The Tribunal did not deal with some of my grounds. Can I get its order rectified under section 254(2) so it looks at them again?
No, not on that ground alone. The Bombay High Court held that section 254(2) gives the Tribunal a power to amend, not to review. The mistake must be obvious and patent, not one that has to be established by a long process of reasoning on a point on which two views are possible. Failure to consider an argument advanced by a party is not an error apparent from the record, though it may be an error of judgment. The Tribunal, having decided on the merits that the commission was not genuine, had no jurisdiction to reopen the whole dispute and allow the deduction.
Decided by the High Court (Bombay High Court; B.N. Srikrishna and Sujata V. Manohar JJ. Judgment by Sujata Manohar J) on 1992-11-06, reported as [1993] 203 ITR 497 (Bom). It bears on section 254(2), section 37, section 256(1) of the Income Tax Act 1961, in Appeals and Deductions & Disallowances matters.
This is the case that fixes the outer limit of section 254(2), and it is cited whenever a losing party dresses up a rehearing as a rectification. It applies the Supreme Court's test from T.S. Balaram v Volkart Brothers, and it goes further than most by expressly disagreeing with two High Court decisions, from Madhya Pradesh and Allahabad, that had treated the omission to consider material on record or an important contention as a mistake apparent from the record. The distinction it draws is the one that matters in practice: an error of judgment is not an error apparent from the record. Note that later authority has been more willing to allow rectification where the non-consideration caused real prejudice, so check the current position before you rely on this to resist a rectification application, or to make one.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee dealt in electrical goods. For assessment year 1970-71 it debited Rs 54,000 as commission to Neeta Electric Corporation under an agreement of 29 October 1969 providing commission on Bombay purchases at two per cent on the first Rs 20 lakh and one and a half per cent above that. All five partners of Neeta were connected with the assessee: two were its partners, two their wives and one an employee. The Income-tax Officer disallowed the deduction under section 37, and the Appellate Assistant Commissioner agreed, no evidence of services having been produced. On 9 June 1975 the Tribunal dismissed the appeal, noting that no correspondence was produced, that the explanation that all directions were given by telephone was implausible given the size of the transactions, that the assessee had its own Bombay purchase office whose expenses it also claimed, and that the purchase bills carried no reference to any commission agent. The assessee applied under section 254(2) saying three of its five grounds had not been dealt with. The Tribunal entertained the application, reheard the matter, and by order of 6 November 1975 allowed the deduction. Two questions were referred under section 256(1).
Both questions were answered in favour of the Revenue, with costs. The Tribunal acted beyond its jurisdiction in setting aside its order of 9 June 1975, and was not justified in allowing the commission of Rs 54,000 under section 37, because it had no jurisdiction to pass the second order. Section 254(2) permits amendment of an order to rectify a mistake apparent from the record; the Tribunal has no power of review under the Act. The first order was on the merits and disclosed no mistake apparent from the record. The two matters the Tribunal said it had overlooked, that the Income-tax Officer had miscalculated the firm's profit percentage and that taxing the sum in both hands would be double taxation, did not permit it to re-examine all the circumstances and reverse itself. The Court doubted whether even a power of review would have allowed what was done.
The Court began from the words of section 254(2), which allow the Tribunal to amend its order with a view to rectifying any mistake apparent from the record. That is a power of amendment, and the Act gives no power of review. It applied T.S. Balaram v Volkart Brothers: a mistake apparent on the record must be obvious and patent, not something established by a long drawn process of reasoning on points on which there may conceivably be two opinions, and a decision on a debatable point of law is not such a mistake. That view had been followed in Gujarat in V.P. Minocha and in Madras in R. Chelladurai, where the Tribunal was held to have no power to alter the quantum of penalty by rectification. Applying it here, the Tribunal had been required to decide whether the commission was deductible, had examined the circumstances and had held it was not. It could not then look into other circumstances tending to support a different conclusion; the mistake it may correct is not an error of judgment but a mistake visible on the record itself. The Court declined to follow the wide observations of the Madhya Pradesh High Court in Mithalal Ashok Kumar, that the Tribunal may rectify where material already on record was not considered, and of the Allahabad High Court in Laxmi Electronic Corporation, that a failure to deal with an important contention must be deemed a mistake apparent from the record, holding both to be against Volkart Brothers, which had not been cited in the Allahabad case. It added that here one of the alleged failures was attributed to the Income-tax Officer, not to the Tribunal at all.
Failure by the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment.
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Handle my notice → Ask a CA on WhatsAppNo, not on that ground alone. The Bombay High Court held that section 254(2) gives the Tribunal a power to amend, not to review. The mistake must be obvious and patent, not one that has to be established by a long process of reasoning on a point on which two views are possible. Failure to consider an argument advanced by a party is not an error apparent from the record, though it may be an error of judgment. The Tribunal, having decided on the merits that the commission was not genuine, had no jurisdiction to reopen the whole dispute and allow the deduction. This was decided by the High Court (Bombay High Court; B.N. Srikrishna and Sujata V. Manohar JJ. Judgment by Sujata Manohar J) and bears on section 254(2), section 37, section 256(1) of the Income Tax Act 1961. It is reported as [1993] 203 ITR 497 (Bom). This is the case that fixes the outer limit of section 254(2), and it is cited whenever a losing party dresses up a rehearing as a rectification. It applies the Supreme Court's test from T.S. Balaram v Volkart Brothers, and it goes further than most by expressly disagreeing with two High Court decisions, from Madhya Pradesh and Allahabad, that had treated the omission to consider material on record or an important contention as a mistake apparent from the record. The distinction it draws is the one that matters in practice: an error of judgment is not an error apparent from the record. Note that later authority has been more willing to allow rectification where the non-consideration caused real prejudice, so check the current position before you rely on this to resist a rectification application, or to make one. If it applies to you, the first step is this: Do not use section 254(2) to reargue the merits. Identify the mistake you say is apparent and show it can be seen without argument.
The assessee dealt in electrical goods. For assessment year 1970-71 it debited Rs 54,000 as commission to Neeta Electric Corporation under an agreement of 29 October 1969 providing commission on Bombay purchases at two per cent on the first Rs 20 lakh and one and a half per cent above that. All five partners of Neeta were connected with the assessee: two were its partners, two their wives and one an employee. The Income-tax Officer disallowed the deduction under section 37, and the Appellate Assistant Commissioner agreed, no evidence of services having been produced. On 9 June 1975 the Tribunal dismissed the appeal, noting that no correspondence was produced, that the explanation that all directions were given by telephone was implausible given the size of the transactions, that the assessee had its own Bombay purchase office whose expenses it also claimed, and that the purchase bills carried no reference to any commission agent. The assessee applied under section 254(2) saying three of its five grounds had not been dealt with. The Tribunal entertained the application, reheard the matter, and by order of 6 November 1975 allowed the deduction. Two questions were referred under section 256(1). The matter was decided on 1992-11-06 by the High Court (Bombay High Court; B.N. Srikrishna and Sujata V. Manohar JJ. Judgment by Sujata Manohar J). On those facts the High Court held as follows. Both questions were answered in favour of the Revenue, with costs. The Tribunal acted beyond its jurisdiction in setting aside its order of 9 June 1975, and was not justified in allowing the commission of Rs 54,000 under section 37, because it had no jurisdiction to pass the second order. Section 254(2) permits amendment of an order to rectify a mistake apparent from the record; the Tribunal has no power of review under the Act. The first order was on the merits and disclosed no mistake apparent from the record. The two matters the Tribunal said it had overlooked, that the Income-tax Officer had miscalculated the firm's profit percentage and that taxing the sum in both hands would be double taxation, did not permit it to re-examine all the circumstances and reverse itself. The Court doubted whether even a power of review would have allowed what was done.
The Court began from the words of section 254(2), which allow the Tribunal to amend its order with a view to rectifying any mistake apparent from the record. That is a power of amendment, and the Act gives no power of review. It applied T.S. Balaram v Volkart Brothers: a mistake apparent on the record must be obvious and patent, not something established by a long drawn process of reasoning on points on which there may conceivably be two opinions, and a decision on a debatable point of law is not such a mistake. That view had been followed in Gujarat in V.P. Minocha and in Madras in R. Chelladurai, where the Tribunal was held to have no power to alter the quantum of penalty by rectification. Applying it here, the Tribunal had been required to decide whether the commission was deductible, had examined the circumstances and had held it was not. It could not then look into other circumstances tending to support a different conclusion; the mistake it may correct is not an error of judgment but a mistake visible on the record itself. The Court declined to follow the wide observations of the Madhya Pradesh High Court in Mithalal Ashok Kumar, that the Tribunal may rectify where material already on record was not considered, and of the Allahabad High Court in Laxmi Electronic Corporation, that a failure to deal with an important contention must be deemed a mistake apparent from the record, holding both to be against Volkart Brothers, which had not been cited in the Allahabad case. It added that here one of the alleged failures was attributed to the Income-tax Officer, not to the Tribunal at all. In the words reproduced by the source cited on this page: "Failure by the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment."
It was decided by the High Court on 1992-11-06 and is reported as [1993] 203 ITR 497 (Bom). 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 37, section 256(1), 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 department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. Both questions were answered in favour of the Revenue, with costs. The Tribunal acted beyond its jurisdiction in setting aside its order of 9 June 1975, and was not justified in allowing the commission of Rs 54,000 under section 37, because it had no jurisdiction to pass the second order. Section 254(2) permits amendment of an order to rectify a mistake apparent from the record; the Tribunal has no power of review under the Act. The first order was on the merits and disclosed no mistake apparent from the record. The two matters the Tribunal said it had overlooked, that the Income-tax Officer had miscalculated the firm's profit percentage and that taxing the sum in both hands would be double taxation, did not permit it to re-examine all the circumstances and reverse itself. The Court doubted whether even a power of review would have allowed what was done. It arises in Appeals and Deductions & Disallowances matters, on section 254(2), section 37, section 256(1) of the Income Tax Act 1961, and was decided by Bombay High Court; B.N. Srikrishna and Sujata V. Manohar JJ. Judgment by Sujata Manohar 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. If the Tribunal has genuinely not dealt with a ground, consider whether the answer is an appeal on a substantial question of law rather than a rectification application. Resisting a rectification application, point to what the Tribunal actually decided and show that reopening it would require re-weighing the evidence, which is review and not amendment. Read this against the later authority permitting rectification where non-consideration of something on record caused prejudice, and frame your application in those terms if that is the position you are in.
Still good law. It applies the Supreme Court's test in T.S. Balaram v Volkart Brothers and the source page records it as followed in a very large number of later cases. But it expressly differs from the Madhya Pradesh and Allahabad decisions on non-consideration of material or of a contention, and later Supreme Court authority has allowed rectification where a non-consideration caused prejudice to a party. Check how the point stands before relying on the wider statements here; that later authority was not read in this session. 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.
Until build 87 this library carried a second entry on the same judgment, at /caselaw/case/cit-v-ramesh-electric-and-trading-co-254-2-rectification/, which asked: The Tribunal did not deal with some of my grounds of appeal. Can it recall its whole order under section 254(2) and decide the appeal again? It was the shorter of the two write-ups and has been merged into this one. That address now redirects here, and every citation, section and subject it carried that this entry did not has been folded in. The batch line gave the year as 1993, which is the year of the report; the judgment is dated 6 November 1992 and that date is used. The Court decided the case on jurisdiction and did not itself examine whether the commission was deductible, so the answer to the second question follows from the first and is not an independent finding on section 37. The tension with the later authority noted under validity was not verified against a source in this session. The batch line also listed section 154, which this judgment does not deal with. 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.
Both questions were answered in favour of the Revenue, with costs. The Tribunal acted beyond its jurisdiction in setting aside its order of 9 June 1975, and was not justified in allowing the commission of Rs 54,000 under section 37, because it had no jurisdiction to pass the second order. Section 254(2) permits amendment of an order to rectify a mistake apparent from the record; the Tribunal has no power of review under the Act. The first order was on the merits and disclosed no mistake apparent from the record. The two matters the Tribunal said it had overlooked, that the Income-tax Officer had miscalculated the firm's profit percentage and that taxing the sum in both hands would be double taxation, did not permit it to re-examine all the circumstances and reverse itself. The Court doubted whether even a power of review would have allowed what was done.
TaxSphere, “CIT v Ramesh Electric and Trading Co.”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-ramesh-electric-and-trading-co-254-2-rectification/ (validity last checked 2026-08-29)
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