2025 (6) TMI 1718 - HC - Income Tax

Validity of CIT (A)/NAFC order as acted without looking into the records - HELD THAT - No hesitation in recording that this seems to be a case of gross negligence if not a case of dereliction in duty. CIT (A) at NAFC who passed the order has acted without looking into the records. At such a high position where he is required to consider each and every aspect of the matter in appeal it is difficult to believe that an officer at his level would act in such a manner that it would result in causing hardship to the assessee and multiply the litigation. This Court is confining it s observations with regard to the order impugned in the present writ application only. In the admitted position this Court sets aside the impugned order as contained in Annexure P/1 to the writ application and directs the CIT (A) to consider the appeal afresh - CIT (A) has offered to give a personal hearing to the petitioner which must be given and a reasoned order be passed within a period of three months from the date of receipt/production of a copy of this order.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

- Whether the order dated 27.11.2024 passed by the Commissioner of Income Tax (Appeal), National Faceless Appeal Center (NFAC), dismissing the appeal on the ground of limitation without considering the limitation petition filed by the petitioner along with the memo of appeal, is legally valid.

- Whether the extension of limitation period granted by the Hon'ble Supreme Court in SLP No. 11840 of 2019 and the directions of the High Court for filing the appeal within four weeks were properly considered by the Appellate Authority.

- Whether the dismissal of the appeal in limine on the ground of limitation without hearing the petitioner or considering the filed limitation petition violates principles of natural justice.

- Whether the petitioner is entitled to any relief, including costs, due to the alleged dereliction of duty by the Appellate Authority.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of dismissal of appeal on ground of limitation without considering limitation petition

Relevant legal framework and precedents: Under the Income Tax Act, appeals against assessment orders must be filed within a prescribed limitation period. However, courts have the discretion to condone delay if sufficient cause is shown. The Hon'ble Supreme Court and the High Court had extended the limitation period for filing the appeal by four weeks in their respective orders, recognizing the pendency of writ proceedings.

Court's interpretation and reasoning: The Court observed that the petitioner had filed the appeal on 03.06.2019 within the four weeks' extension granted by the Supreme Court and had also filed a limitation petition along with the memo of appeal. The Appellate Authority's dismissal of the appeal on the ground of limitation without considering the limitation petition was found to be a mechanical and routine act, lacking due diligence.

Key evidence and findings: The petitioner's Form 35 (memo of appeal) filed online clearly stated the delay and referenced the writ petition before the High Court and the SLP before the Supreme Court. The petitioner supplied copies of the relevant judgments extending the limitation period. The Appellate Authority ignored these facts.

Application of law to facts: The Court held that the Appellate Authority erred in not considering the limitation petition and the judicial extensions of limitation period. The dismissal in limine was contrary to the law and principles of natural justice.

Treatment of competing arguments: The Respondents contended that the High Court had not granted any period of limitation but only allowed four weeks to file appeal, which the Appellate Authority was to consider on merits. However, the Court found this argument untenable as the Supreme Court had explicitly extended the limitation period and the petitioner complied accordingly.

Conclusion: The dismissal of the appeal on limitation grounds without considering the limitation petition and relevant judicial orders was illegal and arbitrary.

Issue 2: Compliance with directions of the Hon'ble Supreme Court and High Court

Relevant legal framework and precedents: The Supreme Court's order in SLP No. 11840 of 2019 dated 10.05.2019 extended the limitation period by four weeks. The High Court, in disposing of the writ petition, directed that the appeal filed within this period along with a limitation petition be considered on merits.

Court's interpretation and reasoning: The Court found that the Appellate Authority completely disregarded these judicial directions. This disregard was viewed as a serious dereliction of duty and a prima facie contemptuous act.

Key evidence and findings: The Court noted the absence of any consideration of the limitation petition or the Supreme Court and High Court orders in the impugned order. The Appellate Authority's failure to provide a hearing or reasoned order was also noted.

Application of law to facts: The Court emphasized that the Appellate Authority is bound to comply with judicial orders and consider appeals in light of such directions. Ignoring these directions vitiates the order passed.

Treatment of competing arguments: The Respondents acknowledged the error and submitted that the impugned order may be set aside and the matter remitted for fresh consideration with a physical hearing.

Conclusion: The Court held that the Appellate Authority's order was passed in disregard of judicial directions and must be set aside with a direction for fresh consideration.

Issue 3: Violation of principles of natural justice and entitlement to relief including costs

Relevant legal framework and precedents: Principles of natural justice require that a party be given a fair opportunity to be heard and that decisions be reasoned and based on consideration of relevant material. Failure to do so amounts to illegality and arbitrariness.

Court's interpretation and reasoning: The Court observed that the Appellate Authority acted without hearing the petitioner or considering the limitation petition and judicial orders. This conduct was characterized as gross negligence and dereliction of duty causing hardship to the petitioner.

Key evidence and findings: The petitioner was compelled to approach the Court again, incurring litigation costs and delay. The Court found this to be an avoidable burden caused by the Appellate Authority's conduct.

Application of law to facts: The Court found that the petitioner was entitled to costs as a consequence of the Department's failure to properly discharge its duties.

Treatment of competing arguments: The Respondents did not dispute the hardship caused and agreed to the remand for fresh consideration but did not specifically address the issue of costs.

Conclusion: The Court awarded costs of Rs. 10,000/- to the petitioner to be paid by the Department, recoverable from the erring officer in accordance with law.

3. SIGNIFICANT HOLDINGS

"This seems to be a case of gross negligence if not a case of dereliction in duty. The CIT (A) at NAFC who passed the order has acted without looking into the records."

"The dismissal of the appeal on the ground of limitation without considering the limitation petition and the judicial extensions of limitation period was illegal and arbitrary."

"The Appellate Authority's action in passing the impugned order is a disobedience and disregard shown to the order of the Hon'ble Supreme Court as well as that of this Court, therefore, it may be taken as contemptuous."

"The impugned order is set aside and the CIT (A) is directed to consider the appeal afresh keeping in view the judgments of the Hon'ble Supreme Court and that of this Court. The CIT (A) shall give a personal hearing to the petitioner and pass a reasoned order within three months."

"The Department of Income Tax/Respondents are directed to pay a cost of Rs. 10,000/- to the petitioner within four weeks. It is open to the Department to realise the cost amount from the erring officer in accordance with law."