ITAT should take into consideration appeals on merits dismissal for non-prosecution is invalid

Uzhuva Support Co-Operative Financial institution Ltd Vs ITO (Kerala Substantial Court docket)
Uzhuva Services Co-Operative Financial institution Ltd, a co-operative culture registered beneath the Kerala Co-operative Societies Act, 1969, filed a writ petition (W.P.(C)No.17013 of 2020) complicated the Profits-tax Appellate Tribunal’s dismissal of their appeal for non-prosecution. The appellant sought to established apart the evaluation order and the consequential orders, restore the attractiveness, and have it decided on deserves. The Kerala Significant Courtroom examined no matter if the Tribunal’s dismissal without the need of looking at the merits was legally sustainable beneath Segment 254 of the Income Tax Act, 1961.
Authorized Context: The situation revolves around Segment 254 of the Cash flow Tax Act, 1961, which mandates that the Appellate Tribunal ought to look at all appeals on their merits. The appellant argued that the Tribunal’s dismissal for non-prosecution, devoid of assessing the deserves, was lawfully unsustainable.
Arguments and Precedents:

Appellant’s Argument: The appellant relied on the Supreme Courtroom decision in Balaji Metal Re-rolling Mills v. Commissioner of Central Excise and Customs (AIR 2015 SCW 426), which dealt with related provisions in the Central Excise Act, 1944. The Supreme Courtroom had held that the Tribunal need to decide appeals on deserves and are unable to dismiss them for non-look.
Supreme Court docket Precedent: The Supreme Court’s judgment in CIT v. S. Chenniappa Mudaliar (1969) even more supported the appellant’s stance. It interpreted Portion 33(4) of the Profits Tax Act, 1922, which corresponds to Section 254 of the 1961 Act, asserting that the Tribunal should give a determination on the merits of the situation, even if the appellant fails to surface.
Earnings Tax Act Provisions: Area 254(1) and (3) of the Profits Tax Act, 1961, parallels Part 33(4) of the 1922 Act, obligating the Tribunal to choose appeals on deserves. The applicable Rule 24 of the Cash flow Tax (Appellate Tribunal) Principles, 1963, also mandates that appeals need to be disposed of on merits just after hearing the respondent, even in the appellant’s absence.

Large Court’s Assessment: The Significant Court docket observed that the Appellate Tribunal dismissed the appellant’s attraction only for non-prosecution, without analyzing the merits, violating the ideas set by the Supreme Courtroom. Rule 24 of the 1963 Procedures requires the Tribunal to come to a decision appeals on deserves, irrespective of the appellant’s existence. The Tribunal’s failure to do so rendered its purchase lawfully unsustainable.
Court’s Decision:

Environment Apart the Tribunal’s Orders: The Large Court docket set aside the Tribunal’s dismissal buy (Ext.P4) and the subsequent buy denying the restoration of the charm (Ext.P6). It directed the Tribunal to reconsider and determine the charm on its merits.
Thought of Delay: The Court docket acknowledged a significant delay in the appellant’s application to established apart the ex parte order—filed 5 yrs just after the Tribunal’s decision. Even with allowing the attraction and the writ petition, the Court imposed a situation: the appellant ought to pay out Rs.5,000 to the Kerala Point out Mediation and Conciliation Centre in a thirty day period and produce the receipt before the Tribunal.

Conclusion: The Kerala High Court’s final decision underscores the statutory obligation of the Money-tax Appellate Tribunal to make your mind up appeals on their merits, even in the absence of the appellant. The ruling aligns with the Supreme Court’s interpretation, emphasizing that dismissals for non-prosecution without the need of benefit thing to consider are legally untenable.
Entire Textual content OF THE JUDGMENT/Buy OF KERALA Higher Court
The appellant, a Co-operative Society registered underneath the Kerala Co-operative Societies Act, 1969, submitted W.P.(C)No.17013 of 2020 praying to established apart Ext.P1 evaluation get and Exts.P4 and P6 consequential orders, to restore Ext.P3 attractiveness and come to a decision the identical on deserves and for other reliefs. Ext.P4 is the buy passed on Ext.P3 attractiveness by the Profits-tax Appellate Tribunal, dismissing the attractiveness for non-prosecution, on the ground that assessee unsuccessful to seem. The uncovered Solitary Choose admitted the writ petition and granted an interim remain of restoration subject to the condition that the appellant pays Rs.10.5 lakhs in just a single month. The direction to deposit Rs.10.5 lakhs, which in accordance to the appellant quantities to 61% of the desire, has been challenged in the writ attraction.
2. Heard Sri Biju George, learned counsel for the appellant and Sri Jose Joseph, discovered Standing Counsel for the Cash flow-tax Office.
3. Considering that the writ petition alone is submitted generally on the floor that the Income-tax Appellate Tribunal can not, in legislation, move an purchase dismissing an attractiveness for default or for non-prosecution, we deem it ideal to call for the documents of the writ petition and consider the identical together with the writ attractiveness.
4. The counsel for the appellant depends on the decision of the Hon’ble Supreme Court in Balaji Metal Re-rolling Mills v. Commissioner of Central Excise and Customs, described in [AIR 2015 SCW 426] in aid of his rivalry. The Hon’ble Supreme Courtroom thought of the provisions of the Central Excise Act, 1944 and the Procedures built thereunder, working with the powers of the Appellate Tribunal. Right after extracting the statutory provisions, the Hon’ble Supreme Court in paragraphs 10 to 12 held as follows:
“10. From a perusal of the aforesaid provisions, we find that the Act enjoins upon the Tribunal to pass order on the appeal confirming, modifying or annulling the selection or purchase appealed in opposition to or may possibly remand the make any difference. It does not give any electrical power to the Tribunal to dismiss the attraction for default or for want of prosecution in situation the appellant is not existing when the appeal is taken up for hearing.
11. A comparable concern arrived up for thought just before this Courtroom in CIT v. S. Chenniappa Mudaliar [CIT v. S. Chenniappa Mudaliar, (1969) 1 SCC 591] whereby this Court docket deemed the provisions of Area 33 of the Earnings Tax Act, 1922 and Rule 24 of the Appellate Tribunal Principles, 1946 which gave energy to the Tribunal to dismiss the enchantment for want of prosecution. For prepared reference, Area 33(4) of the Revenue Tax Act, 1922 and Rule 24 of the Appellate Tribunal Procedures, 1946 are reproduced under:
Section 33(4) of the Revenue Tax Act, 1922
“33. (4) The Appellate Tribunal could, following offering each events to the attraction an prospect of staying heard, move these kinds of orders thereon as it thinks fit, and shall converse any these orders to the assessee and to the Commissioner.”
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Rule 24 of the Money Tax Appellate Tribunal Rules, 1946
“24. In which on the working day mounted for hearing or any other day to which the listening to may be adjourned, the appellant does not surface when the appeal is called on for hearing, the Tribunal may perhaps dismiss the appeal for default or may listen to it ex parte.”
12. Thinking of the aforesaid provisions, this Court docket held as underneath: (S. Chenniappa Mudaliar case [CIT v. S. Chenniappa Mudaliar, (1969) 1 SCC 591] , SCC pp. 595­96, para 7)
“7. The plan of the provisions of the Act relating to the Appellate Tribunal seemingly is that it has to dispose of an charm by generating this sort of orders as it thinks in good shape on the deserves. It follows from the language of Area 33(4) and in specific the use of the term ‘thereon’ that the Tribunal has to go into the correctness or usually of the points made a decision by the departmental authorities in the gentle of the submissions manufactured by the appellant. This can only be carried out by providing a selection on the merits on concerns of truth and law and not by merely disposing of the enchantment on the floor that the celebration worried has failed to show up. As observed in Hukumchand Mills Ltd. v. CIT [Hukumchand Mills Ltd. v. CIT, (1967) 63 ITR 232 (SC)] , the word ‘thereon’ in Section 33(4) restricts the jurisdiction of the Tribunal to the subject matter-make any difference of the attraction and the terms ‘pass this sort of orders as the Tribunal thinks fit’ consist of all the powers (except maybe the ability of enhancement) which are conferred on the Appellate Assistant Commissioner by Area 31 of the Act. The provisions contained in Section 66 about building a reference on concerns of law to the Superior Court will be rendered nugatory if any such electricity is attributed to the Appellate Tribunal by which it can dismiss an appeal, which has or else been correctly submitted, for default without having building any order thereon in accordance with Area 33(4). The posture gets very basic when it is remembered that the assessee or the Commissioner of Earnings Tax, if aggrieved by the orders of the Appellate Tribunal, can have resort only to the provisions of Portion 66. So far as the queries of point are involved the conclusion of the Tribunal is ultimate and reference can be sought to the Large Courtroom only on queries of legislation. The Superior Court workouts purely advisory jurisdiction and has no appellate or revisional powers. The advisory jurisdiction can be exercised on a suitable reference becoming manufactured and that cannot be finished except the Tribunal alone has handed proper get beneath Segment 33(4). It follows from all this that the Appellate Tribunal is bound to give a correct choice on thoughts of truth as nicely as law which can only be done if the charm is disposed of on the deserves and not dismissed owing to the absence of the appellant. It was laid down as much back again as the yr 1953 by S.R. Das, J. (as he then was) in CIT v. Arunachalam Chettiar [CIT v. Arunachalam Chettiar, (1953) 23 ITR 180 (SC)] that the jurisdiction of the Tribunal and of the Higher Court is conditional on there currently being an purchase by the Appellate Tribunal which might be said to be one beneath Portion 33(4) and a concern of legislation arising out of these kinds of an buy. The Special Bench, in the present scenario, although analyzing this part really appositely referred to the observations of Venkatarama Aiyar, J. In CIT v. Scindia Steam Navigation Co. Ltd. [CIT v. Scindia Steam Navigation Co. Ltd., (1961) 42 ITR 589 (SC)] indicating the requirement of the disposal of the attractiveness on the deserves by the Appellate Tribunal. This is how the learned Decide had put the matter in the type of interrogation: (ITR p. 609)
‘… How can it be said that the Tribunal need to search for for assistance on a issue which it was not called upon to look at and in regard of which it had no option of determining whether or not the decision of the Court docket really should be sought?’
Hence hunting at the substantive provisions of the Act there is no escape from the summary that underneath Part 33(4) the Appellate Tribunal has to dispose of the attractiveness on the deserves and cannot limited circuit the same by dismissing it for default of appearance.”
5. It can be viewed from the paragraphs extracted previously mentioned that the Supreme Courtroom regarded as the situation with reference to the provisions of the Money-tax Act, 1922 and the Appellate Tribunal Procedures, 1946, working with the powers of the Cash flow-tax Appellate Tribunal also and held that on the lookout at the substantive provisions of the Act, the Tribunal must not have dismissed the attractiveness for want of prosecution and it ought to have made the decision the enchantment on deserves, even if the appellant or its counsel was not existing when the charm was taken up for hearing. Rule 24 as it stood then presented for dismissal of the enchantment for default. The Apex Court docket held that Area 33(4) of the Act does not allow the dismissal of an attraction by the Tribunal, for default or non-look. Portion 254(1) and (3) of The Revenue Tax Act, 1961, is in pari materia with Segment 33(4) of the Profits Tax Act, 1922. Even so, Rule 24 of the Earnings Tax (Appellate Tribunal) Procedures, 1963, has undergone considerable transform from the Rule 24 which existed in the 1946 Policies. Rule 24 of the 1963 Principles reads thus:
“Rule 24. Hearing enchantment ex parte for default by the appellant.
Exactly where, on the day mounted for listening to or on any other day to which the listening to could be adjourned, the appellant does not appear in particular person or by way of an authorised representative when the attraction is termed on for hearing, the Tribunal may possibly dispose of the attraction on deserves after hearing the respondent:
Delivered that in which an attractiveness has been disposed of as offered above and the appellant seems later on and satisfies the Tribunal that there was enough trigger for his non-visual appearance when the attractiveness was called on for hearing, the Tribunal shall make an purchase seting apart the ex parte get and restoring the appeal.”
6. A examining of Ext.P4 would obviously exhibit that the Appellate Tribunal has not deemed Ext.P3 enchantment on merits and the only cause for dismissing it is mentioned to be for non-prosecution. The appellant filed Ext.P5 Miscellaneous Petition trying to get to established apart the ex parte get for restoring the enchantment back to file. But the very same was also dismissed by the Tribunal as for every Ext.P6 get, for the motive that the exact is filed past time.
7. In the light of the binding judgment of the Apex Courtroom and the provisions contained in Part 254 of the Profits Tax Act, 1961 and Rule 24 of the Money Tax (Appellate Tribunal)Procedures, 1963, the writ appeal and the writ petition are allowed. We hold that Ext.P4 get passed by the Appellate Tribunal is not issued in accordance with regulation, and the very same is set apart. Considering that Ext.P4 buy is not an get handed on merits, there is no need of the appellant approaching the Tribunal for setting apart the ex parte get and restoration of the charm, as per the Proviso to Rule 24. Ext.P6 get which is consequential, is also established apart. The Tribunal is directed to reconsider the appeal Ext.P3 on deserves and dispose of the same in the fashion stipulated by the Statute. The events shall bear their respective costs.
8. We consider notice of the point that the purchase of the To start with Appellate Authority was handed on 31.01.2014 and that of the Tribunal was handed on 26.06.2014, and the appellant selected to want an software to set aside the ex parte order only after five yrs, on 22.11.2019. Even while the attraction and the writ petition filed by the appellant is allowed, we are of the view that there is inordinate hold off in complicated the purchase of the Appellate Tribunal, which all the very same is to be handled as non est. The attractiveness and the writ petition is consequently authorized, subject matter to the appellant paying a sum of Rs.5,000/- (Rupees 5 Thousand only) toward expenditures to the Kerala Condition Mediation and Conciliation Centre and developing a duplicate of the receipt in a period of a person thirty day period in advance of the Tribunal.