Wish you all a very happy, prosperous, healthy and wealthy year 2022. While I pen this editorial, India is celebrating Makar Sankranti. I wish all the readers a very happy Makar Sankranti. This festival is celebrated all over the country, in diverse ways, with different names. This festival of harvest brings hope and dispels the gloom, caused by COVID-19, through different variants. While economic activity is showing signs of recovery the current growth rate is more than the Pre COVID-19 growth rate. The latest variant of COVID-19 ‘Omicron’ is threatening to disrupt these gains, made by the economy. The onus is on us to thwart this attempt by adhering to COVID-19 appropriate behavior.
I would like to discuss an anomaly, caused by a recent decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Communications [Civil Appeals 7110 and 7111 of 2021 dated 3rd Dec. 2021]. In this decision, while considering the scope of powers of Income Tax Appellate Tribunal [ITAT] under section 254(2) of the Income tax Act, 1961 (hereinabove referred to as “the Act”), the Hon’ble Supreme Court observed that “Even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers may pass an order recalling its earlier order which is an erroneous order, cannot be accepted. As observed hereinabove, if the order passed by the ITAT was an erroneous on merits, in that case, the remedy available to the assessee was to prefer an appeal before the High Court, which in fact was filed by the Assessee before the High Court, but later on the assessee withdrew the same in the instant case.”
It is interesting to note that the same provisions were considered by the Apex Court on earlier occasions and came to different conclusion. The observations, made by the Apex Court, especially in the case of ACIT vs. Saurashtra Kutch Stock Exchange Ltd (2008) 305 ITR 227 (SC), are at variance with the above observations. Similarly, the Hon’ble Supreme Court in the case of Honda Siel Power Projects Limited vs. CIT (2007) 295 ITR 466 (SC) observed that “As stated above, the expression “rectification of mistake from the record” occurs in section 154. Also finds place in section 254 (2). The purpose behind enactment of section 254(2) is based on the fundamental principle that no party appearing before the Tribunal, be it an assesse or the department, should suffer on account of any mistake committed by the Tribunal. This fundamental principle has nothing to do with the inherent powers of the Tribunal.” The Hon’ble Court further observed that “Rule of Precedent” is an important aspect of legal certainty in rule of law. That principle is not obliterated by section 254(2) of the Income tax Act, 1961. When prejudice results from an order attributable to the Tribunals mistake, error or omission, it is the duty of the Tribunal to set it right. Atonement to the wronged party by the court or Tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review.”
It is quite interesting to note that the above mentioned Civil Appeals were preferred by the Department against the decision of Bombay High Court in WP 1406 of 2017, 1431 of 2017 and 1432 of 2017 wherein the order of the ITAT under section 254(2) of the Act to recall its order dated 6th September, 2013 under section 254(1) of the Act. The ITAT, it is important note that, while passing the order under section 254(1) dated 6th September, 2013 had followed the ratio laid down by the Karnataka High Court in the case of CIT vs. Samsung Electronics Ltd. (2012) 345 ITR 494 (Kar.). The Assessee’s grievance was, during the course of hearing, across the bar it had cited several decisions of the coordinate benches of the ITAT and the decision of Delhi High Court in the case of DCIT vs. Ericsson AB (2012) 343 ITR 470. However, the ITAT preferred to follow the ratio laid down by the Karnataka High Court. The Assessee moved the miscellaneous applications to point out these mistakes apparent on record. The ITAT allowed the miscellaneous applications filed by the assessee. Now it is interesting to note that the above referred decision of the Karnataka High Court CIT versus Samsung Electronics Co Ltd is subsequently reversed by the Apex Court in the case of Engineering Analysis Centre of Excellence Private Limited versus CIT (2021) 432 ITR 471(SC). Thus, the anomaly is, the issue on merits is concluded by the Apex Court in favour of the assesse. However, the above decision puts the assesse in the same situation as it was, after the ITAT’s decision under section 254(1) dated 6th September, 2013. It seems the decisions referred to herein above were not brought to the notice of the Apex Court. Otherwise, the Hon’ble Court may have come to a different conclusion. The decisions of the ITAT are final with respect to facts. Certain times, the law is applied by appreciating the facts in a wrong manner then such mistake may have to be rectified by the ITAT which may amount to change the outcome of the appeal. Now, such error can be rectified only through an appeal under section 260A of the Act. Our experience shows that an appeal filed before the High Court under section 260A of the Act takes years before it is finally heard.
In this issue of the AIFTP-Journal eminent professionals have contributed their articles. I thank them for sparing their valuable time for the journal.