Assistant Commissioner, Income Tax, Rajkot v. Saurashtra Kutch Stock Exchange Ltd

ASSISTANT COMMISSIONER, INCOME TAX, RAJKOT v. SAURASHTRA KUTCH STOCK EXCHANGE LTD. (Civil Appeal No. 1171 of 2004) SEPTEMBER 15, 2008 [C.K. THAKKER AND LOKESHWAR SINGH PANTA, JJ.] Income Tax Act, 1961: s. 254(2): 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 jurisdictional court by tri-bunal - Held: Is "mistake apparent from the record" which can be rectified u/s. 254(2) - Decision of jurisdictional 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 jurisdiction in rectifying mistake - Order of tribunal as upheld by High Court does not call for interference. s. 154 - Mistake apparent from the record - Rectifica- tion - Scope of - Held: Such mistake being patent, manifest and self-evident error does not require elaborate discussion of evidence or argument to establish it - It can be corrected by issuing writ of certiorari - An error is not apparent on the face of record if one has to travel beyond the record to see G whether the judgment is correct or not - Error apparent from, the record strikes on mere looking and does not need long-drawn-out process of reasoning. [2008] 13 S.C.R. -Review- Power of- Held: Is not an inherent power It is neither natural nor fundamental right of aggrieved party- Such power must be conferred by law - In absence thereof, the or--der cannot be reviewed On facts, tribunal merely rectified mistake apparent from the record, thus, it was within the power 8 [of ][tribunal. ] Judgment/Order: Applicability of - Retrospective or pro-spective - Held: Function of Court is not to pronounce a 'new rule' but to maintain and expound the 'old one' - If subsequent -decision alters earlier decision, it does not make new law It c only discovers the correct principle of law which has to be ap--plied retrospectively Even where earlier decision operated for quite some time, decision rendered later on would have retrospective effect clarifying the legal position which was ear-lier not correctly understood. -Doctrine of 'prospective overruling' object of. Respondent-assessee is a Stock Exchange. The as-sessee being a 'charitable institution', claimed exemption from payment of income-tax uls. 11 of the Income Tax Act, 1961. The Assessing Officer as also the Commissioner of E Income Tax (Appeals) rejected the claim. The Income Tax Appellate Tribunal also dismissed the appeal on 27.10.2000. The assessee then filed Miscellaneous Appli-cation uls. 254(2) of the Act on the ground that the deci-sion of the 'Jurisdictional Court'-High Court in *Hiralal F Bhagwati's case that the 'trust' was entitled to exemption from payment of tax under the Act, was not brought to the notice of the tribunal and thus, there was a "mistake apparent from record" which required rectification. The Income Tax Appellate Tribunal allowed the application holding that there was a 'mistake apparent from the G record' within the meaning of sub-section (2) of section 254 of the Act which required rectification and recalled its earlier order dated 27.10.2000. High Court upheld the or-der of the tribunal. Hence, the present appeal. Dismissing the appeal, the Court. ASSISTANTCCM\1NR, INCOME TAX, RAIKOTv. SAURASHTRA 423 KUTCH STOCK EXCHANGE LTD. HELD: 1.1 The plain reading of sub-section (1) of A [2008] 13 S.C.R.421 Section: CONCLUSION Section 254 of the Income Tax Act, 1961 makes it more than clear that the Tribunal will pass an order after afford-ing opportunity of hearing to both the parties to appeal. Sub-section (4) expressly declares that save as otherwise provided in Section 256. (Reference), "orders passed by 8 the Appellate Tribunal on appeal shall be final". Sub-sec-tion (2) enacts that the Tribunal may at any time within four years from the date of the order rectify any mistake apparent from the record suo motu. The Tribunal shall rec-tify such mistake if it is brought to notice of the Tribunal c by the ;issessee or the Assessing Officer. Sub-section (2) thus, covers two distinct situations. So far as the first part of s. 254 is concerned, it is in the discretion of the Tribu-nal to rectify the mistake which is clear from the use of the expression 'may' by the Legislature. The second part, D however, enjoins the Tribunal to exercise the power if such mistake is brought to the notice of the Tribunal ei-ther by the assessee or by the Assessing Officer. The use of the word 'sha/f directs the Tribunal to exercise such power. However, there·is no dispute that if there is a 'mis-E take apparent from the record' and the assessee brings it to the notice of the Tribunal, it must exercise power un-der sub-section (2) of Section 254 of the Act. [Paras 21, 23 and 24) [433-G-H; 434-A,D-F) 1.2 The power of review is not an inherent power. F Right to seek review of an order is neither natural nor fun-damental right of an aggrieved party. Such power must be conferred by law. If there is no power of review, the order cannot be reviewed. In view of the settled legal po-sition, if the submission of the the Revenue is correct that G the Tribunal has exercised power of review, the order passed by the Tribunal mustbe set aside. But, if the Tri-bunal has merely rectified a mistake apparent from the record as submitted by the counsel for the assessee, it was within the power of the Tribunal and no grievance A can be made against exercise of such power. [Paras 25 and 29] [435-8-C; 435-H; 436 A-8] Patel Narshi Thakershi & Ors. v. Pradyumansinghji Arjunsinghji (1971) 3 SCC 844 - referred to. 2. A patent, manifest and self-evident error which does not require elaborate discussion of evidence or ar-gument to establish it, can be said to be an error appar-ent on the face of the record and can be corrected while exercising certiorari jurisdiction. An error cannot be said c [to ][be ][apparent on the face ][of ][the record ][if ][one ][has ][to travel ]beyond the record to see whether the judgment is cor-rect or not. An error apparent on the face of the record means an error which strikes on mere looking and does not need long- drawn-out process of reasoning on points D [where there may conceivably ][be ][two opinions. Such er-]ror should not require any extraneous matter to show its incorrectness. To put it differently, it should be so mani-fest and clear that no Court would permit it to remain on record. If the view accepted by the Court in the original E [judgment is one ][of ][the possible views, the case cannot ]be said to be covered by an error apparent on the face of the record. [Para 37] [440-C-F] T.S. Balaram v. Vo/kart Brothers, Bombay (1971) 2 SCC 526; Hari Vishnu Karnath v. Syed Ahmad /shaque (1955) 1 F [1104; ][Satyanarayan Laxminarayan ][Hegde ][& ][Ors. ][v. ]Mallikarjun Bhavanappa Tirumale (1960) 1 SCR 890; Syed Yakoob v. K.S. Radhakrishnan & Ors. (1964) 5 SCR 64 - re-ferred to. 3.1 It is also well-settled that a judicial decision acts G retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a 'new rule' but to maintain and expound the 'old one'. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a sub-H [sequent decision alters the earlier one, it (the later deci-] ASSISTANTCav\\'INR, INCOME TAX, RAJKOTv. &\URASHTRA 425 KUTCH STOCK EXCHANGE LTD. sion) does not make new law. It only discovers the cor-rect principle of law which has to be applied retrospec-tively. To put it differently, even where an earlier decision of the Court operated for quite some time, the decision rendered later on would have retrospective effect clarify-ing the legal position which was earlier not correctly un-derstood. [Para 42) [441 F-G] 3.2. The doctrine of 'prospective overruling' is an ex- ception to the general rule of doctrine of precedent and is based on the philosophy that 'the past cannot always be erased by a new judicial declaration.' [Para 44] [442-C-D] Go/ak Nath v. Union of India (1967) 2 SCR 762 - re- ferred to. 3.3 Rectification of an· order stems from the fundamen- tal principle that justice is above all. It is exercised to remove D the error and to disturb the finality.[Para 45] [442 D-E) S. Nagaraj & Ors. v. State of Karnataka, 1993 Supp (4) sec 595 - referred to. 4.1 Both the Tribunal and the High Court were right E in holding that non-consideration of a decision of Juris-dictional Court (in this 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" which could be recti-tied under Section 254(2) of the Act. [Para 40) [441-C) 4.2 In the instant case, the tribunal decided the matter on 27.10.2000. Hirata/ Bhagwati was decided few months prior to that decision, but it was not brought to the atten-tion of the Tribunal. In the circumstances, the Tribunal has not committed any error of law or of jurisdiction in exercis-ing power under sub-section (2) of Section 254 of the Act and in rectifying "mistake apparent from the record". Since no error was committed by the Tribunal in rectifying the mistake, the High Court was not wrong in confirming the said order. Therefore, both the orders are strictly in conso- 426 A nance with law and no case has been made out to inter-fere with the orders. {Paras 47 and 48] [443-C-E] Assistant Commissioner of Income-Tax v. Saurashtra Kutch Stock Exchange Ltd., 2003 (262) ITR 146; *Hirata/ Bhagwati v. Commissioner of Income Tax (2000) 246 ITR 188; 8 Suhrid Geigy Limited v. Commissioner of Surtax, Gujarat, (1999) 237 ITR 834 - referred to. 5. By the impugned order passed by tribunal and con-firmed by High Court, the Income Tax Appellate Tribunal c [has merely recalled its earlier order passed in appeal and ]directed the Registry to fix the case for re-hearing. The matter will now be heard again on merits. The said order . is challenged by the Revenue in this Court; The asses-see has no grievance against the impugned order. There-D [fore, ][it ][would ][not ][be appropriate ][for ][this Court ][to ][decide ]that whether on merits, the assessee is or is not entitled to exemption from payment of tax u/s. 11 of the Act. There-fore, this Court refrains from expressing any opinion on the said question. As and when the tribunal will hear the matter, it will decide the matter on its own merits without E being influenced by any observation made. [Paras 18, 49] [432-E-F; 444-A-E] Case Law Reference Para 1 Referred to. (2003) 262 ITR 146 Paras 6, (2000) 246 ITR 188 14,36,39,47 Para 11