Facts of the Case

The present appeals were filed by the Revenue against the order dated 01.04.2022 passed by the Income Tax Appellate Tribunal (ITAT) concerning Miscellaneous Applications arising out of earlier appeals. The matter related to Assessment Years 2008-09 and 2009-10.

The Tribunal had earlier passed an order dated 26.10.2018 on merits. Subsequently, the assessee filed applications under Section 254(2) of the Income Tax Act, 1961 seeking recall of the said order on the ground that no notice of hearing was received, resulting in non-appearance.

The Tribunal, being satisfied with the explanation and supporting affidavit filed by the assessee, recalled its earlier order. Aggrieved by this recall, the Revenue preferred appeals before the Delhi High Court.

 Issues Involved

  1. Whether the ITAT has the power under Section 254(2) of the Income Tax Act, 1961 to recall an order passed on merits.
  2. Whether non-service of notice and absence of opportunity of hearing justifies recall of an ex parte order.
  3. Whether such recall falls within rectification of mistake apparent on record or exceeds statutory jurisdiction.

 Petitioner’s Arguments (Revenue)

  • The Revenue contended that Section 254(2) permits only rectification of mistakes apparent on record and does not empower the Tribunal to recall an order passed on merits.
  • It was argued that the Tribunal exceeded its jurisdiction by reviewing its earlier decision under the guise of rectification.
  • The recall of the order dated 26.10.2018 was therefore alleged to be legally unsustainable.

 Respondent’s Arguments (Assessee)

  • The assessee submitted that it had not received notice of the hearing, which resulted in its absence when the matter was taken up.
  • An affidavit of the Director was filed to substantiate the claim of non-receipt of notice.
  • It was contended that denial of opportunity of hearing violated principles of natural justice, and therefore recall of the order was justified.

 Court Findings / Judgment

  • The Court observed that the Tribunal had recorded incorrect appearances of parties, which constituted a mistake on record.
  • It noted that the assessee’s assertion regarding non-receipt of notice was not controverted by the Revenue.
  • The Tribunal rightly applied the principle that no party should be condemned unheard and recalled the ex parte order in the interest of justice.
  • The Court held that even if Section 254(2) is narrowly interpreted, the Tribunal possesses incidental and ancillary powers to recall its order to prevent miscarriage of justice.
  • Reliance was placed on judicial precedents affirming that rectification powers include correcting errors causing prejudice due to tribunal’s mistake.
  • The Court further upheld that Rule 25 of the Income Tax Appellate Tribunal Rules, 1963 independently empowers the Tribunal to set aside ex parte orders upon sufficient cause being shown.

 Court Order

The Delhi High Court found no merit in the appeals filed by the Revenue and dismissed both appeals, thereby upholding the Tribunal’s decision to recall the earlier order.

 Important Clarifications

  • The Tribunal can recall an order where a party was not given proper opportunity of hearing.
  • Rectification under Section 254(2) includes correction of procedural errors leading to injustice.
  • Incidental and ancillary powers of the Tribunal extend beyond strict statutory interpretation when required to uphold natural justice.
  • Rule 25 of the ITAT Rules provides independent authority for recall of ex parte orders.
  • Non-mention of the source of power does not invalidate the exercise of such power if it otherwise exists in law.

 Sections Involved

  • Section 254(2) of the Income Tax Act, 1961
  • Rule 25 of the Income Tax Appellate Tribunal Rules, 1963

Link to download the order https://delhihighcourt.nic.in/app/showFileJudgment/RAS13022023ITA782023_120307.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.