Recently a number of decisions have come in which Income Tax Appellate Tribunal has dismissed appeals for non-persecution. This paper is an attempt to understand the legal provisions regarding dismissal of appeal for non-appearance.
Rule 24 of the Income Tax Appellate Tribunal Rules reads as,
24. Hearing of appeal ex parte for default by the appellant.- Where, on the day fixed for hearing or on any other date to which the hearing may be adjourned, the appellant does not appear in person or through an authorised representative when the appeal is called on for hearing, the Tribunal may dispose of the appeal on merits after hearing the respondent;
Provided that where an appeal has been disposed of as provided above and the appellant appears afterwards and satisfies the Tribunal that there was sufficient cause for his non-appearance when the appeal was called on for hearing, the Tribunal shall make an order setting aside the ex parte order and restoring the appeal.”
The Rule is very clear. If the appellant or his authorised representative does not appear, the tribunal may dispose the appeal on merits ex-parte. There is no provision to dsmiss the appeal for non-persecution per se.
The new Rule 24 has been in effect since 01.08.1987. Earlier the rule allowed for dismissal of appeal for non-persecution. Earlier Rule 24 of the ITAT Rules read as,
“Where, on the day fixed for hearing or on any other date to which the hearing may be adjourned, the appellant does not appear when the appeal is called on for hearing, the Tribunal may, in its discretion either dismiss the appeal for default or may hear it ex-parte.”
Rules and subordinate laws, enacted to fulfill the purpose of the main statute. If, any rule violates any provision of the parent Act, such rules are ultra virus. While examining the earlier rule, with Section 33(4) of the erstwhile Income Tax Act, the Supreme Court held in CIT v. S. Chenniappa Mudaliar, [(1969) 1 SCC 591],
“The scheme of the provisions of the Act relating to the Appellate Tribunal apparently is that it has to dispose of an appeal by making such orders as it thinks fit on the merits. It follows from the language of Section 33(4) and in particular the use of the word “thereon” that the Tribunal has to go into the correctness or otherwise of the points decided by the departmental authorities in the light of the submissions made by the appellant. This can only be done by giving a decision on the merits on questions of fact and law and not by merely disposing of the appeal on the ground that the party concerned has failed to appear. As observed in Hukumchand Mills Ltd. v. CIT, [63 ITR 232] the word “thereon” in Section 33(4) restricts the jurisdiction of the Tribunal to the subject-matter of the appeal and the words “pass such orders as the Tribunal thinks fit” include all the powers (except possibly the power of enhancement) which are conferred upon the Appellate Assistant Commissioner by Section 31 of the Act. The provisions contained in Section 66 about making a reference on questions of law to the High Court will be rendered nugatory if any such power is attributed to the Appellate Tribunal by which it can dismiss an appeal, which has otherwise been properly filed, for default without making any order thereon in accordance with Section 33(4). The position becomes quite simple when it is remembered that the assessee or the CIT, if aggrieved by the orders of the Appellate Tribunal, can have resort only to the provisions of Section 66. So far as the questions of fact are concerned the decision of the Tribunal is final and reference can be sought to the High Court only on questions of law. The High Court exercises purely advisory jurisdiction and has no appellate or revisional powers. The advisory jurisdiction can be exercised on a proper reference being made and that cannot be done unless the Tribunal itself has passed proper order under Section 33(4). It follows from all this that the Appellate Tribunal is bound to give a proper decision on questions of fact as well as law which can only be done if the appeal is disposed of on the merits and not dismissed owing to the absence of the appellant. It was laid down as far back as the year 1953 by S.R. Das, J. (as he then was) in CIT, v. Mtt. Ar. S. Ar. Arunachalam Chettiar [23 ITR 180] that the jurisdiction of the Tribunal and of the High Court is conditional on there being an order by the Appellate Tribunal which may be said to be one under Section 33(4) and a question of law arising out of such an order. The Special Bench, in the present case, while examining this aspect quite appositely referred to the observations of Venkatarama Aiyar, J. in CIT v. Scindia Steam Navigation Co. Ltd. [42 ITR 589] indicating the necessity of the disposal of the appeal on the merits by the Appellate Tribunal. This is how the learned judge had put the matter in the form of interrogation:
“How can it be said that the Tribunal should seek for advice on a question which it was not called upon to consider and in respect of which it had no opportunity of deciding whether the decision of the Court should be sought.”
Thereafter the court declared,
“Thus looking at the substantive provisions of the Act there is no escape from the conclusion that under Section 33(4) the Appellate Tribunal has to dispose of the appeal on the merits and cannot short-circuit the same by dismissing it for default of appearance.”
The principle was affirmed by Supreme Court in Balaji Steels Re-rolling Mills v. CCE [2014 (16) SCC 360]. The proposition is settled in a long line of judgments of High Courts,
a) Bharat Petroleum Corporation Limited Vs ITAT, Mumbai [2013 SCC online BOM 1385: (2013) 359 ITR 271).
b) Balaji Steel Rolling Mills Vs. CCE, 2014 (310) ELT 209 SC.
c) CIT v. H S Akodia [(1966) 61 ITR 50 (MP)]
d) M X De Nornha & Sons v. CIT [(1950) 18 ITR 928 (All)]
e) Mangat Ram Kuthalia v. CIT [(1960) 38 ITR 1 (Pun)]
f) Ganesh Vs. CCE, Salem-I, Madras High Court [2019 (365) ELT 301 (Mad.)]
Another View:
Supreme Court held in Sunderlal Mannalal v. Nandramdas Dwarkadas [A.I.R. 1958 M.P. 260] wherein it was held,
“Now the Act does not give any power of dismissal. But it is axiomatic that no Court or Tribunal is supposed to continue a proceeding before it when the party who has moved it has not appeared nor cared to remain present the dismissal, therefore, is an inherent power which every Tribunal possesses…”
This statement of law was approved by the Supreme Court in Dr. P. Nalla Thampy Thera v. B.L. Shankar [1984 (Supp.) S.C.C. 631]. Again, in New India Assurance Co. Ltd. v. R. Srinivasan [(2000) 3 S.C.C. 242], the Supreme Court observed,
“That every Court or judicial body or authority, which has a duty to decide a lis between two parties, inherently possesses the power to dismiss a case in default. Where a case is called up for hearing and the party is not present, the Court or the judicial or quasi-Judicial body is under no obligation to keep the matter pending before it or to pursue the matter on behalf of the complainant who had instituted the proceedings. That is not the function of the Court or, for that matter of a judicial or quasi-judicial body. In the absence of the complainant, therefore, the Court will be will within its jurisdiction to dismiss the complaint for non-prosecution. So also, it would have the inherent power and jurisdiction to restore the complaint on good cause being shown for the non-appearance of the complainant.”
Nature of Tax Appeal:
Tax appeals are by nature continuation of assessment proceedings. Though Appellate Tribunal look like some type of appellate court, that is not the reality. Appellate proceedings in tax matters are continuation of assessment proceedings. In IRC v. Sneath, [1932] 17 TC 149, Greer L.J. gave a description of the true position of a tax appeal in the following words (p. 164):
“I think, the estimating authorities, even when an appeal is made to them, are not acting as judges deciding litigation between the subject and the Crown. They are merely in the position of valuers whose proceedings are regulated by statute to enable them to make an estimate of the income of the taxpayer for the particular year in question….. The appeal is merely another step taken by the Commissioners, at the instance of the taxpayer, in the course of the discharge by them of their administrative duty of collecting the sur-tax.”
In Rex v. Special Commissioners of Income Tax, [1935] 20 TC 381, went to the Court of Appeal and there Lord Wright M.R. reiterated the position in the following passage in his judgment (p. 387):
“I may note here at once that in making the assessment and in dealing with the appeals the Commissioners are exercising their statutory authority and their statutory duty which they are bound to carry out, not as judges deciding an issue between two particular parties: their obligation is wider than that. It is to exercise their judgment on such material as comes before them, and, as we shall see later, to obtain any material which they think is necessary and which they think they ought to have, and on that to make the assessment or the estimate which the law requires them to make. They are not deciding the case inter partes; they are assessing or estimating the amount which in the interests of the country at large the taxpayer ought to have to deal with as the basis on which he is to be taxed.”
Full Bench of Madras High Court, held in State of Tamil Nadu v. Arulmurugan & Co., [(1982) 51 STC 381], that the appellate authorities perform precisely the same functions as the assessing authority. The Full Bench expressed the view that a tax appeal is a rehearing of the entire assessment and it cannot be equated to adversary proceedings in appeal in civil cases. The following passage (at page 392), from the judgment of the Full Bench would be relevant,
“An appellate authority under the taxing enactments sits in appeal, only in a manner of speaking. What it does, functionally, is only to adjust the assessment of the appellant in accordance with the facts on the record and in accordance with the law laid down by the legislature. An appeal is a continuation of the process of assessment, and an assessment is but another name for adjustment of the tax liability to accord with the taxable event in the particular taxpayer’s case. There can be no analogy or parallel between a tax appeal and an appeal, say, in civil cases. A civil appeal, like a law suit in the court of first instance out of which it arises, is really and truly an adversary proceeding, that is to say, a controversy or tussle over mutual rights and obligations between contesting litigants ranged against each other, as opponents. A tax appeal is quite different. Even as the assessing authority is not the taxpayer’s “opponent”, in the strictly procedural sense of the term, so too the appellate authority sitting in appeal over the assessing authority’s order of assessment is not strictly an arbitral tribunal deciding a contested issue between two litigants ranged on opposite sides. In a tax appeal, the appellate authority is very much committed to the assessment process. The appellate authority can itself enter the arena of assessment, either by pursuing further investigation or causing further investigation to be done. It can do so on its own initiative, without being prodded by any of the parties. It can enhance the assessment, taking advantage of the opportunity afforded by the taxpayer’s appeal, even though the appeal itself has been mooted only with a view to a reduction in the assessment. These are special and exceptional attributes of the jurisdiction of a tax appellate authority. These attributes underline the truth that the appellate authority is no different, functionally and substantially, from the assessing authority itself.”
Similar view has been taken by Supreme Court in case of State of Orissa v. Babu Lal Chappolia [(1966) 18 STC 17 (SC)], CAGIT v. V N Narayan [(1972) 83 ITR 453 (SC)], S N Swarnnamal v. CED [(1973) 88 ITR 366 (Mad.)] etc.
If tax appeals are continuation of assessment proceedings, can tax be collected without completing assessment proceeding? Article 265 of the Constitution provides that no tax can be collected except by authority of law. Appellate proceedings are laws, which are required to be followed before tax can legally be collected. And the provisions of law are required to be followed even if the tax payer does not participate in the proceedings. No assessing authority can refuse to assess the tax fairly and legally, merely because the tax payer is not participating in the proceeding. Thus, dismissal of appeals by ITAT for non-persecution is wholly illegal and unjustified.
Principle of Natural Justice:
An appellate authority is required to extend opportunity to be heard to the appellant. It has been held in numerous cases that “right to natural justice” is a personal right. A person can waive it, a person may not avail it. Merely because a person is not availing his right of natural justice, it cannot be a ground of refusal to do statutory duty of deciding appeal by the Tribunal.
In view of these, this author is of the view that dismissal of appeals by the Tribunals, for non-persecution is illegal and unjustified.
[Views expressed are personal views of the author. The author may be contacted on rajesh@rklegal.org]
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