Medsave Health Insurance TPA Limited Vs ACIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi bench, has recalled a common ex-parte order it had previously issued in multiple appeals filed by Medsave Health Insurance TPA Limited. The tribunal accepted the company’s explanation that the non-appearance during the appeal hearings was due to the sudden and prolonged absence of a key director responsible for handling tax matters, deeming it a “sufficient cause” under the tribunal’s rules.
The case involved miscellaneous applications filed by Medsave Health Insurance seeking to set aside a common ex-parte order dated March 29, 2023, which had been passed in appeals related to Assessment Years 2013-14, 2014-15, 2017-18, 2018-19, and 2019-20. An ex-parte order is typically passed when one party fails to appear before the tribunal on the scheduled hearing date.
Medsave Health Insurance, a company involved in Third Party Administration of insurance claims, submitted that its day-to-day operations were managed by two working directors. Dr. Adish Labru oversaw matters related to the medical profession and liaison with insurance companies and hospitals, while Shri Naresh Kumar Sureka was responsible for the commercial affairs of the company, including direct and indirect taxes.
The company explained that Shri Naresh Kumar Sureka suddenly ceased attending office duties from December 12, 2022, and subsequently resigned from his directorship on May 19, 2023. Evidence of his resignation, including a copy of Form DIR-12 filed with the Ministry of Corporate Affairs, was placed on record. An affidavit from Shri Naresh Kumar Sureka was also submitted confirming his prolonged absence.
The assessee contended that the abrupt and extended absence of the director handling tax matters created a significant void in the company’s operations. As Dr. Adish Labru was unable to manage the commercial and tax-related responsibilities in addition to his own duties, various notices issued by the ITAT regarding the pending appeals remained unattended. This lack of awareness and representation, the company argued, led to the appeals being heard and decided ex-parte.
The application for recall was filed under Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963. Rule 24 deals with the hearing of appeals ex parte when the appellant defaults in appearance. Crucially, the proviso to this rule states that where an appeal has been disposed of ex parte, the tribunal shall make an order setting aside the ex parte order and restoring the appeal if the appellant appears afterwards and satisfies the tribunal that there was “sufficient cause” for their non-appearance when the appeal was called for hearing.
The assessee’s representative argued before the ITAT that the circumstances surrounding Shri Naresh Kumar Sureka’s sudden departure and subsequent resignation constituted a valid and sufficient cause for the non-appearance. They referred to several judicial precedents to support their plea for recalling the ex-parte order. The cases cited included the Delhi High Court’s decision in Kerala Papers Pvt. Ltd. vs. ITO, the Supreme Court’s ruling in Collector, Land Acquisition vs. Mst. Katiji (a widely cited case on liberal approach to ‘sufficient cause’ for condoning delay), and orders from other ITAT benches such as Unicure Remedies Pvt. Ltd. vs. ACOT (Ahmedabad ITAT), Anish Metals Pvt. Ltd. vs. DCIT (Mumbai ITAT), and Shri Nati Lal Gupta vs. ITO (Delhi ITAT). These precedents generally underscore the principle that genuine and unavoidable circumstances preventing a party from appearing can be accepted as sufficient cause for recalling an ex-parte order, to ensure that cases are decided on their merits rather than on technical grounds of default.
The tax department’s representative, the Ld. Departmental Representative (DR), relied on the original common ex-parte order, arguing that it had been passed in accordance with law and should not be disturbed.
The ITAT, after considering the submissions from both sides and reviewing the records, focused on the requirement of “sufficient cause” under Rule 24. The tribunal noted that Rule 24 itself does not prescribe any specific time limit for filing an application to recall an ex-parte order; the sole condition is the appellant providing a satisfactory explanation constituting sufficient cause for non-appearance.
The tribunal carefully evaluated the reasons provided by Medsave Health Insurance. It found the reasons, supported by the affidavit of the concerned director and the statutory filing with the Ministry of Corporate Affairs, to be “clearly bona fide”. The ITAT explicitly concluded that “sufficient cause for non-attendance as above has been attributed” by the assessee.
The tribunal observed that accepting the assessee’s plea and recalling the ex-parte order was necessary to prevent a “miscarriage of justice,” implying that the assessee should not be denied an opportunity to present their case on the merits due to circumstances beyond their immediate control that led to their default in appearance. The ITAT also acknowledged that the legal contentions and case laws cited by the assessee supported the grounds for recalling the ex-parte order.
In its order, the ITAT allowed the miscellaneous applications filed by Medsave Health Insurance. The common ex-parte order dated March 29, 2023, passed in the specified appeals was consequently recalled and set aside. The tribunal directed the Registry to schedule the affected appeals for a fresh hearing in due course. The ITAT clarified that its decision in the lead miscellaneous application would apply with necessary changes to the other related applications covered by the common ex-parte order.
This ruling reinforces the principle that procedural defaults can be excused by the ITAT under Rule 24 if the non-appearance is demonstrably due to genuine circumstances amounting to sufficient cause, thereby upholding the right of a litigant to be heard on the merits of their case.
FULL TEXT OF THE ORDER OF ITAT DELHI
