HAJARAM PUROHIT, MUMBAI V. DCIT- 36, MUMBAI

MA 407/MUM/2022

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8313 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 22 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 07-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 21-12-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 15-12-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Rectification of order; Principle of natural justice; Reasonable cause; Condonation of delay; Set aside
• Section: 192; 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, MUMBAI SHRI B.R. BASKARAN, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER MA No. 407/MUM/2022 (Arising out of ITA No. 2667/Mum/2015) (Assessment Year: 2010-11) Hajaram Purohit, Shop No. 8, Building No. 33, Ganesh Bhuvan, 3 rd Khetwadi Lane, Mumbai - 400004 [PAN: AGUPP6813F] ................ Appellant Deputy Commissioner of Income Tax- 36, Mumbai, Aaykar Bhavan, Mumbai - 400020 Vs ................ Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri Viraj Mehta Shri Anil Sant Date Conclusion of hearing Pronouncement of order : : 22.12.2023 08.03.2024 O R D E R Per Rahul Chaudhary, Judicial Member: 1. The present Miscellaneous Application has been filed by the Appellant/Assessee for recall of the ex-parte order, dated 31/08/2017, passed by the Tribunal in ITA No. 2667/Mum/2015, pertaining to the Assessment Year 2010-2011. 2. The application under consideration seeking setting aside of the ex- parte order, dated 31/08/2017, has been filed after a delay of 1779 days. At the outset, the Learned Departmental Representative MA No. 407/Mum/2022 Assessment Year: 2010-11 2 opposed the application and submitted that the same be dismissed as being barred by limitation in terms of Section 254(2) of the Act. On the other hand, explaining the circumstances in which there was a delay in filing the application, the Ld. Authorised Representative for the Appellant submitted that the Appellant had some misunderstanding with the consultant who assisted in filing the appeal on account of which the professional relationship between the Appellant and the said consultant was not cordial. None appeared for the Appellant on 02/08/2017, and the appeal was dismissed vide ex- parte order, dated 31/08/2017. When the aforesaid order of the Tribunal was received, the same was placed before the consultant for legal advice and for taking remedial action. Thereafter, on account of dispute/misunderstanding there was break-down of communication between the Appellant and the consultant. Subsequently, when the pending issues were resolved, the consultant informed the Appellant that the application seeking recall of the order, dated 31/08/2017, had not been filed. Soon, thereafter, the Appellant contacted the Ld. Authorized Representative and the application under consideration was filed. It was submitted that since the Appellant has been able to explain the reasons why the hearing on 02/08/2017, had gone unattended, the ex-parte order dated 31/08/2017 passed by the Tribunal be recalled. In this regard, the Learned Authorised Representative for the Appellant placed reliance on Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 [hereinafter referred to as ‘the ITAT Rules’] and the judgment of the Hon’ble Delhi High Court in the case of Cement Corporation of India Ltd. Vs. Assistant Commissioner of Income Tax [2023] 149 taxmann.com 192 (Delhi). The Ld. Authorised Representative for the Appellant further pointed out that MA No. 407/Mum/2022 Assessment Year: 2010-11 3 though the application seeking condonation of delay of 83 days in filing the appeal before the Tribunal was filed by the Appellant, the same could not be supported by way of oral arguments since none was present on behalf of the Appellant during the hearing on 02/08/2017 when the Appellant was proceeded ex-parte and the appeal was taken to be heard. It was submitted that the appeal was not adjudicated on merits and was dismissed on the grounds of limitation by way of ex-parte order. If granted an opportunity the Appellant would be able to satisfy the Tribunal on the issue of delay in filing the appeal as well as on the merits. In view of the aforesaid, it was requested by the Ld. Authorised Representative for the Appellant that the appeal be restored for adjudication on merits. 3. We have considered the rival submissions and perused the material on record. We find that the appeal was filed before the Tribunal after a delay of 83 days. The Appellant had filed application seeking condonation of delay which was accompanied by an affidavit. Vide order, dated 31/08/2017, the Tribunal dismissed the appeal holding as under: “2. In spite of issue of several notices none appeared on behalf of the assessee nor any adjournment was sought. 3. This appeal is filed with a delay of 83 days and assessee filed affidavit explaining the reasons for the delay. On a perusal of the reasons and explanations given for the delay in the affidavit filed are vague and not a reasonable cause. The assessee could not properly explain the reasonable cause in not filling the appeal for such a long delay of 83 days. Thus, we reject the explanation of the assessee and the delay in filing the appeal is not condoned and dismissed in- limine.” 4. Thus, the appeal was dismissed as being barred by limitation by way of an ex-parte order dated 31/08/2017. The case of the Appellant is that the appeal hearing had gone unattended as at the relevant time MA No. 407/Mum/2022 Assessment Year: 2010-11 4 the Appellant did not have cordial relations with the Tax Consultant on account of some disputes and misunderstanding. Since the Appellant has been able to explain the reasons for not attending the hearing held on 02/08/2017, the order dated 31/08/2017, be recalled in terms of Rule 24 of the ITAT Rules. We note that in the case of Cement Corporation of India Ltd. Vs. Assistant Commissioner of Income Tax [2023] 149 taxmann.com 192 (Delhi) the Hon’ble Delhi High Court condoned the delay of more than 6 months in filing the miscellaneous application. After examining the provisions contained in Rule 24 of the Rules, the Hon’ble Delhi High Court held as under: “4.1 Via the said order, the Tribunal has dismissed the Misc. APP NO. 606 (Delhi) of 2018, whereby a prayer was made for recalling the order dated 24-1-2018 passed by the Tribunal. 4.2 The Tribunal, on 24-1-2018, dismissed the appeal preferred by the petitioner, on the ground of non-prosecution. 4.3 A perusal of the said order shows, that the Tribunal noted that the petitioner had been served, and thus, no purpose would be served in issuing a fresh notice. 4.4 In the very same order i.e. the order dated 24-1-2018, the Tribunal also observes, that it would treat the appeal as not being admitted, and in this regard, the Tribunal has taken recourse to Rule 19 of the ITAT Rules. 5. It is the petitioner's assertion, that the order dated 24-1-2018 was received by it on 5-2-2018. The petitioner also avers, that the aforementioned miscellaneous application was filed on 24-9-2018, which, as noticed, was dismissed on 7-9-2022. 6. The reasoning of the Tribunal for rejecting the miscellaneous application is contained in paragraph 4 of the impugned order, the order dated 7-9-2022. 6.1 For the sake of convenience, the same is extracted hereafter: MA No. 407/Mum/2022 Assessment Year: 2010-11 5 “4. We have heard the rival submissions and perused the records before us. From the record placed before us it is noticed that these Misc applications were filed on 24-9-2018. The provisions of sub-section (2) of section 254 stipulates the time limit for disposal of Misc application filed at any time within 6 months from the end of the month in which the order was passed by the Tribunal under section 254(1) of the Act. It is noticed that the Tribunal had passed the order under section 254(1) of the Act on 24-1-2018 meaning thereby any Misc application filed under section 254(2) of the Act with a view to rectify any mistake apparent from record is to be disposed of at any time within 6 months from the end of the month in which the order was passed re before 31-7-2018. In the case of the assessee the Misc. applications were filed on 24th September, 2018 which is beyond the period of 6 months for disposal of the Misc applications set out in the provisions of section 254(2) meaning thereby the Misc applications should have been filed before 31st July, 2018. The assessee filed petition requesting for condonation of delay in filing Misc applications. However, nowhere in the statute provides for condonation of delay in filing Misc. applications before the Tribunal under section 254(2) of the Act. Condonation of delay in filing Misc applications by the Tribunal is beyond the powers of the Tribunal in the absence of any specific provision in the statute. In the circumstances the Misc applications filed by the assessee are liable to be rejected." 7. As would be evident, the Tribunal seems to have taken recourse to the provisions of section 254 of the Act. The Tribunal has alluded to the fact, that since rectification of mistake, apparent from the record, can be made within six months from the end of the month in which the concerned order was passed, the petitioner's application for recall of the order dated 24-1-2018 could not have been entertained 7.1 In this context, the Tribunal has fixed two points de, the date on which the petitioner's miscellaneous application was filed i.e., 24-9- 2018, and when the six-month period expired, commencing from the end of the month in which the order was passed i.e., 31-7-2018. Having noticed these dates, the Tribunal has concluded that under section 254 of the Act, it had no power to condone the delay qua the application for recall of its order, which was filed beyond six months. 8. In our view, the application moved by the petitioner was not moved with a view to rectify any mistake apparent from the record, or even to amend any order. The petitioner simply sought a recall of MA No. 407/Mum/2022 Assessment Year: 2010-11 6 the order dated 24-1-2018, whereby the appeal was dismissed for non-prosecution. Therefore, in our opinion, the said provision was not applicable for adjudicating the petitioner's application for recall of the order dated 24-1-2018. It appears, that the only avenue available to the Tribunal was as contemplated in Rule 24 of the ITAT Rules. 8.1 For the sake of convenience, the same is extracted hereafter: "[Hearing of appeal ex parte for default by the appellant. 24. 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.]" 9. A perusal of the said Rule seems to plainly convey, that if on the date fixed for hearing, or on any other date to which the hearing is adjourned, the appellant does not appear in person or through an authorized representative, when the appeal is called out for hearing, the Tribunal may dispose of the appeal on merits, after hearing the respondent. 10. Furthermore, the proviso appended to the Rule indicates, that where an appeal has been disposed of on merits, and the appellant appears thereafter, the Tribunal may set aside the ex parte order and restore the appeal, if it is satisfied that there was sufficient cause for his non-appearance Although in the main part of Rule 24, the expression used is "may", when read with the proviso appended thereto, it leads to the conclusion that if the Tribunal chooses to dispose of the appeal on merits after hearing the respondent in the absence of the appellant, and the appellant thereafter appears and shows sufficient cause for not appearing on the date when the appeal is disposed of, the Tribunal is obliged, in law, to set aside the order passed on merits and restore the appeal. As it appears from a perusal of the record, the Tribunal's attention does not seem to have been drawn towards Rule 24 of the ITAT Rules The Tribunal, as noted MA No. 407/Mum/2022 Assessment Year: 2010-11 7 above, has, in our view, taken recourse to the wrong provision ie, Section 254 of the Act. 11. Having heard the learned counsel for the parties in some detail and examined the record, according to us, this matter may deserve a hearing on merits, for the following reason: (i) The petitioner has been denied depreciation allowance, amounting to Rs. 53,31,982/- for the period in issue te, AY 2011-2012. According to the petitioner, the Commissioner of Income-tax (Appeals) ["CIT(A)"] had denied the depreciation allowance to the petitioner, on the ground that the subject plants had been closed, and the plant and machinery was held only for the purpose of selling the same, in pursuance of the scheme framed by the Board for Industrial and Financial Reconstruction (BIFR) constituted under the Sick Industrial Companies (Special Provisions) Act, 1985. However, the petitioner claims, that in the previous AYs i.e., AY 2003-2004 to AY 2010-2011 and in AY 2014-2015, depreciation claimed with respect to the very same block assets was sustained by the CIT(A). 12. Furthermore, in our view, while there was delay, the appellant seems to have furnished some reasons for explaining the delay. Broadly, the reasons given were that the notice of hearing issued by the Tribunal for the hearing on 24-1-2018 was misplaced, and did not reach the concerned officer of the petitioner, which according to the petitioner, was the primary cause for non-attendance on the said date. Furthermore, as per the petitioner, it was unaware of the passing of the dismissal order dated 24-1-2018, and only came to know about the same only on 5-2-2018. The petitioner also contends, that the inadvertent delay in filing the miscellaneous application was caused on account of the concerned persons in the Department being temporarily transferred to a plant outside Delhi, and some persons retiring during the relevant period. 13. Having regard to the aforesaid, in our opinion, the appeal deserves to be heard on merits. 13.1 Accordingly, the impugned order dated 7-9-2022 is set aside. The matter is remitted to the Tribunal for disposal of the petitioner's statutory appeal on merits.” (Emphasis Supplied) MA No. 407/Mum/2022 Assessment Year: 2010-11 8 5. On perusal of the above judgment, we find that in the above case, the appeal was dismissed by the Tribunal on the ground of non- prosecution, without examining the merits. The Hon’ble High Court condoned the delay of more than 6 months in filing application for recall of the ex-parte order by placing reliance on Rule 24 of the ITAT Rules and restored the appeal before the Tribunal for adjudication on merits. 6. Further, we note that in the case of Principal Commissioner of Income Tax-7 Vs. Income Tax Appellate Tribunal [2020] 116 taxmann.com 451 (Bombay)/ [2020] 425 ITR 581 (Bombay) [24-01-2020], the Hon’ble Bombay High Court had made following observations: “15. From a reading of Rule 24 as extracted above, it is seen that Tribunal is vested with the power to recall an ex-parte order. Requirement of the proviso is that Tribunal must be satisfied that there was sufficient cause for non-appearance of the appellant. No time limit is prescribed in Rule 24. 16. On a conjoint reading of the two provisions, there appears to be no contradiction between section 254(2) of the Act and Rule 24 of the Rules as extracted above. Both the provisions can be and should be read harmoniously to advance the objective that a decision on merit should be avoided in the absence of the aggrieved litigant. It is an established principle of natural justice that a litigant should be heard before a decision is taken. 17. In Srei Infrastructure Finance Ltd. (supra) Supreme Court referred to its earlier decisions in the case of Grindlays Bank Ltd. v. Central Government Industrial Tribunal, 1980 Supp SCC 420 and Kapra Mazdoor Ekta Union v. Birla Cotton Spg & Weg Mills Ltd. [2005] 13 SCC 777 and distinguished between a procedural review and a review on merit. Supreme Court held that a Tribunal or a quasi- judicial body is always endowed with such ancillary or incidental powers as are necessary to discharge its functions effectively for the purpose of doing justice between the parties. Such a power inheres in every Tribunal.” (Emphasis Supplied) MA No. 407/Mum/2022 Assessment Year: 2010-11 9 7. On perusal of the above judgments of the Hon’ble High Courts, it can be concluded that (a) provision contained in Section 254(2) of the Act are not applicable for adjudicating the application for recall of the ex-parte order and the only avenue available to the Tribunal is as contemplated in Rule 24 of the ITAT Rules whereby the Tribunal has been vested with the power to recall an ex-parte order; (b) Requirement of the proviso to Rule 24 of the ITAT Rules is that Tribunal must be satisfied that there was sufficient cause for non- appearance of the Appellant on the date when the Appellant was proceeded ex-parte and (c) no time limit is prescribed in Rule 24 of the ITAT Rules for filing an application for recall of the order. 8. In view of the above, it can be concluded that an application filed in terms of Rule 24 of the ITAT Rules seeking recall of an ex-parte order passed by the Tribunal without examining the merits can be entertained by the Tribunal. While Rule 24 of ITAT Rules does not provide for any time limit for making such application, in our view, the aforesaid application in terms of Rule 24 of ITAT Rules should be filed within a reasonable time, which would depend upon the facts and circumstances of each case. We note that even Section 254(2) provided for a period of 4 years for seeking rectification of the order which was reduced to 6 months w.e.f. 01/06/2016. In the present case the time taken by the Appellant for filing application seeking recall of the ex-parte order partly overlapped the period of around 2 years during which the nation was dealing with COVID-19 pandemic i.e. period from 15/03/2020 to 28/02/2022 taken into consideration by the Hon’ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020. While explaining the reasons for delay of balance period in filing application under consideration, it was explained by the Appellant that in the present case the hearing fixed for 02/08/2017 MA No. 407/Mum/2022 Assessment Year: 2010-11 10 had gone unattended as there was dispute/misunderstanding between the Appellant and the consultant. For the same reason, the filing of the present application was delayed. While the Appellant had a belief that the application seeking recall of the order has been filed, no steps were taken by the tax consultant. On perusal of record, we find that in appellate proceedings before the CIT(A) also none had appeared for the Appellant and the appeal was dismissed by the CIT(A) vide order dated 31/10/2014, against which the Appellant had preferred the appeal before the Tribunal after a delay of 83 days. Vide order dated 31/08/2017, the appeal before the Tribunal was dismissed as being barred by limitation after the appellant was proceeded ex-parte. Thus, the appeal was not adjudicated on merits. While the Revenue has opposed the application, keeping in view the aforesaid facts and circumstances of the present case, we deem it appropriate to provide another opportunity to the Appellant. In our view, no prejudice would be caused to the Revenue in case the appeal is adjudicated on merits after hearing the Appellant. Accordingly, subject to payment of cost of INR 25,000/- in the Prime Minister’s National Relief Fund and furnishing of receipt of such deposit within 15 days from the date of his order, the ex-parte, order dated 31/08/2017, passed by the Tribunal shall stand recalled. The Appellant is directed to pursue the appeal diligently and file the factual/legal paper-book before the Tribunal within a period of 30 days from the date of the present order. Subject to the aforesaid, the appeal shall stand restored back to its original number for adjudication on the issue of condonation of delay of 83 days in filing the appeal and thereafter, if required, for adjudication of the issues raised in appeal on merits after hearing the Appellant. The registry is directed to list the appeal after a MA No. 407/Mum/2022 Assessment Year: 2010-11 11 period of 30 days from the date of the present order before regular bench in due course after giving notice to both the sides. 9. In result, in terms of paragraph 8 above, the present Miscellaneous Application preferred by the Assessee is allowed. Order pronounced on 08.03.2024. Sd/- Sd/- (B.R. Baskaran) Accountant Member (Rahul Chaudhary) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 08.03.2024 Alindra, PS MA No. 407/Mum/2022 Assessment Year: 2010-11 12 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT 5. दिभ गीय प्रदिदनदध, आयकर अपीलीय अदधकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदधकरण, म ुंबई / ITAT, Mumbai