Effective service and natural justice govern disposal of reference applications; ex parte dismissal without notice can be rectified and restored.

A rectification application under section 254(2) could be used to correct an order dismissing a reference application for non-appearance where the applicant had not been given effective notice and hearing. The Tribunal read section 256(1) with its procedural rules to hold that disposal of the application without affording that opportunity was contrary to statutory procedure and natural justice, and therefore constituted a mistake apparent from the record. Notice returned with the endorsement "left" did not amount to effective service under section 282 and the relevant procedural rules, so the presumption of due service was rebutted. The ex parte disposal was therefore unsustainable and the matter was restored for fresh hearing.

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Issues: (i) Whether the Tribunal could rectify, under section 254(2), its order dismissing a reference application under section 256(1) for absence of the applicant and restore the application for fresh hearing; (ii) Whether notice of hearing returned with the endorsement "left" amounted to effective service so as to justify disposal of the application in the applicant's absence.

Issue (i): Whether the Tribunal could rectify, under section 254(2), its order dismissing a reference application under section 256(1) for absence of the applicant and restore the application for fresh hearing.

Analysis: Section 256(1) was read with the Tribunal's procedural rules, particularly Rules 19, 20 and 37 of the Income-tax (Appellate Tribunal) Rules, 1963, to conclude that an applicant is entitled to notice and an of hearing before the application is disposed of. The dismissal of the application for absence, without affording that opportunity, was held to be contrary to the statutory procedure and the principles of natural justice. The resulting order, being made without jurisdiction in the manner adopted, was treated as a mistake apparent from the record and capable of correction.

Conclusion: The Tribunal could rectify the order and restore the reference application for fresh hearing.

Issue (ii): Whether notice of hearing returned with the endorsement "left" amounted to effective service so as to justify disposal of the application in the applicant's absence.

Analysis: Service under section 282 of the Income-tax Act, 1961, read with the relevant procedural rules and Order V of the Code of Civil Procedure, 1908, requires delivery or tender of notice to the person concerned. The endorsement "left" was held to rebut the presumption of due service under section 27 of the General Clauses Act, 1897, because it indicated that the notice was not actually delivered or tendered to the addressee. Since effective service had not been established, the Tribunal could not validly proceed ex parte against the applicant.

Conclusion: The notice was not effectively served, and the ex parte disposal could not be sustained.

Final Conclusion: The rectification application succeeded, the prior dismissal of the reference application was set aside, and the matter was directed to be heard afresh after giving the parties notice and opportunity of hearing.

Ratio Decidendi: Where a statutory application must be decided after notice and hearing, an order passed without effective service and without affording that opportunity is contrary to natural justice and may be corrected as a mistake apparent from the record, with restoration of the matter for fresh hearing.

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