Calcutta High Court
Commissioner Of Income-Tax vs Ballabh Prasad Agarwalla on 1 February, 1996
Equivalent citations: [1998]233ITR354(CAL)
JUDGMENT Bhagabati Prosad Banerjee, J.
1. This is an application under Section 256(2) of the Income-tax Act, 1961, for referring the following questions of law in respect of the assessment year 1986-87, corresponding to the accounting year 1985-86 :
"1. Whether, on the facts" and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in recalling the order of the Tribunal for fresh hearing ?
2. Whether, in view of the elaborate discussion in the Tribunal order (paragraph 12) and when no such claim was made before any of the income-tax authorities, the order of the Tribunal in miscellaneous application recalling the earlier order, is legally correct ?
3. Whether, in view of the fact that the Bench which heard the matter giving rise to the miscellaneous application is different from the Bench disposing of the application recalling the order of the Income-tax Appellate Tribunal for fresh hearing, the order of the Tribunal is legally correct in terms of Rule 34A(3) of the Income-tax (Appellate Tribunal} Rules, 1963 ?"
2. The facts of this case, in short, are that the assessee was assessed as an individual and in the assessment, the Assessing officer disallowed the payment of Rs. 9,87,295 by invoking the provisions of Section 40A(3) of the Income-tax Act, 1961.
3. The assessee, being aggrieved by the order of assessment, took the matter in appeal before the Commissioner of Income-tax (Appeals), and the Commissioner of Income-tax had deleted the entire addition of Rs. 9,87,295 made under Section 40A(3) of the said-Act.
4. The Revenue, being aggrieved by the appellate order passed by the Commissioner of Income-tax (Appeals), preferred an appeal before the Tribunal. The Tribunal, on consideration of the matter, was of the view that the provisions of Section 40A(3) of the Act had been enacted to curb tax evasion and to control the use and circulation of unaccounted or commonly called black money.
5. Keeping in mind that object, the Tribunal held that the payments in question could have been made by crossed bank drafts and when admittedly the assessee made part payment to the sellers by crossed bank drafts, the part payment to some sellers in cash was rightly disallowed by the Assessing Officer and accordingly reversed the order passed by the Commissioner of Income-tax (Appeals).
6. Thereafter, a miscellaneous application was filed before the Tribunal by the assessee for reconsideration of the decision of the Tribunal in so far as the rejection of the claim of the assessee that certain payments should have been allowed under Section 40A(3) of the said Act read with Rule 6DD(j) of the Rules, as the payments were made to new parties. In other words, the parties were new to the assessee whereas it was not the submission of the assessee that the assessee was new in the trade, as stated by the Tribunal in the impugned order, and decided the issue with some misconception.
7. The Tribunal considered the rival contentions of the parties and held that the payments were made to the parties who were new to the assessee and those payments should not be considered to be disallowed under Section 40A(3), if Rule 6DD(j) was properly considered, and as the Tribunal felt that the matter was not considered properly and that prima facie the assessee had made out a case that these payments could not have been considered to be disallowed under Section 40A(3) of the said Act if Rule 6DD(j} of the said Act was properly considered, and, accordingly, the Tribunal recalled the earlier order and to that extent, for a fresh hearing.
8. Against this order, dated October 12, 1993, an application was moved for reference under Section 256(1) of the Act, which was rejected. It was held that there was no referable question of law that arose out of the order of the Tribunal.
9. In the original order, the Tribunal was of the view that Rule 6DD(j) and the Central Board of Direct Taxes circular could not be applied in favour of the assessee in view of the fact that the assessee was carrying on the business earlier. In the middle of the application, the assessee had pointed out that it was not the case before the Tribunal that it was carrying on business for the first time, but relying on the Central Board of Direct Taxes circular and Rule 6DD(j), pointed out that the parties from whom he purchased the goods in that year, were new and, therefore, the assessee contended that since the purchases were from the new parties, the provisions of Rule 6DD(j) and the Central Board of Direct Taxes circular, allowing exemption of the application of Section 40A(3) of the said Act, were to be applied. The Tribunal found merit in the assessee's contention and accepted the plea and under such circumstances the Tribunal had recalled the earlier order dated May 24, 1993, for a fresh hearing.
10. It was pointed, out by the Tribunal that the said finding of the Tribunal was essentially a finding of fact and no question of law arose.
11. Mr. Ram Chandra Prosad, learned counsel appearing on behalf of the Revenue, contended that the Tribunal had no jurisdiction to review its earlier order inasmuch as the remedy of review is a creature of the statute and if the statute does not contain the powers of review, then the powers cannot be exercised, and in this connection referred to the judgment of the learned single judge of this court, Justice S. C. Ghose (as his Lordship then was), in the case of Shew Paper Exchange v. ITO [1974] 93 ITR 186.
12. It is not in dispute that the tribunal or a statutory body has no inherent power of review, the power of review must be expressly conferred by the statute. Review of an order means re-examination or to give a second view of the matter for the purpose of alteration or reversal of the view already taken after changing the earlier opinion or view.
13. The Supreme Court, in the case of H. C. Suman v. Rehabilitation Ministry Employees Co-operative House Building Society Ltd., , has held that once a quasi-judicial order becomes final, it cannot be reviewed by the authority passing the same unless such power is provided for and an order expressly rescinding an earlier valid order buf impliedly nullifying a final quasi-judicial order issued by the same authority is bad in the absence of such power conferred by a statute on such authority.
14. There are several decisions of the Supreme Court on this point that unless the power of review is expressly conferred by the statute the authority has no power of review. But, at the same time, a decision would be treated as given per incuriam when it is given in ignorance of the terms of a statute, or of a Rule having the force of law. An order passed without reference to the relevant provisions of the Act and without any citation of authority is per incuriam (see Municipal Corporation of Delhi v. Gurnam Kaur, .
15. In the case of Punjab Land Development and Reclamation Corporation Ltd. v. Presiding Officer , the Supreme Court explained the principle of per incuriam and held that the Latin expression "per incuriam" means through inadvertence. A decision can be said to be given per incuriam when a High Court has acted in ignorance of a decision of the Supreme Court. The problem of judgment per incuriam when actually arises would present no difficulty as the Supreme Court can lay down the law afresh even when two or more judgments cannot stand together. Article 141 which embodies as a Rule of law the doctrine of precedent was enacted to declare the law binding on all courts in the country excluding the Supreme Court itself.
16. Section 254(2) of the Income-tax Act expressly confers power upon the Tribunal to correct any mistake apparent from the record and power to amend any order passed under Sub-section (1) of Section 254.
17. Section 154 of the Income-tax Act also provides power for rectification of mistake apparent from the record.
18. In the ease of Kil Kotagiri Tea and Coffee Estates Co. Ltd. v. ITAT [1988] 174 ITR 579, 586 (Ker), the Kerala High Court held that Section 254(2) and Section 154 enable the concerned authorities to rectify any "mistake apparent from the record". The said expression has a wider content than the expression "error apparent on the face of the record" occurring in Order 47, Rule 1 of the Civil Procedure Code. The restrictions on the power of review under Order 47, Rule 1, Civil Procedure Code, do not hold good in the case of Section 254(2) and Section 154.
19. In the case of Neeta S. Shah v. CIT [1991] 191 ITR 77, 80 (Kar), the Karnataka High Court held that when an earlier order of the Appellate Tribunal is founded on a mistaken assumption and the error is discovered, the power of rectification under Section 254(2) can be invoked because the very basis of the earlier order requires rectification.
20. The Allahabad High Court in the case of Laxmi Electronics Corporation Ltd. v. CIT [1991] 188 ITR 398, 401, held that the Tribunal has no power to review. Its only power is one of rectification conferred by Section 254(2). It is a well-settled proposition that an act of court (which, in the context, means and includes a Tribunal of the nature of the Income-tax Appellate Tribunal), should not prejudice a party. In such a case, it would not be just to drive the party to a reference under Section 256. It must be left to the Tribunal to reopen the appeal if it finds that it has omitted to deal with an important ground urged by the party. It is not correct to say that the expression "record" in the phrase "mistake apparent from the record" in Section 254(2) means only the judgment. The record means the record before the Tribunal, Failure to deal with a preliminary objection amounts to a mistake apparent from the record.
21. It is not a case where the Tribunal has reviewed or intended to review the earlier order. It is not a case where there is any scope for change of the opinion or view already taken. It was a case where the Tribunal found that the Tribunal had not considered the effect of Rule 6DD(j) of the Income-tax Rules, which is a statutory Rule and the circular of the Department in the matter of application of the provisions of Section 40A(3) of the Act.
22. It is also not a case where that power of rectification is sought to be made on the ground of subsequent amendment of the provisions of law with retrospective effect, but to correct a particular mistake or error in the order which in law may be required to be rectified.
23. It is a case where the Tribunal sought to rectify the order so as to bring it in conformity with the law and the circular of the Department, which was not considered properly. This power of rectification of mistake is executed for the ends of justice.
24. The provisions of Section 254(2) of the said Act could not be construed in a manner which would produce an anomaly or otherwise produce an irrational or illogical result.
25. The primary aim of legal policy is to do justice. It must be assumed that Parliament does not intend to do injustice or to allow a wrong thing to continue contrary to law or public policy.
26. Accordingly, applying the above principles, it cannot be said that the Tribunal, in the instant case, wanted to exercise its power of review. No fresh material was sought to be considered and the Tribunal did not intend to change its view earlier taken. It is a case where the Tribunal was of the view that a particular statutory Rule and the circular of the Department which is binding upon the Tribunal, had not been considered while disallowing a claim invoking the provisions of Section 40A(3) of the said Act.
27. In other words, the Tribunal has recalled the earlier order which the Tribunal was of the view was passed in contravention and/or in ignorance of statutory provisions.
28. It is one of the basic principles and a legal policy that when there is a provision for rectification of a mistake on the record, that power should be allowed to be exercised for correcting mistakes and/or error on the record and if the Tribunal feels that the Tribunal has committed an error of law,, in that event, it would be against the concept of justice and fair play and also against the principle of legal policy not to allow the Tribunal to exercise such power.
29. Considering the facts and circumstances of the case, we are clearly of the view that the power that is sought to be exercised by the Tribunal comes within the scope" and ambit of the provisions of Section 154, read with Section 254(2) of the said Act, and accordingly we do not find that any question of law arises out of the order of the Tribunal, dated October 12, 1993.
30. The application is accordingly rejected.
Dibyendu Bhusan Dutta, J.
31. I agree.