2019 (7) TMI 1441 - HC - Income Tax

Ex- parte order of the ITAT dismissing the appeal - none had appeared on behalf of appellant and as such appeal came to be dismissed and finding recorded by the tribunal in that regard is to the effect that matter was also heard exparte qua the assessee - HELD THAT - Case of appellant or its authorized representative does not appear when the matter is called for hearing tribunal can dispose of said appeal on merits after hearing the respondent. Though in the instant case Tribunal has recorded that it has heard the counsel appearing for the revenue, order dated 31.03.2017 passed by tribunal does not disclose as to the reason for rejecting the grounds urged in appeal memorandum and no supporting reasons have been assigned. It is in this background, the expression dispose of the appeal on merits occurring Rule 24 would acquire significance. In other words, there is a duty cast on the Tribunal to adjudicate the claim on merits even in the absence of parties or their authorized representative. In the instant case, it would not end at this stage, an application was filed for recall of said order. For recalling the order, reasons assigned by the counsel appearing on behalf of assessee was, he had noted down the date of hearing erroneously as 30.04.2017 instead of 30.03.2017. The possibility of said error occurring cannot be ruled out, particularly when number of cases are being handled by the authorized representative of assessee. Under such circumstances, the technicalities, if any, has to give way for substantial justice or in other words, on the ground of technicalities, substantial justice cannot be sacrificed. To put it differently, an opportunity, if afforded to the assessee to put forth his case before the Tribunal, no prejudice or loss would have caused to the revenue, but on the other hand, appeal could have been adjudicated by the Tribunal on merits and finality could have been given.

Summary

Issues:
1. Tribunal's justification in affirming orders without considering appellant's grounds.
2. Rejection of deduction claim under Section 54B of Income Tax Act.

Issue 1: Tribunal's Justification for Affirming Orders
The appellant challenged the Tribunal's order rejecting their application for recall of the order dated 31.03.2017. The Tribunal dismissed the appeal as the appellant failed to appear on the scheduled hearing dates. The Tribunal heard the revenue's arguments and affirmed the CIT (Appeals) decision without providing reasons for rejecting the appellant's grounds. The Tribunal's order cited Rule 24, which allows disposal of an appeal on merits if the appellant or representative fails to appear. However, the Tribunal did not disclose reasons for rejecting the grounds urged in the appeal memorandum. The appellant filed an application for recall, citing an erroneous hearing date as the reason for non-appearance. The High Court emphasized that substantial justice should prevail over technicalities and ruled in favor of the appellant, setting aside the Tribunal's order and directing a fresh hearing on merits.

Issue 2: Rejection of Deduction Claim under Section 54B
The appellant sold agricultural land and claimed a deduction under Section 54B of the Income Tax Act for investing the sale proceeds in agricultural lands. Simultaneously, the appellant claimed a deduction under Section 54F on the capital gains from the same asset. However, the assessing officer rejected the deduction claim under Section 54B. The CIT (Appeals) upheld the rejection, leading to the appeal before the Tribunal. The Tribunal dismissed the appeal due to the appellant's non-appearance, resulting in the current challenge under Section 260A of the Income Tax Act. The High Court, after addressing the first substantial question of law regarding the Tribunal's handling of the appeal, ruled in favor of the appellant, setting aside the previous orders and restoring the appeal to the Income Tax Appellate Tribunal for a fresh hearing and disposal on merits.

This detailed analysis of the judgment outlines the issues involved, the arguments presented, and the High Court's decision regarding each issue, providing a comprehensive understanding of the legal proceedings and the reasoning behind the judgment.