ASSISTANT COMMISSIONER, INCOME TAX, RAJKOT vs. SAURASHTRA KUTCH STOCK EXCHANGE LTD.

CIVIL APPEAL No. 1171/2004Supreme Court[2008] 13 S.C.R. 42115 September 2008Bench: 2 JudgesAuthor: C.K. THAKKER, LOKESHWAR SINGH PANTA24 pages
AI SummaryDismissed

What were the facts?

The assessee, Saurashtra Kutch Stock Exchange Ltd., claimed exemption from income tax under Section 11 of the Income Tax Act, 1961, as a charitable institution. The Assessing Officer and the Commissioner of Income Tax (Appeals) rejected this claim. The Income Tax Appellate Tribunal (ITAT) also dismissed the assessee's appeal on October 27, 2000. Subsequently, the assessee filed a Miscellaneous Application under Section 254(2) of the Act, arguing that the ITAT's decision was a "mistake apparent from the record" because the jurisdictional High Court's decision in *Hiralal Bhagwati's case*, which held that a 'trust' was entitled to tax exemption, had not been brought to the ITAT's notice. The ITAT allowed this application, recalling its earlier order. The High Court upheld the ITAT's order, leading to the present appeal by the Assistant Commissioner, Income Tax, Rajkot.

What did the Supreme Court hold?

The Supreme Court held that the ITAT had the power to rectify its order under Section 254(2) of the Income Tax Act, 1961. The Court clarified that while the power of review is not inherent, the power to rectify a "mistake apparent from the record" is statutory. It found that the non-consideration of a jurisdictional High Court's decision, rendered prior to the ITAT's order and not brought to its notice, constitutes a "mistake apparent from the record" that can be rectified under Section 254(2). The Court reasoned that judicial decisions operate retrospectively, discovering the correct principle of law. Therefore, the ITAT did not commit an error of law or jurisdiction in rectifying the mistake. The High Court was also correct in upholding the ITAT's order. The Court explicitly stated that it had not expressed any opinion on the merits of the assessee's claim for exemption, leaving that to be decided by the ITAT upon re-hearing.

What were the issues?

1. Whether the Income Tax Appellate Tribunal (ITAT) had the power under Section 254(2) of the Income Tax Act, 1961, to rectify its order dated October 27, 2000, on the ground of a "mistake apparent from the record"? - Assessee's contention: The ITAT correctly exercised its power under Section 254(2) because the non-consideration of the jurisdictional High Court's decision in *Hiralal Bhagwati's case*, which was rendered prior to the ITAT's order and not brought to its notice, constituted a "mistake apparent from the record". - Revenue's contention: The ITAT exercised the power of review, which is not an inherent power and must be conferred by law. If the ITAT exercised review powers, its order should be set aside. 2. Whether a decision of the jurisdictional court, rendered prior to the ITAT's order and not brought to its notice, constitutes a "mistake apparent from the record" under Section 254(2) of the Act? - Assessee's contention: Such non-consideration is a "mistake apparent from the record" that the ITAT can rectify. - Revenue's contention: (Not recorded in the judgment).

Which sections of the Income-tax Act were involved?

Section 254(2),Section 11,Section 154,Section 256

AI-generated summary — verify with the full judgment below

[2008] 13 S.C.R. 421 ASSISTANT COMMISSIONER, INCOME TAX, RAJKOT A v. SAURASHTRA KUTCH STOCK EXCHANGE LTD. (Civil Appeal No. 1171 of 2004) SEPTEMBER 15, 2008 B [C.K. THAKKER AND LOKESHWAR SINGH PANTA, JJ.] Income Tax Act, 1961: s. 254(2): c Exercise of power under- Scope of- Held: Tribunal may · rectify any mistake apparent from the record suo motu - How- ever, when assessee or Assessing Officer brings such mis- · take to the notice of tribunal, it shall exercise the power. and D rectify the mistake.

Power of tribunal to rectify mistake in its order- Scope of - Non-consideration of decision of juri ictional court by tri- bunal - Held: Is "mistake apparent from the record" which can be rectified u/s. 254(2) - Decision of juri ictional court ren- E dered few months prior to decision of tribunal and not brought to the notice of tribunal - Thus, tribunal did not commit any error of law or of juri iction in rectifying mistake - Order of tribunal as upheld by High Court does not call for interference. s. 154 - Mistake apparent from the record - Rectifica- F tion - Scope of - Held: Such mistake being patent, manifest and self-evident error does not require elabo

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