KARNATAKA JEWELS LTD V. JOINT COMMISSIONER OF INCOME TAX

SCA/18781/2014

AI Insights

The case involves Karnataka Jewels Ltd., the petitioner, who challenged an order by the Income Tax Appellate Tribunal dismissing their appeal for non-prosecution. The dismissal occurred because the petitioner did not inform the Tribunal about a change of address, leading to non-receipt of hearing notices. The High Court found that the Tribunal erred in dismissing the appeal without considering its merits, referencing the Supreme Court's decision in CIT v. S. Chenniappa Mudaliar and the Income Tax (Appellate Tribunal) Rules, 1963. The court restored the appeal to the Tribunal for a decision on merits and imposed costs on the petitioner for the delay in addressing the Tribunal's order.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 694108 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 01-09-2015
• Assessment Year: misc
• Other Referred Cases: Sanket Estate & Finance (P.) Ltd. v. Commissioner of Income-tax, CIT v. S. Chenniappa Mudaliar
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: BANDISH SOPARKAR
• Keywords: Appeal Dismissal; Foreign Exchange Fluctuation loss; Non-prosecution; Penalty
• Section: 143(3); 271(1)(c)

Judgement Text

"C/SCA/18781/2014 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 18781 of 2014 FOR APPROVAL AND SIGNATURE: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR.JUSTICE A.G.URAIZEE ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? No 2 To be referred to the Reporter or not ? No 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? No ========================================================== KARNATAKA JEWELS LTD....Petitioner(s) Versus JOINT COMMISSIONER OF INCOME TAX & 1....Respondent(s) ========================================================== Appearance: MR B S SOPARKAR, ADVOCATE for the Petitioner(s) No. 1 MRS MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 1 RULE SERVED for the Respondent(s) No. 2 ========================================================== CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR.JUSTICE A.G.URAIZEE Page 1 of 6 C/SCA/18781/2014 JUDGMENT Date : 01/09/2015 ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. This petition under Article 226 of the Constitution of India is directed against the order dated 7.10.2005 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench “A” in ITA No.2056/Ahd/2000 whereby the Tribunal has dismissed the appeal preferred by the petitioner assessee for non- prosecution. 2. The petitioner filed its return of income for assessment year 1991-92 on 31.12.1991 showing income of Rs. Nil. After scrutiny, the foreign exchange fluctuation loss on purchase of plant and machinery charged to revenue account was disallowed and total addition of Rs.14,76,277/- was made vide assessment order dated 5.1.1994 under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act). Subsequently, by an order dated 28.9.1995 passed under section 271(1)(c) of the Act, the respondent No.1 imposed penalty of Rs.8,48,860/-. The petitioner carried the matter in appeal before the Commissioner of Income Tax (Appeals) who, by an order dated 26.7.2000, dismissed the appeal and confirmed the penalty. The petitioner carried the matter in further appeal before the Income Tax Appellate Tribunal (hereinafter referred to as “the Tribunal”). It appears that during the pendency of the appeal before the Tribunal, the address of the petitioner came to be changed and hence, the petitioner did not receive the notice issued by the Tribunal intimating it about the date of hearing of the appeal. By the Page 2 of 6 C/SCA/18781/2014 JUDGMENT impugned order dated 7.10.2005, the Tribunal dismissed the appeal by assuming that the assessee was not interested in pursuing the appeal, as it had not intimated the change in address to the Tribunal, which has given rise to the present petition. 3. Mr. Bandish Soparkar, learned advocate for the petitioner invited the attention of the court to the decision of this court in the case of Sanket Estate & Finance (P.) Ltd. v. Commissioner of Income-tax, (2013) 216 Taxmann 21 wherein the court by placing reliance upon the decision of the Supreme Court in the case of CIT v. S. Chenniappa Mudaliar, (1969) 74 ITR 41 (SC) has held that the Tribunal cannot dismiss the appeal without adverting to the merits. Referring to the impugned order, it was pointed out that the sole ground on which the appeal has been dismissed is on the ground of non- prosecution. It was submitted that the impugned order passed by the Tribunal being contrary to the law laid down by this court in the above referred decision, deserves to be quashed and set aside and the appeal is required to be restored to the file of the Tribunal to be decided afresh on merits. 4. Opposing the petition, Mrs. Mauna Bhatt, learned senior standing counsel for the respondent submitted that there has been considerable delay on the part of the petitioner in challenging the order passed by the Tribunal. It was submitted that the petitioner being the appellant before the Tribunal, ought to have informed the Tribunal about the change in address. That in the absence of the change of address having been notified to the Tribunal, no fault can be found on the part of the Tribunal in dismissing the appeal on the ground of non- Page 3 of 6 C/SCA/18781/2014 JUDGMENT prosecution. It was submitted that it is only after notices of demand came to be issued to the petitioner for recovery of the penalty amount, that the petitioner has thought it fit to challenge the order passed by the Tribunal. It was submitted that if at all this court is inclined to restore the appeal to the Tribunal in view of the law laid down in the case of Sanket Estate & Finance (P.) Ltd. v. Commissioner of Income-tax (supra), suitable costs may be imposed on the petitioner. 5. In rejoinder, Mr. Bandish Soparkar, learned counsel for the petitioner invited the attention of the court to the record of the case to submit that the petitioner was not served with the copy of the order passed by the Tribunal and that the petitioner had tried to obtain a copy of the impugned order from the Tribunal which was furnished belatedly. It was only thereafter, that the petitioner could file the present petition. It was, accordingly, urged that the facts do not warrant imposition of costs. 6. This court has considered the submissions advanced by the learned counsel for the respective parties and has perused the record and proceedings of the case. 7. From the facts, as emerging from the record, it is evident that the proceedings before the Tribunal came to be conducted ex parte in view of the fact that the petitioner had not informed the Tribunal about the change of its address. Accordingly, notice of hearing issued by the Tribunal came to be unserved by the postal authorities. It is in these circumstances, that the Tribunal had dismissed the appeal for non-prosecution. However, this court in the case of Sanket Page 4 of 6 C/SCA/18781/2014 JUDGMENT Estate & Finance (P.) Ltd. v. Commissioner of Income-tax (supra) has, after considering the scheme of the Income Tax (Appellate Tribunal) Rules, 1963 (hereinafter referred to as “the Rules”) and more particularly rule 24 thereof, which provides that where, on the day fixed for hearing or 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 on for hearing, the Tribunal may dispose of the appeal on merits after hearing the respondent, as well as in the light of the decision of the Supreme Court in the case of CIT v. S. Chenniappa Mudaliar (supra), has held that rule 24 of the Rules makes it abundantly clear that the Tribunal cannot dismiss the appeal without adverting to the merits. Therefore, though the petitioner assessee who was the appellant before the Tribunal has failed to appear before it during the course of hearing of the appeal, in the light of the provisions of rule 24 of the Rules, the Tribunal could not have dismissed the appeal for non- prosecution but ought to have disposed of the appeal on merits after hearing the respondent. The impugned order being contrary to the provisions of rule 24 of the Rules as well as the above referred decision of this court in the case of Sanket Estate & Finance (P.) Ltd. v. Commissioner of Income- tax (supra), cannot be sustained. 8. However, as rightly submitted by the learned counsel for the revenue, there has been considerable delay on the part of the petitioner in approaching this court against the impugned order passed by the Tribunal. While it is true that the petitioner was not aware of the impugned order passed by the Tribunal till the demand notices came to be issued upon it, it is the Page 5 of 6 C/SCA/18781/2014 JUDGMENT petitioner who is responsible for such state of affairs as the petitioner has failed to inform the Tribunal about the change of its address. Under the circumstances, the request made by the learned counsel for the respondent for imposition of costs appears to be reasonable. 9. For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned order dated 7.10.2005 passed by the Tribunal in ITA No.2056/Ahd/2000 for assessment year 1991-92 is hereby quashed and set aside and the appeal is restored to the file of the Tribunal which shall decide the same afresh on merits in accordance with law after affording reasonable opportunity of hearing to the respective parties. It is clarified that this court has not gone into the merits of the impugned order passed by the Commissioner of Income Tax (Appeals). Rule is made absolute accordingly with costs which are quantified at Rs.10,000/- (Rupees ten thousand). The petitioner shall pay the costs of Rs.10,000/- to the respondent No.1 within a period of one week from today. (HARSHA DEVANI, J.) (A.G. URAIZEE, J.) zgs Page 6 of 6 "