Facts of the Case

  1. The Revenue had filed appeals before the Delhi High Court under Section 260A challenging the ITAT’s order dated 12 January 2016.
  2. The dispute arose from earlier ITAT proceedings where, by order dated 6 February 2009, the Tribunal had allowed the Revenue’s appeals and partly allowed the Assessee’s cross-objections.
  3. Subsequently, the Assessee filed Miscellaneous Applications under Section 254(2) seeking rectification/recall of the said order.
  4. The ITAT, by order dated 24 April 2009, allowed the applications and recalled its earlier order.
  5. The Revenue did not challenge the recall order dated 24 April 2009.
  6. After restoration, the ITAT reheard and disposed of the appeals afresh.
  7. The Revenue thereafter challenged the subsequent ITAT order and questioned the Tribunal’s power to review its earlier order under Section 254(2).

Issues Involved

  1. Whether the ITAT could exercise powers under Section 254(2) to recall its earlier order.
  2. Whether the Revenue could challenge the legality of the recall order indirectly in an appeal under Section 260A, after not challenging the recall order itself.
  3. Whether the issue regarding jurisdiction under Section 254(2) survived after the recall order had attained finality.

Petitioner’s Arguments (Revenue’s Arguments)

  • The Revenue argued that the ITAT exceeded its jurisdiction under Section 254(2) by reviewing its earlier final order.
  • It was contended that Section 254(2) permits only rectification of mistakes apparent on record and does not authorize substantive review.
  • The Revenue sought to challenge the subsequent order by questioning the legality of the recall mechanism adopted by the Tribunal.

Respondent’s Arguments (Assessee’s Arguments)

  • The Assessee contended that the recall order dated 24 April 2009 was validly passed under Section 254(2).
  • It was argued that the Revenue never challenged the said recall order before the High Court.
  • Since the recall order attained finality, the Revenue could not reopen that issue in a later appeal against the fresh ITAT order.
  • The Assessee submitted that the challenge was legally barred and no substantial question of law arose.

Court Order / Findings

The Delhi High Court dismissed the appeals and held as follows:

  • The order dated 24 April 2009 passed by the ITAT under Section 254(2) was never challenged by the Revenue.
  • Since that order attained finality, its validity could not be questioned in a subsequent appeal arising from the fresh adjudication after restoration.
  • The Court held that once the recall order remained unchallenged, the Revenue lost the opportunity to dispute the Tribunal’s jurisdiction at a later stage.
  • Consequently, the question sought to be urged by the Revenue did not arise for consideration.
  • The appeals were accordingly dismissed.

Important Clarification

This judgment clarifies that where an order of the ITAT under Section 254(2) recalling an earlier order is not independently challenged, such order attains finality and cannot later be questioned indirectly in an appeal against the subsequent order passed after rehearing. The decision reinforces the procedural principle of finality and bars collateral challenges.

Sections Involved

  • Section 254(2), Income Tax Act, 1961 – Rectification of mistakes apparent from record
  • Section 260A, Income Tax Act, 1961 – Appeal to High Court

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:8924-DB/SMD25072017ITA5712016_155851.pdf

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