CIT LUDHIANA vs. M/S PEARL WOOLEN MILLS LDH.

The Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, has referred the following questions of law for the opinion of this court arising out of its order dated 31.3.1997 passed in I.T.A. No. 1497 & 1508/Chandi/71-72 for the assessment year 1966-67:- “(i) Whether on the facts and circumstances of the case, 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 ? (ii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in recalling its previous finding given in its Appellate Order dated 18.3.1976 restoring the addition of Rs. 9,36,000/- by the Income Tax Officer and affirming the order of the Appellate Assistant Commissioner granting relief to the assessee to the tune of Rs. 8,34,730/- against the aforesaid addition ?”

The assessee derived income from manufacture and sale of woolen yarn and scooter and declared loss for the year in question but the Assessing Officer added unaccounted stock pledged with the bank and not accounted for in the books of account, as undiclosed income. The addition was partly upheld by the CIT (A). The Tribunal, vide its order dated 18.3.1976, restored the addition.

The assessee filed an application under Section 254 (2) for rectification of order dated 18.3.1976. The said application was dismissed by order dated 12.7.1977 holding that there was no mistake apparent on the record and points raised were of argumentative nature.

After 9 months, second application under Section 254 (2) was made which was almost similar to the application earlier made and dismissed on 12.7.1977. The said application was accepted, vide order dated 31.3.1979 and reversing the view earlier taken by the Tribunal, addition made by the Assistant Appellate Commissioner was upheld. The Tribunal, inter-alia, observed as under:- “8. 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 & 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 be to reject the assessee's present petition simply on the ground that since the assessee was rejected earlier on its petitions under Section 254 (2) of the Act, a fresh petition cannot lie.

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 of Rs. 9,36,302/- 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 case that any fresh evidence is required to decide the assessee's petition.”

Thereafter, the Tribunal considered the whole matter afresh, on merits and reversing the earlier view upheld the setting aside of additions.

We have heard learned counsel for the parties and perused the record.

Learned counsel for the revenue submits that the scope of rectification under section 254 (2) is limited to correcting of an error on the face of record and not to re-adjudicate the issues. Reliance has been placed on T.S. Balaram, Income-tax Officer, Company Circle IV, Bombay v. Volkart Brothers and others (1971) 82 ITR 50, Commissioner of Income-Tax v. Ramesh

Question to be considered is whether it is open to Tribunal to readjudicate the matter and that too when an earlier application under Section 254 (2) had been dismissed on the same issue.

We are clearly of the opinion that the Tribunal could not have readjudicated 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. Reference may be made to judgment of the Hon’ble Supreme Court in Patel Narshi Thakershi and others v. Shri Pradyuman Singhji Arjunsinghji, (1971) 3 SCC 844, wherein it was observed as under:- “4……It is well settled that the power to review is not an inherent power. It must be conferred by law either specifically or by necessary implication….”

The above view has been reiterated in Kapra Mazdoor Ekta Union v. Birla Cotton Spinning and Weaving Mills Limited, (2005) 13 SCC 777. 13. There is no express power of review conferred on the Tribunal. Even otherwise, scope of review does not extend to rehearing of a case on merits. (Tuleshwar Sharma v. Aibam Pishak Sharma, (1979) 4 SCC 389, Meera Bhanja v. Nirmala Kumari Chaudhary, (1995) 1 SCC 170). Finality of order of Tribunal cannot be disturbed by a different bench beyond the statutory power available to it. The Tribunal has referred to principle of inherent power and incidental power and also the principle that act of Court cannot prejudice anyone. 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 section 254 (2) of the Act, which is akin to Section 152 CPC. In Niyamat Ali Molla v. Sonargon Housing Coop. Society Ltd.,(2007) 13 SCC 421, after referring to earlier judgments, the scope of such power was considered and it was observed that the said power was neither akin to power of review nor could clothe the court to modify judgment on merits. Scope of power of rectification has been repeatedly considered, inter-alia, in Volkart Brothers, Deva Metal, Saurashtra Kutch (supra) and such power 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 inherent power nor the principle of mistake of court not prejudicing a litigant nor by involving doctrine of incidental power, the Tribunal could reverse a decision on merits. Power available to a court of record, ex debito justitiae, or power to be invoked where an order may be nullity, on account of having passed without service of a party, stand on a different footing.

Thus, we hold 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.

The questions referred are, thus, answered in favour of the revenue and against the assessee.

Reference is disposed of accordingly. (ADARSH KUMAR GOEL) JUDGE November 12, 2009 (GURDEV SINGH ) prem