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While considering the application under Section 254(2) of the Act, the Appellate Tribunal is not required to revisit its earlier order and to go into detail on merits. The powers under Section 254(2) of the Act are akin to Order XLVII Rule 1 CPC. In exercise of powers under Section 254(2) of the Act, the Appellate Tribunal may amend any order passed by it under sub-section (1) of Section 254 of the Act with a view to rectifying any mistake apparent from the record only. Such an observation was made by the Hon’ble Supreme Court of India before Hon’ble Justice M.R. SHAH & Hon’ble Justice B.V. NAGARATHNA in the matter of Commissioner of Income Tax (IT-4) vs M/s Reliance Telecom Limited [CIVIL APPEAL NO. 7110 OF 2021] on 03.12.2021.

The facts arising to the present appeal were that the respondent company entered into a supply contract with  Ericsson A.B. The respondent company filed an application under Section 195(2) of the Act before the Assessing Officer, to make payment to the non-resident company for the purchase of software without TDS. It was contended by the Assessee that it was for the purchase of software and Ericsson A.B. had no permanent establishment in India and in terms of the DTAA between India and Sweden & USA, the amount paid is not taxable in India. The same was rejected by the Assessing Officer and directed the respondent company to deduct tax at the rate of 10% as royalty. The respondent appealed before the Commissioner of Income Tax (Appeals). The CIT vide order dated 27.05.2008 was held in favour of the respondent. Aggrieved by the said order Revenue appealed before the ITAT and by a detailed judgment and order dated 06.09.2013, the ITAT allowed the Revenue’s appeal. The respondent filed a miscellaneous application for rectification under Section 254(2) of the Act. Simultaneously, the respondent also filed the appeal before the High Court against the ITAT order dated 06.09.2013.vide common order dated 18.11.2016, the ITAT allowed the respondent’s miscellaneous application filed under Section 254(2) of the Act and recalled its original order dated 06.09.2013. Feeling aggrieved and dissatisfied with the order passed by the ITAT allowing the miscellaneous application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013, the Revenue preferred writ petition before the High Court, which the High Court dismissed. Thus, the present appeal was preferred by the Revenue.

The Hon’ble Supreme Court of India observed that “While allowing the application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013, it appears that the ITAT has re-heard the entire appeal on merits as if the ITAT was deciding the appeal against the order passed by the C.I.T. In exercise of powers under Section 254(2) of the Act, the Appellate Tribunal may amend any order passed by it under sub-section (1) of Section 254 of the Act with a view to rectifying any mistake apparent from the record only”

Furthermore, the Hon’ble Supreme Court of India held that the power under Section 254(2) of the Act is akin to Order XLVII Rule 1 CPC. the Appellate Tribunal is not required to revisit its earlier order and to go into detail on merits. The powers under Section 254(2) of the Act are only to rectify/correct any mistake apparent from the record. The only remedy available to the respondent was to prefer the appeal before the High Court.

Finally, the Hon’ble Supreme Court of India disposed of the present appeal with leave to the respondent to file afresh before the Hon’ble High Court who shall decide the matter afresh looking into the merits of the case.

Click Here To Read The Judgment.

Judgment Reviewed by: Rohan Kumar Thakur