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should not be withdrawn.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

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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.

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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

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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

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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

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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

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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

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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

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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.

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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

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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

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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:

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… … … … …

(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

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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.

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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

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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;

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   “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

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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.

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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

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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.

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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

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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

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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

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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)

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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.

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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

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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

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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

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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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