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Shri Bhimraj D. Jain, 2, Jagirdar Manzil, Daftary Road, Malad East, Mumbai-400016 Vs. ITO 24(1)(3), C-13, 5th Floor, Pratyakshakar Bhavan, Bandra Kurla Complex (E) Mumbai-400051
July, 08th 2014

                  [^   , 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.
                                                       2 MA No. 116/Mum/2014(Arising out of ITA No. 4851/Mum/2012)
                                                          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


         " 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;
                                                     3 MA No. 116/Mum/2014(Arising out of ITA No. 4851/Mum/2012)
                                                        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


       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
                                                      4 MA No. 116/Mum/2014(Arising out of ITA No. 4851/Mum/2012)
                                                         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


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);
                                                    5 MA No. 116/Mum/2014(Arising out of ITA No. 4851/Mum/2012)
                                                       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.
                                                 6 MA No. 116/Mum/2014(Arising out of ITA No. 4851/Mum/2012)
                                                    Shri Bhimraj D. Jain

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


                 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
                             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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