REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1171 OF 2004

ASSISTANT COMMISSIONER,

INCOME TAX, RAJKOT … APPELLANT

VERSUS

SAURASHTRA KUTCH STOCK

EXCHANGE LTD. … RESPONDENT

J U D G M E N T

C.K. THAKKER, J.

1. The present appeal is directed against

the judgment and order passed by the High Court

of Gujarat, Ahmedabad on March 31, 2003 in

Special Civil Application No. 1247 of 2002

[Assistant Commissioner of Income-Tax v.

Saurashtra Kutch Stock Exchange Ltd., (2003)

262 ITR 146]. By the said judgment, the High

Court confirmed the order passed by the Income

Tax Appellate Tribunal, Ahmedabad on September

5, 2001 in Misc. Application NO. 31/Rjt/2000.

By the said order, the Tribunal held that there

was a ‘mistake apparent from the record’ within

the meaning of sub-section (2) of Section 254

of the Income Tax Act, 1961 and accordingly, it

recalled its earlier order passed on October

27, 2000 in ITA No. 69/Rjt/2000.

2. Shortly stated the facts of the case

are that Saurashtra Kutch Stock Exchange Ltd.-

respondent herein is an assessee under the

Income Tax Act, 1961 (hereinafter referred to

as ‘the Act’). It is a Company registered under

Section 25 of the Companies Act, 1956. The

assessee is a ‘Stock Exchange’ duly recognized

under the Securities Contracts (Regulation)

Act, 1956. As a ‘Stock Exchange’, it is a

‘charitable institution’ entitled to exemption

under Sections 11 and 12 of the Act from

payment of income-tax. The assessee, therefore,

made an application on February 10, 1992 for

registration under Section 12A of the Act. The

Commissioner of Income Tax, Rajkot registered

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it on July 8, 1996. The assessee filed its

return of income on October 29, 1996 for the

assessment year 1996-97 declaring its total

taxable income as ‘Nil’, claiming exemption

under Section 11 of the Act although the

assessee had not been registered under Section

12A of the Act. The return was processed under

sub-section (1)(a) of Section 143 of the Act.

On November 7, 1997, a notice was issued to the

assessee by the Commissioner of Income Tax

under Section 154 of the Act to show cause why

exemption granted under Section 11 of the Act

should not be withdrawn. The assessee replied

to the said notice and asserted that in

accordance with Section 12A of the Act, the

trust had made an application for registration

and, hence, it was entitled to exemption under

Section 11 of the Act. Meanwhile, the

Commissioner of Income Tax on February 20, 1998

granted registration to the assessee on

condition that the eligibility regarding

exemption under Section 11 of the Act would be

3

examined by the Assessing Officer for each

assessment year.

3. By an order dated December 3, 1999,

the Assessing Officer assessed the income of

the assessee under sub-section (3) of Section

143 of the Act and rejected the claim of

exemption under Section 11 of the Act.

4. Being aggrieved by the said order, the

assessee preferred an appeal before the

Commissioner of Income Tax (Appeals), Rajkot.

The Commissioner, vide his order dated February

28, 2000, rejected all the contentions of the

assessee and held that the assessee was not

entitled to exemption.

5. The assessee challenged the decision

of the Commissioner of Income Tax by filing

further appeal before the Income Tax Appellate

Tribunal, Rajkot. The Tribunal, however, held

that the authorities were right in not granting

exemption and in holding the assessee liable to

pay tax. Accordingly, it dismissed the appeal

on October 27, 2000.

4

6. On November 13, 2000, the assessee

filed Miscellaneous Application under sub-

section (2) of Section 254 of the Act in the

Tribunal to rectify the error committed by the

Tribunal in the decision rendered by it in

appeal. The Tribunal, by an order dated

September 5, 2001, allowed the 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 October 27, 2000. For

allowing the application, the Tribunal relied

upon a decision rendered by the High Court of

Gujarat in Hiralal Bhagwati v. Commissioner of

Income Tax, (2000) 246 ITR 188 as also in

Suhrid Geigy Limited v. Commissioner of

Surtax, Gujarat, (1999) 237 ITR 834.

7. 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 which, as stated above, was

5

dismissed by the High Court. Hence, the present

appeal.

8. On December 19, 2003, notice was

issued by this Court and in the meantime,

further proceedings before the Tribunal were

stayed. Leave was granted on February 16, 2004

and stay was ordered to continue. On February

25, 2008, a Bench presided over by Hon’ble the

Chief Justice of India ordered the Registry to

list the appeal for final hearing during summer

vacation. Accordingly, the matter has been

placed before us.

9. We have heard learned counsel for the

parties.

10. The learned counsel for the Revenue

submitted that the Tribunal committed an error

of law and of jurisdiction in exercising power

under sub-section (2) of Section 254 of the Act

and in recalling its earlier order passed in

appeal. It was submitted that the Tribunal is a

statutory authority (though not an ‘income tax

authority’ under Section 116) and is exercising

6

power conferred by the Act. It has no

‘plenary’ powers. It has no power to review its

own decisions. Power under Section 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’. If the assessee was aggrieved by the

said order, it could have challenged the order

by taking appropriate proceedings known to law.

Miscellaneous Application under Section 254(2)

of the Act was not maintainable. Again, the

order passed under Section 254 by the Tribunal

is final under sub-section (4) of the said

section. By invoking the jurisdiction under

sub-section (2) of the said section, the

statutory ‘finality’ cannot be destroyed or the

provision cannot be made nugatory. The

Tribunal, therefore, could not have allowed the

application and recalled its earlier order as

there was no error apparent on the record. The

7

Revenue, therefore, challenged the said order.

Unfortunately, however, the High Court

committed the same error and dismissed the writ

petition. The order passed by the High Court

also suffers from similar infirmity. Both the

orders, therefore, are required to be quashed

and set aside.

11. Even on merits, neither the Tribunal

nor the High Court was right, submitted the

learned counsel for the Revenue. The counsel

urged that the Tribunal exercised the power

under Section 254(2) of the Act relying on a

decision of the High Court of Gujarat in

Hiralal Bhagwati, but a contrary view has been

taken by this Court in Delhi Stock Exchange

Assn. Ltd. v. Commissioner of Income Tax,

(1997) 225 ITR 234 (SC). In view of the

declaration of law by this Court, the assessee

is not entitled to exemption from payment of

tax.

12. The learned counsel submitted that

this Court may consider the appeal of the

8

Revenue on merits and decide whether the

order passed by the Tribunal in the appeal was

in consonance with law and settled legal

position.

13. The learned counsel for the assessee,

on the other hand, supported the order passed

by the Tribunal in Miscellaneous Application

and in recalling its earlier order passed in

appeal as also the order passed by the High

Court. According to the counsel, the Tribunal

was functioning by exercising its powers in

Gujarat. As such, it is an inferior Tribunal

subject to the supervisory jurisdiction of the

High Court of Gujarat under Article 227 of the

Constitution. The High Court of Gujarat is thus

‘Jurisdictional Court’ over the Tribunal. The

Tribunal is, therefore, bound by a decision of

the High Court of Gujarat.

14. The question which fell for

consideration before the Income Tax Authorities

related to exemption in favour of ‘trust’. The

issue came up for consideration before the High

9

Court of Gujarat in Hiralal Bhagwati whether a

‘trust’ was entitled to exemption from payment

of tax under the Act. The High Court held that

the ‘trust’ could claim such exemption. All

authorities under the Act, including the

Tribunal, were bound by the said decision.

Unfortunately, however, the attention of the

Court was not invited to the said decision at

the time when the case of the assessee was

considered and orders were passed under the

Act. Subsequently, however, the assessee came

to know about the said judgment and hence an

application under Section 254 (2) was filed

bringing it to the notice of the Tribunal.

There was thus a ‘mistake apparent from the

record’ and the Tribunal was bound to recall

its earlier order which has been done. No

illegality can be said to have been committed

by the Tribunal in allowing the application and

in recalling the order and no grievance can be

made against such action of the Tribunal.

Moreover, no prejudice had been caused to the

1

Revenue inasmuch as the Tribunal has not

allowed the appeal filed by the assessee nor

quashed an order of assessment. It merely

recalled the earlier order in the light of a

decision of the High Court of Gujarat. The

order of the Tribunal, therefore, was strictly

in accordance with law.

15. When the Revenue approached the High

Court, the High Court again considered the

legal position and held that in allowing the

application and in exercising power under

Section 254(2) of the Act, the Tribunal had not

acted illegally and dismissed the writ

petition. The orders passed by the Tribunal, as

also by the High Court, are in accordance with

law and no interference is called for.

16. The counsel also submitted that even

on merits, the Tribunal was right in recalling

its earlier order. The assessee is entitled to

exemption from payment of tax as ‘trust’

inasmuch as such exemption is legal, lawful and

was validly granted in favour of the assessee.

1

The view taken by the High Court of Gujarat in

Hiralal Bhagwati has been approved by this

Court recently in Assistant Commissioner of

Income Tax, Surat v. Surat City Gymjkhana,

Civil Appeal Nos. 4305-06 of 2002; decided on

March 04, 2008. It was, therefore, submitted

that there is no substance in the appeal and

the appeal deserves to be dismissed.

17. Having heard learned counsel for the

parties, two questions have been raised by the

parties before us. Firstly, whether the Income

Tax Appellate Tribunal, Gujarat was right in

exercising power under sub-section (2) of

Section 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.

18. By the impugned order passed by the

Tribunal and confirmed by the High Court, the

1

Income Tax Appellate Tribunal has merely

recalled its earlier order passed in appeal and

directed the Registry to fix the case for re-

hearing. The matter will now be heard again on

merits. The said order is challenged by the

Revenue in this Court. The assessee has no

grievance against the impugned order. In our

opinion, therefore, it would not be appropriate

for this Court to decide the second question

which has been raised by the parties; viz.

whether on merits, the assessee is or is not

entitled to exemption from payment of tax under

Section 11 of the Act. We, therefore, refrain

from expressing any opinion on the second

question.

19. The learned counsel for the parties

drew our attention to the relevant provisions

of the Act. Section 252 of the Act provides

for constitution of Income Tax Appellate

Tribunal by the Central Government consisting

of as many judicial and accountant members as

it thinks fit to exercise the powers and

1

discharge the functions conferred on such

Tribunal under the Act. It also provides for

qualification of Members. It enacts that the

Central Government shall ordinarily

appoint a judicial member of the Tribunal

to be the President thereof. Section 253

enables an assessee aggrieved by any of the

orders mentioned in the said section to

appeal to Tribunal. Section 254 deals with

orders passed by the Tribunal and is material

for the purpose of controversy raised in the

present appeal. The section as stood then read

thus;

254. Orders of Appellate Tribunal

(1) The Appellate Tribunal may, after

giving both the parties to the appeal

an opportunity of being heard, pass

such orders thereon as it thinks fit.

(2) The Appellate Tribunal may, at any

time, within four years from the date

of the order, with a view to

rectifying any mistake apparent from

the record, amend any order passed by

it under sub-section (1), and shall

make such amendment if the mistake is

brought to its notice by the assessee

or the Assessing Officer:

1

… … … … …

(4) Save as provided in Section 256,

orders passed by the Appellate

Tribunal on appeal shall be final.

(emphasis supplied)

20. Section 255 of the Act lays down

procedure to be followed by the Tribunal.

Section 256 provides for reference to High

Court at the instance of the assessee or

Revenue. Section 154 of the Act, likewise,

empowers Income Tax Authorities to rectify

mistakes.

21. Plain reading of sub-section (1) of

Section 254 quoted hereinabove 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 the Appellate Tribunal on appeal

1

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 assessee or the

Assessing Officer.

22. Sub-section (2) thus 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 Assessing Officer.

1

23. It was submitted that so far as the

first part 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 ‘shall’ directs the Tribunal to exercise

such power.

24. 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. Whereas the learned

counsel for the Revenue submitted that in the

guise of exercise of power under sub-section

(2) of Section 254 of the Act, really the

Tribunal has exercised power of ‘review’ not

1

conferred on it by the Act, the counsel for the

assessee urged that the power exercised by the

Tribunal was of rectification of ‘mistake

apparent from the record’ which was strictly

within the four corners of the said provision

and no exception can be taken against such

action.

25. The learned counsel for the Revenue

contended that the normal principle of law is

that once a judgment is pronounced or order is

made, a Court, Tribunal or Adjudicating

Authority becomes functus officio [ceases to

have control over the matter]. Such judgment

or order is ‘final’ and cannot be altered,

changed, varied or modified. It was also

submitted that Income Tax Tribunal is a

Tribunal constituted under the Act. It is not

a ‘Court’ having plenary powers, but a

statutory Tribunal functioning under the Act of

1961. It, therefore, cannot act outside or de

1

hors the Act nor can exercise powers not

expressly and specifically conferred by law. It

is well-settled that 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.

26. Our attention, in this connection, was

invited by the learned counsel to a leading

decision of this Court in Patel Narshi

Thakershi & Ors. V. Pradyumansinghji

Arjunsinghji, (1971) 3 SCC 844. Dealing with

the provisions of the Saurashtra Land Reforms

Act, 1951 and referring to Order 47, Rule 1 of

the Code of Civil Procedure, 1908, this Court

held that there is no inherent power of review

with the adjudicating authority if it is not

conferred by law.

27. The Court stated;

1

“It is well settled that the power

to review is not an inherent power. It

must be conferred by law either

specifically or by necessary

implication. No provision in the Act

was brought to our notice from which

it could be gathered that the

Government had power to review its own

order. If the Government had no power

to review its own order, it is obvious

that its delegate could not have

reviewed its order”.

(emphasis supplied)

28. The view in Patel Narshi Thakershi

has been reiterated by this Court in several

cases. It is not necessary for us to refer to

all those cases. The legal proposition has not

been disputed even by the learned counsel for

the assessee.

29. In view of settled legal position, if

the submission of the learned counsel for the

Revenue is correct that the Tribunal has

exercised power of review, the order passed by

the Tribunal must be set aside. But, if the

Tribunal has merely rectified a mistake

2

apparent from the record as submitted by the

learned counsel for the assessee, it was within

the power of the Tribunal and no grievance can

be made against exercise of such power.

30. The main question, therefore, is: What

is a ‘mistake apparent from the record’? Now,

a similar expression ‘error apparent on the

face of the record’ came up for consideration

before courts while exercising certiorari

jurisdiction under Articles 32 and 226 of the

Constitution. In T.S. Balaram v. Volkart

Brothers, Bombay, (1971) 2 SCC 526, this Court

held that “any mistake apparent from the

record” is undoubtedly not more than that of

the High Court to entertain a writ petition on

the basis of an “error apparent on the face of

the record”. It was, however, conceded in all

leading cases that it is very difficult to

define an “error apparent on the face of the

record” precisely, scientifically and with

certainty.

2

31. In the leading case of Hari Vishnu

Kamath v. Syed Ahmad Ishaque, (1955) 1 SCR

1104, the Constitution Bench of this Court

quoted the observations of Chagla, C.J. in

Batuk K. Vyas v. Surat Municipality, ILR 1953

Bom 191 : AIR 1953 Bom 133 that no error can be

said to be apparent on the face of the record

if it is not manifest or self-evident and

requires an examination or argument to

establish it. The Court admitted that though

the said test might apply in majority of cases

satisfactorily, it proceeded to comment that

there might be cases in which it might not work

inasmuch as an error of law might be considered

by one Judge as apparent, patent and self-

evident, but might not be so considered by

another Judge. The Court, therefore, concluded

that an error apparent on the face of the

record cannot be defined exhaustively there

being an element of indefiniteness inherent in

its very nature and must be left to be

2

determined judicially on the facts of each

case.

32. The Court stated;

“It may therefore be taken as

settled that a writ of certiorari

could be issued to correct an error of

law. But it is essential that it

should be something more than a mere

error; it must be one which must be

manifest on the face of the record.

The real difficulty with reference to

this matter, however, is not so much

in the statement of the principle as

in its application to the facts of a

particular case. When does an error

cease to be mere error, and become an

error apparent on the face of the

record? Learned Counsel on either side

were unable to suggest any clear-cut

rule by which the boundary between the

two classes of errors could be

demarcated”. (emphasis supplied)

33. In Satyanarayan Laxminarayan Hegde &

Ors. v. Mallikarjun Bhavanappa Tirumale, (1960)

1 SCR 890, this Court referring to Batuk K.

Vyas and Hari Vishnu Kamath stated as to what

cannot be said to be an error apparent on the

face of the record.

2

34. The Court observed;

“An error which has to be

established by a long drawn process of

reasoning on points where there may

conceivably be two opinions can hardly

be said to be an error apparent on the

face of the record. As the above

discussion of the rival contentions

show the alleged error in the present

case is far from self evident and if

it can be established, it has to be

established by lengthy and complicated

arguments. We do not think such an

error can be cured by a writ of

certiorari according to the rule

governing the powers of the superior

court to issue such a writ”.

35. Again, in Syed Yakoob v. K.S.

Radhakrishnan & Ors., (1964) 5 SCR 64, speaking

for the Constitution Bench, Gajendragadkar, J.

(as his Lordship then was) stated;

“A writ of certiorari can be issued

for correcting errors of jurisdiction

committed by inferior courts or

Tribunals; these are cases where

orders are passed by inferior courts

or tribunals without jurisdiction, or

in excess of it, or as a result of

failure to exercise jurisdictions. A

writ can similarly be issued where in

exercise of jurisdiction conferred on

it, the Court or Tribunal acts

2

illegally or improperly, as for

instance, it decides a question

without giving an opportunity to be

heard to the party affected by the

order, or where the procedure adopted

in dealing with the dispute is opposed

to principles of natural justice.

There is, however, no doubt that the

jurisdiction to issue a writ of

certiorari is a supervisory

jurisdiction and the Court exercising

it is not entitled to act as an

appellate Court. This limitation

necessarily means that findings of

fact reached by the inferior Court or

Tribunal as a result of the

appreciation of evidence cannot be

reopened or questioned in writ

proceedings. An error of law which is

apparent on the face of the record can

be corrected by a writ, but not an

error of fact, however grave it may

appear to be. In regard to a finding

of fact recorded by the Tribunal a

writ of certiorari can be issued if it

is shown that in recording the said

finding, the Tribunal had erroneously

refused to admit admissible and

material evidence, or had erroneously

admitted inadmissible evidence which

has influenced the impugned finding.

Similarly, if a finding of fact is

based on no evidence, that would be

regarded as an error of law which can

be corrected by a writ of certiorari.

In dealing with this category of

cases, however, we must always bear in

mind that a finding of fact recorded

by the Tribunal cannot be challenged

in proceedings for a writ of

certiorari on the ground that the

relevant and material evidence adduced

before the Tribunal was insufficient

2

or inadequate to sustain the impugned

finding. The adequacy or sufficiency

of evidence led on a point and the

inference of fact to be drawn from the

said finding are within the exclusive

jurisdiction of the Tribunal, and the

said points cannot be agitated before

a writ court. It is within these

limits that the jurisdiction conferred

on the High Courts under Art. 226 to

issue a writ of certiorari can be

legitimately exercised ”.

(emphasis supplied)

36. The Court concluded;

“It is, of course, not easy to

define or adequately describe what an

error of law apparent on the face of

the record means. What can be

corrected by a writ has to be an error

of law; but it must be such an error

of law as can be regarded as one which

is apparent on the face of the record.

Where it is manifest or clear that the

conclusion of law recorded by an

inferior Court or Tribunal is based on

an obvious mis-inter-pretation of the

relevant statutory provision, or

sometimes in ignorance of it, or may

be, even in disregard of it, or is

expressly founded on reasons which are

wrong in law, the said conclusion can

be corrected by a writ of certiorari.

In all these cases, the impugned

conclusion should be so plainly

inconsistent with the relevant

statutory provision that no difficulty

is experienced by the High Court in

2

holding that the said error of law is

apparent on the face of the record. It

may also be that in some cases, the

impugned error of law may not be

obvious or patent on the face of the

record as such and the Court may need

an argument to discover the said

error; but there can be no doubt that

what can be corrected by a writ of

certiorari is an error of law and the

said error must, on the whole, be of

such a character as would satisfy the

test that it is an error of law

apparent on the face of the record. If

a statutory provision is reasonably

capable of two constructions and one

construction has been adopted by the

inferior Court or Tribunal, its

conclusion may not necessarily or

always be open to correction by a writ

of certiorari. In our opinion, it is

neither possible nor desirable to

attempt either to define or to

describe adequately all cases of

errors which can be appropriately

described as errors of law apparent on

the face of the record. Whether or not

an impugned error is an error of law

and an error of law which is apparent

on the face of the record, must always

depend upon the facts and

circumstances of each case and upon

the nature and scope of the legal

provision which is alleged to have

been misconstrued or contravened ”.

(emphasis supplied)

2

37. In our judgment, therefore, 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.

2

38. Though the learned counsel for the

assessee submitted that the phrase “to rectify

any mistake apparent from the record” used in

Section 254(2) (as also in Section 154) is

wider in its content than the expression

“mistake or error apparent on the face of the

record” occurring in Rule 1 of Order 47 of the

Code of Civil Procedure, 1908 [vide Kil

Kotagiri Tea & Coffee Estates Co. Ltd. v.

Income-Tax Appellate Tribunal & Ors., (1988)

174 ITR 579 (Ker)], it is not necessary for us

to enter into the said question in the present

case.

39. As stated earlier, the decision was

rendered in appeal by the Income Tax Appellate

Tribunal, Rajkot. Miscellaneous Application

came to be filed by the assessee under sub-

section (2) of Section 254 of the Act stating

therein that a decision of the ‘Jurisdictional

Court’, i.e. the High Court of Gujarat in

Hiralal Bhagwati was not brought to the notice

2

of the Tribunal and thus there was a “mistake

apparent from record” which required

rectification.

40. The core issue, therefore, is whether

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 a “mistake apparent

from the record”? In our opinion, both - the

Tribunal and the High Court - were right in

holding that such a mistake can be said to be a

“mistake apparent from the record” which could

be rectified under Section 254(2).

41. A similar question came up for

consideration before the High Court of Gujarat

in Suhrid Geigy Limited v. Commissioner of

Surtax, Gujarat, (1999) 237 ITR 834 (Guj). It

was held by the Division Bench of the High

Court that if the point is covered by a

decision of the Jurisdictional Court rendered

3

prior or even subsequent to the order of

rectification, it could be said to be “mistake

apparent from the record” under Section 254 (2)

of the Act and could be corrected by the

Tribunal.

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

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 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

decision of the Court operated for quite some

time, the decision rendered later on would have

retrospective effect clarifying the legal

3

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 judicatae 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.

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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 of

Karnataka, 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

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

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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.

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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 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

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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.

…………………………………………………………… J.

(C.K. THAKKER)

…………………………………………………………… J.

(LOKESHWAR SINGH PANTA)

NEW DLEHI,

September 15, 2008.

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