2021 (6) TMI 260 - AT - Income Tax

Tribunal's Appeal Dismissal Overturned, Emphasis on Fair Opportunity

The Tribunal's decision to dismiss the appeal for non-prosecution was found to be in violation of legal principles and procedural requirements. The order ... Decision on merits notwithstanding non-prosecution - dismissal for non-prosecution and uncured defects - principles of natural justice (audi alteram partem) - Rule 24 of the Income Tax Appellate Tribunal Rules, 1946 and adjudication on merits - rectification of mistake apparent from record under section 254(2) of the Income Tax Act, 1961Dismissal for non-prosecution and uncured defects - decision on merits notwithstanding non-prosecution - principles of natural justice (audi alteram partem) - The Tribunal's dismissal of the appeal for non-prosecution and on the ground of uncured defects without deciding the appeal on merits was not in accordance with law. - HELD THAT: - The Tribunal recorded dismissal for non-prosecution and that defects in the memorandum remained uncured, and did not decide the appeal on its merits. This approach is inconsistent with the Supreme Court's ruling in CIT v. S. Chenniappa Mudaliar and subsequent authorities which require the Tribunal to decide questions of fact and law on merits even where a party fails to appear. The obligation to decide appeals on merits is reinforced by the requirements of natural justice and Rule 24 of the Income Tax Appellate Tribunal Rules, 1946. Reliance on High Court and other decisions (including Rabindra Kumar Mohanty and the jurisdictional precedents cited) supports the principle that dismissal for non-prosecution without adjudication on merits is impermissible and can amount to a failure to perform the Tribunal's statutory duty. [Paras 5, 6, 7]The dismissal for non-prosecution and for alleged uncured defects without deciding the appeal on merits was contrary to law.Rectification of mistake apparent from record under section 254(2) of the Income Tax Act, 1961 - power to recall and restore appeal - The Tribunal's order dismissing the appeal constituted a mistake apparent from the record which the Tribunal could rectify under its jurisdiction to correct such mistakes. - HELD THAT: - Having found that dismissal without deciding on merits was contrary to settled law, the Tribunal's earlier order amounted to a reviewable mistake apparent on the face of the record. The appellate forum has the power to rectify such mistakes and to recall and restore proceedings for fresh adjudication. Jurisprudence cited (including the jurisdictional High Court decisions) recognises that dismissal for default may be corrected so that the appeal can be disposed of on merits. [Paras 7, 8]The earlier order was a mistake apparent from record and capable of being rectified; the Tribunal may recall and restore the appeal.Decision on merits notwithstanding non-prosecution - restoration and fresh disposal of appeal - The appeal is to be restored and remitted for fresh disposal on merits after giving the parties an opportunity of being heard. - HELD THAT: - In view of the legal position that appeals should be decided on merits and that dismissal for non-prosecution without adjudication is impermissible, the appropriate remedy is to recall the impugned order and direct fresh hearing and adjudication. The Tribunal accordingly exercised its power to recall the order in ITA No.2237/PUN/2013 for A.Y. 2006-07 and directed listing for hearing so that the appeal may be decided in accordance with law after affording opportunity to both parties. [Paras 8]The impugned order is recalled; the appeal is restored and listed for fresh hearing and disposal on merits.Final Conclusion: The Miscellaneous Application is allowed: the Tribunal's order dated 20.05.2016 dismissing the appeal for A.Y. 2006-07 is recalled as being contrary to settled law; the appeal is restored and directed to be heard and decided on merits after affording parties an opportunity. Issues involved:Recall of order due to non-prosecution and uncured defects in appeal memo.Analysis:The appellant filed a Miscellaneous Application seeking the recall of the order passed by the Tribunal due to non-prosecution resulting in the dismissal of the appeal for the assessment year 2006-07. The appellant argued that the notice of hearing was not served, and all defects in the appeal memo had been cured and forwarded by registered post. However, during the hearing, no one appeared on behalf of the assessee. The Tribunal had dismissed the appeal for non-prosecution and uncured defects without delving into the merits of the case. The Tribunal's approach was found to be contrary to legal principles established by the Hon'ble Supreme Court and various High Courts, emphasizing the duty of the Tribunal to decide on merits rather than dismissing appeals solely due to non-appearance. The Orissa High Court also highlighted the importance of following legal procedures even in the absence of the taxpayer during appellate proceedings.The legal position laid down by the Supreme Court and various High Courts emphasized that the dismissal of appeals for non-prosecution is unjustified and contrary to the principles of natural justice. The right to natural justice is considered a personal right, and the Tribunal is obligated to afford an opportunity to be heard to the appellant, even if they choose not to participate. The Tribunal's duty is to decide on the merits of the appeal, regardless of the appellant's presence during the hearing. The Tribunal was directed to reconsider its decision, restore the appeal, and decide on merits after providing both parties with an opportunity to be heard.The Tribunal's order was deemed to be inconsistent with the legal precedents and Rule 24 of the Income Tax Appellate Tribunal Rules. The High Courts' decisions highlighted that the dismissal of appeals due to non-prosecution is a rectifiable mistake under Section 254(2) of the Income Tax Act, capable of being corrected by the Tribunal. Therefore, the Tribunal recalled the order and directed a fresh disposal of the appeal in accordance with the law, allowing the Miscellaneous Application filed by the assessee.In conclusion, the Tribunal's decision to dismiss the appeal for non-prosecution was found to be in violation of legal principles and procedural requirements. The order was recalled, and the appeal was directed to be reconsidered on its merits, emphasizing the importance of providing both parties with a fair opportunity to present their case during appellate proceedings.