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  • Rajesh Balia
  • Mohd. Yamin, JJ.
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  • Mohd. Yamin, JJ.
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Smart Summary

Judgment Summary — Rajesh Balia, J.

Factual and Procedural Background

The appellant challenged an order of the Income-Tax Appellate Tribunal (the Tribunal) dated 20 September 1999 arising from Miscellaneous Application No. 43.JP of 1998. The assessee-respondent had earlier preferred an appeal against an order of the Assessing Officer made under section 158BC of the Income-Tax Act, 1961. The Tribunal originally decided that appeal on 29 June 1998.

The assessee filed a miscellaneous application pointing out that grounds Nos. 31 to 42 of the memo of appeal remained undecided. The Tribunal agreed that grounds Nos. 31 to 34, in particular ground No. 34 which went to the basis of the order, had not been considered due to an oversight. The Tribunal allowed the application, recalled the order dated 29 June 1998, and ordered that the appeal be heard afresh.

The appellant argued that the Tribunal lacked a general power of review and that merely failing to decide certain grounds did not constitute a mistake apparent on the record. The Court (Rajesh Balia, J.) heard the appellant's counsel and examined whether the Tribunal's action was permissible under section 254(2) of the Income-Tax Act.

Legal Issues Presented

  1. Whether the Income-Tax Appellate Tribunal, under section 254(2) of the Income-Tax Act, 1961, may rectify its own order by recalling it where there is a "mistake apparent on the face of the record".
  2. Whether the Tribunal's inadvertent failure to decide specific grounds of appeal (grounds Nos. 31–34, especially No. 34) constitutes a mistake apparent on the face of the record justifying recall and rehearing.
  3. Whether recalling an earlier order and making a fresh order in such circumstances amounts to an impermissible review (i.e., a review on merits) beyond the Tribunal's power.

Arguments of the Parties

Appellant's Arguments

  • The Tribunal does not possess a general power of review comparable to a civil court's powers under Order 47, and therefore could not recall its earlier order.
  • The mere failure of the Tribunal to decide certain grounds (due to not comprehending the nature of the issues) does not amount to a "mistake apparent on the record" as required to invoke section 254(2).

Assessee-Respondent's Position (as reflected in the Tribunal's application)

  • The assessee contended by miscellaneous application that grounds Nos. 31 to 42 of the memo of appeal remained undecided by the Tribunal and that this omission was a mistake apparent on the record which deserved correction.
  • The Tribunal accepted that grounds Nos. 31 to 34 (particularly ground No. 34) were not considered and viewed this as an oversight affecting the basis of the order.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Moran Mar Basselios Catholicos v. Mar Poulose Athanasius, AIR 1954 SC 526 Failure to deal with and determine an important issue in a judgment can be an "error apparent on the face of the record" justifying review/rectification. The Court relied on this authority to support the proposition that omission to decide an important issue which affects the title or the root of the matter amounts to a mistake apparent on the face of the record; the Tribunal's failure to consider ground No. 34 was analogised to this situation.
ITO v. ITAT, [1987] 168 ITR 809 (Raj) The Tribunal cannot review its order on merits; section 254(2) rectification is confined to "mistake apparent on the face of the record" and does not empower general review on factual conclusions. The Court distinguished this decision because in that case the alleged mistake related to the correctness of factual conclusions rather than an inadvertent omission to decide an important issue. The Court held that ITO v. ITAT did not govern the facts before it.
CIT v. Ramesh Electric and Trading Co., [1993] 203 ITR 497 (Bom) Where the Tribunal has not considered some arguments while deciding an issue, that omission does not necessarily amount to failure to decide an important question; such cases are not within the same category as omissions to decide a vital issue. The Court found this precedent inapplicable because that case concerned omission to consider certain arguments within a decided issue, whereas the present case involved failure to decide discrete grounds which went to the root of the matter.
Grindlays Bank Ltd. v. Central Government Industrial Tribunal, 1980 Supp SCC 420; AIR 1981 SC 606 (A.P. Sen, J.) Distinguishes two senses of "review": (1) procedural review inherent in a court/tribunal to correct palpable erroneous orders passed under misapprehension (procedural defects), and (2) review on merits; procedural defects may be corrected ex debito justitiae even absent express statutory power. The Court invoked this reasoning to support the proposition that recalling an order to correct procedural omissions (e.g., failure to hear a party or failure to decide an issue) is a corrective power that inheres in tribunals and does not amount to an impermissible review on merits.

Court's Reasoning and Analysis

The Court proceeded step-by-step from statute to application of precedent:

  1. Statutory basis: The Court noted that section 254(2) of the Income-Tax Act empowers the Income-Tax Appellate Tribunal to "rectify its own order" if there exists a "mistake apparent on the record." The Court equated this power to the limited review power in Order 47, rule 1 of the Civil Procedure framework that permits a court to review where there is an error apparent on the face of the record.
  2. Nature of the omission: The Tribunal had expressly recorded that it failed to consider grounds Nos. 31–34 (particularly ground No. 34) which went to the very basis of the earlier order, and it described the failure as an "oversight." The Court treated this omission as analogous to the kind of omission held, in Moran Mar Basselios, to be an error apparent on the face of the record.
  3. Distinguishing authorities relied on by appellant: The Court examined ITO v. ITAT and CIT v. Ramesh Electric. In ITO v. ITAT the alleged "mistake" related to the correctness of the Tribunal's factual conclusions (i.e., a challenge to merits), which is not the kind of omission that section 254(2) addresses. In Ramesh Electric the Tribunal had not considered some arguments when deciding an issue, but that did not amount to leaving an important issue undecided; hence it was not analogous.
  4. Scope of rectification under section 254(2): The Court emphasised that rectification under section 254(2) is not confined to clerical or arithmetical errors; it can extend to substantive and procedural mistakes apparent on the record. Where a mistake amounts to non-decision of an issue going to the root of the matter, the appropriate corrective order is to recall and rehear or to decide that issue after affording parties a hearing.
  5. Procedural correction vs. review on merits: Relying on Grindlays Bank, the Court accepted the distinction between procedural review (an inherent corrective power to remedy procedural defects or palpable errors) and review on merits. The Court concluded that recalling an order to correct a procedural omission does not equate to an impermissible substantive review.
  6. Application to the facts: Given the Tribunal's finding that grounds constituting a vital question were inadvertently left undecided, the Court concluded that the Tribunal rightly exercised its power under section 254(2) to rectify the order by recalling it and ordering a fresh hearing/decision on the omitted grounds.

Holding and Implications

Holding: The appeal is dismissed. Explicitly, the Court held that the Tribunal validly exercised its power under section 254(2) to rectify an order that contained a mistake apparent on the face of the record by recalling the earlier order and directing a fresh hearing on the omitted grounds.

Implications and Consequences:

  • The Tribunal's recall of its earlier order and the direction to hear the appeal afresh on the omitted grounds (including ground No. 34) is upheld.
  • The Court made clear that rectification under section 254(2) can address substantive and procedural omissions apparent on the record and is not limited to mere clerical/arithmetic corrections.
  • The decision emphasises the distinction between corrective action for procedural omissions (permissible under section 254(2) and inherent powers) and a prohibited review on merits; the present case falls within the permissible category.
  • The Court stated that no substantial question of law arises from the appeal; accordingly, the appeal was dismissed in limine. The opinion does not announce or purport to establish any broader precedent beyond the application of established principles to the facts before it.

This summary is limited strictly to the content of the provided opinion and does not add or infer facts or reasoning beyond the text of the judgment excerpt supplied.

Show full summary ...

    Commissioner Of Income-Tax v. Ramesh Chand Modi

    Rajesh Balia, J.:— Heard learned counsel for the appellant.

    2. The appellant challenges the order passed by the Income-Tax Appellate Tribunal dated September 20, 1999, in Misc. Application No. 43.JP of 1998. The assessee-respondent preferred an appeal against the order passed by the Assessing Officer under section 158BC of the Income-Tax Act, 1961. That appeal was decided by the Tribunal on June 29, 1998, and in respect of that order a miscellaneous application was made by the assessee pointing out that grounds Nos. 31 to 42 of the appeal remain to be decided, this was a mistake apparent on the record and deserves to be corrected. The Tribunal, agreeing with this contention that the grounds referred to in the memo of appeal at Nos. 31 to 34 though taken by the assessee remain undecided, in particular quoted ground No. 34 and was of the view that this ground goes to the very basis of the order and though this ground was taken by the assessee in his appeal it could not be considered “due to over-. sight”. On the aforesaid conclusion, the application was allowed and the order dated June 29, 1998, was recalled. The appeal was ordered to be heard afresh for deciding in accordance with law. Learned counsel for the appellant urged that the Tribunal has no general power of review and the recalling of the earlier order amounts to reviewing the earlier order that was beyond the scope of the authority of the Tribunal. It was further stated by learned counsel that merely because the Tribunal failed to decide those grounds without comprehending the nature of the issues this did not amount to a mistake apparent on the record. We are unable to accept the contention of learned counsel. The Income-Tax Appellate Tribunal has been empowered under section 254(2) to rectify its own order in case there exists a mistake apparent on the record. The power is akin to one of the grounds on which a civil court is permitted to rectify its own judgment under Order 47, rule 1, which empowers a court to review its own order if on account of some mistake or error on the face of the record an aggrieved party applies for such review. The expression “error apparent on the face of record” has received judicial interpretation concerning various mistakes which have been pointed out in the facts of many cases. Relevant for the present purposes, we may notice the decision of the Supreme Court in Moran Mar Basselios Catholicos v. Mar Poulose Athanasius, AIR 1954 SC 526, wherein a review application filed by the aggrieved person before the Travancore and Cochin High Court was rejected. However, reversing the decision of the Travancore and Cochin High Court, the court said (headnote):

    “The majority judgments of the Full Bench were defective on the face of them in that they did not effectively deal with and determine an important issue in the case on which depended the title of the plaintiffs and the maintainability of the suit. This was certainly an error apparent on the face of the record.”

    3. This is what the Tribunal has said in the present case that it failed to consider the four grounds taken in the memo of appeal and has referred to ground No. 34 in its order. We, in the circumstances, are of the opinion that the Tribunal has exercised its jurisdiction under section 254 in accordance with the settled principles for determining the “mistake apparent from the face of the record” and discovering the mistake on the face of the order has acted in furtherance of correcting the order.

    4. Learned counsel has referred to two decisions. One is ITO v. ITAT, [1987] 168 ITR 809 (Raj). It was a case in which as a result of search conducted at the business as well as the residence of the assessee in the ensuing proceedings an addition of Rs. 80,000 was made in his income for the assessment year 1978-79. The appeal of the assessee before the Income-Tax Officer and the Commissioner failed. Thereafter, the assessee moved the Income-Tax Appellate Tribunal under section 254(2) of the Act for rectification of the mistake. The mistake which was pointed out by the assessee was that the conclusions reached by the Tribunal were wrong on the facts. It is in these circumstances, the court observed that it does not empower the Tribunal to review its own order and recall its earlier order. There is no doubt as to the proposition that the Income-Tax Appellate Tribunal does not enjoy the powers of reviewing in general its order as are available with the civil court under Order 47 on various grounds. The power of rectification is confined to the ground “mistake apparent on the face of the record”. The order of the learned single judge does not reveal the facts on which the order of recalling the Tribunal's order was founded, viz., whether there existed any mistake of omitting the decision on an important issue in the case or not. But obviously it was not a case in which the Tribunal has failed to decide an important issue by inadvertence as was, the case before the Supreme Court referred to above.

    5. Another decision on which the reliance was placed is CIT v. Ramesh Electric and Trading Co., [1993] 203 ITR 497 (Bom). This decision, in our opinion, has not decided the issue which has been raised before us because it was not a case in which the Tribunal has failed to decide an important issue raised before it. It was only a case where while deciding an issue the Tribunal has not taken into consideration some of the arguments. That is to say that the Tribunal has failed to consider one or some of the aspects of the issues decided by it. This case, in our opinion, is clearly not falling within the four corners of the controversy which we are considering wherein the Tribunal opining that it failed to decide the grounds raised by the assessee before it in the memo of appeal by not properly considering what those grounds are, it has stated clearly that “by oversight it has failed to take notice of those grounds”. In these circumstances, the case in hand clearly falls within the ratio laid by the Supreme Court and the two decisions cited by learned counsel do not govern the facts of the case.

    6. Once the conclusion is reached that the Tribunal had power to rectify mistakes on the face of the record and that there existed mistakes on the face of the record that the Tribunal has not dealt with the important issue arising in the case which goes to the root of the matter, the only consequential order of rectification that could be passed was to recall the earlier order and make a fresh order deciding the issue which was left undecided after hearing the parties on that issue. That undecided issue could not have been decided in favour or against any party without hearing them in that regard. The contention of learned counsel that there is no power to recall and substitute another order as a result of rectification because it amounts to review is not well founded. Once a mistake on the face of the record is established what order should follow to correct that mistake shall always depend on the facts and circumstances requiring to rectify the mistake. If the mistake is one which requires determination of some undecided issue because it has not been decided though raised, the procedure that would follow the discovery of such mistakes is to recall the order, and decide the case afresh or to decide that issue after affording an opportunity of hearing the parties concerned and pass a fresh order in the light of finding on such issue. The order under section 254(2) is not confined to arithmetical or clerical mistake, no only to correct substantive mistakes but also procedural mistakes.

    7. The whole contention of learned counsel for the appellant is founded on the premise that recalling of the order for making a fresh order amounts to review and not rectification. While it is true that the power of rectification of an order is far narrower than the power to review generally, the methodology of rectifying the order when mistake apparent from the record is found, may to correct a mistake in the substantive aspect of the order as well as mistake in the procedural aspect of making order. Recalling of an order for correcting an apparent mistake in the procedural aspect cannot be equated with review. For illustration purposes, if from the record it appears that one of the parties has not at all been heard and the order has been made in breach of the principles of natural justice going to root of the matter. The only appropriate method of correcting such mistake is to recall the order and make a fresh order after affording an opportunity of hearing to such party. So also when an order is made ex parte when a party absents himself on any date of hearing, if the party shows sufficient cause for his absence the court has power to make a fresh order after recalling the earlier order by affording a hearing to such party. Similarly, in the present case, where the Tribunal fails to decide some of the questions raised before it inadvertently or by oversight, adopting a similar course is the requirement of correcting such mistake. In all such cases, ordinarily the court or the Tribunal acts ex debito justitiae to prevent abuse of process, even in the absence of specific provision. It is apt to notice the following observation made by A.P Sen J. in Grindlays Bank Lta. v. Central Government Industrial Tribunal, 1980 Supp SCC 420 : AIR 1981 SC 606, while repelling a contention that an order setting aside an ex parte order amounts to review which cannot be exercised in the absence of express authorisation by law (page 610 of AIR 1981 SC and page 145 of 58 FJR):

    “The question whether a party must be heard before it is proceeded against is one of procedure… different considerations arise on review. The expression ‘review’ is used in two distinct senses, namely, (1) a procedural review which is either inherent or implied in a court or Tribunal to set aside a palpable erroneous order passed under a misapprehension by it, and (2) a review on merits when the error sought to be corrected is one of law and is apparent on the face of the record. It is in the latter sense that the court in Narshi Thakershi's case held that no review lies on merits unless a statute specifically provides for it, obviously when a review is sought due to a procedural defect, the inadvertent error committed by the Tribunal must be correcied ex debito justitiae to prevent the abuse of its process and such power inheres in every court or Tribunal.”

    8. Where a Tribunal fails to notice the question raised before it inadvertently under any misapprehension, in correcting such error by recalling the order made without deciding such question which goes to the root of the matter for deciding the same appropriately falls in such category of procedural mistakes which such Tribunal must correct ex debito justitiae, even in the absence of any power. The present case falls in that class.

    9. Thus, in our opinion, no substantial question of law arises in this appeal. The appeal is, therefore, dismissed in limine.

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    Commissioner Of Income-Tax v. Ramesh Chand Modi
    (Jul 4, 2000)