Tribunal cannot reject Miscellaneous Application, without examining the merits

Kalra Papers Private Limited Vs ITO (Delhi High Court)

The facts of the present case are not in controversy. On 24^th July, 2018, the Tribunal decided the appeal of the Revenue on merits and ex-parte, as there was no presence on behalf of the Petitioner. Thereafter, on 03^rd December, 2018, the Petitioner filed the Miscellaneous Application under Section 254(2) of the Act read with Rule 25 of the ITAT Rules, wherein explanations were provided for such non-appearance. It was accompanied by an affidavit of the Director of the Petitioner-company dated 03^rd December, 2018, stating that the non-appearance was on account of the illness of the counsel. The Petitioner had also filed an affidavit dated 26^th October, 2020 of one Mr. Neeraj Bansal, a senior partner of M/s Bansal Neeraj & Associates Chartered Accountants, which were the authorized representatives of the Petitioner-company before the assessment and appellate authorities. It was explained that Mr. Nitin Goel, partner at M/s Bansal Neeraj & Associates Chartered Accountants, was looking after the appeal proceedings. He suddenly fell ill on account of dengue fever and was, therefore, unable to attend the office for 15 days. In these circumstances, he could not pass on the instructions to his office or to Mr. Neeraj Bansal to attend the proceedings before the ITAT. To our mind, the Miscellaneous Application and affidavits filed in support thereof discloses sufficient cause for non-appearance. The Tribunal, has inappropriately rejected the Miscellaneous Application, without examining the merits of the said submissions. Paras 5 and 6 of the Impugned Order, as reproduced above, reveal that the Tribunal dismissed the Miscellaneous Application merely on the ground that the Petitioner had sought frequent adjournments before the matter was finally heard on 05^th July, 2018. In this regard, it was also pointed out that the Miscellaneous Application was filed without much delay. In fact, as already noted, the Petitioner had also preferred an appeal under Section 260A of the Act before this Court, which was disposed of in the terms stated earlier. Thus, it cannot be said that the Petitioner has shown laxity in pursuing the said litigation. The presumption of disinterest against the Petitioner is speculative. The other factor that prevailed upon the Tribunal was the lapse of time since the first date of hearing. However, the Tribunal ignored the fact that Petitioner had approached the Tribunal in December 2018, and thus, the time gap of 2 years between the first date of hearing and the date of decision cannot be a compelling measure. In our view, these factors ought not to be viewed in isolation, without taking into consideration the sufficiency of reasons for non-appearance. The Petitioner had given a sufficient and cogent explanation for non-appearance of its Representative, which, however, the Tribunal has failed to take into account. Besides, in para 6 of the Impugned Order, the Tribunal also went into the question of merits of the ex-parte decision, by delving into the correctness of order. This also was an erroneous yardstick for deciding the Miscellaneous Application. The Tribunal has failed to appreciate that the Petitioner was seeking the recall of the order dated 24^th July, 2018 and restoration of the appeal, and not the rectification of any mistake apparent on record. The merits of the case could not have been gone into at the stage of deciding an application under Rule 25 of the ITAT Rules. Rules 24 and 25 of the ITAT Rules enable the Tribunal to restore the appeal, if a party appears afterwards and satisfies the Tribunal that there was a sufficient cause for its non-appearance when the appeal was taken-up for hearing. The proviso to Rule 25 deals with the situation where the Tribunal has passed an ex-parte order, due to non-appearance of the Respondent, even though the order was passed on merits. Thus, we are of the opinion that the reasoning given in para 6 of the Impugned Order is beyond the scope and ambit of Rules 25 of the ITAT Rules.

We are satisfied that the assessee was prevented by sufficient cause from appearing before the ITAT when the appeal was taken up for hearing. Further, the Tribunal has taken into consideration such reasons which were not germane for deciding the Miscellaneous Application. The sufficiency of the cause, which was the only factor to be examined, has been ignored by the Tribunal. If sufficient cause is shown, the Tribunal is obligated to consider the same and make an order setting aside the ex-parte order, irrespective of the fact that the final order decided the appeal on merits.

FULL TEXT OF THE HIGH COURT ORDER/JUDGEMENT

CM APPL. 30441/2020 (For exemption)

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