2025 (2) TMI 768 - HC - Income Tax

Appeal restored to CIT(A) for merit-based decision after dismissal for non-prosecution during COVID-19 pandemic

The HC allowed the appeal and set aside both the Tribunal's order and CIT(A)'s dismissal order dated 16.10.2019. The court held that CIT(A) should decide ... Power of CIT(A) to dismiss the appeal for non-prosecution - delay in filing the appeal to be condoned due to sufficient cause, including the impact of the COVID-19 pandemic - HELD THAT:- Sub-section 2 of Section 251 states that the Joint Commissioner (Appeals) or the Commissioner (Appeals), as the case may be, shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation contained in Section 251 states that in disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant. Thus, on a plain reading of the above provision indicates that the Commissioner (Appeals) should decide the appeal petition on merits. The Hon’ble Supreme Court in Aditya Khaitan & Ors. [2023 (10) TMI 155 - SUPREME COURT] had taken note of the impact of the covid pandemic and observed that when the whole world is in grip of devastating pandemic, it could never have been said that the parties were slipping over their rights. In the instant case it is no doubt that the entire period was not covered during the pandemic but the part of the period was undoubtedly covered during the pandemic. Even thereafter there has been some delay in the matter. However, what is to be borne in mind is the settled legal principle that the facts of each case have to be considered before applying the legal principle as to how an application under Section 5 of the Limitation Act has to be decided. Ordinarily, a litigant does not stand to gain by either preferring an appeal belatedly or not appearing before the appellate forum. There may be cases where for certain mala fide reasons the appellant will avoid proceedings. However, in the instant case there is no such record to show that the appellant had deliberately lodged appeal belatedly before the Tribunal or that deliberately they did not appear before the CIT(A) for certain other collateral purposes. Therefore, apart from that, since the matter involves the tax liability, and the appellant’s remedy before the CIT(A) is a very valuable remedy since the Commissioner’s powers are coterminus with that powers of the assessing officer, we deem it appropriate to restore the appeal to the CIT(A) for being decided on merits subject to the condition that the appellant should not seek for any adjournment and should cooperate in the disposal of the appeal by the Commissioner. Appeal is allowed and the order passed by Tribunal is set aside as well as the order passed by the CIT dated 16.10.2019 and the appeal stands restored to the file to be decided on merits in accordance with law. The issues presented and considered in this legal judgment are as follows:1. Whether the first appellate authority had the jurisdiction to dismiss the appeal for non-prosecution without deciding on the merits.2. Whether the delay in filing the appeal should be condoned due to sufficient cause, including the impact of the COVID-19 pandemic.The Court considered the appellant's failure to diligently prosecute the matter before the first appellate authority and the delayed filing of the appeal. The Court analyzed the relevant legal framework under Section 251 of the Income Tax Act, 1961, which grants the Commissioner (Appeals) the power to decide appeals on merits. The Court also referenced precedents such as Ratanchand Manoharmal vs. Income Tax Officer and Commissioner of Income-tax (Central), Nagpur Vs. Premkumar Arjundas Luthra to support the argument that appeals should not be dismissed for non-appearance but should be decided on their merits.The Court further discussed the impact of the COVID-19 pandemic on the delay in filing the appeal, citing the Supreme Court's decision in Aditya Khaitan & Ors. Vs. IL and FS Financial Services Limited. The Court emphasized the importance of considering the facts of each case before applying legal principles regarding the condonation of delay.Based on the analysis of the legal framework, precedents, and arguments presented by the parties, the Court concluded that the appeal should be allowed. The Court set aside the orders of the Tribunal and the Commissioner and restored the appeal to the Commissioner (Appeals) for a decision on merits. The Court imposed the condition that the appellant should not seek adjournments and should cooperate in the appeal's disposal.The significant holdings of the judgment include the Court's determination that the first appellate authority should decide appeals on their merits and that the delay in filing the appeal, including the impact of the COVID-19 pandemic, should be considered when assessing sufficient cause for condonation.In conclusion, the Court allowed the appeal, set aside the previous orders, and restored the appeal to the Commissioner (Appeals) for a decision on merits, emphasizing the importance of cooperation and timely prosecution in tax matters.