ORDER
R. Gururajan, J.
1. The CIT, Bangalore, is before me aggrieved by the rejection of an application filed by the Department for recalling the order passed by the Tribunal in terms of Annexure ‘M’.
2. M/s Electronic Research Ltd. filed its return of income for the asst. yr. 1995-96. It was completed under Section 1.43(3) of the Act on 31st March, 1998. Three issues were raised in the said assessment order. The first respondent preferred an appeal against the assessment order before the CIT(A). The claim of depreciation was also a subject-matter in the said proceedings. The depreciation disallowances is to the extent of Rs. 4 crores on the asset purportedly leased out. The first appellate authority held in favour of the first respondent.
3. The Finance Act (No. 2), 1998, introduced a scheme known as ‘Kar Vivad Samadhan Scheme’. Subsequent to the notification of the said scheme, the first respondent filed second appeal 6’efore the second respondent, Income-tax Appellate Tribunal (for short the Tribunal’) and the appeal was barred by limitation by 26 days. An application was filed for condoning delay and the application was supported by an affidavit sworn to by one Mrs. Deepa, an employee of the first respondent. According to the petition averments, the Tribunal took an unusual step of hearing the condonation petition separately.
4. Thereafter, the first respondent in the light of the pending appeal obtained a certificate in terms of the Kar Vivad Samadhan Scheme. Certificate is filed at Annexure ‘H’.
5. The Department filed an application before the Tribunal and that application was dismissed. The Department filed an appeal under Section 260A of the IT Act before this Court in ITA No. 166/1999. This Court dismissed the appeal on the ground that no substantial question of law arises from the order and appeal. Thereafter, a miscellaneous petition was filed seeking to recall the order in exercise of inherent powers of the Tribunal on the ground of a fraud played on the Tribunal by the respondent. He strongly relies on the judgment of the Supreme Court in United India Insurance v. Rajendra Singh and Ors. . That application was rejected. The CIT is, therefore, before me.
6. Respondents have entered appearance. They deny various averments made against them by the petitioner. They refer to an order passed by this Court in ITA No. 166/1999 in their support. Their further contention is that in the light of acceptance of declaration filed by them in respect of Kar Vivad Samadhan Scheme, no useful purpose is served by considering the miscellaneous petition.
7. Heard Dr. Krishna, learned counsel appearing for the Department and Sri Sarangan, learned senior counsel for the assessee. Dr. Krishna, learned counsel took me through the pleadings to contend that a fraud has been played and the same was highlighted by the petitioner and the Tribunal instead of appreciating the stand of the Department has chosen to reject the same. According to him, the true justice is polluted by the first respondent. He also says that a fraud has been played on the Tribunal by making an affidavit of Mrs. Deepa and filing it before the Tribunal for condonation of delay and admission of an appeal. He strongly relies on the judgment of the Supreme Court in (supra). The Department has filed the statement of Mrs. Deepa and Mr. Buhari in support of their allegations recorded under Section 131 of the Act at pp. 59 to 64.
8. Sri Sarangan, learned senior counsel, on the other hand contends that the Department filed a miscellaneous petition in miscellaneous petition No. 33/99 in ITA No. 728/1998, Annexure ‘J’ and the same came to be rejected by this Court in terms of Annexure ‘K’. According to the learned counsel in the light of these two orders, the Tribunal rightly refused to recall the earlier order of the Tribunal. He says that even otherwise no useful purpose is served by recalling the order in the case on hand. According to the learned counsel a certificate has already been given and that certificate has become final and binding and it cannot be disturbed. Therefore, the recalling application would serve no purpose. According to him he relies on a few judgments in the case on hand.
9. After hearing the learned counsel, I have carefully perused the material on record.
10. The material facts reveal of the factum of the respondent deriving the benefits in terms of Kar Vivad Samadhan Scheme. The Department has issued a certificate in terms of Annexure ‘H’ in terms of the certificate. Penalty of 2,62,42,770 is waived. This benefit is in the light of a pending appeal. The appeal was barred by time and an affidavit was filed explaining delay in the matter. The petitioners have produced material on record with regard to the details of the fraud in terms of examination of Mrs. Deepa and Mr. Buhari. The documents are found at p. 50 and it runs up to p. 64. The petitioner made an application to recall the order on the ground of a fraud and in the light of the Supreme Court’s judgment. In the said petition, the Department pointed out several omissions in the affidavit filed by Mrs. Deepa. The Tribunal has rejected the petition even without referring to the judgment on the basis of which the miscellaneous petition was filed. In the application, the petitioner has stated that the application now preferred by them is for invoking the inherent powers of the Court for recalling its orders on the ground of a fraud. Dr. Krishna, as I mentioned earlier, complains that the Tribunal has not even referred to the materials leading to fraud and also the judgment of the Supreme Court.
11. The Tribunal is an adjudicating body constituted under the Act. It consists of a Judicial Member (JM) and an Administrative (sic-Accountant) Member (AM). It is a judicial body. The IT Act provides for various adjudicating bodies at various levels.
Section 252 of the Act provides for the Tribunal consisting of one JM and one AM to discharge the functions conferred by the appellate authority.
Section 253 provides for various types of orders against which appeals are available to a litigant to the Tribunal. Rules also have been framed in this regard.
12. The Supreme Court in the case of United India Insurance v. Rajendia Singh and Ors. (supra) has considered a fraud on Court and the remedy in such situations. The Supreme Court has thus ruled in para 12 reading as under:
“No one can possibly fault the insurance company for persistently pursuing the matter up to this Court because they are dealing with public money. If they have discovered that such public fund, in a whopping measure, would be knocked off fraudulently through a fake claim, there is full justification for the insurance company in approaching the Tribunal itself first. At any rate the High Court ought not to have refused to consider their grievances. What is the legal remedy when a party to a judgment or order of Court later discovered that it was obtained by fraud.”
13. The Supreme Court noticed the relevancy of fraud and the remedy in such matters in paras 15 and 16. The Supreme Court ruled that if an opportunity is not provided to litigants to substantiate their contention it might certainly lead to serious injustice. In the case on hand, to my shock and surprise, the Tribunal consisting of a JM has not even thought fit to apply his mind with regard to a fraud and its effect on judicial bodies. In fact, to my further shock and surprise the Tribunal has also not even referred to the judgment of the apex Court not withstanding the petition being based on the said judgment of the Supreme Court. I express my strongest displeasure the way in which an application is dealt, by a Judicial body consisting of a JM. In the impugned order, the learned Tribunal holds that it has no inherent powers to render justice to the matter. If only the Tribunal has taken pains to notice the various provisions of the Act and also the judgment of the Supreme Court, the Tribunal would not have ruled that there was no power to set aside a fraud in the given set of circumstances.
14. The Punjab High Court in Mangat Ram Kuthiala and Ors. v. CYT (1960) 38 ITR 1 (Punj) has considered the powers of the Tribunal and has ruled “that it is a settled rule that a judicial Tribunal could recall and quash its own order in exceptional cases when it was shown that it was obtained by fraud or by palpable mistake or was made in utter ignorance of a statutory provision and the like, and for the application of that rule the class of the Tribunal was not a material matter but what was of substance and material was the nature of the proceedings before it; if the proceedings were in the nature of judicial proceedings, then irrespective of the class of the Tribunal the rule applied; that the Tribunal had inherent jurisdiction to entertain the first application, dt. 13th Feb., 1950.”
15. The Calcutta High Court has considered the case of a power to rectify an order. The Calcutta High Court has ruled “that the inherent power to rectify a wrong committed by itself, by a Court or Tribunal, is not, really speaking, a power to review.”
16. In ITO v. S.B. Singar Singh & Sons and Anr. , the Allahabad High Court has ruled that “even when express power to review its orders is not conferred by a statute, a Court or a Tribunal has inherent jurisdiction to rectify a wrong committed by itself”. Therefore, it cannot be said that the Tribunal has absolutely no jurisdiction as held by it even when a plea of fraud is placed before it. It is rather unfortunate that the Tribunal has not focussed the after effect of fradulent pleas and fradulent acts by litigants while passing the impugned order. I must also point out at this stage that the wheels of justice can move only on true facts. Any mischief including a fraud on the Tribunal would result in derailing the wheels of justice. Justice is based on truth and truth cannot be trampled by an act of fraud. A litigant has to come to the Court with clean hands and an unclean hand has to be shown the door by a Court and not an entry to the Court. Such entries to such persons would pollute the true atmosphere of a temple of justice. All these necessary material unfortunately is not considered by the Tribunal, while rejecting the petition.
17. In these circumstances, I am fully convinced that the Tribunal has failed to exercise its power in the matter of rendering justice by setting aside a fraud played by a litigant. The Tribunal has also failed to notice that large sums of money was involved in the case on hand and based on the order passed by the Tribunal, the respondent has benefited to the extent of crores of rupees. By condoning delay, the respondent has availed the benefits in terms of the Kar Vivad Samadhan Scheme to a large extent, running to crores of rupees. All these aspects have not been properly adverted to or considered by the Tribunal. On the other hand, the Tribunal has ruled that in the light of the certificate the matter has become final and, therefore, there cannot be any grievance. The Tribunal has missed a relevant point namely, a fraud played on it. What are its effects or after effects can be noticed only after setting aside that order of fraud and not beforehand. It is like a cart being put before a horse and not the horse after the cart. At any rate, the relevant facts/law has been omitted in the case on hand and, therefore, a case is certainly made out by the petitioner before me. Any non-interference in a case like this would be perpetuating and percolating a fraud played on a Judicial Tribunal. Moreover, the petitioner has also placed some acceptable materials with regard to fraud. Therefore notwithstanding the stiff opposition of Sri Sarangan, learned senior counsel, I am compelled to interfere in the larger interest of purity of justice and purity of Tribunal. I must also notice that the Tribunal has gravely erred in finding fault with the Department in not bringing it to the notice of the Tribunal, the order of the High Court. A careful reading of the material on record would reveal that the appeal filed by the Tribunal was dismissed by this High Court on the ground of “no substantial question of law”. It was not in case of any adjudication either on a plea of fraud or on a plea of jurisdiction of power of the Tribunal. The entire approach of the Tribunal in my view requires to be noticed by this Court to reject the case of the respondent.
18. Sri Sarangan, learned senior counsel however, invites my attention to the judgment of the Supreme Court in Smt Sushila Rani v. CIT and Anr. . That was a judgment in which the Supreme Court was considering as to whether a certificate could be reopened under the Kar Vivad Samadhan Scheme. That was not a case of any fraud as in the present case.
19. Similarly, Killick Nixon Ltd. v. Dy. CIT (2002) 258 ITR 627 (SC) is not a case of fraud. Therefore, what would happen in the case of a detection of fraud on the earlier orders is a matter that requires decision after recalling the order based on fraud. In fact, the Supreme Court itself in United India Insurance Co. Ltd. v. Rajendra Singh and Ors. (supra) has answered the remedy in the event of a fraud in para 16. The Supreme Court has said that in such cases, opportunity has to be provided to both the parties as stated in para 17. Therefore, in my view, the given set of circumstances and the apex Court’s clear pronouncement of law on fraud on the Tribunal compell me to interfere in the case on hand and I do so.
20. The impugned order is set aside. Matter is remitted back to the Tribunal to consider the claim put forth by the petitioner afresh after affording a reasonable opportunity to the petitioner to substantiate allegations. Opportunity has to be afforded to the respondent to rebut the allegation. While disposing of the contention afresh the Tribunal is not to be influenced by anyone of my observations, if any made by me on the merits of the allegations.
21. In the case on hand, I am compelled to impose costs on the respondents for their omission and commission on the peculiar facts of this case. The cost is quantified at Rs. 5,000 and is payable to the Prime Minister’s Relief Fund within four weeks from today.
22. Writ petition is allowed. The order is set aside with the above directions.
23. Ordered accordingly.