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2015 (4) TMI 412 - MADRAS HIGH COURT

2015 (4) TMI 412 - MADRAS HIGH COURT - [2015] 373 ITR 355 (Mad) - Recall of previous order - Power of Tribunal to recall its final order - Whether in a case of wealth tax, the Tribunal has power to recall its order in the guise of rectification of mistake contrary to the provision under Section 35 of the Wealth Tax Act - Held that:- Power under Section 35(1)(e) of the Wealth Tax Act extends only to rectify the mistake apparent from the face of the record. An error cannot be said to be apparent o .....

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elf-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. A point which was not examined on facts or in law cannot be dealt with as a mistake apparent from the record.

Tribunal at the first instance had given benefit to the assessee and thereafter, the Department filed Miscellaneous Petitions to recall the order on the legal plea that the benefit of exclusion of asset would not .....

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ly exercise its jurisdiction under Section 35(1)(e) of the Wealth Tax Act in the manner indicated in the provision and, de hors the provisions in the Act, it has no jurisdiction to recall its final order passed on the merits of the case. - Tribunal, while exercising the power of rectification, can recall its order, if it is satisfied that on account of mistake, manifest error or omission attributable to the Tribunal, prejudice is caused to the party. The Tribunal can recall its order for rectifi .....

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aw: "Whether in a case of wealth tax, the Tribunal has power to recall its order in the guise of rectification of mistake contrary to the provision under Section 35 of the Wealth Tax Act?" 2. The brief facts of the case are as follows: The assessee is a company engaged in the business of manufacturing and sale of glass products, especially laboratory items. The assessee had filed return of income for the assessment years 1997-98 and 1998-99. However, the assessee had not filed its retu .....

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evy of wealth-tax. Thereafter, the assessee filed return of wealth-tax under Section 14(1) of the Wealth Tax Act on 24.11.2003 admitting 'nil' income. After hearing the objections of the assessee, the Assessing Officer rejected the said objections and passed an order under Section 16(3) read with Section 17 of the Wealth Tax Act by determining total wealth of ₹ 8,35,00,000/- each for both the assessment years. 3. Aggrieved by the same, the assessee preferred appeals before the Comm .....

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ard the rival submissions and perused the material on record. The CWT(Appeals) has not passed speaking order on re-opening. He just held that re-opening is justified. No where the CWT(A) has discussed the reason for re-opening and who it is justified. He is telling that it was based on the audit objection. The nature of audit objection was not discussed. The plea of the Assessee relating to the assessability of income from the factory building and plant and machinery as business income in the co .....

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TR 164)(Mad.)." 5. Thereafter, the Commissioner of Wealth Tax (Appeals) passed an order on 21.11.2011 dismissing the appeals. 6. Aggrieved by the same, the assessee preferred appeals before the Tribunal. 7. The Tribunal, by order dated 13.3.2012, in W.T.A.Nos.5 and 6 of 2012, decided the issue in favour of the assessee holding as follows: "Therefore, what is to be seen is that even though the assessee is receiving lease rent from the lessee, the property remained a commercial asset exp .....

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ror in the order of the Hon'ble ITAT, on improper application of the provisions of law as applicable to the relevant years. In short, the ITAT have wrongly applied the amended provisions in the present years i.e. 1997-98 and 1998-99. 8. It is noticed that the assessee has no case that it will get exemption to the applicability of section 2(ea) under any of the exclusion clauses of (1), (2) or (3) for the relevant assessment year. In the above context the issue whether the lease asset remande .....

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of the assessee and posted the appeals for re-hearing. The relevant portion of the order dated 18.1.2013 reads as follows: "These miscellaneous petitions are filed by the Revenue. These are in the nature of rectification petitions. They relate to the assessment years 1997-98 and 1998-99. These rectification petitions are filed in the context of the common order passed by the Tribunal on 13-3-2012 in WTA Nos.5 and 6(Mds)/2012. On going through the averments made by the Revenue, we find that .....

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cupy for the purpose of any business or profession carried on by him. As per clause (3) if the assessee occupies the house for the purpose of any business or profession it is excluded from " assets". Therefore, no wealth-tax is required to be paid. But in the present case the assessee had leased out the land, building and machinery to a third party. Therefore, it cannot be said that the assessee has occupied land and building for the purpose of its business. Whatever portion was occupi .....

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This turn of event forced the assessee to pursue the matter before this Court in the following manner. 12. Aggrieved by the order of the Tribunal dated 18.1.2013 recalling the earlier final order dated 13.3.2012, two appeals have been filed by the assessee before this Court in T.C.(A)Nos.23 and 25 of 2015 and as against the second final order dated 13.3.2013, two appeals have been filed by the assessee before this Court in T.C.(A)Nos.24 and 26 of 2015. 13. The primary issue raised by the learned .....

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is filed and allowed and consequently, earlier orders are recalled and fresh orders are passed. Here is a case, where there is no mistake apparent on the face of the record. On the contrary, the Department has raised a legal plea, which according to the Department, the Tribunal failed to address. Learned counsel appearing for the assessee pointed out that the Department, if aggrieved against the wrong interpretation or failure to consider the case in correct perspective, should have filed an app .....

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v. Deputy Commissioner of Income-Tax and another), wherein, this Court while dealing with issue of review by the Tribunal, held as follows: "13. From the various judgments of the Supreme Court above referred to and other High Courts, it is clear that the Tribunal' s power under section 254(2) is not to review its earlier order but only to amend it with a view to rectify any mistake apparent from the record. What can be termed as " mistake apparent ?" " Mistake" in ge .....

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apparent" is that it must be something which appears to be ex facie and incapable of argument and debate. If such a " mistake apparent on the face of record" is brought to the notice, section 254(2) empowers the Tribunal to amend the order passed under section 254(1). Amendment of an order does not mean obliteration of the order originally passed and its substitution by a new order. What is mistake apparent on the face of the record or where does a mistake cease to be mere mistak .....

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the appeals are canvassed on the legality of the proceedings before the Tribunal. 15. Heard learned counsel appearing for the appellant and the learned Standing Counsel appearing for the Revenue and perused the materials placed before this Court. 16. To appreciate the submissions raised at the Bar, we shall refer to the provision contained in Section 35(1)(e) of the Wealth Tax Act relating to rectification. It reads as follows : "Rectification of mistakes. 35(1) With a view to rectifying a .....

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ct is a self-contained code. The Income-tax Appellate Tribunal is a creation of the statute and its powers are cir cumscribed by the provisions of the Act. Appeals are filed before it under section 253 of the Act. Section 254(1) contemplates disposal of the said appeal after giving an opportunity to both the parties of being heard. Sub-section (2) of section 254 enables the Tribunal to rectify any mistake apparent from the record. Sub-section (4) of section 254 specifies that save as provided in .....

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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 section 254(1) is the effective order so far as the appeal is concerned. Any order passed under section 254(2) either allowing the amendment or refusing to amend gets merged with the original order passed. The order as amended or remaining unamended is the effective order for all pract .....

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ibed in terms of rule 24 of the Income-tax (Appellate Tribunal) Rules, 1963, and that too only in cases 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. This position was highlighted by one of us (Justice Arijit Pasa yat, Chief Justice) in CIT v. ITAT [1992] 196 ITR 640 (Orissa) . Judged in the above background the order passed by the Tribunal is indefensible." [emphasis supplied] 19. In the case of Sah .....

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The Tribunal has no inherent power of review. It is thus axiomatic that while exercising its jurisdiction to amend its order on the ground of rectification of mistake it cannot recall its order passed on the merits." 20. A reading of the above-said decisions reveals that the power under Section 35(1)(e) of the Wealth Tax Act extends only to rectify the mistake apparent from the face of the record. An error cannot be said to be apparent on the face of the record if one has to travel beyond .....

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iscussion of evidence or argument to establish it can be said to be an error apparent on the face of the record. A point which was not examined on facts or in law cannot be dealt with as a mistake apparent from the record. 21. It is worth to note that even if a Tribunal renders a judgment without dealing with a specific factual situation not raised in appeal, it may be an irregularity of procedure but that would not empower the Tribunal with the jurisdiction to recall the order. The aggrieved pa .....

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[2003] 262 ITR 146 wherein a Division Bench of the Gujarat High Court while dealing with a writ petition preferred under articles 226 and 227 of the Constitution of India came to hold as follows: "(a) The Tribunal has power to rectify a mistake apparent from the record on its own motion or on an application by a party under section 254(2) of the Act ; (b) An order on appeal would consist of an order made under section 254(1) of the Act or it could be an order made under sub-section (1) as a .....

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self-evident, should not be a debatable issue, but this test might break down, because judicial opinions differ, and what is a mistake apparent from the record cannot be defined precisely and must be left to be determined judicially on the facts of each case ; (f) Non-consideration of a judgment of the jurisdictional High Court would always constitute a mistake apparent from the record, regardless of the judgment being rendered prior to or subsequent to the order proposed to be rectified ; (g) A .....

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s case a decision of the High Court of Gujarat) or of the Supreme Court can be said to be a 'mistake apparent from the record'? In our opinion, boththe Tribunal and the High Courtwere right in holding that such a mistake can be said to be a 'mistake apparent from the record' which could be rectified under section 254(2)." 24. In the case of Honda Siel Power Products Ltd. V. Commissioner of Income Tax reported in [2007] 295 ITR 466, the Supreme Court while dealing with the sc .....

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istake committed by the Tribunal. This fundamental principle has nothing to do with the inherent powers of the Tribunal. In the present case, the Tribunal in its order dated September 10, 2003 allowing the rectification application has given a finding that Samtel Color Ltd. (supra) was cited before it by the assessee but through oversight it had missed out the said judgment while dismissing the appeal filed by the assessee on the question of admissibility/allowability of the claim of the assesse .....

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ibunal's mistake, error or omission, then it is the duty of the Tribunal to set it right. Atonement to the wronged party by the court or Tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review." (emphasis supplied) 25. From a reading of the above-said decisions, it is clear that in a case of mistake apparent from the record, the Tribunal can recall its own order and rectify it. 26. In the case of L.D.Bhatia Hingwala (P) Ltd. v. Asst. CIT (De .....

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ta and we notice that the decision was distinguished on the factual score and none of the decisions have proceeded to say that it is not a precedent for the proposition that the Tribunal under no circumstances can recall its own order. 33. In view of our aforesaid analysis, we proceed to state our conclusions in seriatim as follows : (A) The decision rendered in Honda Siel Power Products Ltd. [2007] 295 ITR 466 by the apex court is an authority for the proposition that the Income-tax AppellateTr .....

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l under no circumstances can recall its order in entirety do not lay down the correct statement of law. (C) Any other decision or authority which has been rendered by pressing reliance on K. L. Bhatia [1990] 182 ITR 361 (Delhi) and the said line of decisions are also to be treated as not laying down the correct pro position of law that the Tribunal has no power to recall an order passed by it in exercise of power under section 254(2) of the Act. (D) The Tribunal, while exercising the power of re .....

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own by the apex court in Honda Siel Power Products Ltd. [2007] 295 ITR 466 (SC) andSaurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227 (SC)." (Emphasis supplied) 27. A plea is made that power to recall has been recognised in paragraph 33(A) above and therefore the Tribunal is justified. We hold that it is not so. It stems from misreading of the above decision. 28. In the present case, we find that the Tribunal at the first instance had given benefit to the assessee and thereafter, the D .....

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tion 35(1)(e) of the Wealth Tax Act to recall the final order dated 13.3.2012 in the guise of rectification. 29. We, therefore, have no hesitation in coming to the conclusion that the Tribunal can only exercise its jurisdiction under Section 35(1)(e) of the Wealth Tax Act in the manner indicated in the provision and, de hors the provisions in the Act, it has no jurisdiction to recall its final order passed on the merits of the case. 30. In the light of the above, we hold that the Tribunal, while .....

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ITR 243 (Delhi) (FB), cannot be misinterpreted that an Appellate Tribunal has got absolute power to recall its order. That power can be exercised only in a case where there is a mistake apparent on the face of the record. The decision of the Supreme Court in the case of Honda Siel Power Products Ltd. V. CIT (supra) makes it clear that on a mere filing of application for rectification, the Tribunal cannot and should not recall its order. Even otherwise, we have to state that recalling the order w .....

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CC 594), the Apex Court, after considering various decisions on the subject, and the legal principle of passing the test of reasonableness, while once again stressed the necessity to record reasons, held as hereinbelow :- 35. The decisions of this Court referred to above indicate that with regard to the requirement to record reasons the approach of this Court is more in line with that of the American courts. An important consideration which has weighed with the court for holding that an administ .....

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siderations which have also weighed with the Court in taking this view are that the requirement of recording reasons would (i) guarantee consideration by the authority; (ii) introduce clarity in the decisions; and (iii) minimise chances of arbitrariness in decision-making. In this regard a distinction has been drawn between ordinary courts of law and tribunals and authorities exercising judicial functions on the ground that a Judge is trained to look at things objectively uninfluenced by conside .....

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ecord reasons for its decision, are of no less significance. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances of arbitrariness and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or judicial review. In our opinion, therefore, the requirement that .....

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ndicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge. 37. Having considered the rationale for the requirement to record the reasons for the decision of an admini .....

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r; and this may be so, even when the decision is final and no further proceedings are open to the disappointed party by way of appeal or otherwise and that where further proceedings are open to a disappointed party, it is contrary to natural justice that the silence of the Minister or the Ministerial Tribunal should deprive them of the opportunity. (p. 80) Prof. H.W.R. Wade has also expressed the view that natural justice may provide the best rubric for it, since the giving of reasons is req .....

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ld be a judge in his own cause, and (ii) that no person should be judged without a hearing, are not exhaustive and that in addition to these two principles there may be rules which seek to ensure fairness in the process of decision-making and can be regarded as part of the principles of natural justice. This view is in consonance with the law laid down by this Court in A.K. Kraipak v. Union of India wherein it has been held : (SCR pp. 468-69 : SCC p. 272, para 20) The concept of natural justice .....

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the course of years many more subsidiary rules came to be added to the rules of natural justice. 38. A similar trend is discernible in the decisions of English courts wherein it has been held that natural justice demands that the decision should be based on some evidence of probative value. (See : R. v. Deputy Industrial Injuries Commissioner ex p. Moore; Mahon v. Air New Zealand Ltd.) 39. The object underlying the rules of natural justice is to prevent miscarriage of justice and secure fair .....

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overn exercise of power by administrative authorities. The rules of natural justice are not embodied rules. The extent of their application depends upon the particular statutory framework whereunder jurisdiction has been conferred on the administrative authority. With regard to the exercise of a particular power by an administrative authority including exercise of judicial or quasi-judicial functions the legislature, while conferring the said power, may feel that it would not be in the larger pu .....

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ment. Such an exclusion can also arise by necessary implication from the nature of the subject matter, the scheme and the provisions of the enactment. The public interest underly-ing such a provision would outweigh the salutary purpose served by the requirement to record the reasons. The said requirement cannot, therefore, be insisted upon in such a case. 40. For the reasons aforesaid, it must be concluded that except in cases where the requirement has been dispensed with expressly or by necessa .....

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s are the hallmark of any order including the order of recall. 34. It has come to our notice that many orders are passed recalling the earlier orders without stating the reasons. Fresh order is passed sometimes upsetting the earlier order in its entirety. This procedure is unknown in legal jurisprudence. 35. The incessant filing of Miscellaneous Petition by one or other party before the Tribunal in the name of rectification application or otherwise gives rise to further appeal before this Court .....

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