9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (1) TMI 971 - HC - Income TaxApplication for recall of an ex-parte order - Dismissal of appeal for non-prosecution - compounding the same by refusing to entertain the application for recall of the order - ITAT has dismissed the application for recall of its order solely on the ground of limitation, observing that it has no power to condone the delay - HELD THAT - Tribunal lost sight of the main provision as enshrined in Rule 24 of the ITAT Rules, which required the ITAT to dispose of the appeal on merits after hearing the respondent. Since it did not proceed to do so, and specifically gave an option to seek recall of its order, we find no justification for dismissing the application for recall on the ground of limitation. Rule 24 of the ITAT Rules, as noted above, enjoined the ITAT to decide the appeal on merits. The appeal filed in 2014, had ripened for final disposal only in 2016 and therefore, dismissal of the appeal without deciding the merits of the case, merely on the ground for non-prosecution, was certainly unwarranted. High Court of Madras in the case of Smt. Ritha Sabapathy vs. DCIT, 2019 (4) TMI 625 - MADRAS HIGH COURT has held that the ITAT cannot dismiss an appeal on account of non-appearance of party without giving finding on merits and remanded the matter to the ITAT. No attempt was made by the ITAT to ascertain the date of actual receipt of the order passed by the ITAT and the ITAT has proceeded to hold the application to be barred by limitation as provided under Section 254(2) of the Act. Section 254 (2) of the Act was amended by the Finance Act, 2016 with effect from 01.06.2016 and the words four years from the date of the order were substituted by six months from the end of the month in which the order was passed . The explanatory notes to the provisions of the Finance Act, 2016, do not throw much light for the purpose of the amendment, except for stating that the period of limitation has been shortened in order to bring certainty to the orders of the ITAT Relevant date for the purpose of commencement of period of limitation - The Supreme Court, in the case of D. Saibaba v. Bar Council of India 2003 (5) TMI 508 - SUPREME COURT had an occasion to consider a similar question in the context of Advocates Act, 1961 for exercising the remedy to review/reference/appeal. In the said case, the expression used in the provision was sixty days from the date of that order . The Court noticed several other decisions, rendered under different acts and came to the conclusion that the expression the date of that order must be construed as meaning the date of the communication or knowledge, actual or constructive of the order sought to be reviewed. Starting point of limitation provided under Section 254 (2) of the Act has to commence from the date of the actual receipt of the judgment and order passed by the ITAT which is sought to be the reviewed. Pertinently, adjudication on the merits of the case by the ITAT is essential for this Court to hear an appeal and the ITAT could not have dismissed the same solely on account of non-appearance of a party. As a result, as of today, the petitioner company is faced with the situation where it cannot exercise its remedy of filing the statutory appeal under Section 260A of the Act, since order dated 18.10. 2016, dismissing the appeal of the appellant, does not adjudicate on the merits of the case. For the assessee to file an appeal under the said provision before this Court, it is required to satisfy that the case involves a substantial question of law. It was the duty and obligation of the ITAT to dispose of the appeal on merits after giving both the parties an opportunity of being heard. The ITAT should have been conscious of the fact that the appellant was not afforded the opportunity to argue the case on merits and for this reason it had given the liberty to apply afresh, while dismissing the appeal for non-prosecution. There was thus no cogent reason for the tribunal not to entertain the application for recall. The ITAT has ignored the decision of the Supreme Court in CIT vs. S.Chenniappa Mudaliar 1964 (4) TMI 138 - MADRAS HIGH COURT in the correct perspective. Course adopted by the ITAT at the first instance, by dismissing the appeal for non-prosecution, and then compounding the same by refusing to entertain the application for recall of the order, cannot be sustained. We, therefore have no hesitation in quashing the impugned order. Accordingly, the present petition is allowed. The order dated 30.08.2019 is quashed and the matter is remanded back to the ITAT with a direction that they shall hear and dispose of appeal on merits
Issues Involved:
1. Dismissal of the appeal by the ITAT for non-prosecution. 2. Application for recall of the ex-parte order dismissed by ITAT on grounds of limitation. 3. Interpretation of the limitation period under Section 254(2) of the Income Tax Act, 1961. 4. Requirement for ITAT to decide appeals on merits under Rule 24 of the ITAT Rules, 1963. 5. The necessity of communication of the order to the parties for the commencement of the limitation period. Detailed Analysis: 1. Dismissal of the Appeal by ITAT for Non-Prosecution: The Petitioner company filed its return for the Assessment Year 2006-07, declaring a loss, which was later scrutinized, and an assessment order was passed, making an addition to the income. The Petitioner appealed to the CIT(A), which granted partial relief. Dissatisfied, the Petitioner appealed to the ITAT, which dismissed the appeal ex-parte on 18.10.2016 due to non-representation, despite notices being sent and returned unserved. The ITAT presumed the Petitioner was not serious about pursuing the appeal and dismissed it in limine without adjudicating on the merits but allowed for a recall application if reasonable cause for non-appearance was shown. 2. Application for Recall of the Ex-Parte Order Dismissed by ITAT on Grounds of Limitation: The Petitioner filed an application on 08.03.2018 to recall the ITAT's ex-parte order, explaining the absence was beyond control. However, the ITAT dismissed this application on 30.08.2019, citing it was barred by limitation under Section 254(2) of the Act, which prescribes a six-month limitation period for rectification of orders. 3. Interpretation of the Limitation Period under Section 254(2) of the Income Tax Act, 1961: The Court noted that Section 254(2) was amended by the Finance Act, 2016, reducing the limitation period from four years to six months. The ITAT interpreted the limitation period to commence from the date the order was passed. However, the Court held that the limitation period should commence from the date the order was communicated to or known by the aggrieved party, either actually or constructively, to avoid rendering the remedy meaningless. 4. Requirement for ITAT to Decide Appeals on Merits under Rule 24 of the ITAT Rules, 1963: The Court emphasized that Rule 24 of the ITAT Rules mandates the ITAT to dispose of appeals on merits even in the absence of the appellant. The ITAT should have decided the appeal on merits rather than dismissing it for non-prosecution, especially when the Revenue had sought an adjournment on the hearing date. 5. The Necessity of Communication of the Order to the Parties for the Commencement of the Limitation Period: The Court highlighted that Section 254(3) of the Act and Rule 35 of the ITAT Rules require the ITAT to communicate its orders to the parties. The limitation period for filing a rectification application should start from the date of actual or constructive knowledge of the order by the aggrieved party. The ITAT failed to ascertain the date of actual receipt of the order by the Petitioner and erroneously dismissed the application by considering the date of the order as the starting point of limitation. Conclusion: The Court quashed the ITAT's order dated 30.08.2019 and remanded the matter back to the ITAT with a direction to hear and dispose of the appeal on merits. The Court reiterated that the ITAT must decide appeals on merits and not dismiss them solely for non-prosecution. The limitation period under Section 254(2) should commence from the date the order is communicated to or known by the aggrieved party. The parties were directed to appear before the ITAT on 05.02.2020.
|
