1 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 19.2.2019 CORAM HON'BLE DR.JUSTICE VINEET KOTHARI AND HON'BLE MR.JUSTICE C.V.KARTHIKEYAN Tax Case Appeal No.169 of 2019 Smt.Ritha Sabapathy Appellant Vs. Deputy Commissioner of Income Tax, Circle - 1, Chennai. Respondent Tax Case Appeal filed under Section 260A of Income Tax Act, 1961 against order of Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai, dated 18.8.2016 made in ITA No.1567/Mds/2016. For Appellant : Mr.R.Sivaraman Senior Standing Counsel For respondent : Mrs.V.Pushpa JUDGMENT (Delivered by DR.VINEET KOTHARI,J) Assessee has filed this Tax Case (Appeal) under Section 260-A of Income Tax Act aggrieved by order dated 18th August, 2016, passed by learned Income Tax Appellate Tribunal for Assessment Year 2010-2011, dismissing appeal of Assessee, not on merits, but, for want of prosecution. following substantial question of law is framed for our consideration:- "Whether, on facts and in circumstances of http://www.judis.nic.in 2 case, Hon'ble Income Tax Appellate Tribunal was right in law in dismissing appeal preferred by Appellant in I.T.A.No.1567/Mds/2016 for Assessment Year 2010-2011 on ground of non- appearance without disposing appeal on merits of case as prescribed under Rule 24 of Income Tax (Appellate Tribunal) Rules, 1963?" 2. Having heard learned counsel appearing for parties, we are satisfied that impugned order of Tribunal deserves to be set aside and matter deserves to be remanded to Tribunal for hearing matter on merits. 3. Section 254 of Act empowers Tribunal to pass such orders 'as it thinks fit' after giving both parties opportunity of being heard. Rule 24 of Income Tax (Appellate Tribunal) Rules, 1963 is quoted below for ready reference:- "Hearing of appeal ex parte for default by appellant. Where, on day fixed for hearing or on any other date to which hearing may be adjourned, appellant does not appear in person or through authorised representative when appeal is called on for hearing, http://www.judis.nic.in 3 Tribunal may dispose of appeal on merits after hearing respondent; Provided that where appeal has been disposed of as provided above and appellant appears afterwards and satisfies Tribunal that there was sufficient cause for his non-appearance, when appeal was called on for hearing, Tribunal shall make order setting aside ex parte order and restoring appeal." 4. Hon'ble Supreme Court has laid down in Balaji Steel Re- Rolling Mills v. Commissioner of Central Excise and Customs (Civil Appeal No.10265 of 2014, dated 14.11.2014) (2015 AIR SCW 426) that fact finding Appellate Tribunals should decide appeals only on merits and they have no power to dismiss Appeals for want of prosecution. relevant portion of said decision is extracted hereunder:- " 11) From perusal of aforesaid provisions, we find that Act enjoins upon Tribunal to pass order on appeal confirming, modifying or annulling decision or order appealed against or may remand matter. It does not give any power to Tribunal to http://www.judis.nic.in 4 dismiss appeal for default or for want of prosecution in case appellant is not present when appeal is taken up for hearing. 12) similar question came up for consideration before this Court in Commissioner of Income-Tax, Madras vs. S. Chenniappa Mudaliar, Madurai 1969 (1) SCC 591 wherein this Court considered provisions of Section 33 of Income-tax Act, 1922 and Rule 24 of Appellate Tribunal Rules, 1946 which gave power to Tribunal to dismiss appeal for want of prosecution. For ready reference, Section 33(4) of Income Tax Act, 1922 and Rule 24 of Appellate Tribunal Rules, 1946 are reproduced below:- Section 33(4) of Income Tax Act, 1922 "33(4). Appellate Tribunal may, after giving both parties to appeal opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to assessee and to Commissioner." http://www.judis.nic.in 5 Rule 24 of Appellate Tribunal Rules, 1946 "24. Where on day fixed for hearing or any other day to which hearing may be adjourned, appellant does not appear when appeal is called on for hearing, Tribunal may dismiss appeal for default or may hear it ex parte." Considering aforesaid provisions, this Court held as under:- " 7. scheme of provisions of Act relating to Appellate Tribunal apparently is that it has to dispose of appeal by making such orders as it thinks fit on merits. It follows from language of Section 33(4) and in particular use of word "thereon" that Tribunal has to go into correctness or otherwise of points decided by departmental authorities in light of submissions made by appellant. This can only be done by giving decision on merits http://www.judis.nic.in 6 on questions of fact and law and not by merely disposing of appeal on ground that party concerned has failed to appear. As observed in Hukumchand Mills Ltd. v. CIT (AIR 1967 SC 455), word "thereon" in Section 33(4) restricts jurisdiction of Tribunal to subject-matter of appeal and words "pass such orders as Tribunal thinks fit" include all powers (except possibly power of enhancement) which are conferred upon Appellate Assistant Commissioner by Section 31 of Act. provisions contained in Section 66 about making reference on questions of law to High Court will be rendered nugatory if any such power is attributed to Appellate Tribunal by which it can dismiss appeal, which has otherwise been properly filed, for default without making any order thereon in accordance with Section 33(4). position becomes quite simple when it is remembered http://www.judis.nic.in 7 that assessee or CIT, if aggrieved by orders of Appellate Tribunal, can have resort only to provisions of Section 66. So far as questions of fact are concerned decision of Tribunal is final and reference can be sought to High Court only on questions of law. High Court exercises purely advisory jurisdiction and has no appellate or revisional powers. advisory jurisdiction can be exercised on proper reference being made and that cannot be done unless Tribunal itself has passed proper order under Section 33(4). It follows from all this that Appellate Tribunal is bound to give proper decision on questions of fact as well as law which can only be done if appeal is disposed of on merits and not dismissed owing to absence of appellant. It was laid down as far back as year 1953 by S.R. Das, J. (as he then was) in CIT, v. Mtt. Ar.S.Ar.Arunachalam http://www.judis.nic.in 8 Chettiar (AIR 1953 SC 118) that jurisdiction of Tribunal and of High Court is conditional on there being order by Appellate Tribunal which may be said to be one under Section 33(4) and question of law arising out of such order. Special Bench, in present case, while examining this aspect quite appositely referred to observations of Venkatarama Aiyar, J. in CIT v. Scindia Steam Navigation Co. Ltd. (AIR 1961 SC 1633) indicating necessity of disposal of appeal on merits by Appellate Tribunal. This is how learned judge had put matter in form of interrogation: "How can it be said that Tribunal should seek for advice on question which it was not called upon to consider and in respect of which it had no opportunity of deciding whether decision of Court http://www.judis.nic.in 9 should be sought." Thus looking at substantive provisions of Act there is no escape from conclusion that under Section 33(4) Appellate Tribunal has to dispose of appeal on merits and cannot short- circuit same by dismissing it for default of appearance." 13) Applying principles laid down in aforesaid case to facts of present case, as two provisions are similar, we are of considered opinion that Tribunal could not have dismissed appeal filed by appellant for want of prosecution and it ought to have decided appeal on merits even if appellant or its counsel was not present when appeal was taken up for hearing. High Court also erred in law in upholding order of Tribunal. 14) We, therefore, set aside order dated 18.01.2014 passed by High Court of Judicature of Bombay, Bench at Aurangabad and http://www.judis.nic.in 10 also order dated 22.08.2012 passed by Tribunal and direct Tribunal to decide appeal on merits. 15) Accordingly, appeal is allowed with cost of Rs. 25,000/- to be payable by Respondent." 5. following observation of Special Bench of Madras High Court in S.Chenniappa Mudaliar v. CIT ((1964) 5 ITR 323) affirmed by Hon'ble Supreme Court in CIT v. S.Chenniappa Mudaliar ((1969) 1 SCC 591) = ((1969) 74 ITR 41) are also interesting and quoted below:- "To sum up position, Appellate Tribunal is appointed machinery under Act for finally deciding questions of fact in relation to assessment of income-tax. Its composition, consisting as it does of qualified persons in law and accountancy, makes it peculiarly qualified to deal with all questions raised in case, whether there be assistance from party or his counsel or not. Section 33(4) obliges it to decide appeal, after giving opportunity to parties to put forward their case. giving of opportunity only http://www.judis.nic.in 11 emphasises character of quasi-judicial function performed by Appellate Tribunal. fact that that opportunity is not availed of in particular case, will not entitle Tribunal not to decide case. There can be no decision of case on its merits if matter is to be disposed of for default of appearance of parties. Further, adjudication on merits of case is essential to enable High Court to perform its statutory duty and for Supreme Court to hear appeal filed under section 66-A. Section 33 (4) itself indicates by use of word 'thereon' that decision should relate to subject matter of appeal. Rule 24, therefore, to be consistent with Section 33(4), could only empower Tribunal to dispose of appeal on its merits, whether there be appearance of party before it or not. This was indeed rule when it was first promulgated in year 1941. rule in its present form, as amended in year 1948, in so far as it enables dismissal of appeal before Income tax Appellate Tribunal for default http://www.judis.nic.in 12 of appearance of appellant, will, therefore, be ultra vires, as being in conflict with provisions of Section 33(4) of Act." 6. aforesaid enunciation of law will govern even now under new Income Tax Act, 1961 since words in Section 254 of Act continues to be same viz., "the Tribunal may pass such orders 'thereon' as it thinks fit". Of course, Rule 24 has since been amended by Income Tax (Appellate Tribunal) Rules, 1963, with effect from 1.8.1987 to fall in line with aforesaid dicta of Hon'ble Supreme Court in case of CIT v. Chenniappa Mudaliar (supra) and now, said Rule 24 does not permit Tribunal to dismiss case for default of appearance at all. 7. We are rather little surprised that how, after so much of case laws on issue and amendment of Rule 24 itself, learned Members of Tribunal, even now commit said folly of dismissing appeals for want of prosecution and for default of appearance on part of Appellants/Assessees. As far as Department is concerned, they have their own Standing Counsels to appear in Tribunal, but, Assessees' Counsels may, some time, not put in appearance for variety of reasons or for genuine overriding reasons for such non-appearance of Counsels on their parts may be because of non-availability of Counsels on particular day, costs http://www.judis.nic.in 13 involved in engaging counsels, etc. or any other such factors but, that does not entitle Tribunal to dismiss appeal without deciding merits of case. 8. On conjoint reading of relevant provisions of Act, Rule 24 of Income Tax (Appellate Tribunal) Rules and aforesaid decisions of Hon'ble Supreme Court, we are of considered opinion that Tribunal could not have dismissed appeal for want of prosecution. Even if assessee could not appear, Tribunal could have decided appeal only on merits, ex parte, after hearing Revenue Side but, dismissal of appeal for want of prosecution is not only illegal but also entails further litigation and proceedings by compelling Assessee to move for setting aside ex parte order, which Tribunal is supposed to do but in present case even that application too came to be dismissed by learned Tribunal. 9. Proviso to Rule 24 clearly mandates that Tribunal shall set aside such ex parte order and restore appeal for deciding same on merits. However, Tribunal seems to have been contended by dismissing appeal for want of prosecution only and not touching merits of case at all and then further erred in dismissing Miscellaneous Petition filed for recalling ex parte order dismissing appeal for want of prosecution. http://www.judis.nic.in 14 10. We are not going into merits of case deliberately, though we are informed that issue on hand was covered by decision of jurisdictional High Court which was binding on Tribunal. We leave it free to Tribunal to decide appeal on merits and in accordance with law. 11. We reiterate that fact finding Tribunals should not shirk their responsibility to decide cases on merits because view and reasons given by such Tribunals are important for Constitutional Higher Courts to look into while deciding substantial questions of law under Section 260-A of Act arising from Tribunal's orders. Obviously, such cryptic orders, not touching merits of case, would not give any rise to any substantial question of law for consideration by High Courts under Section 260-A of Act. Assessee's valuable rights of getting issues decided on merits by final fact finding body viz., Tribunal cannot be given short shrift in aforesaid manner. legal and binding responsibility, therefore, lies upon Tribunal to decide appeal on merits irrespective of appearance of Assessee or his counsel before it or not. 12. Considering enabling powers in words 'as it thinks fit' employed in Section 254 of Act read with Rule 24 and in view of law laid down by Hon'ble Supreme Court aforesaid, we set http://www.judis.nic.in 15 aside impugned order of learned Tribunal and direct Tribunal to decide appeal on merits afresh in accordance with law. 13. parties may appear before Tribunal at first instance on 11.3.2019 and Tribunal may decide appeal afresh on merits in accordance with law within period of three months thereafter. 14. With this observation, present appeal is allowed and substantial question of law is answered in favour of Assessee and against Revenue. No order as to costs. 15. Copy of this judgment may be sent to President of Income Tax Appellate Tribunal as well as Law Secretary in Ministry of Law and Justice so that same may be brought to notice of all Members of Income Tax Appellate Tribunal and new appointees in Income Tax Appellate Tribunal at time of their recruitment itself. President of Income Tax Appellate Tribunal may also get it circulated to all existing Members of Income Tax Appellate Tribunal, so that such orders resulting in serious miscarriage of justice should not be repeated by any Member of Tribunal. (V.K.,J.) (C.V.K.,J.) 19.2.2019 Index : Yes Internet : Yes ssk. http://www.judis.nic.in 16 To 1. Deputy Commissioner of Income Tax, Circle - 1, Chennai. 2. Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai. http://www.judis.nic.in 17 DR.VINEET KOTHARI, J. and C.V.KARTHIKEYAN, J. ssk. T.C.(A) No.169 of 2019 19.2.2019. http://www.judis.nic.in Ritha Sabapathy v. Deputy Commissioner of Income-tax, Circle - 1, Chennai