2018 (10) TMI 1131 - HC - Income Tax

Rectification application to recall an ex-parte order of ITAT rejected - applications were rejected for reason of they having been filed beyond the six months period as provided under Section 254(2) - reasons for delay - Held that - Tribunal erred insofar as treating the present applications as rectification applications. Though an application for restoration is not specifically provided; hearing of an appeal after declaring the appellant ex-parte and dismissal for reason of non-appearance of the appellant are procedural in nature and sufficient prescriptions have been made in the ITAT Rules as noticed hereinabove, for restoration and hearing the appeal on merits. In such circumstances, the applications filed ought to have been treated as one filed for setting aside the ex-parte order and the appeals ought to have been restored to be heard on merits. It is seen from the affidavit filed produced as Annexure-E, before the Tribunal that there was a Company Appeal pending before the National Company Law Appellate Tribunal (NCLAT), New Delhi for reason of disputes having arisen within the Management and between the Directors. Notice on the appeal is said to have been received by one of the Directors, who have been specifically removed as per the order of the NCLAT. The present management came into office on the basis of the NCLAT order which is dated 24.5.2017. The applications themselves are filed on 20.12.2017. The dismissal of the earlier appeals were on 19.11.2015. Though sufficient cause has been shown, we are of the opinion that the appeals can be directed to be considered by the Tribunal only on terms. We, hence, direct the appellant to pay an amount of ₹ 25,000/- (Rupees twenty five thousand only) each for the assessment years in each of the appeals before us to the Chief Minister s Distress Relief Fund within a period of one month from the date of receipt of certified copy of this judgment. On production of receipt of the same by the appellant before the Tribunal, there shall be restoration of the appeals and the same shall be considered on merits

Summary

Issues:
1. Interpretation of the provisions under Section 254(2) of the Income Tax Act, 1961 regarding the time limit for filing applications.
2. Determination of whether the applications should be treated as rectification applications or applications for restoration.
3. Analysis of the procedural rules under the Income Tax Appellate Tribunal Rules, 1963 for setting aside ex-parte orders and restoration of appeals.
4. Consideration of the reasons for delay in filing the applications and determining if sufficient cause has been shown.
5. Imposition of terms for restoration of the appeals and payment to the Chief Minister's Distress Relief Fund.

Analysis:
The judgment delivered by the Kerala High Court involved appeals arising from the order of the Tribunal for the assessment years 2008-09, 2009-10, and 2011-12. The Tribunal had rejected applications to recall an ex-parte order, citing that they were filed beyond the six months' period as provided under Section 254(2) of the Income Tax Act, 1961. The appellant argued that the applications should not have been treated as rectification applications but as applications for restoration based on the provisions in the Income Tax Appellate Tribunal Rules, 1963. The Court agreed, stating that the applications should have been treated as filed for setting aside the ex-parte order, and the appeals should have been restored for hearing on merits.

The Court noted that the Tribunal had erred in treating the applications as rectification applications and emphasized that sufficient provisions existed in the ITAT Rules for restoration and hearing of appeals on merits after an ex-parte order. Despite considering remanding the matter back to the Tribunal, the Court decided to assess the reasons for the delay itself. The appellant had cited delays due to disputes within the management and proceedings before the National Company Law Appellate Tribunal. The Court found that sufficient cause had been shown for the delay and directed the appellant to pay a specified amount to the Chief Minister's Distress Relief Fund for each assessment year within a month. Upon receipt of the payment, the appeals would be restored and considered on merits, with the appellant entitled to any tax benefits associated with the payment.

In conclusion, the Kerala High Court's judgment clarified the distinction between rectification applications and applications for restoration in the context of setting aside ex-parte orders in income tax appeals. The Court emphasized adherence to procedural rules and considerations of sufficient cause for delays in filing applications, ultimately imposing terms for the restoration of appeals to be considered on merits.