Wp 2858-19-O v. Tuff Drillingprivate Limited, (2018)11 Scc 470

Priya Soparkar 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.2858 OF 2019 The Pr. Commissioner of Income Tax-7… PetitionerV/s. Income tax Appellate Tribunal Bench “B” and anr.… Respondents --- Mr.Nirmal Chandra Mohanty, Advocate for the Petitioner.Ms.Shilpa Kapil, Advocate for Respondent No.1. --- CORAM : UJJAL BHUYAN & MILIND N. JADHAV, JJ. DATE : JANUARY 24, 2020 P.C.:- 1.Heard Mr.N.C.Mohanty, learned standing counsel,Revenue for the petitioner; and Mrs.Shilpa Kapil, learnedcounsel for respondent No.1. 2.This petition has been filed under Article 226 of theConstitution of India by the Principal Commissioner ofIncome Tax-7, Mumbai assailing the legality andcorrectness of order dated 1[st] February, 2019 passed bythe Income Tax Appellate Tribunal, Bench "B" , Mumbai(briefly "the Tribunal" hereinafter) in MA No.483/M/2018 Priya Soparkar 2909 wp 2858-19-o for the assessment year 2006-07, whereby the earlierorder of the Tribunal dated 10[th] January, 2018 passed inIncome Tax Appeal No.3910/Mum/2010 has been recalledand the appeal has been directed to be placed for hearingafresh. 3.It may be mentioned that respondent No.2 i.e. theassessee had preferred Income Tax Appeal No.3910/Mum/2010 for the assessment year 2006-07 beforethe Tribunal against the order passed by theCommissioner of Income Tax (Appeals)-13, Mumbaidated 6[th] January, 2010. By order dated 10[th] January,2018, Tribunal dismissed the appeal. 4.From a perusal of the order dated 10[th] January, 2018it is seen that there was no representation on behalf ofrespondent No.2 i.e. the assessee and Tribunal decidedthe appeal on merit in the absence of the assessee afterhearing the Departmental Representative. 3909 wp 2858-19-o 5.Respondent No.2 thereafter filed an application forrecall of the aforesaid order dated 10[th] January, 2018 andfor hearing the appeal afresh. The said application wasregistered as MA No.483/M/2018. After hearing learnedcounsel for respondent No.2 as well as the DepartmentalRepresentative, Tribunal passed the impugned orderdated 1[st] February, 2019 recalling the earlier orderdated 10[th] January, 2018 and fixing the appeal forhearing afresh on merit. 6.Mr.Mohanty, learned standing counsel submits thatthe impugned order was passed under Section 254(2) ofthe Act. Referring to the said provision he submits that atime limit of six months from the end of the month inwhich the Tribunal had passed the order is provided torectify any mistake in the order which is apparent fromthe record. In the instant case, though the miscellaneousapplication was filed by the assessee on 9[th] July, 2018within the aforesaid period of six months, Tribunal did notdispose of the same within the prescribed limitationperiod. Infact, much later on 1[st] February, 2019. Priya Soparkar 4909 wp 2858-19-o 6.Mr.Mohanty, learned standing counsel submits thatthe impugned order was passed under Section 254(2) ofthe Act. Referring to the said provision he submits that atime limit of six months from the end of the month inwhich the Tribunal had passed the order is provided torectify any mistake in the order which is apparent fromthe record. In the instant case, though the miscellaneousapplication was filed by the assessee on 9[th] July, 2018within the aforesaid period of six months, Tribunal did notdispose of the same within the prescribed limitationperiod. Infact, much later on 1[st] February, 2019. Priya Soparkar 4909 wp 2858-19-o Therefore, the said order cannot be sustained. Hesubmits that there is no provision under Section 254extending the period of limitation. Further submission ofMr.Mohanty is that in exercise of the power conferredunder sub-section (5) of Section 255 of the Act, IncomeTax (Appellate Tribunal) Rules, 1963 (briefly “the Rules”hereinafter) have been framed. Rule 24 of the saidRules provides that in case of an ex-parte order if theappellant appears otherwise and satisfies the Tribunalthat there was sufficient cause for his non-appearancewhen the appeal was called for hearing, the Tribunalshall make an order setting aside the ex-parte orderand restore the appeal. However, his contention is thatthough time limit is not provided under Rule 24, thetime limit prescribed under Section 254 (2) has to bestrictly adhered to as the Rules cannot contravene oroperate beyond the parent Act. In support of hissubmissions, Mr.Mohanty has placed reliance on adecision of the supreme Court in Assam Company Ltd.Vs. State of Assam, 248 ITR 567. Priya Soparkar 5909 wp 2858-19-o 7.On the other hand, learned counsel for respondentNo.1 submits that though the impugned order has beenpurportedly passed under Section 254 (2) of the Act, thesame infact is an order by the Tribunal invoking itsinherent power of procedural review. She submits thatsuch a power inheres in every Tribunal and this has beenacknowledged by the Supreme Court inSreiInfrastructure Finance Limited Vs. Tuff DrillingPrivate Limited, (2018)11 SCC 470. 8.In his reply Mr.Mohanty fairly submits that thelimitation of six months from the end of the month inwhich the order was passed was substituted in sub-section (2) of Section 254 by the Finance Act, 2016 witheffect from 1[st] June, 2016. Prior to that the limitation wasfour years from the date of the order. In Sree AyyanarSpinning and Weaving Mills Limited Vs.Commissioner of Income Tax, 301 ITR 434 SC,Supreme Court had upheld order passed by the Tribunalbeyond the limitation of four years. 6 909 wp 2858-19-o 9.Submissions made by learned counsel for theparties have been considered. 10.Facts are not in dispute. However, a brief recital ofthe facts is considered necessary. The initial order passedby the Tribunal on 10[th] January, 2018 was an ex-parteone. The assessment year under consideration is 2006-07. The limitation of six months as noticed above wassubstituted by the Finance Act, 2016 with effect from 1[st]June, 2016. Therefore, for the assessment year underconsideration the limitation period may be construed tobe four years from the date of the order. Even otherwise,if a view is taken that since the impugned order waspassed by the Tribunal on 1[st] February, 2019, thesubstituted limitation period of six months would beapplicable, then also it is seen that the said period ofsix months was available to respondent No.2 till 31[st] July,2018. Respondent No.2 had filed the application forrecall of the ex-parte order on 9[th] July, 2018 within thelimitation period of six months. However, Tribunalpassed the impugned order only on 1[st] February, 2019. 11.At this stage, we may advert to Section 254(2) ofthe Act, relevant portion of which reads as under:- “254(1)………………………………………………….. 11.At this stage, we may advert to Section 254(2) ofthe Act, relevant portion of which reads as under:- “254(1)………………………………………………….. (2) The Appellate Tribun al may, at any timewithin six months from the end of the monthin which the order was passed, with a view torectifying any mistake apparent from therecord, amend any order passed by it undersub-section (1) and shall make suchamendment if the mistake is brought to itsnotice by the assessee or the AssessingOfficer: …………………………………………………………...” 12. From a careful reading of the provision, it is seen that Tribunal is vested with the power to rectify anymistake apparent from the record to amend any orderpassed by it under sub-section (1) of Section 254 at anytime within six months from the end of the month inwhich the order was passed, provided the mistake isbrought to its notice by the assessee or by the AssessingOfficer. 13.The use of the expression “may” in the aforesaidprovision is clearly indicative of the legislative intent Priya Soparkar 8909 wp 2858-19-o that the limitation period of six months from the end ofthe month in which the order was passed is not to beconstrued in such a manner that there can not be anyextension of time beyond the said period of six months.This is so because the assessee or the Assessing Officercan only bring the mistake to the notice of the Tribunal.The assessee or the Assessing Officer has no controlover the Tribunal. For one reason or the other, theTribunal may not be in a position to pass the order underSection 254(2). For the inability of the Tribunal to passsuch an order within the period provided, neither theassessee nor the revenue should suffer. What thereforebecomes relevant is that the assessee or the AssessingOfficer should bring the mistake to the notice of theTribunal within the limitation period. 14.Rule 24 of the Income Tax (Appellate Tribunal)Rules, 1963 (Rules) is relevant. Rule 24 reads as under :- “24. Where, on the day fixed for hearing or onany other date to which the hearing may beadjourned, the appellant does not appear inpersonorthroughanauthorizedrepresentative when the appeal is called onany other date to which the hearing may beadjourned, the appellant does not appear inpersonorthroughanauthorizedrepresentative when the appeal is called on Priya Soparkar for hearing, the Tribunal may dispose of theappeal on merits after hearing the respondent: Provided that where an appeal hasbeen disposed of as provided aboveand the appellant appears afterwardsand satisfies the Tribunal that therewas sufficient cause for his non-appearance, when the appeal wascalled on for hearing the Tribunal shallmake an order setting aside the ex-parte order and restoring the appeal.” 15.From a reading of Rule 24 as extracted above, it isseen that Tribunal is vested with the power to recall anex-parte order. Requirement of the proviso is thatTribunal must be satisfied that there was sufficientcause for non-appearance of the appellant. No time limitis prescribed in Rule 24. 16. On a conjoint reading of the two provisions, thereappears to be no contradiction between Section 254(2)of the Act and Rule 24 of the Rules as extracted above.Both the provisions can be and should be readharmoniously to advance the objective that a decisionon merit should be avoided in the absence of the Priya Soparkar 10909 wp 2858-19-o aggrieved litigant. It is an established principle ofnatural justice that a litigant should be heard before adecision is taken. 16. On a conjoint reading of the two provisions, thereappears to be no contradiction between Section 254(2)of the Act and Rule 24 of the Rules as extracted above.Both the provisions can be and should be readharmoniously to advance the objective that a decisionon merit should be avoided in the absence of the Priya Soparkar 10909 wp 2858-19-o aggrieved litigant. It is an established principle ofnatural justice that a litigant should be heard before adecision is taken. 17.In Srei Infrastructure Finance Limited (supra)Supreme Court referred to its earlier decisions in thecase of Grindlays Bank Ltd. Vs. Central GovernmentIndustrial Tribunal, 1980 Supp SCC 420 and KapraMazdoor Ekta Union Vs. Birla Cotton Spinning andWeaving Mills Limited, (2005) 13 SCC 777 anddistinguished between a procedural review and a reviewon merit. Supreme Court held that a Tribunal or a quasi-judicial body is always endowed with such ancillary orincidental powers as are necessary to discharge itsfunctions effectively for the purpose of doing justicebetween the parties. Such a power inheres in everyTribunal. 18.As candidly pointed out by Mr.Mohanty, with regardto the pre-amended provision of Section 254(2),Supreme Court inSree Ayyanar Spinning and 11 909 wp 2858-19-o Weaving Mills Limited (supra), had accepted theposition that such an order can be recalled beyond thethen prescribed period of four weeks, provided theapplication is made within the limitation period. In fact,Rajasthan High Court in Harshavardhan Chemicalsand Minerals Limited Vs. Union of India, 256 ITR767 took the view that if the assessee had moved theapplication within four years from the date of the order,the Tribunal was bound to decide the application on itsmerit and not on the ground of limitation. Supreme Courtagreed with the view expressed by the Rajasthan HighCourt and in the facts of that case held that theapplication for rectification was made within four years.Tribunal took its own time to dispose of the application.Therefore, Madras High Court erred in holding that theapplication could not have been entertained by theTribunal beyond four years. 19.We may now advert to the impugned order. By thesaid order Tribunal has recalled the ex-parte order andfixed the appeal for hearing afresh, which has been filed Priya Soparkar 12 909 wp 2858-19-o by none else than the assessee. Ultimately, what theTribunal has done is only to provide an opportunity ofhearing to the assessee. No prejudice has been causedto the revenue by such order of the Tribunal. 20.Thus, having regard to the discussions madeabove and on due consideration, we are of the view thatthe challenge made by the revenue in this writ petition ismisconceived. Consequently we find no merit in the writpetition. 21.Writ petition is accordingly dismissed, but withoutany order as to costs. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.)