Tribunal must decide the appeal on merit if adjournment is not allowed as requested by both parties before it- practice of multiplying cases by dismissal of appeals is not proper.

[C.A. DEV KUMAR KOTHARI]

A study in view of latest judgment of Punjab and Hariyana High Court.

Relevant links: 

Section 254 of I.T.Act.

Rules 19, 23, 24, 25 and 32 of ITAT Rules.

CIT V Avon Cycles Ltd. 2009 TMI 32473

RAJENDRA PRASAD BORAH Versus INCOME-TAX APPELLATE TRIBUNAL AND OTHERS 2008 -TMI - 30147 - GAUHATI HIGH COURT

CIT v. S. Chenniappa Mudaliar [1969] 74 ITR 41 = 2008 -TMI - 5141 - SUPREME Court,

CIT v. Multiplan India (P.) Ltd. [1991] 38 ITD 320,

The Assam Tribune v. CIT [2006] 285 ITR 452 (Guawahati ) 

As per provision of the Income Tax Act, 1961 and the ITAT Rules the Tribunal must decide appeal on merit even if the appellant and / or respondents is absent.  The Tribunal must hear the party present and decide the appeal on merit. In case it is not possible to decide the appeal on merit, then the judicious course available to the Tribunal is to adjourn the hearing. In an interesting case both parties were seeking adjournment as counsels were not available. The Tribunal dismissed appeal. The High Court held that at best Tribunal could decide the appeal on merit even in case of ex parte hearing but could not dismiss appeal. The matter has been restored to Tribunal to decide appeal on merit after hearing parties.  

Unfortunately patently wrong and illegal practice of dismissal of appeal when assessee as appellant is absent is followed by Tribunal. Such practice should come to immediate  end - a request on behalf of taxpayers. 

Case before Punjab and Harayana high Court: 

In CIT V Avon Cycles Ltd. 2009 TMI 32473 an interesting issue came for consideration.

In this case the Tribunal dismissed the appeal ignoring request of both parties for adjournment. Tribunal failed to decided appeal on merits but simply dismissed appeal. Although both the parties were requesting for adjournment as their counsels were not available. The Court held that the Tribunal could very well consider their request for adjournment or proceed to decide the case on merits but dismissal of appeal was not proper. The court also held that parties should be afforded opportunity to address arguments on merits and therefore impugned order passed by the Tribunal was set aside 

The question before the High Court was as follows:

"Whether on the facts and in the circumstances of the case, the Tribunal was right in law to dismiss the appeal of department for non prosecution instead of deciding the same on merits irrespective of the fact same issue stands decided in favour of the department by the jurisdictional High Court?"

On reading of the reported  judgment of the high Court we find the following facts and circumstances:

1. The appeal before the Tribunal  was on behalf of the revenue and at  the time of hearing, concerned departmental representative was not available for some unavoidable reasons. Some other departmental representative sought( verbally) adjournment.
2. The assessee also sought adjournment by filing a petition.
3. The Tribunal did not allow or reject the appeal on merit but simply dismissed the appeal for non prosecution by the appellant (revenue).
4. It is alleged in the question raised  that the matter was covered by judgment of the high Court in favour of the Revenue.
5. Although at the time of hearing fixed before the Tribunal the assessee had sought adjournment  however, before the high Court , learned counsel for the respondent / assessee took technical view and submitted that it was for the department to pursue the appeal filed by it, before the Tribunal, and in case of negligence and non-appearance at the time when the case was called for hearing, the Tribunal had no choice but to dismiss the same in default.
6. The High Court found that the approach of the Tribunal, was not justice-oriented because both the parties were requesting for adjournment and that too in the absence of their respective counsel. The Tribunal could very well consider their request or proceed to decide the case on merits instead of dismissing the same in default. The technicalities should take a back seat as far as determination of rights of the parties is concerned. The parties should be afforded opportunity to address arguments on merits instead of dismissing the case in default.
7. Therefore for the above reasons the high Court set aside the order passed by the Tribunal and directed the parties to appear before the Tribunal on 20.10.2008 for further proceedings

Authors observations:

It appears that learned Tribunal has followed short-cut practice of disposal of appeals and generating  more cases out of one case. This is perhaps by following decision of Tribunal in the case of CIT v. Multiplan India (P.) Ltd. [1991] 38 ITD 320. Following this decision a practice is adopted by which appeals are dismissed ( even healthy practice of passing over of the case is many times not followed), even if counsel is late by few minutes. Then the appellant has to submit an application for restoration, which is considered by Tribunal and then the Tribunal may either restore the appeal or dismiss the Miscellaneous Application for restoration. Thus, for one appeal there can be three orders for disposal of appeal or applications - first dismissal of appeal, second restoration of appeal by deciding MA in favor of applicant, and then again deciding the appeal. 

Dismissal of appeal is patently wrong:

a. Rule 32 provide for adjournment of hearing from time to time. To render justice at least one more opportunity could have been given to the appellant as well as respondent.

b. As per question referred the matter was already decided in favor of the revenue by the High Court. That means the matter was decided by Tribunal also earlier. Therefore, the Tribunal could have attempted to find out legal position and decided the issue on merit.

c. There is no provision to dismiss appeal in the ITAT Rules. In fact as per S. 254 of the I.T.Act and  ITAT Rules the Tribunal has to pass an order on appeal after hearing party or parties to suit who are present, if any.

d. A properly filed appeal has to be treated as admitted and has to be decided on merit. Non-admission of the appeal can only be on grounds like incompetent appeal, defective appeal, non payment of appeal fees (which was not at all required in this case as the revenue was appellant), time barred appeal… etc. In such cases also, as discussed later on usually  registry department of the ITAT looks after the matter and give notice of defects and allow reasonable time to remove defect. In case  defects are rectified by the appellant, the registry department informs that ultimate admission of appeal shall be decided by the Tribunal. Where there is no defect pointed out by the registry office, and a notice of hearing has been issued, it can be assumed that the appeal has been admitted.

e.dismissal of appeal in limine is not an order on the appeal as required under section 254 of the Act.

f. The Tribunal has before it at least the ground of appeal before itself, order of  the CIT(A), statement of facts and grounds of appeal before the CIT(A),  assessment order and the order of the CIT(A). Which can reasonably be considered as sufficient material for deciding  such  appeal. In practice also  we find that about 80% of matters involved in most of the appeal are decided by these documents, without any need to make further reference to the papers filed in the paper book.

g. interest of justice (and also the interest of revenue in this case) demanded that the appeal should have been disposed off on merits after consideration of the appeal records, if it was possible,  or if it was not possible, the honorable members could have  sent show cause  notice for dismissal of appeal in limine or could have fixed appeal for last time.

h.Considering the facts that it was appeal of the revenue/ department, the D/R was not present, the respondent made request for adjournment it was proper to adjourn the hearing

i. Therefore, dismissal of the appeal by the Tribunal for non appearance of concerned D/R of the revenue was not at all justified.

According to  the provision of  section 254 of the Act and the state of law as contained in rule 24 of the  ITAT Rules, the Tribunal must decide the appeal and pass an order on appeal. A dismissal of appeal is not an order on appeal such dismissal orders suffers from patent error of law and are liable to be adjudged non est, ineffectual, null and void. Particularly so  in view of judgment of the apex court in CIT v. S. Chenniappa Mudaliar [1969] 74 ITR 41 which was followed in The Assam Tribune v. CIT [2006] 285 ITR 452 (Guawahati )  and in RAJENDRA PRASAD BORAH Versus INCOME-TAX APPELLATE TRIBUNAL AND OTHERS 2008 -TMI - 30147 - GAUHATI HIGH COURT.

Some recent decisions of ITAT 

Recently also it is observed that the wrong practice , which begun with decision in case of Multiplan is being followed. In some cases, even when the appellant has filed paper book and written submission and has also appeared at previous occasions, the appeal was dismissed merely because for some reason at the time of next hearing the appellant was not present or was delayed for some reason. This is not at all justified. The dismissal of appeal is base don mere presumption that the appellant is not interested in pursuing the appeal. Such presumption is patently wrong, because the appellant has paid fees for filing an appeal before the Tribunal, has appointed counsel, has filed documents, including paper book, has attended at previous occasions when the case was adjourned. Furthermore, once a case is adjourned, the appeal cannot be dismissed by applying sub-rule (2) to Rule 19. Because an adjournment is under Rule 32, and that Rules does not have a proviso like one found in Rule 19 of the ITAT Rules.  

In view of the above mentioned legal position, the practice of the Tribunal to dismiss appeal merely due to absence of appellant must come to an end immediately and the Tribunal must follow its own  Rules  and decide appeal on merit to render justice.