The Income Tax Appellate Tribunal, Delhi, has firmly reaffirmed that its power under Section 254(2) of the Income Tax Act is strictly limited to correcting mistakes apparent from the record, and cannot be invoked to revisit or review the merits of a previously rendered order. This ruling closes a potential avenue for revenue authorities seeking to circumvent appellate limitations.
Background & Facts
The Dispute
The dispute arose from an assessment order passed for Assessment Year 2018-19 against M/s JPMC Hospital and Path Lab, a partnership firm run by Dr. P.K. Khanna and Dr. Rita Khanna. The Assessing Officer made an addition of Rs. 9,26,100 to the declared income of Rs. 9,26,100 after a search and seizure operation under Section 132 of the Income Tax Act was conducted on 17.01.2019 at the hospital premises. The assessee challenged this addition before the Commissioner of Income Tax (Appeals), who partially allowed the appeal on 28.09.2023. Aggrieved, the assessee appealed to the Income Tax Appellate Tribunal, which allowed the appeal and set aside the addition.
Key Facts
- The assessee filed its income tax return on 17.08.2018 declaring income of Rs. 9,26,100
- Search and seizure under Section 132 was conducted on 17.01.2019 at the hospital and partners’ residences
- The Assessing Officer made an addition of Rs. 9,26,100 in the assessment order
- The Commissioner of Income Tax (Appeals) passed an order on 28.09.2023 partly allowing the appeal
- The Tribunal delivered its order on 28.05.2025 allowing the assessee’s appeal and setting aside the addition
- The Revenue filed a miscellaneous application on 08.05.2026 seeking recall of the Tribunal’s order
Procedural History
- 17.08.2018: Assessee filed return declaring income of Rs. 9,26,100
- 17.01.2019: Search and seizure conducted under Section 132
- Date unspecified: Assessing Officer passed assessment order with addition of Rs. 9,26,100
- 28.09.2023: Commissioner of Income Tax (Appeals) partly allowed the appeal
- 28.05.2025: Tribunal allowed the assessee’s appeal and set aside the addition
- 08.05.2026: Revenue filed Miscellaneous Application No. 400/Del/2025 seeking recall of the Tribunal’s order
- 08.05.2026: Tribunal pronounced order dismissing the application
The Parties' Positions
For the Appellant (Revenue)
The Revenue contended that the Tribunal failed to consider that sufficient time existed between the proposal for approval under Section 153D and its actual grant. It argued that the approval authority had applied its mind and that this factual oversight constituted a mistake apparent from the record, justifying rectification under Section 254(2).
For the Respondent (Assessee)
The assessee’s counsel argued that Section 254(2) does not empower the Tribunal to review or reconsider its own order on merits. The application, they submitted, was a disguised review petition and legally impermissible.
Relief Sought
The Revenue sought recall and modification of the Tribunal’s order dated 28.05.2025, arguing that the omission of material facts rendered the order erroneous and amendable under Section 254(2).
The Legal Issue
Can the Income Tax Appellate Tribunal recall its own order under Section 254(2) of the Income Tax Act on the ground that it overlooked facts, when the alleged omission relates to the merits of the case rather than a clerical or obvious error apparent from the record?
Arguments Presented
For the Appellant
The Revenue contended that the Tribunal’s failure to consider the procedural compliance under Section 153D - specifically, the timing and deliberative process behind the approval - amounted to a mistake apparent from the record. It argued that since the approval was not mechanical and involved application of mind, its non-consideration by the Tribunal was an error that could be corrected under Section 254(2).
For the Respondent
The assessee countered that Section 254(2) is not a vehicle for review. The Tribunal had already considered all submissions and evidence before delivering its order. The Revenue’s grievance was not about a clerical error or omission in calculation, but about disagreement with the factual appreciation and legal conclusion - a matter beyond the scope of rectification.
The Court's Analysis
The Tribunal examined the scope of Section 254(2), which permits rectification of mistakes apparent from the record. It emphasized that such mistakes must be obvious, patent, and capable of being corrected without re-adjudication of facts or re-appreciation of evidence.
"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."
The Tribunal relied on the binding precedent of the Supreme Court in Reliance Petro Telecom Limited v. Union of India (Civil Appeal Nos. 7110 and 7112 of 2021), which held that an order passed under Section 254(2) to recall a prior order on the basis of merits cannot be sustained. The Supreme Court clarified that if an order is erroneous on facts or law, the only remedy lies in an appeal to the High Court - not in a recall petition.
The Tribunal noted that the Revenue had not pointed to any arithmetic error, misstatement of law, or clerical omission in its order. Instead, it sought to challenge the Tribunal’s factual finding that the addition of Rs. 9,26,100 was not substantiated. This, the Tribunal held, was a clear attempt to circumvent the appellate process.
The Tribunal further observed that allowing such applications would undermine the finality of orders and open the floodgates to repeated challenges under the guise of rectification. The power under Section 254(2) is remedial, not appellate.
The Verdict
The Miscellaneous Application filed by the Revenue was dismissed. The Tribunal held that its order dated 28.05.2025 could not be recalled under Section 254(2) as the alleged error related to appreciation of facts, not a mistake apparent from the record. The original order dated 28.05.2025 in ITA No. 2906/Del/2023 stands affirmed.
What This Means For Similar Cases
Rectification Cannot Substitute Appeal
- Practitioners must not file rectification applications under Section 254(2) to challenge factual findings or legal conclusions - such challenges must be raised before the High Court via appeal
- Revenue authorities should avoid using rectification as a procedural workaround to revisit adverse tribunal decisions
Mistake Must Be Obvious and Non-Disputable
- Only errors such as incorrect calculation of income, misquoting of a statutory provision, or omission of a clearly referenced document qualify as mistakes apparent from the record
- Disagreement over evidentiary weight or interpretation of facts does not meet the threshold for rectification
Finality of Tribunal Orders Is Protected
- Once an order is pronounced and no appeal is pending, it attains finality unless set aside by a higher forum
- Any attempt to reopen the order through a collateral application under Section 254(2) will be summarily dismissed
