2024 (6) TMI 545 - HC - Income Tax

Dismissal of appeal and miscellaneous application by ITAT for non-prosecution - statutory obligation of the Appellate Tribunal to consider appeals on merits - HELD THAT - We find that another Division Bench of this Court, in Uzhuva Service Co-operative Bank Ltd. 2020 (9) TMI 1311 - KERALA HIGH COURT in an almost identical situation, found that the Income Tax Appellate Tribunal acting under Section 254 of the IT Act, 1961, cannot dismiss an appeal preferred by an assessee for non-prosecution. The court found that in terms of the provisions of Section 254 of the IT Act, the Appellate Tribunal was statutorily obliged to consider all appeals on merits and the dismissal for non-prosecution, without considering the merits of the appeal, was not legally sustainable. We further notice that in the said case also, the assessee had filed an application for the restoration of the appeal beyond the statutory period prescribed under the Income Tax (Appellate Tribunal) Rules. The situation, therefore, was not different from what arises in the instant case. Thus, taking note of the said precedent of this Court and finding it to be in confirmity with the statutory provisions under the IT Act and Rules, we allow this writ appeal by setting aside the impugned judgment of the learned Single Judge, and P6 orders of the Income Tax Appellate Tribunal that were impugned in the writ petition, and direct the Appellate Tribunal to restore the appeal on its file and pass orders on merits after hearing the appellant, within an outer time limit of six months from the date of receipt of a copy of this judgment.

Summary

Issues:
- Appeal against the judgment denying deduction under Section 10B for assessment years 2007-08 and 2008-09.
- Dismissal of appeal by Income Tax Appellate Tribunal for non-prosecution.
- Impugning the dismissal orders and restoration application.
- Interpretation of statutory provisions under Section 254 of the Income Tax Act.

Analysis:

The appellant, engaged in Software Development and Export of IT enabled services, filed an appeal against the denial of deduction under Section 10B for the assessment years 2007-08 and 2008-09. The First Appellate Authority allowed an alternate contention for deduction under Section 10A for 2008-09 but rejected it for 2007-08. Subsequently, the appellant's appeal before the Income Tax Appellate Tribunal was dismissed for non-prosecution, with the appellant claiming they did not receive notice of hearing or the dismissal order. The appellant's application for restoration of the appeal was also dismissed as belated, leading to the writ petition challenging the dismissal orders of the Appellate Tribunal.

The learned Single Judge acknowledged the statutory obligation of the Appellate Tribunal under Section 254 of the Income Tax Act to consider appeals on merits and not dismiss them for non-prosecution. However, the writ petition was dismissed on the grounds of the belated miscellaneous application for restoration. The appellant, represented by Senior Counsel and Standing Counsel for the Income Tax Department, argued before the High Court.

In a similar precedent, another Division Bench of the Court held that the Appellate Tribunal cannot dismiss appeals for non-prosecution under Section 254 of the IT Act, emphasizing the statutory obligation to consider appeals on merits. The Court noted that the situation in the present case mirrored the previous case where an application for restoration was filed beyond the statutory period. Consequently, the High Court allowed the writ appeal, setting aside the Single Judge's judgment and directing the Appellate Tribunal to restore the appeal and decide on merits within six months, in line with the statutory provisions under the IT Act and Rules.

In conclusion, the High Court disposed of the writ appeal by overturning the dismissal orders of the Appellate Tribunal and emphasizing the obligation to consider appeals on merits as prescribed by the statutory provisions under the Income Tax Act.