Commissioner of Income Tax vs Pearl Woollen Mills

The Tribunal, Chandigarh Bench, Chandigarh, has referred the following questions of law for the opinion of this Court arising out of its order dt. 31st March, 1997 passed in ITA Nos. 1497 and 1508/Chd/1971-72 for the asst. yr. 1966-67 :

(i) Whether on the facts and circumstances of the case, Tribunal was right in law in entertaining a second application u/s 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 u/s 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 Tribunal was right in law in recalling its previous finding given in its appellate order dt. 18th March, 1976 restoring the addition of Rs. 9,36,000 by the ITO and affirming the order of the AAC 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 woollen yarn and scooter and declared loss for the year in question but the AO 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 dt. 18th March, 1976, restored the addition.

The assessee filed an application u/s 254(2) for rectification of order dt. 18th March, 1976. The said application was dismissed by order dt. 12th July, 1977 holding that there was no mistake apparent on the record and points raised were of argumentative nature.

After 9 months, second application u/s 254(2) was made which was almost similar to the application earlier made and dismissed on 12th July, 1977. The said application was accepted, vide order dt. 31st March, 1979 and reversing the view earlier taken by the Tribunal, addition made by the AAC was upheld (sic). The Tribunal, inter alia, observed as under :

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 u/s 254(2) of the Act, a fresh petition cannot lie.

This is a peculiar case in as much 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 u/s 254(2) is limited to correcting of an error on the face of record and not to readjudicate the issues. Reliance has been placed on T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay, , Commissioner of Income Tax Vs. Ramesh Electric and Trading Co., , Commissioner of Income Tax (CNTL), Ludhiana Vs. Hero Cycles Pvt. Ltd., Ludhiana, , Commissioner of Income Tax Vs. Kamal Bhai Ismilji, , Commissioner of Income Tax Vs. The Income Tax Appellate Tribunal and Others, , Assistant Commissioner, Income Tax, Rajkot Vs. Saurashtra Kutch Stock Exchange Ltd., and Deva Metal Powders Pvt. Ltd. Vs. Commissioner, Trade Tax, U.P., .

Learned Counsel for the assessee, however, submits 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 matter should be adjudicated afresh.

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

We are clearly of the opinion that the Tribunal could not have readjudicated the matter u/s 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 Vs. Shri Pradyumansinghji Arjunsinghji, , wherein it was observed as under :

...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 Vs. Management of Birla Cotton Spinning and Weaving Mills Ltd. and Another, .

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. Aribam Tuleshwar Sharma Vs. Aribam Pishak Sharma and Others, , Smt. Meera Bhanja Vs. Smt. Nirmala Kumari Choudhury, . 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 u/s 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 invoking 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.