Supreme Court of India
ASSISTANT COMMISSIONER, INCOME TAX, RAJKOTversusSAURASHTRA KUTCH STOCK EXCHANGE LTD.
- Citation
- 2008 INSC 1037
- Decided
- 15 September 2008
- Disposal
- Dismissed
- Bench
- C K THAKKER
Holding
The ITAT correctly exercised its power under Section 254(2) to rectify a mistake apparent from the record, and the High Court's confirmation of that rectification is upheld.
Summary
The Saurashtra Kutch Stock Exchange Ltd., a charitable institution, claimed exemption from income tax under Section 11 of the Income Tax Act, 1961, but its claim was rejected by the Assessing Officer, the Commissioner of Income Tax (Appeals), and the Income Tax Appellate Tribunal (ITAT). The ITAT later filed a miscellaneous application under Section 254(2) to rectify a "mistake apparent from the record" because it had not considered a prior decision of the Gujarat High Court (Hiralal Bhagwati) that supported the exemption claim. The ITAT allowed the application, recalled its earlier order, and the Gujarat High Court upheld this rectification. The Revenue challenged the ITAT's exercise of power, arguing that it amounted to an unauthorized review and that the decision of the High Court could not be treated as a mistake. The Supreme Court held that Section 254(2) permits the tribunal to correct a patent, manifest error when brought to its notice, and that non‑consideration of a jurisdictional court's decision qualifies as such a mistake; thus, the tribunal acted within its statutory authority and the High Court's order stands. Consequently, the appeal was dismissed without addressing the substantive tax exemption issue.
Issues considered
- Whether the Income Tax Appellate Tribunal can rectify its earlier order under Section 254(2) of the Income Tax Act, 1961 by invoking a "mistake apparent from the record" when it failed to consider a decision of the jurisdictional High Court.
- Whether such rectification amounts to an exercise of an inherent power of review, which is not conferred by law.
- What constitutes a "mistake apparent from the record" under Section 254(2) and whether non‑consideration of a jurisdictional court's decision falls within that definition.
- Whether the tribunal's action was within its statutory power and thus the High Court's confirmation was correct.
Legislation cited
- Income Tax Act, 1961s. 11, s. 12, s. 12A, s. 143(1)(a), s. 154, s. 252, s. 253, s. 254(1), s. 254(2), s. 254(4), s. 255, s. 256
Subjects
Income TaxSection 254mistake apparent from the recordAppellate Tribunalrectificationreview powerprospective overrulingjurisdictional courttax exemptionstatutory interpretation
Judgment
[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 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- F
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.
421 H
422 SUPREME COURT REPORTS [2008] 13 S.C.R.
•
A 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
of tribunal.
8
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.
D 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.
H 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
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-
take apparent from the record' and the assessee brings it E
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
H··
424 SUPREME COURT REPORTS [2008] 13 S.C.R.
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.
B 2. A patent, manifest and self-evident error which y ..,
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
where there may conceivably be two opinions. Such er-
D
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
judgment is one of the possible views, the case cannot
E 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 SCR 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- A
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- B
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] c
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) F
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- G
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- H
426 SUPREME COURT REPORTS [2008] 13 S.C.R.
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-
fore, it would not be appropriate for this Court to decide
D
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
(2003) 262 ITR 146 Referred to. Para 1
F
(2000) 246 ITR 188 Referred to. Paras 6,
14,36,39,47
(1997) 225 ITR 234 (SC) Referred to. Para 11
G (1971) 3 sec 844 Referred to. Para 26
(1971) 2 sec 526
(1955) 1 SCR 1104
Referred to.
Referred to.
Para 30
Para 31
...
(1960) 1 SCR 890 Referred to. Para 33
H
ASSISTANTCOWlllNR, INCOME TAX, RA.JKOTv. Sl\URASHTRA 427
KUTCH STOCK EXCHANGE LTD.
(1964) 5 SCR 64 Referred to. Para 35 A
(1999) 237 ITR 834 (Guj) Referred to. Paras 6, 41
(1967) 2 SCR 762 Referred to. Para 44
1993 Supp (4) SCC 595 Referred to. Para 46
B
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 1171
of 2004
From the final Judgment and Order dated 31.3.2003 of
the High Court of Gujarat atAhmedabad in Special Civil Appli-
cation No. 1247 of 2002 C
V. Shekhar, Vikram Gulati and B.V. Balaram Das for the
Appellant. ·"
H.A. Raichura and Saroj Raichura for the Responde_nts.
D
The Judgment of the Court was delivered by
C.K. THAKKER, J. 1. The present appeal ·is directed
against the judg.inent and order passed by the High Court of
Gujarat, Ahmedabad on March 31, 2003 in Special Civil Appli-
cation No. 1247 of 2002 (Assistant Commissioner of Income- E
Tax v. Saurashtra Kutch Stock Exchange Ltd., (2003) 262 ITR
146]. By the said judgment, the High Court confirmed the order
passed by the Income Tax Appellate Tribunal, Ahmedabad on
September 5, 2001 in Misc. Application NO. 31/Rjt/2000. By
the said order, the Tribunal held that there was a 'mistake ap- F
· parent from the record' within the meaning of sub-section (2) of
Section 254 of the Income Tax Act, 1961 and accordingly, it
recalled its earlier order passed 011 October 27, 2000 in ITA
No. 69/Rjt/2000.
2. Shortly stated the facts of the case are that Saurashtra G
Kutch Stock Exchange Ud.-respondent herein is an assessee
under the Income Tax Act, 1961 (hereinafter referred to as 'the
Act'). It is a Company registered under Section 25 of the Com-
panies Act, 1956. The assessee is a 'Stock Exchange' duly
recognized under the Securities Contracts (Regulation) Act, H
428 SUPREME COURT REPORTS [2008] 13 S.C.R.
A 1956. As a 'Stock Exchange', it is a 'charitable institution' en-
titled to exemption under Sections 11 and 12 of the Act from
payment of income-tax. The assessee, therefore, made an ap-
plication on February 10, 1992 for registration under Section
12A of the Act. The Commissioner of Income Tax, Rajkot regis-
8 tered it on July 8, 1996. The assessee filed its return of income ~ ~
on October 29, 1996 forthe assessment year 1996-97 declar-
ing its total taxable income as 'Nil', claiming exemption under
Section 11 of the Act although the assessee had not been reg-
istered under Section 12A of the Act. The return was processed
c under sub-section (1 )(a) of Section 143 of the Act. On Novem-
ber 7, 1997, a notice was issued to the assessee by the Com-
missioner of Income Tax under Section 154 of the Act to show
cause why exemption granted under Section 11 of the Act should
not be withdrawn. The assessee replied to the said notice and
asserted that in accordance with Section 12A of the Act, the
0
trust had made an application for registration and, hence, it was ~ "
entitled to exemption under Section 11 of the Act. Meanwhile,
the Commissioner of Income Tax on February 20, 1998 granted
registration to the assessee on condition that the eligibility re-
garding exemption under Section 11 of the Act would be exam-
E ined by the Assessing Officer for each assessment year.
3. By an order dated December 3, 1999, the Assessing
Officer assessed the income of the assessee under sub-sec-
tion (3) of Section 143 of the Act and rejected the claim of ex-
F emption under Section 11 of the Act. ;.
4. Being aggrieved oy the said order, the assessee pre-
ferred an appeal before the Commissioner of Income Tax (Ap-
peals), Rajkot. The Commissioner, vide his order dated Febru-
ary 28, 2000, rejected all the contentions of the assessee and
G held that the assessee was not entitled to exemption.
5. The assessee challenged the decision of the Commis-
sioner of Income Tax by filing further appeal before the Income -.. ·
Tax Appellate Tribunal, Rajkot. The Tribunal, however, held that
the authorities were right in not granting exemption and in hold-
H
A5SISTANTcaMl/1NR, INCON'ETAX, RA.JKOTv. &\URASHffiA 429
KUTCH STOCK EXCHANGE LTD. [C.K. THAKKER, J.]
ing the assessee liable to pay tax. Accordingly, it dismissed the A
appeal on October 27, 2000.
6. On November 13, 2000, the assessee filed Miscella-
neous Application under sub-section (2) of Section 254 of the
Act in the Tribunal to rectify the error committed by the Tribunal
in the decision rendered by it in appeal. The Tribunal, by an 8
order dated September 5, 2001, allowed the application and
held that there was a 'mistake apparent from the record' which
required rectification. Accordingly, it recalled its earlier order
passed in appeal on October 27, 2000. For allowing the appli-
cation, the Tribunal relied upon a decision rendered by the High C
Court of Gujarat in Hirata/ Bhagwati v. Commissioner of In-
come Tax, (2000) 246 ITR 188 as also in Suhrid Geigy Lim-
ited v. Commissioner of Surtax, Gujarat, (1999) 237 ITR 834.
7. Dissatisfied with the order passed by the Tribunal in D
Miscellaneous Application, rectifying a 'mistake apparent from
record' and recalling its earlier order, the Revenue filed a writ
petition which, as stated above, was dismissed by the High
Court. Hence, the present appeal.
8. On December 19, 2003, notice was issued by this Court E
and in the meantime, further proceedings before the Tribunal
were stayed. Leave was granted on February 16, 2004 and
stay was ordered to continue. On February 25, 2008, a Bench
presided over by Hon'ble the Chief Justice of India ordered the
Registry to list the appeal for final hearing during summer vaca- F
tion. Accordingly, the matter has been placed before us.
9. We have heard learned counsel for the parties.
10. The learned counsel for the Revenue submitted that
the Tribunal committed an error of law and of jurisdiction in ex- G
ercising power under sub-section (2) of Section 254 of the Act
and in recalling its earlier order passed in appeal. It was sub-
mitted that the Tribunal is a statutory authority (though not an
'income tax authority' under Section 116) and is exercising
power conferred by the Act. It has no 'plenary' powers. It has no H
430 SUPREME COURT REPORTS [2008] 13 S.C.R.
A power to review its own decisions. Power under Section 254(2)
can be exercised in case of any 'mistake apparent from the
record'. According to the counsel, even if the order passed by
the Tribunal was incorrect or wrong in law, it would not fall within
the connotation 'mistake apparent on record'. If the assessee
B was aggrieved by the said order, it could have challenged the
order by taking appropriate proceedings known to law. Mis-
cellaneous Application under Section 254(2) of the Act was not
maintainable. Again, the order passed under Section 254 by the
Tribunal is final under sub-section (4) of the said section. By in-
c voking the jurisdiction under sub-section (2) of the said section,
the statutory 'finality' cannot be destroyed or the provision cannot
be made nugatory. The Tribunal, therefore, could not have allowed
the application and recalled its earlier order as there W•.iS no er-
ror apparent or the record. The Revenue, therefore, challenged
D ·the said order. Unfortunately, however, the High Court committed
the same error and dismissed the writ petition. The order passed
by the High Court also suffers from similar infirmity. Both the or-
ders, therefore, are required to be quashed and set aside.
11. Even on merits, neither the Tribunal nor the High Court
E was right, submitted the learned counsel for the Revenue. The
counsel urged that the Tribunal exercised the power under Sec-
tion 254(2) of the Act relying on a decision of the High Court of
Gujarat in Hiralal Bhagwati, but a contrary view has been taken
by this Court in Delhi Stock Exchange Assn. Ltd. v. Commis-
F sioner of Income Tax, (1997) 225 ITR 234 (SC). In view of the
declaration of law by this Court, the assessee is not entitled to
exemption from payment of tax.
12. The learned counsel submitted that this Court may con-
sider the appeal of the Revenue on merits and decide whether
G the order passed by the Tribunal in the appeal was in conso-
nance with law and settled legal position.
13. The learned counsel for the assessee, on the other
hand, supported the order passed by the Tribunal in Miscella-
neous Application and in recalling its earlier order passed in
H
ASSISTANTCOv1MNR, INCOIVIETAX, RAJKOTv. &\URASHTRA 431
KUTCH STOCK EXCHANGE LTD. [C.K. THAKKER, J.]
appeal as also the order passed by the High Court. According A
to the counsel, the Tribunal was functioning by exercising its
powers in Gujarat. As such, it is an inferior Tribunal subject to
the supervisory jurisdiction of the High Court of Gujarat under
Article 227 of the Constitution. The High Court of Gujarat is thus
'Jurisdictional Court' over the Tribunal. The Tribunal is, there- B
~
.. fore, bound by a decision of the High Court of Gujarat.
14. The question which fell for consideration before the
Income Tax Authorities related to exemption in fpvour of 'trust'.
The issue came up for consideration before the High Court of
Gujarat in Hirata/ Bhagwati whether a 'trust' was entitled to ex- c
emption from payment of tax under the Act. The High Court held
that the 'trust' could claim such exemption. All authorities under
the Act, including the Tribunal, were bound by the said deci-
sion. Unfortunately, however, the attention of the Court was not
invited to the said decision at the time when the case ofthe D
assessee was considered and orders were passed under the·
"' Act. Subsequently, however, the assessee came to know about
the said judgment and hence an application under Section 254
(2) was filed bringing it to the notice of the Tribunal. Th.ere was
thus a 'mistake apparent from the record' and the Tribunal was E·
bound to recall its earlier order which has been done. No ille-
gality can be said to have been committed by the Tribunal in
allowing the application and in recalling the order and no griev-
ance can be made against such action of the Tribunal. More-
over, no prejudice had been caused to the Revenue inasmuch F
A\ as the Tribunal has not allowed the appeal filed by the asses-
see nor quashed an order of assessment. It merely recalled the
earlier order in the light of a decision of the High Court of Gujarat.
The order of the Tribunal, therefore, was strictly in accordance
with law.
G
15. When the Revenue approached the High Court, the
High Court again considered the legal position and held that in
"" allowing the application and in exercising power under Section
~
254(2) of the Act, the Tribunal had not acted illegally and dis-
missed the writ petition. The orders passed by the Tribunal, as H
432 SUPREME COURT REPORTS [2008] 13 S.C.R.
A also by the High Court, are in accordance with law and no inter-
ference is called for.
16. The counsel also submitted that even on merits, the
Tribunal was right in recalling its earlier order. The assessee is
entitled to exemption from payment of tax as 'trust' inasmuch
B as such exemption is legal, lawful and was validly granted in
• .,,
favour of the assessee. The view taken by the High Court of
Gujarat in Hirata/ Bhagwati has been approved by this Court
recently in Assistant Commissioner of Income Tax, Surat v.
Surat City Gymjkhana, Civil Appeal Nos. 4305-06 of 2002;
c decided on March 04, 2008. It was, therefore, submitted that
there is no substance in the appeal and the appeal deserves to
be dismissed.
17. Having heard learned counsel for the parties, two ques-
tions have been raised by the parties before us. Firstly, whether
D
the Income Tax Appellate Tribunal, Gujarat was right in exercis-
ing power under sub-section (2) of Section 254 of the Act on "'
the ground that there was a 'mistake apparent from the record'
committed by the Tribunal while deciding the appeal and
whether it could have recalled the earlier order on that ground.
E Secondly, whether on merits, the assessee is entitled to ex-
emption as claimed.
18. By the impugned order passed by the Tribunal and
confirmed by the High Court, the Income Tax Appellate Tribunal
F has merely recalled its earlier order passed in appeal and di-
;.
rected 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 assessee has no grievance
against the impugned order. In our opinion, therefore, it would
not be appropriate for this Court to decide the second question
G
which has been raised by the parties; viz. whether on merits,
the assessee is or is not entitled to exemption from payment of
tax under Section 11 of the Act. We, therefore, refrain from ex-
pressing any opinion on the second question.
..
H
ASSISTANTC0\'1MNR, INCOMETAX. RA.JKOTv. SAURASHTRA 433
KUTCH STOCK EXCHANGE LTD. [C.K. THAKKER, J.]
19. The learned counsel for the parties drew our attention A
to the relevant provisions of the Act. Section 252 of the Act pro-
vides for constitution of Income Tax Appellate Tribunal by the
Central Government consisting of as many judicial and accoun-
tant members as it .thinks fit to exercise the powers and dis-
' ~
charge the functions conferred on such Tribunal under the Act. It B
also provides for qualification of Members. It enacts that the
Central Government shall ordinarily appoint a judicial member
of the Tribunal to be the President thereof. Section 253 enables
an assessee aggrieved by any of the orders mentioned in the
said section to appeal to Tribunal. Section 254 deals with or- c
ders passed by the Tribunal and is material for the purpose of
controversy raised in the present appeal. The section as stood
then read thus;
254. Orders of Appellate Tribunal
D
(1) The Appellate Tribunal may, after giving both the parties
" to the appeal an opportunity of being heard, pass such
orders thereon as it thinks fit.
(2) The Appellate Tribunal may, at any time, within four
years from the date of the order, with a view to rectifying E
any mistake apparent from the record, amend any order
passed by it under sub-section (1), and shall make such
amendment if the mistake is brought to its notice by the
assessee or the Assessing Officer:
F
(4) Save as provided in Section 256, orders passed by
the Appellate Tribunal on appeal shall be final.
(emphasis supplied)
G
20. Section 255 of the Act lays down procedure to be fol-
" 1owed by the Tribunal. Section 256 provides for reference to
~
~
High Court at the instance of the assessee or Revenue. Sec-
tion 154 of the Act, likewise, empowers Income Tax Authorities
to rectify mistakes.
H
434 SUPREME COURT REPORTS [2008] 13 S.C.R.
A 21. Plain reading of sub-section (1) of Section 254 quoted
hereinabove makes it more than clear that the Tribunal will pass
an order after affording opportunity of hearing to both the par-
ties to appeal. Sub-section (4) expressly declares that save as
otherwise provided in Section 256 (Reference), "orders passed
B by the Appellate Tribunal on appeal shall be final". Sub-section
(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 rectify such mistake if it is
brought to notice of the Tribunal by the. assessee or the As-
e sessing Officer.
22. Sub-section (2) thus covers two distinct situations;
(i) It enables the Tribunal at any time within four years
from the date of the order to amend any order passed
under sub-section (1) with a view to rectify any mistake
D
apparent from the record; and
(ii) It requires the Tribunal to make such amendment if
the mistake is brought to its notice by the assessee
or the Assessing Officer.
E 23. It was submitted that so far as the first part is con-
cerned, it is in the discretion of the Tribunal to rectify the mis-
take which is clear from the use of the expression 'may' by the
Legislature. The second part, however, enjoins the Tribunal to
exercise the power if such mistake is brought to the notice of
F the Tribunal either by the assessee or by the Assessing Officer.
The use of the word 'shalf directs the Tribunal to exercise such
power.
24. There is, however, no dispute by and between the par-
G ties that if there is a 'mistake apparent from the record' and the
assessee brings it to the notice of the Tribunal, it must exercise
power under sub-section (2) of Section 254 of the Act. Whereas
the learned counsel for the Revenue submitted that in the guise
of exercise of power under sub-section (2) of Section 254 of
H the Act, really the Tribunal has exercised power of 'review' not
ASSISTANT Gavfv1NR, INCOME TAX, RAJKOT v. SAURASHTRA 435
KUTCH STOCK EXCHANGE LTD. [C.K. THAKKER, J.]
conferred on it by the Act, the counsel for the assessee urged A
that the power exercised by the Tribunal was of rectification of
'mistake apparent from the record' which was strictly within the
four corners of the said provision and no exception can be taken
· against such actiQ.n.
25. The learned counsel for the Revenue contended th.at B
a
the normal principle of law is that once judgment is pronounced
or order is made, a Court, Tribunal or Adjudicating Authority
becomes functus officio [ceases to have control over the mat-
ter]. Such judgment or order is 'final' and cannot be altered,
changed, varied or modified. It was also submitted that Income C
Tax Tribunal is a Tribunal constituted under the Act. It.is not a
'Court' having plenary powers, but a statutory Tribunal function-
ing under the Act of 1961. It, therefore, cannot act outside or de
hors the Act nor can exercise powers not expressly and spe-
cifically conferred by law. It is well-settled that the power of re- D
view is not an inherent power. Right to seek review of an order
is neither natural nor fundamental right of an aggrieved party.
Such power must be conferred by law. If there is no power of
review, the order cannot be reviewed.
26. Our attention, in this connection, was invited by the E
learned counsel to a leading decision of this Court in Patel
Narshi Thakershi & Ors. II. Pradyumansinghji Arjunsinghji,
(1971) 3 SCC 844. Deaifng with the provisions of the Saurashtra
Land Reforms Act, 1951 and referring to Order 47, Rule 1 of
the Code of Civil Procedure, 1908, this Court held that there is F
no inherent power of review with the adjudicating authority if it
is not conferred by law.
u .
27. The Court stated;
"It is well settled that the power to review is not an inherent . G·
power. It must be conferred by law either specifically or
by necessary implication. No provision in the Act was
brought to our notice !rom which it could be gathered that
the Government had power to review its own order. If the
Government had no power to review ·its own O!'_.der, it is H
436 SUPREME COURT REPORTS [2008] 13 S.C.R.
A obvious that its delegate could not have reviewed its order".
(emphasis supplied)
28. The view in Patel Narshi Thakershi has been reiter-
ated by this Court in several cases. It is not necessary for us to
B refer to all those cases. The legal proposition has not been dis- ' -
puted even by the learned counsel for the assessee.
29. In view of settled legal position, if the submission of
the learned counsel for the Revenue is correct that the Tribunal
has exercised power of review, the order passed by the Tribu-
e nal must be set aside. But, ifthe Tribunal has merely rectified a
mistake apparent from the record as submitted by the learned
counsel for the assessee, it was within the power of the Tribu-
J nal and no grievance can be made against exercise of such
power.
D
30. The main question, therefore, is: What is a 'mistake
apparent from the record'? Now, a similar expression 'error
apparent on the face of the record' came up for consideration
before courts while exercising certiorari jurisdiction under Ar-
ticles 32 and 226 of the Constitution. In TS. Balaram v. Vo/kart
E Brothers, Bombay, (1971) 2 SCC 526, this Court held that "any
mistake apparent from the record" is undoubtedly not more than
that of the High Court to entertain a writ petition on the basis of
an "error apparent on the face of the record". It was, however,
conceded in all leading cases that it is very difficult to define an
F "error apparent on the face of the record" precisely, scientifi-
cally and with certainty.
31. In the leading case of Hari Vishnu Karnath v. Syed
Ahmad /shaque, (1955) 1 SCR 1104, the Constitution Bench
G. of this Court quoted the observations of Chagla, C.J. in Batuk
K. Vyas v. Surat Municipality, ILR 1953 Born 191 : AIR 1953
Born 133 that no error can be said to be apparent on the face
of the record if it is not manifest or self-evident and requires an
examination_or argument to establish It. The Court admitted that
H though the said test might apply in majority of cases satisfacto-
ASSISTANTCO'v1MNR, INCCTVIETAX, RAJKOTv. SA.URASHTRA 437
KUTCH STOCK EXCHANGE LTD. [C.K. THAKKER, J.]
rily, it proceeded to comment that there might be cases in which A
it might not work inasmuch as an error of law might be consid-
ered by one Judge as apparent, patent and self-evident, but
might not be so considered 'by another Judge. The Court, there-
fore, concluded that an error apparent on the face of the record
cannot be defined exhaustively there being an element of in- B
definiteness inherent in its very nature and must be left to b.e
determined judicially on the facts of each case.
32. The Court stated;
"It may therefore be taken as settled that a writ of certiorari c
could be issued to correct an error of law. But it is essential
that it should be something more than a mere error; it
must be one which must be manifest on the face of the
record. The real difficulty with reference to this matter,
" however, is not so much in the statement of the principle
D
as in its application to the facts of a particular case. When
does an error cease to be mere error, and become an
error apparent on the face of the record? Learned
Counsel on either side were unable to suggest any clear-
cut rule by which the boundary between the two classes
of errors could be demarcated". E
(emphasis supplied)
33. In Satyanarayan Laxminarayan Hegde & Ors. v.
~
Mal/ikarjun Bhavanappa Tirumale, (1960) 1 SCR 890, th.is
.J. Court referring to Batuk K. Vyas and Hari Vishnu Karnath stated F
as to what cannot be said to be an error apparent on the face of
the record.
34. The Court observed;
"An error which has to be established by a long drawn G
,_ process of reasoning on points where there may
conceivably be two o'pinions can hardly be said to be an
error apparent on the face of the record. As the above
discussion ofthe rival contentions show the alleged error
in the present case is far from self evident and if it can be H
438 SUPREME COURT REPORTS (2008) 13 S.C.R.
A established, it has to be established by lengthy and
complicated arguments. We do not think such an error
can be cured by a writ of certiorari according to the rule
governing the powers of the superior court to issue such
a writ".
8 35. Again, in Syed Yakoob v. K.S. Radhakrishnan & Ors.,
(1964) 5 SCR 64, speaking for the Constitution Bench,
Gajendragadkar, J. (as his Lordship then was) stated;
"A writ of certiorari can be issued for correcting errors of
c jurisdiction committed by inferior courts or Tribunals; these
are cases where orders are passed by inferior courts or
tribunals without jurisdiction, or in excess of it, or as a
result of failure to exercise jurisdictions. A writ can £imilarly
be issued where in exercise of jurisdiction conferred on it,
the Court or Tribunal acts illegally or improperly, as for
D
instance, it decides a question without giving an
opportunity to be heard to the party affected by the order,
or where the procedure adopted in dealing with the dispute
is opposed to principles of natural justice. There is,
however, no doubt that the jurisdiction to issue a writ of
E certiorari is a supervisory jurisdiction and the Court
exercising it is not entitled to act as an appellate Court.
This limitation necessarily means that findings of fact
reached by the inferior Court or Tribunal as a result of the
appreciation of evidence cannot be reopened or
F questioned in writ proceedings. An error of law which is
apparent on the face of the record can be corrected by a
writ, but not an error of fact, however grave it may appear
to be. In regard to a finding of fact recorded by the Tribunal
a writ of certiorari can be issued if it is shown that in
G recording the said finding, the Tribunal had erroneously
refused to admit admissible and material evidence, or
had erroneously admitted inadmissible evidence which
has influenced the impugned finding. Similarly, if a finding
of fact is based on no evidence, that would be regarded
H as an error of law which can be corrected by a writ of
ASSISTANTcaJMNR, INCQ'vlETAX, RAJKOTv. SA.l..JRASHTAA 439
KUTCH STOCK EXCHANGE LTD. [C.K. THAKKER, J.]
certiorari. In dealing with this category of cases, however, A
we must always bear in mind that a finding of fact recorded
by the Tribunal cannot be challenged in proceedings for a
writ of certiorari on the ground that the relevant and material
evidence adduced before the Tribunal was insufficient or
~
inadequate to sustain the impugned finding. The adequacy B
or sufficiency of evidence led on a point and the inference
of fact to be drawn from the said finding are within the
exclusive jurisdiction of the Tribunal, and the said points
cannot be agitated before a writ court. It is within these
limits that the jurisdiction conferred on the High Courts
under Art. 226 to issue a writ of certiorari can be
c
legitimately exercised".
(emphasis supplied)
..., 36. The Court concluded;
D
"It is, of course, not easy to define or adequately describe
what an error of law apparent on the face of the record
means. What can be corrected by a writ has to be an error
of law; but it must be such an error of law as can be
regarded as one which is apparent on the face of the E
record. Where it is manifest or clearAhat the conclusion of
law recorded by an inferior Court or Tribunal is based on
an obvious mis-inter-pretation of the relevant statutory
provision, or sometimes in ignorance of it, or may be,
~
even in disregard of it, or is expressly founded on reasons F
which are wrong in law, the said conclusion can be
corrected by a writ of certiorari. In all these cases, the
impugned conclusion should be so plainly inconsistent
with the relevant statutory provision that no difficulty is
experienced by the High Court in holding that the said
G
I error of law is apparent on the face of the record. It may
also be that in some cases, the impugned error of law
~
may not be obvious or patent on the face of the record as
such and the Court may need an argument to discover the
said error; but there can be no doubt that what can be
H
-
440 SUPREME COURT REPORTS [2008] 13 S.C.R.
A corrected by a writ of certiorari is an error of law and the
said error must, on the whole, be of such a character as
would satisfy the test that it is an error of law apparent on
the face of the record. If a statutory provision is reasonably
capable of two constructions and one construction has
been adopted by the inferior Court or Tribunal, its
• •
8
conclusion may not necessarily or always be open to
correction by a writ of certiorari. In our opinion, it is neither
possible nor desirable to attempt either to define or to
describe adequately all cases of errors which can be
c appropriately described as errors of law apparent on the
face of the record. Whether or not an impugned error is
an error of law and an error of law which is apparent on
the face of the record, must always depenc upon the
facts and circumstances of each case and upon the
nature and scope of the legal provision which is alleged
D "'
to have been misconstrued or contravened".
(emphasis supplied)
37. In our judgment, therefore, a patent, manifest and self-
evident error which does not require elaborate discussion of
E evidence or argument to establish it, can be said to be an error
apparent on the face of the record and can be corrected while
exercising certiorari jurisdiction. An error cannot be said to be
apparent on the face of the record if one has to travel beyond
the record to see whether the judgment is correct or not. An
F error apparent on the face of the record means an error which
strikes on mere looking and does not need long- drawn-out pro-
cess of reasoning on points where there may conceivably be
two opinions. Such error should not require any extraneous
matter to show its incorrectness. To put it differently, it should
G- be so manifest and clear that no Court would permit it to remain
on record. If the view accepted by the Court in the original judg-
ment is one of the possible views, the case cannot be said to •
be covered by an error apparent on the face of the record.
38. Though the learned counsel for the assessee submit-
H
ASSISTANTCOV1MNR, INCOMETAX, RAJKOTv. 56.URASHTRA 441
KUTCH STOCK EXCHANGE LTO. [C.K. THAKKER, J.]
ted that the phrase "to rectify any mistake apparent from the A
record" used in Section 254(2) (as also in Section 154) is wider
in its content than the expression "mistake or error apparent on
the face of the record" occurring in Rule 1 of Order 47 of the
Code of Civil Procedure, 1908 [vide Kil Kotagiri Tea & Coffee
Estates Co. Ltd. v. Income-Tax Appellate Tribunal & Ors., B
(1988) 174 ITR 579 (Ker)], it is not necessary for us to enter
into the said question in the present case.
39. As stated earlier, the decision was rendered in ap-
peal by the Income Tax Appellate Tribunal, Rajkot. Miscella-
neous Application came to be filed by the assessee under sub- c
section (2) of Section 254 of the Act stating therein that a deci-
sion of the 'Jurisdictional Court', i.e. the High Court of Gujarat
in Hirata/ Bhagwati was not brought to the notice of the Tribunal
and thus there was a "mistake apparent from record" which re-
quired rectification. D
40. The core issue, therefore, is whether non-consider-
ation of a decision of Jurisdictional Court (in this case a deci-
sion of the High Court of Gujarat) or of the Supreme Court can
;)- be said to be a "mistake apparent from the record"? In our opin-
ion, both - the Tribunal and the High Court- were right in holding E
that such a mistake can be said to be a "mistake apparent from
the record" which could be rectified under Section 254(2).
I
41. A similar question came up for consideration before
.. the High Court of Gujarat in Suhrid Ge~gy Limited v. Commis- F
sionerof Surtax, Gujarat, (1999) 237 ITR 834 (Guj). It was held
by the Division Bench of the High Court that if the point is cov-
ered by a decision of the Jurisdictional Court rendered prior or
even subsequent to the order of rectification, it could be said to
be "mistake apparent from the record" under Section 254 (2) of
G
the Act and could be corrected by the Tribunal.
l> 42. In our judgment, it is also well-settled that a judicial
decision acts retrospectively. According to Blackstonian theory,
it is not the function of the Court to pror:iounce a 'new rule' but to
maintain and expound the 'old one'. In other words, Judges do H
442 SUPREME COURT REPORTS [2008] 13 S.C.R.
A not make law, they only discover or find the correct law. The law
has always been the same. If a subsequent decision alters the
earlier one, it (the later decision) does not make new law. It only
discovers the correct principle of law which has to be applied
retrospectively. To put it differently, even where an earlier deci-
B sion of the Court' operated for quite some time, the decision
. .
rendered later on would have retrospective effect clarifying the
legal position which was earlier not correctly understood.
43. Salmond in his well-known work states;
c "(T)he theory of case law is that a judge does not make
law; he merely declares it; and the overruling of a previous
decision is a declaration that the supposed rule never
was law. Hence any intermediate transactions made on
the strength of the supposed rule are governed by the law
established in the overruling decision. The overruling is
D
retrospective, except as regards matters that are res
;udicatae or accounts that have been settled in the
meantime''.
(emphasis supplied)
E <
44. It is no doubt true that after a historic decision in Golak
Nath v. Union of India, (1967) 2 SCR 762, this Court has ac-
cepted the doctrine of 'prospective overruling'. It is based on.
the philosophy: "The past cannot always be erased by a new
judicial declaration". It may, however, be stated that this is an
F exception to the general rule of the doctrine of precedent
45. Rectification of an order stems from the fundamental
principle that justice is above all. It is exercised to remove the
error and to disturb the finality.
G 46. In S. Nagaraj & Ors. v. State of Kamataka, 1993 Supp
(4) SCC, Sahai, J. stated;
"Justice is a virtue which transcends all barriers. Neither
the rules of procedure nor technicalities of law can stand
in its way. The order of the Court should not be prejudicial
H
ASSISTANTCOVMNR, INCOME TAX, RAJKOTv. SL\URAsHTRA 443
KUTCH STOCK EXCHANGE LTD. [C.K. THAKKER, J.]
to anyone. Rule of stare decisis is adhered for consistency A
but it is not as inflexible in Administrative Law as in Public
Law. Even the law bends before justice. Entire concept of
writ jurisdiction exercised by the higher courts is founded
on equity and fairness. If the Court finds that the order was
passed under a mistake and it would not have exercised B
the jurisdiction but for the erroneous assumption which in
fact did not exist and its perpetration shall result in
miscarriage of justice then it cannot on any principle be
precluded from rectifying the error. Mistake is accepted
as valid reason to recall an order. Difference lies in the c
nature of mistake and scope of rectification, depending
on if it is of fact or law. But the root from which the power
flows is the anxiety to avoid injustice. It is either statutory
or inherent. The latter is available where the mistake is of
the Court. In Administrative Law, the scope is still wider.
Technicalities apart if the Court is satisfied of the injustice D
then it is its constitutional and legal obligation to set it right
by recalling its order".
47. In the present case, according to the assessee, the
Tribunal decided the matter on October 27, 2000. Hiralal E
Bhagwati was decided few months prior to that decision, but it
was not brought to the attention of the Tribunal. In our opinion, in
the circumstances, the Tribunal has not committed any error of
law or of jurisdiction in exercising power under sub-section (2)
of Section 254 of the Act and in rectifying "mistake apparent F
from the record". Since no error was committed by the Tribunal
in rectifying the mistake, the High Court was not wrong in con-
firming the said order. Both the orders, therefore, in our opin-
ion, are strictly in consonance with law and no interference is
called for.
G
48. For the foregoing reasons, in our view, no case has
been made out to interfere with the order passed by the Income
• Tax Appellate Tribunal, Ahmedabad and confirmed by the High
Court of Gujarat. The appeal deserves to be dismissed and is
accordingly dismissed. On the facts and in the circumstances H
444 SUPREME COURT REPORTS (2008] 13 S.C.R.
A of the case, however, the parties are ordered to bear their own
costs.
49. Before parting, we may state that we have not stated
anything on the merits of the matter. As indicated earlier, the
assessee has not approached this Court. Only the Revenue
8 has challenged the order passed under Section 254(2) of the
Act. The Tribunal, in view of the order of rectification, has di-
rected the Registry to fix the matter for re-hearing and as such
the appeal will be heard on merits. We, therefore, clarify that
we may not be understood to have expressed any opinion one
C way or the other so far as exemption from payment of tax claimed
by the assessee is concerned. As and when the Tribunal will
hear the matter, it will decide on its own merit without being
influenced by any observations made by it in the impugned or-
der or in the order of the High Court or in this judgment.
D
50. Ordered accordingly.
N.J. Appeal dismissed.
"
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