Facts :  The assessee, a stock exchange, was a company registered u/s. 25 of the Companies Act, 1956. As a ‘stock exchange’, it was a ‘charitable institution’ entitled to exemption under ss. 11 and 12 of the Act. On application by the assessee, the registration u/s. 12A was granted to the assessee. The registration was granted with a condition that the same will be examined on a year to year basis. In the Return of Income filed for A.Y. 1996-97, the assessee declared Nil taxable income claiming exemption u/s. 11 of the Act. The Return was initially processed u/s. 143(1)(a) of the Act. Later the assessee was served with a notice u/s. 154 of the Act proposing rectification in its case and withdrawing the exemption u/s. 11. The assessee replied to the notice that the exemption was claimed in accordance with section 12A and it was entitled to the exemption u/s. 11. The regular assessment in the case of the assessee was completed by order dated 3-12-1999 u/s. 143(3) of the Act rejecting the claim of exemption u/s. 11 of the Act. The CIT (A) confirmed the order of the assessing officer and dismissed the appeal of the assessee. On further appeal, the Tribunal confirmed that the authorities were right in not granting exemption. The appeal of the assessee was accordingly dismissed by the Tribunal on 27^thOctober 2000.

The Gujarat High Court in the case of Hiralal Bhagwati v. CIT (2000) 246 ITR 188 (Guj) (HC)  had held that the Trust was entitled to exemption u/s. 11 of the Act on the facts similar to that of the assessee. The aforesaid decision was rendered few months prior to the order of the Tribunal in the case of the appellant. However, unfortunately the said decision was not cited before the Tribunal at the time of hearing of the appeal. The appellant later on took a note of the aforesaid decision and thereafter filed a Miscellaneous Application before the Tribunal u/s. 254(2) of the Act on 13^th November, 2000. The Tribunal allowed the Miscellaneous 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 27^th October 2000. The Tribunal relied upon the decision in the case of Hiralal Bhagwati v. CIT (supra) and also in Suhrid Geigy Ltd. v. CIT (1999) 237 ITR 834 (Guj)(HC)  

Dissatisfied with the order passed by the Tribunal in miscellaneous application, rectifying a ‘mistake apparent from record’ and recalling its earlier order, the Revenue filed a writ petition before the Gujarat High Court, which was dismissed by the High Court on 31^st March, 2003. [Asstt. CIT v. Saurashtra Kutch Stock Exchange Ltd. (2003) 262 ITR 146 (Guj) (HC) ]. The revenue filed appeal against the said decision of the Gujarat High Court before the Hon. Supreme Court.

Issues : Whether the Tribunal was right in exercising power under sub-s. (2) of s. 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 whether it could have recalled the earlier order on that ground. Secondly,

whether on merits, the assessee is entitled to exemption as claimed.

Views : Before the Supreme Court, the Revenue contended that the Tribunal committed an error of law and of jurisdiction in exercising power under sub-s. (2) of s. 254 of the Act and in recalling its earlier order passed in appeal. It has no power to review its own decisions. Power under s. 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’. The order of the Tribunal has attained finality in accordance with sub-section (4) of section 254 of the Act and such finality cannot be disturbed by resorting to sub-section (2) of the section 254. The revenue also argued that even on merits of the case, the assessee’s claim was not maintainable. The Tribunal had relied on the decision of the Gujarat High Court in the case of Hiralal Bhagwati (supra), but a contrary view taken by the Supreme Court in Delhi Stock Exchange Association Ltd. v.. CIT (1997) 225 ITR 235 (SC). The revenue contended that in view of the declaration of law by the Supreme Court, the assessee was not entitled to the exemption on merits of the case.

Per Contra the assessee supported the order passed by the Tribunal in the Miscellaneous Application and recalling of its earlier order. The assessee argued that the Tribunal was functioning by exercising its powers in the State of Gujarat and, being an inferior Tribunal, it was subject to the supervisory jurisdiction of the High Court of Gujarat under Article 227 of the Constitution. The Tribunal is, therefore, bound by a decision of the High Court of Gujarat. The issue that came up for consideration before the authorities related to exemption u/s. 11 to the trust which has been considered by the Gujarat High Court in the case of Hiralal Bhagwati (supra). All the authorities under the Act including the Tribunal were bound by the said decision. Therefore, there was a mistake apparent from record and the Tribunal was bound to recall its earlier order, which has been done. There cannot be any illegality in the Tribunal’s action recalling the earlier order. The assessee also argued that the Tribunal has not allowed its appeal nor has quashed the assessment order and accordingly there was no prejudice caused to the revenue due to mere recalling of the order.  As regards the merits of the claim, the assessee contended that the assessee was entitled to the exemption. The assessee contended that the view taken by the Gujarat High Court in the case of Hiralal Bhagwati (supra) had been approved by the Supreme Court in the case of Asstt. CIT v. Surat City Gymkhana, (2008) 5 DTR 115 (SC) . It was, therefore, submitted that there is no substance in the appeal of the department and the appeal deserves to be dismissed.

Held : The Supreme Court observed that by the order in the Miscellaneous Application, the Tribunal has merely recalled its earlier order in appeal and the same will be heard again. The appeal is filed by the revenue. The assessee has no grievance against the impugned order and therefore, it would not be appropriate for the Supreme Court to decide on the merits of the matter. The Supreme Court accordingly refrained from expressing any opinion on the second question relating to the merits of the matter.

Thereafter the Supreme Court took cognizance of the provisions of section 254. The Supreme Court observed that sub-section (2) of the section 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 AO. There is, however, no dispute by and between the parties 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. The Supreme Court appreciated that though the power to review the order (as contended to have been done by the revenue) is not available to the Tribunal under section 254, the power to rectify the mistake apparent from the record (as contended to have been done by the assessee) is certainly available under section 254 of the Act.

Accordingly, the Supreme Court observed that the main question is as to what constitutes a mistake apparent from the record for the purpose of section 254(2) of the Act?  The Supreme Court referred to decisions in the cases of T.S. Balaram, ITO v. Volkart Bros. (1971) 2 SCC 526 ; Hari Vishnu Kamath v. Syed Ahmad Ishaque (1955) 1 SCR 1104; Batuk K. Vyas v. Surat Municipality I LR 1953 Bom 191 : AIR 1953 (Bom) 133 ; Satyanarayan Laxminarayan Hegde  v. Mallikarjun Bhavanappa Tirumale (1960) 1 SCR 890. The Supreme Court finally held that 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 (rectification). 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. The Supreme Court held that non-consideration of a decision of jurisdictional Court or of the Supreme Court can be said to be a “mistake apparent from the record”.

In view of these observations, the Supreme Court concluded that 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 were held to be strictly in consonance with law and no interference was called for. (AY.1996 -97)   (CA No. 1171 of 2004 dt 15 -9 2008)

Editorial : In CIT v. Honda Siel Power Products Ltd  v.  CIT  (2007) 295  ITR 466 (SC), the Court held that the non consideration of the decision of a Co-ordinate Bench of the Tribunal is a mistake apparent from the record. In CIT

1. VLS Finance Ltd (2008) 310 ITR 224 (Delhi) (HC), Kailasnath Malhotra v. JCIT (2009) 34 SOT 541 (TM) (Mum) (Trib), it was held that non-consideration of decision of Supreme Court or Jurisdictional High Court is a mistake apparent from record and rectifiable under section 254(2) of the Act. Refer CBDT Circular No. 68 dt. 17-11-1971 (1972) 83 ITR 6 (St).

“Life is an aspiration. Its mission is to strive after perfection, which is self-realization.  The  ideal must not be lowered because of our weaknesses    or imperfections.”

– Mahatma Gandhi