# ASSISTANT COMMISSIONER, INCOME TAX, RAJKOT v. SAURASHTRA KUTCH STOCK EXCHANGE LTD

- **Citation:** [2008] 13 S.C.R. 421
- **Court:** Supreme Court of India
- **Decided:** 2008-09-15
- **Case number:** Civil Appeal No. 1171 of 2004
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/assistant-commissioner-income-tax-rajkot-v-saurashtra-kutch-stock-exchange-ltd-23541
- **Pages:** 24

## Headnote

[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 - However, 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 tribunal - Held: Is "mistake apparent from the record" which can
be rectified u/s. 254(2) - Decision of jurisdictional court renE
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 - RectificaF
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 longdrawn-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 order 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 prospective - 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 applied retrospectively - Even where earlier decision operated
for quite some time, decision rendered later on would have
retrospective effect clarifying the legal position which was earlier not correctly understood.
D
Doctrine of 'prospective overruling' - object of.
Respondent-assessee is a Stock Exchange. The assessee 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 Application uls. 254(2) of the Act on the ground that the decision 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 order 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 affording 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 Appel

## Text

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[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 - However, 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 tribunal - Held: Is "mistake apparent from the record" which can
be rectified u/s. 254(2) - Decision of jurisdictional court renE
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 - RectificaF
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 longdrawn-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 order 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 prospective - 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 applied retrospectively - Even where earlier decision operated
for quite some time, decision rendered later on would have
retrospective effect clarifying the legal position which was earlier not correctly understood.
D
Doctrine of 'prospective overruling' - object of.
Respondent-assessee is a Stock Exchange. The assessee 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 Application uls. 254(2) of the Act on the ground that the decision 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 order 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 affording 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-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 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 Tribunal 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 either 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 'misE
take 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. [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 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. In view of the settled legal position, 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 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
c 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 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 error should not require any extraneous matter to show its
"
incorrectness. To put it differently, it should 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
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 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 - referred 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 subH 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 corA
rect principle of law which has to be applied retrospectively. 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 unB
derstood. [Para 42) [441 F-G]
3.2. The doctrine of 'prospective overruling' is an exception 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 Jurisdictional 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 attention of the Tribunal. In the circumstances, the Tribunal has
not committed any error of law or of jurisdiction in exercisG
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 consoH
426
SUPREME COURT REPORTS
[2008] 13 S.C.R.
A nance with law and no case has been made out to interfere 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 confirmed 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 assessee has no grievance against the impugned order. ThereD 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. Therefore, this Court refrains from expressing any opinion on
the said question. As and when the tribunal will hear the
E
matter, it will decide the matter on its own merits without
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
Referred to.
Para 30
(1955) 1 SCR 1104
Referred to.
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
(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
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 1171
of 2004
A
B
From the final Judgment and Order dated 31.3.2003 of
the High Court of Gujarat atAhmedabad in Special Civil Application 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.
The Judgment of the Court was delivered by
D
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 Application No. 1247 of 2002 (Assistant Commissioner of IncomeE
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 apF
· 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 Companies 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' entitled to exemption under Sections 11 and 12 of the Act from
payment of income-tax. The assessee, therefore, made an application on February 10, 1992 for registration under Section
12A of the Act. The Commissioner of Income Tax, Rajkot regis8 tered it on July 8, 1996. The assessee filed its return of income
~ ~
on October 29, 1996 forthe assessment year 1996-97 declaring its total taxable income as 'Nil', claiming exemption under
Section 11 of the Act although the assessee had not been registered under Section 12A of the Act. The return was processed
c under sub-section (1 )(a) of Section 143 of the Act. On November 7, 1997, a notice was issued to the assessee by the Commissioner 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
0 asserted that in accordance with Section 12A of the Act, the
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 regarding exemption under Section 11 of the Act would be examE 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-section (3) of Section 143 of the Act and rejected the claim of exF emption under Section 11 of the Act.
;.
4. Being aggrieved oy the said order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Rajkot. The Commissioner, vide his order dated February 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 Commissioner of Income Tax by filing further appeal before the Income
-.. ·
Tax Appellate Tribunal, Rajkot. The Tribunal, however, held that
H
the authorities were right in not granting exemption and in hold-
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 Miscellaneous 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 application, the Tribunal relied upon a decision rendered by the High C
Court of Gujarat in Hirata/ Bhagwati v. Commissioner of Income Tax, (2000) 246 ITR 188 as also in Suhrid Geigy Limited 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 vacaF
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 exG
ercising power under sub-section (2) of Section 254 of the Act
and in recalling its earlier order passed in appeal. It was submitted 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. Miscellaneous 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 inc 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 error 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 orders, 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 Section 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. CommisF 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 consider the appeal of the Revenue on merits and decide whether
G the order passed by the Tribunal in the appeal was in consonance 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 Miscellaneous 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, thereB
..
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 decision. 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 illegality can be said to have been committed by the Tribunal in
allowing the application and in recalling the order and no grievance can be made against such action of the Tribunal. Moreover, no prejudice had been caused to the Revenue inasmuch
F
A\
as the Tribunal has not allowed the appeal filed by the assessee 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 dismissed 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 interference is called for.
16. The counsel also submitted that even on merits, the
Tribunal was right in recalling its earlier order. The assessee is
B
entitled to exemption from payment of tax as 'trust' inasmuch
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 quesD tions have been raised by the parties before us. Firstly, whether
the Income Tax Appellate Tribunal, Gujarat was right in exercising 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
E whether it could have recalled the earlier order on that ground.
Secondly, whether on merits, the assessee is entitled to exemption 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 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 assessee has no grievance
against the impugned order. In our opinion, therefore, it would
G not be appropriate for this Court to decide the second question
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 expressing 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
to the relevant provisions of the Act. Section 252 of the Act provides for constitution of Income Tax Appellate Tribunal by the
Central Government consisting of as many judicial and accountant members as it .thinks fit to exercise the powers and discharge the functions conferred on such Tribunal under the Act. It
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 orders 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
(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
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:
(4) Save as provided in Section 256, orders passed by
the Appellate Tribunal on appeal shall be final.
(emphasis supplied)
20. Section 255 of the Act lays down procedure to be fol1owed by the Tribunal. Section 256 provides for reference to
High Court at the instance of the assessee or Revenue. Section 154 of the Act, likewise, empowers Income Tax Authorities
to rectify mistakes.
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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 parties 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 Ase sessing Officer.
D
E
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
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.
23. It was submitted that so far as the first part is concerned, it is in the discretion of the Tribunal to rectify the mistake 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 parG 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
the normal principle of law is that once a judgment is pronounced
or order is made, a Court, Tribunal or Adjudicating Authority
becomes functus officio [ceases to have control over the matter]. 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 functioning under the Act of 1961. It, therefore, cannot act outside or de
hors the Act nor can exercise powers not expressly and specifically conferred by law. It is well-settled that the power of reD
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
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[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 reiterated 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 disputed 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 Tribue 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 TribuJ
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 Articles 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, scientifically 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-
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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 considered by one Judge as apparent, patent and self-evident, but
'
might not be so considered by another Judge. The Court, therefore, concluded that an error apparent on the face of the record
cannot be defined exhaustively there being an element of inB
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
as in its application to the facts of a particular case. When D
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 clearcut rule by which the boundary between the two classes E
of errors could be demarcated".
(emphasis supplied)
~
33. In Satyanarayan Laxminarayan Hegde & Ors. v.
J.
Mal/ikarjun Bhavanappa Tirumale, (1960) 1 SCR 890, th.is
F
Court referring to Batuk K. Vyas and Hari Vishnu Karnath stated
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
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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".
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
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
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
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
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
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
as an error of law which can be corrected by a writ of
ASSISTANTcaJMNR, INCQ'vlETAX, RAJKOTv. SA.l..JRASHTAA 439
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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
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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
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
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
to have been misconstrued or contravened".
(emphasis supplied)
37. In our judgment, therefore, a patent, manifest and selfevident 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 process 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
H
on record. If the view accepted by the Court in the original 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.
38. Though the learned counsel for the assessee submit-
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ASSISTANTCOV1MNR, INCOMETAX, RAJKOTv. 56.URASHTRA 441
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