Section 254(2) of Income Tax Act does not empower ITAT to recall order: Supreme Court

The Supreme Court has clarified that the power of the Income Tax Appellate Tribunal (ITAT) under Section 254(2) of the Income Tax Act is limited to rectifying or amending an order in view of an error apparent from the record, and the said power cannot be used to recall an order (Commissioner of Income Tax (IT-4), Mumbai v M/s Reliance Telecom Limited).A Bench of Justices MR Shah and BV Nagarathna held that if an order passed by the ITAT is erroneous on merits, the remedy is to prefer an appeal before the concerned High Court. ."The powers under Section 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that. Even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers it may pass an order recalling its earlier order which is an erroneous order, cannot be accepted. As observed hereinabove, if the order passed by the ITAT was erroneous on merits, in that case, the remedy available to the Assessee was to prefer an appeal before the High Court," the Court observed..The case arose from the sale of a software made by Ericsson AB to Reliance Telecom, the respondent. TDS (tax deducted at source) was not paid by the respondent citing the Double Taxation Avoidance Agreement (DTAA) between India and Sweden & US. The claim was rejected by the Assessing Officer and the respondent was instructed to deduct 10 per cent as royalty..The respondent, after deducting the tax, filed an appeal before the Commissioner of Income Tax (Appeals), which decided in favour of the respondent. However, CIT, Mumbai challenged this decision before the ITAT which favoured the revenue department in its original order.Against the detailed judgment and order dated September 6, 2013 passed by the ITAT, the assessee-respondent filed a miscellaneous application for rectification under Section 254(2) of the Act. Simultaneously, the assessee also filed an appeal before the High Court against the ITAT order. The ITAT, on November 18, 2016 passed an order recalling its earlier order of September 6 and the respondent withdrew the writ petition before the High Court.The revenue department then filed a writ petition before the Bombay High Court challenging the order passed by the ITAT on November 18 allowing the miscellaneous application under Section 25 4(2) of the Act and recalling its earlier order of September 6, 2013. The High Court, however, dismissed the petition leading to the present appeal before the Supreme Court. .The Supreme Court allowed the plea holding that the order passed by the ITAT on November 18 was beyond the scope and ambit of the powers under Section 254(2) of the Act."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. Therefore, the powers under Section 254(2) of the Act are akin to Order XLVII Rule 1 CPC. While considering the application under Section 254(2) of the Act, the Appellate Tribunal is not required to re-visit its earlier order and to go into detail on merits," the top court ruled.The Court also said that if the assessee prefer appeal before the High Court against the original order of ITAT dated September 6, 2013 within a period of six weeks, the same may be decided and disposed of in accordance with law and on its own merits and without raising any objection with respect to limitation..[Read Judgement]