Whether Income Tax Appellate Tribunal (ITAT) in exercise of Rule 24 of the Income Tax Appellate Tribunal Rules, 1963 (Tribunal Rules) can dismiss the appeal for non prosecution, and, second, interpreting Rule 24 of the Tribunal Rules and Section 254(1) and (2) of the Income Tax Act, 1961 in reference to application of Rule 24.
Two issues emerged for adjudication before the Bombay High Court. First, whether Income Tax Appellate Tribunal (ITAT) in exercise of Rule 24 of the Income Tax Appellate Tribunal Rules, 1963 (Tribunal Rules) can dismiss the appeal for non prosecution, and, second, interpreting Rule 24 of the Tribunal Rules and Section 254(1) and (2) of the Income Tax Act, 1961 in reference to application of Rule 24. In reference to first issue, the High Court held that in terms of Rule 24 of the Tribunal Rules, the Tribunal does not have the option of dismissing an appeal for default or on account of non prosecution. The Tribunal in exercise of its inherent jurisdiction can either adjourn the hearing or dispose of the appeal on merits after hearing the other party, the Respondent. In the instant matter, an appeal was listed for hearing before the Tribunal however, by the time Petitioner could reach the Tribunal matter was already called and dismissed for non-prosecution. Matter could not also be mentioned as Tribunal has no practice of mentioning at any time of the day. The Tribunal while passing the order of dismissal even did not consider the merits of the appeal or heard the Respondents on merits. ITAT later also dismissed the application for recall of order of dismissal passed in the year 2007, vide its impugned order. On the issue of Tribunal not following the practice of mentioning matters before it, the High Court observed that to ensure that justice is done the Tribunal cannot as a matter of practice bar any Advocates/representative from mentioning their matters before the Tribunal and therefore it must do away with such a practice. However, outcome of mentioning is for the Tribunal to decide in exercise of its discretion. Under Rule 24 of the Tribunal Rules, the Tribunal does not have the option of dismissing an appeal for default. In reference to second issue as to whether an application to set right the above error i.e. recalling of order passed in ignorance of Rule 24 would be an application to correct the same under Section 254(1) or (2) of the Act. It was held that where a specific provision has been provided in the Act to deal with a particular situation, it is not open to ignore the same and apply some other provision. Under Section 254(1) both the parties to appeal are given an opportunity to be heard before any order as Appellate Tribunal deems fit is passed. Sub clause (2) prescribes that if mistake apparent on record in the order passed is brought into notice within four years of its pronouncement, the same may be amended. As has been held by the Apex Court, the rectification of an order stands on the fundamental principle that since justice is above all, recall of an order is not barred on rectification application being made by one of the parties and hence the application for rectification will be governed by Section 254(2) of the Act. In the present case since application was made after four years, the same was rightly held as time barred. It was however also clarified that the order if passed in breach of Rule 24 of the Tribunal Rules, would be an irregular and not a void order and even if assumed that such order is a void order, the same would continue to be binding till it is set aside by a competent Tribunal. BPCL vs. ITAT and Others [Bombay HC, 23.10.2013]