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

Citation: [2008] 13 S.C.R. 421

Court: Supreme Court of India

Bench: C.K. THAKKER, LOKESHWAR SINGH PANTA

Case summary

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

Judgment text

[2008] 13 S. C. R. 421 ASSISTANT COMMISSIONER, INCOME TAX, RAJKOT v. SAURASHTRA KUTCH STOCK EXCHANGE LTD. (Civil Appeal No. 1171 of 2004) SEPTEMBER 15, 2008 [C. K. THAKKER AND LOKESHWAR SINGH PANTA, JJ. ] Income Tax Act, 1961: s. 254(2): Exercise ofpower 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 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 rendered 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 - Rectification - 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 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. • Review- Power of- Held: Is not an inherent power- It is neithernatural nor fundamental right ofaggrieved 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 of tribunal.

8 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 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. 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 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 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 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. Dismissing the appeal, the Court. ASSISTANTCCM\1NR, INCOMETAX, RAIKOTv. SAURASHTRA 423 KUTCH STOCK EXCHANGE LTD. HELD: 1. 1 The plain reading of sub-section (1) of 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 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, 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 '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. [Paras 21, 23 and 24) [433-G-H; 434-A,D-F) 1. 2 The power of review 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. In view of the settled legal position, if the submission of the the Revenue is correct that 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·· [2008] 13 S. C. R. 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. y .. , 2. A patent, manifest and self-evident error which 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 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 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 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 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 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 subsequent decision alters the earlier one, it (the later deci- ASSISTANTCav\\'INR, INCOMETAX, RAJKOTv. &\URASHTRA 425 KUTCH STOCK EXCHANGE LTD. sion) 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 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 understood. [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] 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 " 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 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 "mistake apparent from the record" which could be recti- ~ tied under Section 254(2) of the Act. [Para 40) [441-C) 4. 2 In the instant case, the tribunal decided the matter on 27. 10. 2000. Hirata/ Bhagwati was decided few months prior to that decision, but it was not brought to the attention of the Tribunal. 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 from the record". Since • ) 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 not make law, they only discover or find the correct law. The law has always been the same. If asubsequent 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- . . 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; "(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 retrospective, except as regards matters that are res ;udicatae or accounts that have been settled in the meantime''. (emphasis supplied) < 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 accepted 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 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. 46. In S. Nagaraj & Ors. v. State ofKamataka, 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 ASSISTANTCOVMNR, INCOMETAX, RAJKOTv.

SL\URAsHTRA 443 to anyone. Rule of stare decisis is adhered for consistency 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 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 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 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 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 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. Both the orders, therefore, in our opinion, are strictly in consonance with law and no interference is called for. 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 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 directed 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 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 order or in the order of the High Court or in this judgment. 50. Ordered accordingly. N. J. Appeal dismissed. "