INCOME TAX APPELLATE TRIBUNAL,MUMBAI - `B' BENCH
[^ , Û Û],
Before S/Sh. Vijay Pal Rao, Judicial Member & Shri Rajendra,Accountant Member
MA No.116/Mum/2014-Arising out of ITA No. 4851/Mum/2012-Assessment Year 2007-08
Shri Bhimraj D. Jain, ITO 24(1)(3),
2, Jagirdar Manzil, Daftary Road, C-13, 5th Floor, Pratyakshakar
Malad East, Mumbai-400016 Vs. Bhavan, Bandra Kurla Complex (E)
PAN: AAACB2994F Mumbai-400051
( /Appellant) (× / Respondent)
Appellant by : Shri Dharmesh Shah
Respondent by : Capt. Pradeep Arya
/ Date of Hearing : 20-06-2014
/ Date of Pronouncement : 04-07-2014
/ O R D E R
Û] Per Rajendra, A.M.:
Vide his application,date25.03.2014,filed u/s.24 of the Income-tax Appellate Tribunal Rules,
1963(Rules) assessee has stated that appeal was dismissed by the Tribunal on 12.02.2014 for non-
pursuance considering the judgment of B.N.Bhattachargee (118 ITR 460) and Multiplan India
Private Ltd.(38 ITD 320),that matter should be restored under rule 24 of the Rules,that he failed to
issue authority letter to his Authorised Representative(AR) and also forgot to make alternative
arrangement for seeking adjournment,that he had informed the AR that matter would be heard on
6th May 2014,that matter was not decided on merits.The application filed by the assessee is
accompanied by an affidavit,dated 22.03.2014,of one Niranjan Modi,Chartered Accountant.In his
affidavit,he has stated that due to failure on the part of the assessee to issue authority letter to his
AR,no one appeared before the Tribunal.In his affidavit dated,19.06.2014,the assessee has stated
that on 04.09.2013,hearing was attended by his employee,that hearing was adjourned to 06.02.
2014,that he was inadvertently given to understand by his employee that hearing was adjourned
6th May 2014,that only upon receiving the order of the Tribunal,he realiesd that hearing was
adjourned on 06.02.2014.
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Shri Bhimraj D. Jain
2.Before us,AR advanced the same arguments which are part of the affidavits of the C.A. and
Bhimraj D. Jain.It was also stated that matter was not decided on merits,that matter should be
recalled and a fresh date of hearing should be given.Departmental Representative(DR) stated that
Tribunal had already passed a reasoned order, it was not an ex-parte order.
3.We have heard the rival submissions and perused the material before us.Before proceeding
further,we are of the opinion that it would be better to mention the historical background and
some of the major principles governing the Rule under consideration.
Provisions of rule 24 of the Rules is more or less similar to Order 9, rule 13 of the Civil Procedure
Code,1908.Coincidentally,Rule24 of Appellate Tribunal Rules,1946 dealt the same subject i.e.
disposal of appeal by the Tribunal on failure of the assessee to appear before it.Before the
Tribunal Rules of 1946 were framed,Rule 37A dealt with the subject.Rule 37A,provided for
restoration of appeals dismissed for default.But,Rule 24 of the 1946 Rules did not provide for
restoration of appeal even if the matter was disposed off ex parte.We would like to reproduce the
rule which read as under:
"Where on the day fixed for hearing or any other day to which the hearing may be adjourned, the
appellant does not appear when the appeal is called on for hearing, the Tribunal may,in its
discretion,either dismiss the appeal for default or may hear it ex parte."
In 1948,it was amended by a notification dated January 26,1948 and the amended rule was as
under:
" Where on the day fixed for hearing or any other day to which the hearing may be adjourned, the
appellant does not appear when the appeal is called on for hearing, the Tribunal may dismiss the
appeal for default."
One of the first cases;where the Tribunal had decided the issue ex parte and issue of restoring it
had been agitated;is the matter of M. X. De Nornha and Sons.In that case a notice fixing the date
of hearing of appeal was sent by the Tribunal by registered post to the address given by the
assessee firm.Following were the remarks of the notice;
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Shri Bhimraj D. Jain
"Take notice that, in default of your appearance, the appeal will be heard and determined
in your absence".
The notice was received by an employee of the firm,who used the seal of the firm, on its behalf.
On the day fixed for hearing of the appeal and on the next day to which the case was adjourned by
the Tribunal,no one appeared and the Tribunal dismissed the appeal for default.Matter travelled to
Hon'ble Allahabad High Court.The assessee argued that the absence of a provision allowing
restoration of such appeals makes the rule ultra vires.Deciding the appeal if favour of the assessee,
the Hon'ble Court (18 ITR 928) held as under:
"There was nothing in the notice to give to the assessee the information that if the assessee did not
appear or did not engage any counsel, his case will not be heard at all and will be dismissed for
default.A question of law thus arose whether, in view of the form of the notice, it was open to the
Income-tax Appellate Tribunal to have dismissed the case for default on 18th July, 1947, when the
assessee did appear and was not represented before it. This question is of importance to the
assessee because if it is held that the Tribunal, in view of the form of the notice, might have heard
the case ex parte but could not dismiss it for default, the case will have to be reheard by the
Tribunal.
The words in the notice being that the appeal will be "heard and determined in the absence of the
assessee ",the Tribunal should have decided the case on merits and the dismissal for default
cannot be said to be a hearing of the appeal and its determination. The word " determination "
must mean a decision on the points raised in the case and not merely an order of dismissal for
default.We are, therefore, of opinion that the Tribunal erred in dismissing the appeal for default,If
it wanted to have the right to dismiss the appeal for default, it ought not to have issued a notice to
the assessee that if he did not appear, the case would be heard and determined in his absence. The
assessee was not bound to engage counsel and he might have felt well satisfied that the merits of
his case were such that the Tribunal,merely by looking into the order under appeal,would decide
the case in his favour."
3.a.The issue that as to whether the provisions of Rule 24 were ultra virus or intra virus was
agitated before the Hon'ble Madras High Court in the matter of S.Chenniappa Mudaliar (53 ITR
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Shri Bhimraj D. Jain
323).Dissenting from the decisions of Shri Bhagwan Radha Kishen(22ITR 104) and Ravula
Subba Rao(27ITR164)Full Bench of Hon'ble Madras High Court held that Rule 24 of the
Appellate Tribunal Rules,1946,was ultra vires.Later on Hon'ble MP High Court in the matter of
Harnandrai Shrikishan Akodia(61ITR50)followed the decision of Madras High Court.Meanwhile
the department filed an appeal in the matter of S Chenniappa Mudaliar before the Apex Court.
Dismissing the appeal, Hon'ble Court(74ITR41) held as under:
"Rule 24 of the Appellate Tribunal Rules, 1946, as amended in 1948, in so far as it enables the
dismissal of an appeal before the ITAT for default of appearance of the appellant, clearly comes
into conflict with section 33(4) and is,therefore,ultra vires."
Rule 24 as it now stands under Rules,1963 reads as under:
" 24. Dismissal of appeal for appellant's default, etc.-Where on the day fixed for hearing or any
other day to which the hearing may be adjourned, the appellant does not appear when the appeal
is called on for hearing, the Tribunal may, in its discretion, either dismiss the appeal for default or
may hear it ex parte:
Provided that where the appeal has been dismissed for default and the appellant appears
afterwards and satisfies the Tribunal that there was sufficient cause for his non-appearance when
the appeal was called on for hearing, the Tribunal shall make an order setting aside the dismissal
and restoring the appeal. "
From the above it is clear that the proviso to rule 24 of the Rules,has removed the defective
provision in the Rules struck down by the Supreme Court by providing for the setting aside of an
ex parte order on the Tribunal being satisfied as to sufficient cause for the non-appearance of the
appellant.
Courts are of the view that the Tribunal has the power and indeed the obligation to dispose of the
appeal and pass such order thereon after giving both the parties in appeal an opportunity of being
heard. It is necessary, therefore,that the Tribunal should have all the powers to ensure that the
opportunity that the Tribunal grants to the parties concerned is fair, adequate and proper.Hon'ble
jurisdictional High Court has expressed its views in this regard,in the matter of K.T. Udeshi as
under (114ITR542);
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Shri Bhimraj D. Jain
"The Appellate Tribunal is required to give a decision on merits on questions of fact and law and
cannot dispose of an appeal by a simple dismissal for default on the ground that the party
concerned has failed to appear."
3.b.It is said that the Rule 24,as it now stands along with the proviso,has brought about a sea
change in the law.But,it is also a fact that the Hon'ble Supreme Court has not struck down rule 24
of the Rules,as it now stands since1963.While deciding the matter of S Chenniappa Mudaliar
(supra)the Supreme Court was considering the validity of Rule 24 of 1946/1948 Rules. Taking in
to consideration the provisions of the Rule 24 Hon'ble Patna High Court has,in the matter of (Dr.)
(Mrs.)Krishna Rana(167ITR652),discussed the scope of the said section in following words:
"The Income-tax Appellate Tribunal is not a court.The Tribunal has no power to review its own
orders.Hence, the Tribunal cannot be clothed with some incidental powers,permitting it to do
indirectly what it cannot do directly.Rule 24 of the Income-tax (Appellate Tribunal) Rules, 1963,
which deals with the powers of the Tribunal to dismiss an appeal for the appellant's default
expressly permits the Tribunal to restore an appeal for rehearing where the appeal has been
dismissed for default.No such provision has been made in regard to dismissal of appeals on
merits(emphasis supplied)...........Recalling of an order automatically necessitates rehearing and
re-adjudication of the entire subject-matter of appeal.The dispute no longer remains restricted to
any mistake sought to be rectified. Power to recall an order is prescribed in terms of rule 24 of the
Income-tax (Appellate Tribunal) Rules,1963,and that too only in cases where the assessee shows
that it had reasonable cause for being absent at a time when the appeal was taken up and was
decided ex parte.We may further add here that there may be cases where the Tribunal itself comes
to notice that the order was passed without any issue of notice or there were such procedural
lapses which rendered the order illicit.In such cases, the order may be set aside and a rehearing
may be directed. This is so because no prejudice should be caused to a party for a wrong
committed by the Tribunal."
In our opinion,the above judgment categorically lays down the rule that if a matter is decided on
merits same cannot be recalled under Rule 24 of the Rules.In another words,matters decided by
the Tribunal after considering the available material cannot be challenged under Rule 24.
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3.c.Proviso to Rule has carved out an exception for non appearance and that is the existence of a
reasonable cause.Tribunal in deciding whether there was sufficient cause or not is expected to
consider whether or not the party was really interested to appear on the date fixed for the case ;if
he honestly intended to remain present and was not guilty of misconduct or gross negligence he
should be given a chance.In our opinion,onus is always on the assessee to prove existence of
sufficient cause.Before a cause can be held to be sufficient,it must be found as a fact that a
particular cause operated upon the mind of the assessee which prevented it for particular omission
or commission.In other words the cause should be so justifiable that a person instructed under law
should believe the explanation as plausible.We are aware that the words sufficient cause have not
been defined under the Act,but in the context of taxation jurisprudence,they would mean a cause
which is beyond the control of the assessee i.e.a cause that prevents a man of ordinary
prudence,acting without negligence or inaction or want of bona fides under normal
circumstances(emphasis supplied).Thus,absence of negligence or inaction are basic ingredients
of sufficient cause.In these circumstances,it can safely be held that if a person does not behave in
a particular manner;as a person of average intelligence and ordinary prudence would behave in
similar set of circumstances; it has to held that in such matter sufficient cause did not exist.
Secondly,there cannot be any strait jacket formula to decide the issue of sufficiency-it depends
upon the facts of each case.
3.d.Now we would like to discuss the cases where the Hon'ble Courts have discussed the issue of
sufficiency/insufficiency of cause while deciding the matter related with Rule 24.In the matter of
Hemla Hosiery Mfg. Dyeing and Printing Mills P. Ltd. notices of hearing were not served upon
the assessee in one appeal and upon the respondent in the other.Justifying the recalling of the
order by the Tribunal under Rule 24 of the Rules,Hon'ble Delhi High Court held that the Tribunal
had recorded a clear finding of fact that the notice regarding the hearing of the appeal was not
properly served,that the non-appearance of the appellant in the appeal filed by it or in the cross
appeal filed by the Revenue was for a sufficient cause.(286 ITR 646)
7 MA No. 116/Mum/2014(Arising out of ITA No. 4851/Mum/2012)
Shri Bhimraj D. Jain
Similarly,in the case of Ravi Prakash Khemka,Hon'ble Madras High Court after considering the
facts of the case held that there were sufficient cause for non appearance of the assessee during
the course of hearing before the Tribunal and therefore order passed by the Tribunal should have
been recalled under Rule 24 of the Rules(288ITR362).In that matter the appeals filed by the
assessee were posted for final hearing and the authorised representative of the assessee,by a letter
addressed to the Tribunal,sought an adjournment on the ground that he had to attend a family
function and was not in a position to attend the hearing.But,the Tribunal decided the appeals on
the merits.Thereafter the petitioners had filed petitions under rule 24 of the Rules,to set aside the
ex parte orders passed by it and to restore the appeals for disposal afresh on the merits, but the
Tribunal dismissed the petitions.Deciding the writ petition filed by the assessee Hon'ble Court
held as under:
"....sufficient cause had been shown by the petitioners for non-appearance before the Tribunal, on
the date of hearing. Considering this,the Tribunal ought to have allowed the petitions. The order of
the Tribunal was liable to be set aside and the appeals restored for the disposal afresh."
Adjournment sought in view of counsel being professionally busy in High Court,has been held a
sufficient cause for non appearance before the Tribunal with regard to invoking of the provisions
of Rule 24 of the Rules by the Hon'ble MP High Court in the case of Babulal Jain(298ITR369).In
the case of Devendra G. Pasale Hon'ble Gujarat High Court(333ITR263) had found that there
were sufficient cause for the assessee to not to appear before the Tribunal so it directed the
Tribunal to set aside ex parte orders.In the case of Anil Kumar Agrahari,Honble MP High Court
had referred to Rule 24 of the Rules and had held that the Tribunal could not have dismissed the
appeal without going into the merits of the case by rejecting the adjournment application filed by
the AR. (323ITR260).In that matter the Tribunal had decided the issue ex parte.
But,where the assessees have not demonstrated the existence of sufficient cause,courts have taken
an adverse view.In the matter of Gauhati Roller Flour Mills Ltd.(308ITR368),the issue before the
Hon'ble Gauhati High Court was that as to whether sufficient cause,as envisaged by the Rule 24
of the Rules,was existing or not.In that matter by an ex parte order the Tribunal had partly allowed
8 MA No. 116/Mum/2014(Arising out of ITA No. 4851/Mum/2012)
Shri Bhimraj D. Jain
the appeals preferred by the assessee in respect of the Ay.s.1984-85 to 1989-90.The assessee filed
a miscellaneous application for setting aside the ex parte order. The Tribunal refused to exercise
its powers under the second proviso to rule 25 of the 1963 Rules, on the ground that the fact that it
was certified by the Postal Department that the adjourned date was notified to the assessee was
not controverted by the assessee by producing any evidence.Assessee filed writ petition before the
Hon'ble High Court and dismissing the same it held that the Tribunal could not be faulted for the
absence of the assessee as the Tribunal had taken all the requisite steps to ensure that an
opportunity of hearing was made available to the assessee.
4.It would be appropriate to consider the facts of the case under consideration.The assessee had
raised four grounds of appeal before the Tribunal.During the assessment/appellate proceedings,the
AO/FAA had made/confirmed certain additions because he had not produced basic evidences
before them for the claims made him in his return.While deciding the appeal,Tribunal deleted one
of the additions and had confirmed the remaining three additions after discussing the merits of
each of the issues.Assessee did not file any paper/document/evidence before the Tribunal also
even though he knew very well that both the revenue authorities had take an adverse view against
him for not furnishing necessary details.Records of the Tribunal reveal that the impugned order
was dispatched to him;at the address given in form no.36;on 18.02.2014 by a registered letter and
was received at the said address on 20.02. 2014.As the application filed by the assessee does not
bear any date,so we are not in a position to find out as to when the application was filed.We
further find that the assessee has filed his affidavit on 19th June,2014 just before the hearing of the
application filed by him,though the affidavit of the CA was prepared on 20.03.2014.Thus,it is
clear that even after receiving the order of the Tribunal,the assessee took its own time to file the
application.Though the assessee has claimed that his employee had misinformed him about the
next date of hearing,but reasons for not filing an affidavit of the employee concerned are known
to the assessee only.
As stated earlier,the very first line of the averments speaks of disposal of the appeal by the
Tribunal following the decisions of Multiplan India Pvt.Ltd. and B.N.Bhattachargee (supra) for
9 MA No. 116/Mum/2014(Arising out of ITA No. 4851/Mum/2012)
Shri Bhimraj D. Jain
non pursuance.It shows that the assessee has not gone through the impugned order.There is no
whisper of non pursuance of the case or reference of the above mentioned cases in the order of the
Tribunal.Matter was decided by the Tribunal on merits.All the above factors clearly prove that the
assessee is not vigilant and is guilty of inaction and carelessness form the very beginning i.e.from
the time of scrutiny assessment to filing of present application.We have also taken note of the fact
that the he has mentioned in his affidavit that he had failed to issue authority letter to his AR and
also forgot to make alternative arrangement for seeking adjournment.
If all the above factors are analysed cumulatively,there is no doubt that the behavior of the
assessee was not of a man of ordinary prudence acting without negligence or inaction.In other
words,no prudent or careful person of average intelligence would have behaved in such a careless
manner.Allowing the appeal filed by him and acceding to relief requested for will amount to
rewarding a person who is neither vigilant nor careful.Premium cannot and should not be paid to
those assessee who take judicial proceedings for granted and want to consume judicial time by
filing appeals/applications without supporting evidences.
We are satisfied that even if any prejudice has resulted to the party because of the order dated 12.
02.2014,it is not attributable to the Tribunal's mistake,error or omission and the assessee has not
furnished any sufficient reason for not attending the hearing before the Tribunal on the date of
hearing.Therefore,we are not inclined to accede to the request made by the assessee in his
application.
As a result, application filed by the assessee stands dismissed.
[ ] .
Order pronounced in the open court on 04th July,2014.
Û 4
Sd/- Sd/-
( / VIJAY PAL RAO) (Û] / RAJENDRA)
Û / JUDICIAL MEMBER / ACCOUNTANT MEMBER
/Mumbai,/Date: 04.07.2014
SK
10MA No. 116/Mum/2014(Arising out of ITA No. 4851/Mum/2012)
Shri Bhimraj D. Jain
/Copy of the Order forwarded to :
1. Assessee / 2. Respondent /×
3.The concerned CIT(A)/ , 4.The concerned CIT /
5. DR "B" Bench, ITAT, Mumbai / ch ,..Û.
6. Guard File/[
× //True Copy//
/ BY ORDER,
/ Dy./Asst. Registrar
, /ITAT, Mumbai
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