The Supreme Court has since decided the point the other way. Can the Tribunal recall its order, or is that a review?
The Allahabad High Court held it is not a review. Where the Tribunal decided on the strength of an earlier Supreme Court decision and the Supreme Court has since interpreted the law differently, the Tribunal's order suffers from a mistake apparent from the record and a rectification application under s.254(2) is maintainable. The Court relied on CBDT Circular No. 68 dated 17 November 1971 and on Saurashtra Kutch Stock Exchange.
Decided by the High Court (Tarun Agarwala J and Mahesh Chandra Tripathi J) on 2014-07-03, reported as Income Tax Appeal No. 127 of 2002 (Allahabad High Court). It bears on section 254(2), section 154, section 260A, section 35 of the Indian Income-tax Act, 1922 of the Income Tax Act 1961, in Appeals and How Tax Law Is Read matters.
This is one side of a question the library must carry as contested. The Revenue's standing argument is that a decision reached on the law as it stood cannot become erroneous later and that recall would be a review, which s.254(2) does not permit. The Circular is the taxpayer's best material because it is the Board's own instruction that a mistake arising from a subsequent interpretation of law by the Supreme Court is a mistake apparent from the records. But note the limits: the Madras High Court in Indus Finance held the Circular applies only where the issue was already in the order and was later settled, not where a new plea is raised, and the Tribunal has declined recall on a later Supreme Court decision in other cases.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For assessment year 1990-91 the Tribunal allowed the Department's appeal, holding that whatever the mode of dissolution or closure of a firm's business, profits have to be ascertained by taking the closing stock at market value, and rejecting the assessee's plea that where a firm is converted into a company the business is not discontinued and the same method of valuation should apply. That view rested on the Supreme Court's decision in A.L.A. Firm v. CIT, 189 ITR 285, that on dissolution of a partnership the closing stock is to be valued at market price. The assessee applied under s.254(2) for rectification, contending there was a mistake apparent on the face of the record. While that application was pending the Supreme Court decided Sakthi Trading Co. v. CIT (2001) 250 ITR 871, holding that where the business continued and the firm was reconstituted the closing stock is to be valued at cost or market price, whichever is lower. That decision was brought to the Tribunal's notice, the s.254(2) application was allowed and the rectification made. The Department appealed under s.260A, contending that since the Tribunal had passed its order on the merits after considering the pros and cons it had no jurisdiction to rectify under s.254(2) and that the rectification amounted to a review.
The appeal failed and was dismissed; no substantial question of law arose. Where, as a result of a subsequent interpretation of law by the Supreme Court in Sakthi Trading Co., the Tribunal's decision based on an earlier Supreme Court decision no longer reflects the correct legal position, that decision is a mistake apparent from the record and a rectification application under s.254(2) is maintainable. The Tribunal was justified in passing the order under s.254(2).
The Court began with CBDT Circular No. 68 dated 17 November 1971, which it reproduced in full: the Board advised that a mistake arising as a result of a subsequent interpretation of law by the Supreme Court would constitute a mistake apparent from the records, that rectificatory action under s.35 of the 1922 Act or s.154 of the 1961 Act would be in order, and that an application pointing out that in the light of a later Supreme Court decision a mistake has occurred in a completed assessment shall be acted upon if filed within time and otherwise in order; the second paragraph of the Circular asks that appeals or references pending on the point be withdrawn. It then applied ACIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227, where the Supreme Court held that rectification stems from the principle that justice is above all, that an error apparent on the record is one which strikes on mere looking and does not need a long drawn out process of reasoning on points on which there may conceivably be two opinions, and that a Tribunal decision rendered without noticing a High Court decision suffers from an error apparent rectifiable under s.254(2). It also relied on the Punjab and Haryana High Court in Shahbad Co-operative Sugar Mills Ltd. v. DCIT [2011] 336 ITR 222, that recourse to rectification is available once the Supreme Court has clarified its earlier decision, and that such rectification is permissible under s.154.
Such decision passed by the Tribunal based on an earlier decision of the Supreme Court is a mistake apparent from the record and consequently a rectification application under section 254(2) is maintainable.
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Handle my notice → Ask a CA on WhatsAppThe Allahabad High Court held it is not a review. Where the Tribunal decided on the strength of an earlier Supreme Court decision and the Supreme Court has since interpreted the law differently, the Tribunal's order suffers from a mistake apparent from the record and a rectification application under s.254(2) is maintainable. The Court relied on CBDT Circular No. 68 dated 17 November 1971 and on Saurashtra Kutch Stock Exchange. This was decided by the High Court (Tarun Agarwala J and Mahesh Chandra Tripathi J) and bears on section 254(2), section 154, section 260A, section 35 of the Indian Income-tax Act, 1922 of the Income Tax Act 1961. It is reported as Income Tax Appeal No. 127 of 2002 (Allahabad High Court). This is one side of a question the library must carry as contested. The Revenue's standing argument is that a decision reached on the law as it stood cannot become erroneous later and that recall would be a review, which s.254(2) does not permit. The Circular is the taxpayer's best material because it is the Board's own instruction that a mistake arising from a subsequent interpretation of law by the Supreme Court is a mistake apparent from the records. But note the limits: the Madras High Court in Indus Finance held the Circular applies only where the issue was already in the order and was later settled, not where a new plea is raised, and the Tribunal has declined recall on a later Supreme Court decision in other cases. If it applies to you, the first step is this: Show that the issue was actually decided in the order you want recalled, and that the decision rested on the earlier legal position that the Supreme Court has since changed — that is what took this case outside review.
For assessment year 1990-91 the Tribunal allowed the Department's appeal, holding that whatever the mode of dissolution or closure of a firm's business, profits have to be ascertained by taking the closing stock at market value, and rejecting the assessee's plea that where a firm is converted into a company the business is not discontinued and the same method of valuation should apply. That view rested on the Supreme Court's decision in A.L.A. Firm v. CIT, 189 ITR 285, that on dissolution of a partnership the closing stock is to be valued at market price. The assessee applied under s.254(2) for rectification, contending there was a mistake apparent on the face of the record. While that application was pending the Supreme Court decided Sakthi Trading Co. v. CIT (2001) 250 ITR 871, holding that where the business continued and the firm was reconstituted the closing stock is to be valued at cost or market price, whichever is lower. That decision was brought to the Tribunal's notice, the s.254(2) application was allowed and the rectification made. The Department appealed under s.260A, contending that since the Tribunal had passed its order on the merits after considering the pros and cons it had no jurisdiction to rectify under s.254(2) and that the rectification amounted to a review. The matter was decided on 2014-07-03 by the High Court (Tarun Agarwala J and Mahesh Chandra Tripathi J). On those facts the High Court held as follows. The appeal failed and was dismissed; no substantial question of law arose. Where, as a result of a subsequent interpretation of law by the Supreme Court in Sakthi Trading Co., the Tribunal's decision based on an earlier Supreme Court decision no longer reflects the correct legal position, that decision is a mistake apparent from the record and a rectification application under s.254(2) is maintainable. The Tribunal was justified in passing the order under s.254(2).
The Court began with CBDT Circular No. 68 dated 17 November 1971, which it reproduced in full: the Board advised that a mistake arising as a result of a subsequent interpretation of law by the Supreme Court would constitute a mistake apparent from the records, that rectificatory action under s.35 of the 1922 Act or s.154 of the 1961 Act would be in order, and that an application pointing out that in the light of a later Supreme Court decision a mistake has occurred in a completed assessment shall be acted upon if filed within time and otherwise in order; the second paragraph of the Circular asks that appeals or references pending on the point be withdrawn. It then applied ACIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227, where the Supreme Court held that rectification stems from the principle that justice is above all, that an error apparent on the record is one which strikes on mere looking and does not need a long drawn out process of reasoning on points on which there may conceivably be two opinions, and that a Tribunal decision rendered without noticing a High Court decision suffers from an error apparent rectifiable under s.254(2). It also relied on the Punjab and Haryana High Court in Shahbad Co-operative Sugar Mills Ltd. v. DCIT [2011] 336 ITR 222, that recourse to rectification is available once the Supreme Court has clarified its earlier decision, and that such rectification is permissible under s.154. In the words reproduced by the source cited on this page: "Such decision passed by the Tribunal based on an earlier decision of the Supreme Court is a mistake apparent from the record and consequently a rectification application under section 254(2) is maintainable." The decision followed or applied ACIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227 (SC) — applied; Shahbad Co-operative Sugar Mills Ltd. v. DCIT [2011] 336 ITR 222 (P&H) — followed; CBDT Circular No. 68 [F. No. 245/17/71-A & PAC] dated 17 November 1971 — applied; Sakthi Trading Co. v. CIT (2001) 250 ITR 871 (SC) — the later decision relied on; A.L.A. Firm v. CIT, 189 ITR 285 (SC) — the earlier decision departed from.
It was decided by the High Court on 2014-07-03 and is reported as Income Tax Appeal No. 127 of 2002 (Allahabad High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 254(2), section 154, section 260A, section 35 of the Indian Income-tax Act, 1922, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal failed and was dismissed; no substantial question of law arose. Where, as a result of a subsequent interpretation of law by the Supreme Court in Sakthi Trading Co., the Tribunal's decision based on an earlier Supreme Court decision no longer reflects the correct legal position, that decision is a mistake apparent from the record and a rectification application under s.254(2) is maintainable. The Tribunal was justified in passing the order under s.254(2). It arises in Appeals and How Tax Law Is Read matters, on section 254(2), section 154, section 260A, section 35 of the Indian Income-tax Act, 1922 of the Income Tax Act 1961, and was decided by Tarun Agarwala J and Mahesh Chandra Tripathi J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put CBDT Circular No. 68 [F. No. 245/17/71-A & PAC] dated 17 November 1971 on record and quote it: the Board's own advice is that a mistake arising from a subsequent interpretation of law by the Supreme Court constitutes a mistake apparent from the records, that an application under s.154 pointing this out shall be acted upon if filed within time and otherwise in order, and that pending appeals or references on the point should be withdrawn. Both this judgment and the Madras High Court in Indus Finance reproduce it, so its text is not in doubt — but neither judgment says anything about its present operative status, so check that before relying on it. Watch the clock: s.254(2) now allows only six months from the end of the month in which the order was passed, and s.154(7) four years from the end of the financial year of the order sought to be amended. A late Supreme Court decision may arrive after the door has shut. Expect the argument that the point is debatable rather than apparent, and meet it by showing the later decision leaves no room for two opinions on the very issue decided.
Validity check could not be completed. Validity check could not be completed; no search for later treatment was made. The label vocabulary cannot carry what matters, so it is stated expressly: the underlying proposition is genuinely contested and must be treated as such. The Madras High Court in Indus Finance Corporation Ltd v CIT (29 July 2015) read Circular No. 68 narrowly, as reaching only an issue already considered in the order and later put to rest by the Supreme Court, and refused it to a new plea. The library already carries a Tribunal decision declining recall on the strength of a later Supreme Court decision. Whether a later Supreme Court decision converts an earlier order into a mistake apparent therefore remains contested and should not be advised as settled. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This judgment has NO numbered paragraphs of its own, so no paragraph locator is given; the only numbered paragraph in the text is 'paragraph no.14' of the Tribunal's earlier order, which the High Court reproduces, and citing that number as the High Court's would be a fabricated locator. The operative passage was retrieved on a second route and matched word for word. The Court's reference to 'section 35/154 of the 1922 Act/the 1961 Act' inside the Circular is the Circular's own wording; the Madras High Court reproduced the same Circular in Indus Finance with '1992 Act' in place of '1922 Act', which is a typographical difference between the two reproductions and not a difference of substance. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal failed and was dismissed; no substantial question of law arose. Where, as a result of a subsequent interpretation of law by the Supreme Court in Sakthi Trading Co., the Tribunal's decision based on an earlier Supreme Court decision no longer reflects the correct legal position, that decision is a mistake apparent from the record and a rectification application under s.254(2) is maintainable. The Tribunal was justified in passing the order under s.254(2).
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