2018 (5) TMI 1789 - HC - Income Tax

Rejection of rectification application - exceeding of jurisdiction by ITAT - Held that - Section 254(2) of the Act was advisably amended to curtail extended period of four years which had been provided to either class of litigants to approach the ITAT for a rectification. In this case, the Court has considered the submissions of the parties. In this case, the ITAT did not decide the appeal on the merits as it is mandated to but rather rejected for non-prosecution. Rule 24 of the Income Tax Appellate Tribunal s Rules and the other provisions of both the Income Tax Act and Rules indicate that the ITAT has to decide the appeals or matters before it on the merits. ITAT s failure to do so, implies that it exceeded its jurisdiction and instead of deciding on the merits, rejected the appeal merely for non-prosecution. In the given circumstances and keeping in view the fact that Rule 25 does not stipulate any period of limitation within which the aggrieved party can approach the Tribunal, it is open to the appellant to approach the Tribunal with a suitable application for restoration of the appeals; in such event, the appeals could be considered on their merits and decided in accordance with law after hearing both the parties, provided, the application is presented before the ITAT within thirty days from today.

Summary

Issues:
1. Appellant's grievance regarding rejection of rectification application by ITAT.
2. Interpretation of Section 254(2) of the Income Tax Act, 1961.
3. Jurisdiction of ITAT in deciding appeals on merits.
4. Appellant's right to approach ITAT for restoration of appeals.

Analysis:

1. The appellant raised a grievance that the ITAT rejected the rectification application, which was moved under Section 254(2) of the Income Tax Act, 1961. The ITAT's order dismissing the appeal was dated 16.06.2016, and the rectification application was filed on 02.6.2017, leading to its dismissal by the impugned order.

2. The appellant contended that Section 254(2) of the Act does not impose any limitation for approaching the ITAT for rectification, citing judgments of Allahabad High Court and Gujarat High Court. However, the Court held that the amendments to Section 254(2) aimed to restrict the extended period for rectification. The ITAT's failure to decide the appeal on merits, rejecting it for non-prosecution, was deemed as exceeding its jurisdiction.

3. Rule 24 of the Income Tax Appellate Tribunal’s Rules mandates the ITAT to decide appeals on merits. The Court emphasized that the ITAT's rejection for non-prosecution indicated a failure to adhere to its jurisdiction. As Rule 25 does not specify a limitation period for approaching the Tribunal, the appellant was granted the right to file an application for restoration of appeals within thirty days for consideration on merits.

4. Consequently, the appeals were disposed of, allowing the appellant to approach the ITAT for restoration of the appeals within thirty days. The ITAT was directed to consider the appeals on their merits and decide in accordance with the law after hearing both parties.