TRIBUNAL HAS NO POWER TO REVERSE A DECISION ON MERITS

[Mr. M. GOVINDARAJAN]

CASE LAW REFERRED - COMMISSIONER OF INCOME TAX V. PEARL WOOLEN MILLS - 2009 -TMI - 35263 - (PUNJAB AND HARYANA HIGH COURT)

                        In this case the assessee derived income from the manufacture and sale of woolen yarn and scooters.    The assessee declared loss for the year 1966-67 in question.   The Assessing Officer added unaccounted stock pledged with the bank and not accounted in the books of accounts of the assessee as undisclosed income.  The assessee filed appeal before the Commissioner of Income Tax (Appeals) against the order of Adjudicating authority.  The addition was partly upheld by the Commissioner of Income Tax (Appeals).  The Tribunal, on the file of the appeal restored the addition.

                        The assessee filed an application for rectification of order of the Tribunal under Sec. 254(2) on 18.03.1976.   The Tribunal dismissed the application for rectification of mistake vide its order dated 12.07.1977.   The Tribunal held that there was no mistake apparent on the record and the points raised were of argumentative nature.  Again the assessee, after the lapse of 9 months, filed an application under Sec. 254(2).  The said application was almost is similar to the application for rectification earlier filed and was dismissed.  The second application was accepted by the Tribunal.  The Tribunal observed as follows:

Once it is held that a mistake has crept in the Tribunal's order by virtue of its omission to deal with ground Nos. 7 and 8 as mentioned above, the question would be as to how such mistake should be corrected.   We have no hesitation in saying that we shall be shirking our responsibility and duty if we are to reject the assessee's present petition simply on the ground that since the assessee was rejected earlier on its petitions under Sections 254(2) of the Act, a fresh cannot file;

This is a peculiar case inasmuch as the assessee has suffered because of omission of the Tribunal and on the facts of the case there are two courses open to us either to recall the Tribunal's order on the point of restoration of addition or to adjudicate the dispute afresh.   We like to adopt the second course because it has already taken a long time and it is nobody's case that any fresh evidence is required to decide the assessee's petition.

The Tribunal considered the whole matter afresh on the merits and reversed the earlier view upheld the setting aside of the additions.

                        The Tribunal referred the following questions of law for the opinion of the High Court:

Whether on the facts and circumstances of the case, the Tribunal was right in law in entertaining a second application under Section 254(2) of the Act raising the same and similar points which had been dealt with by it in the first application filed by the assessee under Section 254(2) of the Act after affording full hearing to the parties?

Whether on the facts and in the circumstances of the case, the Tribunal was right in law in recalling its previous finding given in its appellate order restoring the addition by the Income Tax Officer and affirming the order of the Appellate Assistant Commissioner granting relief to the assessee against the foresaid decision?

The Revenue submitted before the High Court that the scope of rectification under Section 254(2) is limited to correcting an error on the face of record and not to readjudicate the issues.  The assessee submitted that the assessee could not be made to suffer on account of omission of the Tribunal in appreciating the submissions which were made and the Tribunal was justified in observing that either the earlier order should be recalled or the matter should be adjudicated afresh.

                        The High Court framed the question to be considered is whether it is open to the Tribunal to readjudicate the matter and that too when an earlier application under Section 254(2) had been dismissed on the same.  The High Court is of the opinion that the Tribunal could not have readjudicated the matter under Sec. 254(2).  The High Court held that it is well settled that a statutory authority cannot exercise power of review unless such power is expressly conferred.  It referred to the decision of Supreme Court in 'Patel Narshi Thakershi V. Shri Pradyumansinghji Arjunsinghji (1971) 3 SCC 844 in which the Supreme Court held that the power to review is not an inherent power and it must be conferred by law either specifically or by necessary implication.

                        The High Court further held that there is no express power of review conferred on the Tribunal.   Even otherwise the scope of review does not extend to rehearing a case on the merits.  The finality of the order of the Tribunal cannot be disturbed by a different bench beyond the statutory power available to it.  The Tribunal has referred to the principle of inherent power and incidental power and also the principle that acts of court cannot prejudice anyone.   The scope of the principle actus curiae neminem gravabit, i.e., nobody will be prejudiced by act of court extends to correcting an error from an accidental slip or omission.  Such power is available under Sec. 254(2) of the Act which is akin to Sec. 152 of civil procedure code. 

                        The High Court further held that the scope of such power was neither akin to power of review nor could clothe the court to modify judgment on the merits.  The scope of power of rectification is limited to correcting an error apparent on the face of record and not to an error to be discovered by long drawn process of reasoning.  Thus neither by invoking the inherent power nor the principle of mistake of court not prejudicing a litigant nor by invoking the doctrine of incidental power, the Tribunal could reverse a decision on the merits.   The powers available to a court of record, ex debito justitiae, or power to be invoked where an order may be nullity, on account of having been passed without service on a party, stand on a different footing.

                        The High Court held that 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.