Case Law Details

Case Name : Smt. Ruhina Ahmed Vs Income-tax Officer, Ward 5(3), Hyderabad (ITAT Hyderabad)
Appeal Number : M.A. NOs. 139 TO 155 (HYD.) OF 2010
Date of Judgement/Order : 21/09/2012
Related Assessment Year : 1999-2000 TO 2003-04
Courts : All ITAT (5374) ITAT Hyderabad (315)


Smt. Ruhina Ahmed


Income-tax Officer, Ward 5(3), Hyderabad

M.A. NOs. 139 TO 155 (HYD.) OF 2010

IT APPEAL NOs. 1220 TO 1236 (HYD.) OF 2009

[ASSESSMENT YEARs 1999-2000 TO 2003-04]

SEPTEMBER 21, 2012


Chandra Poojari, Accountant Member

All these miscellaneous applications filed by different assessees are seeking rectification in the order of the Tribunal dated 30th April 2010 wherein the Tribunal confirmed that there is valid service of notice u/s. 148 of the Act to the assessee.

2. The learned AR submitted before us that there is an apparent error appearing in the order of the Tribunal. He drew our attention to page No. 15 specifically to the following sentence in that para

“In my view, the facts in the matter under consideration do not lend any support to contention of the assessee’s counsel that notice cannot even be deemed to have been received and served was as to foist jurisdiction of the ITO to proceed with the matter. The various decisions relied by the assessee’s counsel thus do not lead any assistance to the assessee’s contention.”

Further he submitted that the Tribunal also observed as follows:

“The irregularity cannot be said to go to the root of the matter but mere irregularity which can always be waived by the parties.”

3. He submitted that there is a mistake in the order of the Tribunal and the general observation of the Tribunal that the various decisions relied upon by the assessee do not lead support to the contention of the assessee is a factual error. He submitted that the decision in the case of Arun Lal v. Asstt. CIT [2010] 124 ITD 85 (Agra) (TM) was not properly considered. According to the learned AR not following the above decision is mistake apparent on record. Further he drew our attention to the following sentence in para 15:

“Though it may be true that GPA holder had not had any authority to accept the notice on behalf of the assessee, but the facts remains that the GPA holder did receive the notice and had hired the chartered accountant to represent the case before the ITO.”

4. He also submitted that the following observation in Tribunal order in para 17 is also an error:

“In such situation, the service on the agent who was personally carrying on the business on behalf of the assessee would be sufficient. In the instant case, the GPA holder of the assessee received the notice which is evident from the acknowledgement furnished before us. The assessee was having transactions in India and when the notice was serviced through the process server of the department, the notice is deemed to have been served as it can ordinarily be expected that the process server knew the person on whom the service was effected. Further, it is also not the case that assessee had filed any authorization form empowering any one particular person to receive notice on his behalf. Therefore, the notice served on the person who is a GPA holder of the assessee and who has actually received the notice cannot be said to be invalid.”

5. Further he submitted that having observed thus the Tribunal holds that there should be valid service of notice and it should be served in terms of code of CPC, and the mere fact that the recipient representing the assessee would not be sufficient to hold that he was authorised to receive notice. The observations of the Tribunal extracted above are contrary to each other. Another mistake is not considering the submission that the address mentioned in the notice cannot be said to be that of non-residence, since it is business address and not residential address.

6. On the other hand, the learned DR submitted that there is no mistake apparent on record which warrants recall of the order of the Tribunal. She relied on the decision in the case of V.T. Somasundaram v. ITO [1999] 70 ITD 398 (Chennai) wherein it was held as follows:

“Held, It was not the case of the assessee that there had been glaring and patent mistake either of facts or law committed by this Tribunal. The grievance of the assessee was that each and every paper to which reference was made or attention drawn at the time of hearing of the appeals had not been elaborately discussed and it was not shown as to how on the basis of these documents the appeals were still not allowable. The second grievance made out by the assessee was that there was no discussion as to how the two judgments cited and relied upon were not relevant and had no applicability so as to allow the appeal. In view of these, the assessee wanted to recall of the order and a fresh decision after hearing. In the judgment in question, it had been stated by the Tribunal that the facts of this case as well as the arguments put forth by the rival parties were examined. These observations clearly indicated the application of mind by the Tribunal and consideration of the relevant material including the case laws cited during the course of hearing of the appeals. For the simple reason that each and every document or each and every sentence or paragraph from such documents had not been threadbared and elaborately discussed in the appeal order did not mean that there had been non-application of mind or non-consideration of the relevant material for arriving at the decision by the Tribunal. It was sufficient if the Tribunal stated that there had been examination of the facts of this case as well as arguments put forth by the rival parties.

It is not necessary or imperative on the part of the appellate authority that it should give additional or separate reasons if the Tribunal is in agreement with the reasons given by the lower tax authorities.

In the instant case, the Tribunal did not deem it fit and proper to give elaborate additional reasons to uphold the impugned order of the Appellate Commissioner and merely endorsed the reasoning and conclusion given by him. Not only that, the Tribunal went a step ahead and stated that the discussion made by the Appellate Commissioner and the conclusion drawn on account of accrual of income were reasonable and justified Nothing further or more was required to be stated or narrated in the appeal order.

From the contents of the written application as well as the arguments of the assessee, it appeared that the assessee wanted another decision not being happy with the decision rendered in the appeal order. If this exercise was to be done by this Tribunal, it amounted to reviewing the earlier decision. It is fairly settled and a trite law that power to review is a specific power which has to be conferred specifically by the legislature and it cannot be inferred as ancillary or inherent to the appellate jurisdiction. The Tribunal is a creature of the Income-tax Act, and it is well-settled legal proposition that the Tribunal has no inherent power of reviewing its order on merits though it has incidental or ancillary powers which can be exercised in order to make the appeal effective. But such power cannot be invoked to re-hear a case on merits. Once an order is passed under section 245(1), the Tribunal become functus officio subject to the provisions of section 256(1). It can hear an application under section 254(2) only to rectify a mistake apparent on record and not for review of its order.

The Supreme Court in the famous case of Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji AIR 1970 SC 1273 have laid down that the power to review is not an inherent power but has to be conferred by law either specifically or by necessary implications. It, there/ore, does not stand to reason that if the power of review is not with the Tribunal, it can nonetheless exercise such a power indirectly in terms of section 254(2) when it cannot be done so directly there being no specific power conferred. As the Tribunal is not a Court it has no power to review its own orders.

The normal rule, therefore, is that the remedy by way of review is a creature by statute. And if the statute does not contain power for review, then the power cannot be exercised at all. Review proceedings imply those proceedings where a party as of right can apply for reconsideration of the matter already decided upon after a fresh hearing on the merits of the controversy between the parties. But such a remedy is available only if provided by the statute. Even assuming that the statute does confer power of review then such a power of review can only be exercised within the parameters fixed by the statute itself.

Therefore, the Tribunal having already delivered a judgment which by operation of law had become final, it was not eligible, authorised or empowered to review its own decision in a subsequent proceeding brought either in the guise of rectification proceedings under section 254(2) or in any other manner. Therefore, the miscellaneous petitions were dismissed”

7. We have heard both the parties and perused the material on record. In this case the Tribunal after considering the entire facts and circumstances of the case held that there is valid service of notice u/s. 148 of the Act. The order of the Tribunal may not be drafted in a manner as the assessee wanted. Because the order is not in favour of the assessee that cannot be said to be an error having mistake apparent on record. The Tribunal cannot be said to be committed an error as the Tribunal not elaborately given the finding that the order of the Tribunal relied upon by the assessee’s counsel is not analysed. The Tribunal after taking due care taken a conscious decision that there is a valid service of notice u/s. 148 of the Act.

8. Further 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 [2010] 330 ITR 164/191 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.”

9. 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.

10. 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.

11. In the case of CIT v. Hindustan Coca Cola Beverages (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.”

12. 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.

13. In our opinion the Tribunal meticulously mentioned arguments of the assessee’s counsel, the points raised him, relevant case-law relied on by the AR and after considering the arguments of the assessee’s counsel passed the order. Being so, we do not find any infirmity in the order of the Tribunal and the petition filed by the assessee cannot be said to be falls under the purview of section 254 of the Act.

14. In the result, all the petitions filed by the assessees are dismissed.

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