2021 (4) TMI 311 - HC - Income Tax

ITAT dismissed an appeal solely on account of non-appearance of the appellant - HELD THAT - In the present case, admittedly, there is no adjudication by the ITAT on merits. In our opinion, the order of the ITAT, dismissing the appeal of the petitioner for non-prosecution and not on merits, as the ITAT was required to do notwithstanding the non-appearance of the petitioner when the appeal was called for hearing, is violative of Rule 24 supra and thus void. Though the petitioner applied as aforesaid to the ITAT, not once but twice, for hearing of his appeal on merits but the ITAT refused to correct the illegality committed. In the circumstances, notwithstanding the delay on the part of the petitioner in impugning the order dated 10th December, 2015, the same has but to be quashed and cannot be sustained. We are unable to agree with the contention of the counsel for the respondent, that the action of the ITAT, of dismissing the appeal for non-prosecution instead of on merits and of refusal to restore the same notwithstanding applications of the petitioner, is merely an irregularity. We have enquired from the counsels, whether the Rules aforesaid provide for any limitation for applying under the proviso to Rule 24, for setting aside/recall of an ex parte order albeit on merits. The counsels are unanimous, that for making an application under the proviso to Rule 24, no limitation is provided. Even otherwise, the first application aforesaid of the petitioner, filed in or about March, 2017, for restoration of the appeal dismissed for non-prosecution on 10th December, 2015, was within three years and the ITAT erred in dismissing the same invoking the amendment to Section 254(2) requiring application thereunder to be filed within six months and in not going into the sufficiency of the reasons given by the petitioner for non-appearance. Thus the need for us to go into the question of, whether amendment of Section 254(2) of the Income Tax Act w.e.f 1st June, 2016, is prospective or retrospective, does not arise inasmuch as the application filed by the petitioner in March, 2017, also invoking, Rule 24 of the ITAT Rules, was within time and could not have been dismissed applying the provisions of limitation applicable to Section 254(2) of the Act; rather, we entertain doubt whether in the face of the specific provision in the Rules, an application for setting aside of an ex-parte order would at all lie under Section 254(2) of the Act. Appeal restored before ITAT

Summary

Issues involved:
Petition impugning ITAT's order of dismissal, application for recall of dismissal order, maintainability of second application, adjudication on merits, violation of Rule 24, limitation for setting aside ex parte order, amendment of Section 254(2), retrospective or prospective application of amendment.

Analysis:

1. Impugning ITAT's Orders:
The petition challenges the ITAT's order of dismissal of M.A. No. 118/DEL/18 and ITA No. 3844/DEL/2013 for Assessment Year 2008-09. The ITAT dismissed the appeal for non-prosecution as the petitioner failed to appear, indicating a lack of interest in pursuing the appeal. The petitioner sought adjudication on merits, leading to subsequent applications for recall of dismissal orders.

2. Adjudication on Merits:
The ITAT's refusal to hear the appeal on merits, despite multiple applications by the petitioner, was found to be violative of Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963. The High Court emphasized the necessity for the ITAT to decide appeals on merits and not solely dismiss them for non-appearance, as established in the Golden Times Services case.

3. Limitation for Setting Aside Ex Parte Order:
The High Court clarified that there is no limitation provided for applying under the proviso to Rule 24 for setting aside an ex parte order and restoring the appeal for hearing. The ITAT's reliance on the amendment to Section 254(2) for dismissing the petitioner's application was deemed erroneous.

4. Retrospective or Prospective Application of Amendment:
The Court determined that the amendment to Section 254(2) requiring applications to be filed within six months did not apply to the petitioner's case, as the application filed in March 2017 was within three years. The Court raised doubts regarding the applicability of Section 254(2) to setting aside ex parte orders under the ITAT Rules.

5. Violation of Rule 24 and Quashing of Orders:
The High Court concluded that the ITAT's actions in dismissing the appeal for non-prosecution and refusing to restore it were not mere irregularities but violations of Rule 24. The orders were quashed, and the appeal was ordered to be restored for hearing on merits, emphasizing the importance of adjudication on the substance of the case.

6. Application of Precedents and Legal Interpretation:
The Court distinguished the present case from the B. N. Bhattacharjee case, highlighting the absence of Rule 24 at that time. The judgment emphasized the need for proper adjudication on merits and adherence to procedural rules for restoring appeals dismissed for non-prosecution.

7. Final Disposition:
The High Court allowed the petition, directing the restoration of the appeal before the ITAT for a hearing on merits. The judgment emphasized the importance of due process and substantive adjudication in tax matters, ensuring fair treatment and compliance with procedural rules.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the High Court's decision and the reasoning behind it.