2018 (5) TMI 1099 - HC - Income Tax

Order u/s 254 - ex-parte order - violation of principles of natural justice - Held that - Article 226 of the Constitution of India does not impose any limitation on the power of the High Court to issue writs, even when there is an alternative remedy. Where there is an efficacious alternative remedy this Court refrains from exercising its extra ordinary jurisdiction. This Court would not reject an application under Article 226 of the Constitution of India, where the remedy, if any, of appeal is uncertain as in the case of an appeal under Section 260A of the 1961 Act which depends on the subjective satisfaction of the Division Bench of the High Court, of existence of a substantial question of law. In any case, there are at least 3 exceptions to the rule of alternative remedy. A writ application might be entertained where the order is in violation of principles of natural justice, where the order has been passed under a law which is ultra vires or is otherwise without jurisdiction or in case of an order which is perverse. The order impugned is patently repugnant to Section 254 of the 1961 Act read with Rule 24 of the 1963 Rules. The writ petition is allowed and the impugned order cannot be sustained and the same is set aside - writ petition is allowed and the impugned order cannot be sustained and the same is set aside

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal on grounds of default, Interpretation of Section 254(1) of Income Tax Act, 1961, Application of Rules 24 and 25 of Income Tax (Appellate Tribunal) Rules, 1963, Amendment of Rule 24 in 1987, Alternative remedy of appeal under Section 260A of Income Tax Act, 1961, Jurisdiction of High Court under Article 226 of the Constitution of India, Exceptions to rule of alternative remedy, Violation of principles of natural justice, Setting aside of impugned order.

Analysis:

The writ petition challenges the order of the Income Tax Appellate Tribunal dismissing the appeal for the assessment year 2009-2010 on the ground of default. The main issue is whether the appeal could have been dismissed solely due to non-appearance of the assessee or their representative. Section 254(1) of the Income Tax Act, 1961 empowers the Appellate Tribunal to pass orders after giving both parties an opportunity to be heard. The Rules 24 and 25 of the Income Tax (Appellate Tribunal) Rules, 1963 require the Tribunal to dispose of an appeal on merits even if the appellant or respondent does not appear.

The petitioner relied on a Supreme Court decision highlighting the conflict between Rule 24 of the 1963 Rules and Section 33 of the 1961 Act, emphasizing the obligation of the Tribunal to decide appeals on merits. Although Rule 24 was amended in 1987 to allow restoration of an appeal in certain cases, the core obligation to decide on merits remains. The argument that a writ petition cannot be used to circumvent the limitation period for filing an appeal under statute was also raised.

Regarding the alternative remedy of appeal under Section 260A of the Income Tax Act, 1961, it was clarified that an appeal lies only on a substantial question of law, and satisfaction of the High Court is necessary for entertaining such an appeal. The jurisdiction of the High Court under Article 226 of the Constitution of India was discussed, highlighting exceptions to the rule of alternative remedy, such as violation of natural justice, ultra vires orders, or perversity. The High Court retains the power to issue writs even when an alternative remedy exists, especially when the remedy of appeal is uncertain.

In this case, the High Court allowed the writ petition, setting aside the impugned order of the Tribunal and directing a fresh consideration of the matter on merits within a specified timeframe. The judgment emphasized the importance of following procedural obligations and ensuring decisions are made in accordance with the law, ultimately upholding the principles of natural justice and fair adjudication.