Supreme Court of India
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.
yet to be reported
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1171 OF 2004
ASSISTANT COMMISSIONER, INCOME TAX, RAJKOT ... APPELLANT
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
2000 [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 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of the Act should not be withdrawn.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 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.
6. On November 13, 2000, the assessee filed Miscellaneous Application under subsection
(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 dismissed by the High Court. Hence, the
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 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 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 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
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 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. 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 Gymkhana, 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
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
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 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: ... ... ... ... ...
(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
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
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 subsection
(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.
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 subsection
(2) of Section 254 of the Act, really the Tribunal has exercised power of `review'
not 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 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;
"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
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
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
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 selfevident
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 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.
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
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 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 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 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)
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
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
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 subsection
(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 of
the Tribunal and thus there was a "mistake apparent from record" which required
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 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 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.
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 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.
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 rehearing
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 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
50. Ordered accordingly.
(LOKESHWAR SINGH PANTA)
NEW DELHI, September 15, 2008.