Facts of the Case

The petitioner, Cement Corporation of India Ltd., challenged the order dated 07.09.2022 passed by the Income Tax Appellate Tribunal (ITAT), whereby its miscellaneous application seeking recall of an earlier order dated 24.01.2018 was dismissed.

The ITAT had originally dismissed the petitioner’s appeal on 24.01.2018 due to non-prosecution. Subsequently, the petitioner filed a miscellaneous application on 24.09.2018 requesting recall of the dismissal order.

However, the Tribunal rejected the application on the ground that it was filed beyond the limitation period prescribed under Section 254(2) of the Income Tax Act, which allows rectification within six months from the end of the month in which the order was passed.

 Issues Involved

  1. Whether an application for recall of an ex parte order of ITAT is governed by Section 254(2) of the Income Tax Act.
  2. Whether delay in filing such recall application can be condoned.
  3. Whether Rule 24 of the ITAT Rules provides an independent remedy for restoration of appeal dismissed for non-prosecution.

 Petitioner’s Arguments

  • The petitioner contended that the application filed was not for rectification of an apparent mistake under Section 254(2), but for recall of an ex parte order.
  • It was argued that Rule 24 of the ITAT Rules is the appropriate provision governing such situations.
  • The delay occurred due to bona fide reasons, including misplacement of notice, administrative issues, and transfer/retirement of concerned personnel.
  • The petitioner also highlighted inconsistency in denial of depreciation, which had been allowed in earlier and subsequent assessment years.

 Respondent’s Arguments

  • The Revenue supported the Tribunal’s order, asserting that the application was barred by limitation under Section 254(2).
  • It was argued that the Tribunal had no power to condone delay in filing such miscellaneous applications.
  • Therefore, the rejection of the application was justified in law.

 Court’s Findings

  • The High Court held that the Tribunal incorrectly applied Section 254(2) of the Act.
  • It clarified that the petitioner’s application was not for rectification, but for recall of an order dismissing the appeal for non-prosecution.
  • The Court emphasized that such cases fall under Rule 24 of the ITAT Rules, not Section 254(2).
  • Rule 24 provides that if sufficient cause is shown for non-appearance, the Tribunal must restore the appeal, and notably, no limitation period is prescribed under this Rule.
  • The Court further observed that the Tribunal possesses incidental and ancillary powers to ensure justice.

 Court Order / Final Decision

  • The impugned order dated 07.09.2022 was set aside.
  • The matter was remitted back to the ITAT for adjudication on merits.
  • The Court held that the appeal deserved to be heard on merits considering the circumstances and explanations provided for delay.

 Important Clarification

  • Distinction Established:
    Section 254(2) applies only to rectification of mistakes apparent on record and is subject to strict limitation.
  • Rule 24 Supremacy in Recall Cases:
    Applications seeking recall of ex parte dismissal orders fall under Rule 24, which:
    • Allows restoration upon showing sufficient cause
    • Is not constrained by limitation
  • Legal Principle Reinforced:
    Procedural rules should not defeat substantive justice, especially where sufficient cause is demonstrated.
  • The Court also relied on the principle laid down in Honda Siel Power Products Ltd. v. Commissioner of Income Tax (2007) 12 SCC 596 regarding powers of the Tribunal.

Sections Involved

  • Section 254(1) & 254(2) of the Income Tax Act, 1961
  • Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS06022023CW14862023_163015.pdf

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