ITAT Can Recall Its Order If Binding Precedent Is Ignored | Section 254(2) Gets Strong Backing

 

In a significant ruling reinforcing judicial discipline, the Delhi ITAT has held that failure to follow binding judicial precedent is a “mistake apparent from record” and can be rectified under Section 254(2) of the Income-tax Act. This decision strengthens the scope of rectification and provides an effective remedy where the Tribunal overlooks settled law.

In Tigre SAS Liquors India Pvt. Ltd. vs DCIT, the Tribunal dealt with Miscellaneous Applications filed by the assessee pointing out that relevant binding precedents were not considered while passing the original order.

Accepting the contention, the ITAT held that non-consideration of binding judicial decisions strikes at the root of the order itself. Such an error is not a mere difference of opinion or a debatable issue—it is a patent mistake apparent from the record. Accordingly, the Tribunal recalled its earlier order for fresh adjudication.

While arriving at this conclusion, the ITAT relied on the landmark judgment of the Supreme Court in ACIT vs Saurashtra Kutch Stock Exchange Ltd., which authoritatively settled the law on this issue. The Apex Court had clearly held that failure to consider a binding decision of the jurisdictional High Court or the Supreme Court constitutes a mistake apparent from the record and is rectifiable under Section 254(2).

This principle is extremely important in practice. Many times, relevant judgments—especially of jurisdictional High Courts—are either not cited or inadvertently overlooked during proceedings. If the Tribunal passes an order ignoring such binding precedents, the error goes beyond mere interpretation—it becomes a legal flaw affecting the validity of the order itself.

The ITAT clarified that Section 254(2) is not limited to clerical or arithmetic mistakes. It also covers manifest legal errors that are evident from the record, including failure to apply binding law. In such cases, rectification is not a review but a correction to ensure that the order aligns with settled legal principles.

This ruling sends a strong message that judicial consistency is not optional—it is mandatory. The Tribunal cannot take a view contrary to binding precedent without addressing it, and any such omission is liable to be corrected.

From a practical perspective, this decision offers a powerful and time-efficient remedy to taxpayers. Instead of approaching higher courts, an assessee can file a Miscellaneous Application under Section 254(2) seeking recall of the order if binding precedents have been ignored.

Key Takeaways for Taxpayers and Professionals

Ignoring binding precedent amounts to a mistake apparent from record.
Such mistakes are rectifiable under Section 254(2.
Rectification can include recall of the entire order for fresh hearing.
This is not a review but correction of a patent legal error.
Section 254(2) is a powerful remedy before escalating litigation.

Conclusion

The ITAT Delhi has reaffirmed a fundamental principle of tax jurisprudence—courts and tribunals must follow binding precedents to maintain consistency and certainty in law.

Bottom Line: If binding law is ignored, the order cannot stand—and Section 254(2) is the tool to correct it.

The copy of the order is as under:

1756461727-CthPMS-1-TO