Facts of the Case

The Income Tax Appellate Tribunal (ITAT) had dismissed the appeals filed by the assessees. Aggrieved by those orders, the assessees preferred appeals before the Delhi High Court under Section 260A of the Income-tax Act, 1961. Those appeals were already pending consideration before the High Court.

Subsequently, the assessees filed applications before the ITAT under Section 254(2) of the Income-tax Act, contending that certain errors apparent on the face of the record existed in the Tribunal’s earlier orders.

The Tribunal, by orders dated 30.06.2009, dismissed the rectification applications. The present appeals were filed before the Delhi High Court challenging the dismissal of those Section 254(2) applications.

Issues Involved

  1. Whether the Income Tax Appellate Tribunal can re-examine the merits of a case while exercising powers under Section 254(2) of the Income-tax Act.
  2. Whether rectification proceedings can be used as a substitute for appellate remedies.
  3. Whether the assessees could still raise the alleged errors before the High Court in the pending appeals under Section 260A.

Petitioner’s Arguments

  • The assessees contended that the Tribunal's original orders suffered from errors apparent on the face of the record.
  • It was argued that such apparent mistakes required rectification under Section 254(2) of the Income-tax Act.
  • The assessees challenged the Tribunal’s refusal to rectify the alleged mistakes and sought interference by the High Court.

Respondent’s Arguments

  • The Revenue supported the Tribunal’s orders dismissing the rectification applications.
  • It was submitted that Section 254(2) is confined to rectification of apparent mistakes and does not empower the Tribunal to revisit or review the merits of its earlier decision.
  • The proper remedy against an allegedly erroneous order of the Tribunal was an appeal under Section 260A, which had already been filed by the assessees.

Court Findings / Observations

The Delhi High Court noted that the assessees had already filed appeals under Section 260A against the substantive orders passed by the ITAT and those appeals were pending before the Court.

The Court observed that the Tribunal, while rejecting the applications under Section 254(2), had correctly recorded that it was not open to re-examine the merits of the case and arrive at a different conclusion from that already reached.

The High Court further noted that if the view taken by the Tribunal in the original orders was erroneous, the remedy lay in pursuing the statutory appeal against those orders and not through rectification proceedings.

The Court recognized that the grounds relating to the alleged errors could still be urged by the assessees in the pending Section 260A appeals.

Court Order

The Delhi High Court disposed of the appeals while expressly reserving the right of the assessees to raise and argue the grounds concerning the alleged errors apparent on the face of the record in the pending appeals against the Tribunal’s original orders.

No interference was made with the Tribunal’s orders rejecting the applications under Section 254(2).

Important Clarification

  • Proceedings under Section 254(2) are limited to rectification of mistakes apparent from the record.
  • The provision does not confer a power of review upon the Tribunal.
  • The Tribunal cannot reconsider the merits of the case or arrive at a fresh conclusion under the guise of rectification.
  • Where a party alleges that the Tribunal’s decision on merits is incorrect, the proper remedy is to file an appeal under Section 260A.
  • Pendency of an appeal under Section 260A enables the appellant to raise all legally permissible grounds challenging the Tribunal’s order.

Sections Involved

  • Section 254(2), Income-tax Act, 1961 – Rectification of mistake apparent from the record by the Income Tax Appellate Tribunal.
  • Section 260A, Income-tax Act, 1961 – Appeal to the High Court against orders of the Income Tax Appellate Tribunal.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2009:DHC:7246-DB/AKS29072009ITA8772009_161021.pdf

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