2015 (3) TMI 805 - HC - Income Tax

Application of advance ruling dismissed for non-prosecution - also application for restoration has been rejected - Held that - Orders dated 16.01.2014 and 30.04.2014 deserve to be set aside. Firstly, the order dated 16.01.2014 is an order simply dismissing the application of the petitioner for non-prosecution, whereas Rule 17 of The Rules 1996, permits the Authority to decide the matter exparte on merits. Further, no adequate reason for rejecting the application for restoration has been given in the order dated 30.04.20214. Merely by saying that the averments made in the two affidavits are contradictory would not be sufficient. The Authority ought to have specified as to what was the contradiction in the two affidavits and why the same was not acceptable. After having gone through the two affidavits, what we find is that initially the applicant-writ petitioner had stated that the notice for hearing on 16.01.2014 was not received by him. In the second affidavit, it was stated that though the said notice may have been delivered but it was misplaced and never brought to the notice of the applicant. The said averments cannot be termed as contradictory statements because the consistent stand of the applicant was that the notice was never within the knowledge of the applicant. In a case like this, where a party seeks Advanced Ruling, under the provision of the Income Tax Act, from the Authority to find out as to whether certain provisions of the Act would be applicable in the case of the applicant-writ petitioner or not, the endeavour of the Authority should be to decide the case on merits and settle the issue between the parties in advance and not throw out the application on mere technicalities. Application of advance ruling accepted - decided in favour of assessee.

Summary

Issues:
Challenge to order of dismissal for non-prosecution and rejection of restoration application.

Analysis:
The petitioner, a company engaged in Telecommunication Value Added Services, filed an application seeking a ruling on withholding tax provisions. The application was admitted after hearings. However, due to non-representation on 16.01.2014, the application was dismissed for non-prosecution. Subsequently, a restoration application was filed citing non-receipt of hearing notice. The restoration application was rejected on grounds of contradictory statements in affidavits. The petitioner argued that dismissal for non-prosecution was unjustified as Rule 17 allows ex parte decision on merits. The Court noted that the Authority failed to specify the contradictions in the affidavits, rendering the rejection unjustified.

The respondents justified the dismissal for non-prosecution, claiming the applicant's absence on the specified date. They argued that the contradictions in the affidavits warranted rejection of the restoration application. However, the Court found the reasons for rejection inadequate and emphasized the need for specific contradictions to justify rejection. The Court highlighted that the purpose of Advance Ruling is to resolve issues in advance and minimize litigation.

The Court analyzed the affidavits and concluded that the statements were not contradictory but consistently highlighted the non-receipt of the hearing notice. The Court deemed the dismissal for non-appearance unjustified, especially after a significant gap since the last hearing. Consequently, the Court quashed the orders of dismissal and restoration rejection, directing the Authority to hear and decide the case on merits promptly. The Court also left open the consideration of Section 245RR of the Income Tax Act for the Authority.

In conclusion, the Court allowed the writ petition, setting aside the dismissal and rejection orders, and instructed the Authority to proceed with the application expeditiously. The judgment emphasized the importance of deciding cases on merits to achieve the objective of Advance Ruling and minimize unnecessary litigation.