Appeal to Appellate Tribunal – Duty of Tribunal to decide appeal on merits – Rule 24 of ITAT Rules, 1963 Rectification of mistakes – Section 254 of ITA, 1961 – Order of Tribunal dismissing appeal ex parte for non-prosecution – Rejection of application for recall on ground of limitation – Not justified – Assessee granted liberty to apply for recall of order; A.Y. 2006-07

27. Golden Times Services Pvt. Ltd. vs. Dy. CIT [2020] 422 ITR 102 (Del.) Date of order: 13^th January, 2020 A.Y.: 2006-07

Appeal to Appellate Tribunal – Duty of Tribunal to decide appeal on merits – Rule 24 of ITAT  Rules, 1963

Rectification of mistakes – Section 254 of ITA, 1961 – Order of Tribunal dismissing appeal ex parte for non-prosecution – Rejection of application for recall on ground of limitation – Not justified – Assessee granted liberty to apply for recall of order; A.Y. 2006-07

The relevant year is the A.Y. 2006-07. In an appeal before the Income-tax Appellate Tribunal, the petitioner company had challenged the addition of Rs. 19,00,000 which was confirmed by the Commissioner (Appeals). The appeal was filed on 11^th December, 2014 and was heard on 30^th August, 2016. The appeal was dismissed by an order dated 18^th October, 2016. In the said order, the Tribunal, while noting that no one was present on behalf of the assessee at the time of hearing, proceeded to dispose of the appeal, observing that notice was sent to the assessee on 15^th July, 2016 at the address mentioned in the memo of appeal but despite that the assessee remained unrepresented. It was further noted that the notice had come back unserved with a report that the property was locked for quite some time. It was also noted that the earlier notice, sent on 1^st June, 2016 on the same address of the assessee, had also been received back unserved with similar comments. The Tribunal, thus, held that the assessee was presumably not serious in pursuing the appeal and dismissed the same in limine. At the same time, the assessee was granted liberty to approach the Income-tax Appellate Tribunal for a recall of the order if it was able to show a reasonable cause for non-appearance. Thus, there was no adjudication on the merits of the appeal.

On 8^th February, 2018 when an inquiry was made about the status of the appeal, the petitioner came to know that the appeal had been dismissed ex parte for non-prosecution. Thereafter, on 8^th March, 2018 an application was filed for recall of the order dated 18^th October, 2016. The petitioner filed the application giving the grounds for non-appearance, with an explanation that the absence was beyond its control. However, the application was dismissed by an order dated 30^th August, 2019 on the ground that the same is barred by limitation u/s 254(2) of the Act.

The petitioner filed a writ petition and challenged the order of the Tribunal. The Delhi High Court allowed the writ petition and held as under:

‘i)   Rule 24 of the Income-tax (Appellate Tribunal) Rules, 1963 mandates the Appellate Tribunal to decide the appeal on its merits. It is the duty and obligation of the Appellate Tribunal to dispose of the appeal on merits after giving both the parties an opportunity of being heard. No limitation is provided in Rule 24 of the Rules.

ii)   Section 254(2) of the Income-tax Act, 1961 refers to suo motu exercise of the power of rectification by the Appellate Tribunal, whereas the second part refers to rectification and amendment on an application being made by the Assessing Officer or the assessee pointing out the mistake apparent from the record. Section 254(2) was amended by the Finance Act, 2016 with effect from 1^st June, 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”.

iii)  Section 254(3) stipulates that the Appellate Tribunal shall send a copy of the order passed by it to the assessee and the Principal Commissioner. Further, Rule 35 of the Income-tax (Appellate Tribunal) Rules, 1963 also requires that the orders are required to be communicated to the parties. The section and the Rule mandate the communication of the order to the parties. Thus, the date of communication or knowledge, actual or constructive, of the orders sought to be rectified or amended u/s 254(2) of the Act becomes critical and determinative for the commencement of the period of limitation.

iv)  The appeal had been dismissed ex parte for non-prosecution. At the same time, the assessee was granted liberty to approach the Appellate Tribunal for recall of the order if it was able to show a reasonable cause for non-appearance. Thus, there was no adjudication on the merits of the appeal. The dismissal of the application for recall of the order on the ground of limitation was not valid.

v)  The course adopted by the Appellate Tribunal 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^th August, 2019 is quashed and the matter is remanded back to the Income-tax Appellate Tribunal with a direction that they shall hear and dispose of I.T.A. No. 6739/Del/2014 on merits.’