Otters Club Vs Director of Income Tax (Exemptions) (Bombay High Court)
Bombay High Court has come down heavily on the Income Tax Appellate Tribunal (ITAT) for passing an order beyond the stipulated 90-day period, as mandated by the ITAT Rules and a previous ruling of the same High Court. The court was hearing a petition filed by Otters Club challenging the ITAT’s dismissal of its application for rectification of an earlier order related to the assessment year 2009-10.
Otters Club had approached the High Court with two primary grievances. Firstly, it argued that the ITAT’s order dated February 3, 2016, was passed in violation of Rule 34(5)(c) of the Income Tax Appellate Tribunal Rules, 1963, which requires the pronouncement of an order within 90 days of the conclusion of the hearing (September 22, 2015, in this case). The club also cited the Bombay High Court’s binding precedent in the Shivsagar Veg. Restaurant case, which had emphasized the need for timely delivery of judgments by appellate authorities, including the ITAT. The delay, according to the petitioner, had led to the ITAT overlooking binding decisions of co-ordinate benches that were brought to its attention.
Secondly, Otters Club contended that a subsequent decision by the Bombay High Court in the case of Maharashtra Housing and Area Development Authority (MHADA) on April 18, 2016, had decided an identical issue in favor of the assessee. Relying on the Supreme Court’s ruling in the Saurashtra Kutch Stock Exchange Ltd. case, which affirmed the rectification of earlier orders based on subsequent jurisdictional High Court decisions, the club argued that the ITAT should have allowed its rectification application.
The ITAT, in its impugned order rejecting the rectification plea, did not dispute the delay in passing the initial order. However, it vaguely mentioned obtaining “administrative clearance” to pass the order beyond the 90-day limit. The Bombay High Court expressed its bewilderment at this explanation, questioning the meaning, basis, timing, and source of such “administrative clearance,” especially in light of the clear provisions of Rule 34(5)(c) read with Rule 34(8) of the ITAT Rules. The High Court also noted that the counsel for the respondents, including the ITAT Registry, could not provide any clarification on this aspect. The court reiterated its earlier directive in the Shivsagar Veg. Restaurant case, which had urged the President of the Tribunal to establish guidelines to prevent delays in delivering orders.
Based on the ITAT’s failure to adhere to the Tribunal Rules and the binding precedent of the Bombay High Court regarding the time limit for pronouncing orders, the High Court found the ITAT’s order rejecting the rectification application unsustainable. Consequently, the Bombay High Court set aside the ITAT’s order dated September 30, 2016, and restored Otters Club’s rectification application to the Tribunal for fresh consideration in accordance with the law. The High Court also directed the Tribunal to consider the impact of the subsequent MHADA judgment in light of the Supreme Court’s decision in the Saurashtra Kutch Stock Exchange Ltd. case. All contentions in the matter were kept open for the Tribunal to adjudicate afresh.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
