1979 (4) TMI 22 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Income-tax Appellate Tribunal to set aside an ex parte order for re-hearing.
2. Interpretation of Rule 25 of the Income-tax (Appellate Tribunal) Rules, 1963.
3. Power of review and inherent powers of the Tribunal under section 254(1) of the Income-tax Act, 1961.

Summary:

1. Jurisdiction of the Income-tax Appellate Tribunal to set aside an ex parte order for re-hearing:
The High Court examined whether the Income-tax Appellate Tribunal (ITAT) had the jurisdiction to set aside an ex parte order and restore the appeal for fresh hearing. The Tribunal had allowed a miscellaneous petition by the assessee for rehearing, citing confusion about the hearing date. The petitioner argued that the Tribunal lacked jurisdiction to set aside an order passed on merits, as there was no provision in the Income-tax Act or Rules empowering it to do so. The court held that the power to set aside an ex parte order is inherent in the Tribunal and could be traced to section 254(1) of the Income-tax Act, which mandates giving both parties a reasonable opportunity of being heard.

2. Interpretation of Rule 25 of the Income-tax (Appellate Tribunal) Rules, 1963:
The petitioner contended that Rule 25, unlike Rule 24, does not provide for setting aside an ex parte order even if sufficient cause for non-appearance is shown by the respondent. The court noted that Rule 25 allows the Tribunal to hear the appeal ex parte if the respondent does not appear, but it does not explicitly prohibit setting aside such an order. The court emphasized that the absence of a specific provision in Rule 25 does not negate the Tribunal's inherent power under section 254(1) to ensure a reasonable opportunity of being heard.

3. Power of review and inherent powers of the Tribunal under section 254(1) of the Income-tax Act, 1961:
The petitioner argued that the Tribunal, being a creature of statute, cannot review its own orders unless expressly provided. The court distinguished between the power of review and the power to set aside an ex parte order. It held that setting aside an ex parte order to afford an opportunity of being heard is not the same as reviewing an order. The court cited the Supreme Court's decision in ITO v. M.K. Mohammed Kunhi, which recognized the Tribunal's inherent powers to make the exercise of its statutory powers effective. The court concluded that the Tribunal's power under section 254(1) includes setting aside an ex parte order to ensure compliance with the statutory requirement of giving both parties a reasonable opportunity of being heard.

Conclusion:
The writ petition was dismissed, affirming the Tribunal's jurisdiction to set aside an ex parte order and restore the appeal for fresh hearing. The court emphasized that the Tribunal's action was in line with ensuring a reasonable opportunity of being heard, as mandated by section 254(1) of the Income-tax Act.