PCIT vs. ITAT (Bombay High Court)

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.2858 OF 2019
The Pr. Commissioner of Income Tax-7 … Petitioner
V/s.
Income tax Appellate Tribunal
Bench “B” and anr. … Respondents
—
Mr.Nirmal Chandra Mohanty, Advocate for the Petitioner.
Ms.Shilpa Kapil, Advocate for Respondent No.1.
—
CORAM : UJJAL BHUYAN &
MILIND N. JADHAV, JJ.
DATE : JANUARY 24, 2020
P.C.:-
1. Heard Mr.N.C.Mohanty, learned standing counsel,
Revenue for the petitioner; and Mrs.Shilpa Kapil, learned
counsel for respondent No.1.
2. This petition has been filed under Article 226 of the
Constitution of India by the Principal Commissioner of
Income Tax-7, Mumbai assailing the legality and
correctness of order dated 1st February, 2019 passed by
the Income Tax Appellate Tribunal, Bench “B” , Mumbai
(briefly “the Tribunal” hereinafter) in MA No.483/M/2018
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for the assessment year 2006-07, whereby the earlier
order of the Tribunal dated 10th January, 2018 passed in
Income Tax Appeal No.3910/Mum/2010 has been recalled
and the appeal has been directed to be placed for hearing
afresh.
3. It may be mentioned that respondent No.2 i.e. the
assessee had preferred Income Tax Appeal No.
3910/Mum/2010 for the assessment year 2006-07 before
the Tribunal against the order passed by the
Commissioner of Income Tax (Appeals)-13, Mumbai
dated 6th January, 2010. By order dated 10th January,
2018, Tribunal dismissed the appeal.
4. From a perusal of the order dated 10th January, 2018
it is seen that there was no representation on behalf of
respondent No.2 i.e. the assessee and Tribunal decided
the appeal on merit in the absence of the assessee after
hearing the Departmental Representative.
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5. Respondent No.2 thereafter filed an application for
recall of the aforesaid order dated 10th January, 2018 and
for hearing the appeal afresh. The said application was
registered as MA No.483/M/2018. After hearing learned
counsel for respondent No.2 as well as the Departmental
Representative, Tribunal passed the impugned order
dated 1st February, 2019 recalling the earlier order
dated 10th January, 2018 and fixing the appeal for
hearing afresh on merit.
6. Mr.Mohanty, learned standing counsel submits that
the impugned order was passed under Section 254(2) of
the Act. Referring to the said provision he submits that a
time limit of six months from the end of the month in
which the Tribunal had passed the order is provided to
rectify any mistake in the order which is apparent from
the record. In the instant case, though the miscellaneous
application was filed by the assessee on 9th July, 2018
within the aforesaid period of six months, Tribunal did not
dispose of the same within the prescribed limitation
period. Infact, much later on 1st February, 2019.
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Therefore, the said order cannot be sustained. He
submits that there is no provision under Section 254
extending the period of limitation. Further submission of
Mr.Mohanty is that in exercise of the power conferred
under sub-section (5) of Section 255 of the Act, Income
Tax (Appellate Tribunal) Rules, 1963 (briefly “the Rules”
hereinafter) have been framed. Rule 24 of the said
Rules provides that in case of an ex-parte order if the
appellant appears otherwise and satisfies the Tribunal
that there was sufficient cause for his non-appearance
when the appeal was called for hearing, the Tribunal
shall make an order setting aside the ex-parte order
and restore the appeal. However, his contention is that
though time limit is not provided under Rule 24, the
time limit prescribed under Section 254 (2) has to be
strictly adhered to as the Rules cannot contravene or
operate beyond the parent Act. In support of his
submissions, Mr.Mohanty has placed reliance on a
decision of the supreme Court in Assam Company Ltd.
Vs. State of Assam, 248 ITR 567.
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7. On the other hand, learned counsel for respondent
No.1 submits that though the impugned order has been
purportedly passed under Section 254 (2) of the Act, the
same infact is an order by the Tribunal invoking its
inherent power of procedural review. She submits that
such a power inheres in every Tribunal and this has been
acknowledged by the Supreme Court in Srei
Infrastructure Finance Limited Vs. Tuff Drilling
Private Limited, (2018)11 SCC 470.
8. In his reply Mr.Mohanty fairly submits that the
limitation of six months from the end of the month in
which the order was passed was substituted in subsection
(2) of Section 254 by the Finance Act, 2016 with
effect from 1st June, 2016. Prior to that the limitation was
four years from the date of the order. In Sree Ayyanar
Spinning and Weaving Mills Limited Vs.
Commissioner of Income Tax, 301 ITR 434 SC,
Supreme Court had upheld order passed by the Tribunal
beyond the limitation of four years.
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9. Submissions made by learned counsel for the
parties have been considered.
10. Facts are not in dispute. However, a brief recital of
the facts is considered necessary. The initial order passed
by the Tribunal on 10th January, 2018 was an ex-parte
one. The assessment year under consideration is 2006-
07. The limitation of six months as noticed above was
substituted by the Finance Act, 2016 with effect from 1st
June, 2016. Therefore, for the assessment year under
consideration the limitation period may be construed to
be four years from the date of the order. Even otherwise,
if a view is taken that since the impugned order was
passed by the Tribunal on 1st February, 2019, the
substituted limitation period of six months would be
applicable, then also it is seen that the said period of
six months was available to respondent No.2 till 31st July,
2018. Respondent No.2 had filed the application for
recall of the ex-parte order on 9th July, 2018 within the
limitation period of six months. However, Tribunal
passed the impugned order only on 1st February, 2019.
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11. At this stage, we may advert to Section 254(2) of
the Act, relevant portion of which reads as under:-
“254(1)…………………………………………………..
(2) The Appellate Tribun al may, at any time
within six months from the end of the month
in which the order was passed, with a view to
rectifying any mistake apparent from the
record, amend any order passed by it under
sub-section (1) and shall make such
amendment if the mistake is brought to its
notice by the assessee or the Assessing
Officer:
……………………………………………………………”
12. From a careful reading of the provision, it is seen
that Tribunal is vested with the power to rectify any
mistake apparent from the record to amend any order
passed by it under sub-section (1) of Section 254 at any
time within six months from the end of the month in
which the order was passed, provided the mistake is
brought to its notice by the assessee or by the Assessing
Officer.
13. The use of the expression “may” in the aforesaid
provision is clearly indicative of the legislative intent
that the limitation period of six months from the end of
the month in which the order was passed is not to be
construed in such a manner that there can not be any
extension of time beyond the said period of six months.
This is so because the assessee or the Assessing Officer
can only bring the mistake to the notice of the Tribunal.
The assessee or the Assessing Officer has no control
over the Tribunal. For one reason or the other, the
Tribunal may not be in a position to pass the order under
Section 254(2). For the inability of the Tribunal to pass
such an order within the period provided, neither the
assessee nor the revenue should suffer. What therefore
becomes relevant is that the assessee or the Assessing
Officer should bring the mistake to the notice of the
Tribunal within the limitation period.
14. Rule 24 of the Income Tax (Appellate Tribunal)
Rules, 1963 (Rules) is relevant. Rule 24 reads as under :-
“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 authorized
representative when the appeal is called on
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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 nonappearance,
when the appeal was
called on for hearing the Tribunal shall
make an order setting aside the exparte
order and restoring the appeal.”
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
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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 Limited (supra)
Supreme Court referred to its earlier decisions in the
case of Grindlays Bank Ltd. Vs. Central Government
Industrial Tribunal, 1980 Supp SCC 420 and Kapra
Mazdoor Ekta Union Vs. Birla Cotton Spinning and
Weaving Mills Limited, (2005) 13 SCC 777 and
distinguished between a procedural review and a review
on merit. Supreme Court held that a Tribunal or a quasijudicial
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.
18. As candidly pointed out by Mr.Mohanty, with regard
to the pre-amended provision of Section 254(2),
Supreme Court in Sree Ayyanar Spinning and
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Weaving Mills Limited (supra), had accepted the
position that such an order can be recalled beyond the
then prescribed period of four weeks, provided the
application is made within the limitation period. In fact,
Rajasthan High Court in Harshavardhan Chemicals
and Minerals Limited Vs. Union of India, 256 ITR
767 took the view that if the assessee had moved the
application within four years from the date of the order,
the Tribunal was bound to decide the application on its
merit and not on the ground of limitation. Supreme Court
agreed with the view expressed by the Rajasthan High
Court and in the facts of that case held that the
application for rectification was made within four years.
Tribunal took its own time to dispose of the application.
Therefore, Madras High Court erred in holding that the
application could not have been entertained by the
Tribunal beyond four years.
19. We may now advert to the impugned order. By the
said order Tribunal has recalled the ex-parte order and
fixed the appeal for hearing afresh, which has been filed
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by none else than the assessee. Ultimately, what the
Tribunal has done is only to provide an opportunity of
hearing to the assessee. No prejudice has been caused
to the revenue by such order of the Tribunal.
20. Thus, having regard to the discussions made
above and on due consideration, we are of the view that
the challenge made by the revenue in this writ petition is
misconceived. Consequently we find no merit in the writ
petition.
21. Writ petition is accordingly dismissed, but without
any order as to costs.
(MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.)
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