had no permanent establishment in India and in terms of the DTAA between India and Sweden &amp; USA, the amount paid is not taxable in India. The same was rejected by the Assessing Officer and directed the respondent company to deduct tax at the rate of 10% as royalty. The respondent appealed before the Commissioner of Income Tax (Appeals). The CIT vide order dated 27.05.2008 was held in favour of the respondent. Aggrieved by the said order Revenue appealed before the ITAT and by a detailed judgment and order dated 06.09.2013, the ITAT allowed the Revenue’s appeal. The respondent filed a miscellaneous application for rectification under Section 254(2) of the Act. Simultaneously, the respondent also filed the appeal before the High Court against the ITAT order dated 06.09.2013.vide common order dated 18.11.2016, the ITAT allowed the respondent’s miscellaneous application filed under Section 254(2) of the Act and recalled its original order dated 06.09.2013. Feeling aggrieved and dissatisfied with the order passed by the ITAT allowing the miscellaneous application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013, the Revenue preferred writ petition before the High Court, which the High Court dismissed. Thus, the present appeal was preferred by the Revenue. 
The Hon’ble Supreme Court of India observed that “While allowing the application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013, it appears that the ITAT has re-heard the entire appeal on merits as if the ITAT was deciding the appeal against the order passed by the C.I.T. In exercise of powers under Section 254(2) of the Act, the Appellate Tribunal may amend any order passed by it under sub-section (1) of Section 254 of the Act with a view to rectifying any mistake apparent from the record only”

Furthermore, the Hon’ble Supreme Court of India held that the power under Section 254(2) of the Act is akin to Order XLVII Rule 1 CPC. the Appellate Tribunal is not required to revisit its earlier order and to go into detail on merits. The powers under Section 254(2) of the Act are only to rectify/correct any mistake apparent from the record. The only remedy available to the respondent was to prefer the appeal before the High Court.

Finally, the Hon’ble Supreme Court of India disposed of the present appeal with leave to the respondent to file afresh before the Hon’ble High Court who shall decide the matter afresh looking into the merits of the case.
Click Here To Read The Judgment.
Judgment Reviewed by: Rohan Kumar Thakur
 The Hon’ble Supreme Court of India observed that “While allowing the application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013, it appears that the ITAT has re-heard the entire appeal on merits as if the ITAT was deciding the appeal against the order passed by the C.I.T. In exercise of powers under Section 254(2) of the Act, the Appellate Tribunal may amend any order passed by it under sub-section (1) of Section 254 of the Act with a view to rectifying any mistake apparent from the record only” 
Furthermore, the Hon’ble Supreme Court of India held that the power under Section 254(2) of the Act is akin to Order XLVII Rule 1 CPC. the Appellate Tribunal is not required to revisit its earlier order and to go into detail on merits. The powers under Section 254(2) of the Act are only to rectify/correct any mistake apparent from the record. The only remedy available to the respondent was to prefer the appeal before the High Court.

Finally, the Hon’ble Supreme Court of India disposed of the present appeal with leave to the respondent to file afresh before the Hon’ble High Court who shall decide the matter afresh looking into the merits of the case.
Click Here To Read The Judgment.
Judgment Reviewed by: Rohan Kumar Thakur
 Furthermore, the Hon’ble Supreme Court of India held that the power under Section 254(2) of the Act is akin to Order XLVII Rule 1 CPC. the Appellate Tribunal is not required to revisit its earlier order and to go into detail on merits. The powers under Section 254(2) of the Act are only to rectify/correct any mistake apparent from the record. The only remedy available to the respondent was to prefer the appeal before the High Court. 
Finally, the Hon’ble Supreme Court of India disposed of the present appeal with leave to the respondent to file afresh before the Hon’ble High Court who shall decide the matter afresh looking into the merits of the case.
Click Here To Read The Judgment.
Judgment Reviewed by: Rohan Kumar Thakur
 Finally, the Hon’ble Supreme Court of India disposed of the present appeal with leave to the respondent to file afresh before the Hon’ble High Court who shall decide the matter afresh looking into the merits of the case.