Facts of the Case

The petitioner filed its return of income for AY 2009-10. An assessment under Section 143(3) was completed following a survey under Section 133A, resulting in additions to income. The Commissioner of Income Tax (Appeals) allowed the appeal and deleted additions.

The Revenue appealed before ITAT, which decided the matter ex-parte in favour of Revenue. The petitioner filed a miscellaneous application under Section 254(2) read with Rule 25 ITAT Rules seeking recall of the ex-parte order, citing non-appearance due to illness of counsel.

The ITAT dismissed the application, leading to the present writ petition before the Delhi High Court.

 Issues Involved

  1. Whether ITAT was justified in rejecting the application for recall of an ex-parte order?
  2. Whether sufficient cause for non-appearance was properly considered?
  3. Whether ITAT could examine merits while deciding an application under Rule 25?
  4. Scope and applicability of Rule 25 of ITAT Rules in restoring appeals. 

 Petitioner’s Arguments

  • Non-appearance was due to genuine illness of counsel, supported by affidavit.
  • ITAT failed to consider “sufficient cause”, which is the only requirement under Rule 25.
  • Tribunal wrongly examined merits of the case, which is impermissible at recall stage.
  • Action of ITAT violated principles of natural justice.
  • Petitioner expressed intention to settle dispute under Vivad Se Vishwas Scheme.

 Respondent’s Arguments

  • Petitioner showed casual conduct and repeated absence during proceedings.
  • ITAT passed a well-reasoned order on merits, hence no need for recall.
  • Proper remedy was to file appeal under Section 260A, not recall application.

 Court’s Findings / Judgment

The Delhi High Court held:

  • Sufficient cause existed for non-appearance due to illness of counsel.
  • ITAT failed to consider affidavits and explanations properly.
  • Tribunal wrongly relied on:
    • Past adjournments
    • Time gap in proceedings
    • Merits of the case
  • Rule 25 mandates restoration if sufficient cause is shown, irrespective of merits.
  • ITAT exceeded jurisdiction by examining correctness of earlier order.
  • Principles of natural justice were violated.

 Accordingly:

  • Impugned ITAT order dated 06.11.2020 set aside
  • Ex-parte order dated 24.07.2018 set aside
  • Appeal restored to ITAT for fresh hearing

 Important Clarifications by Court

  • At recall stage, only “sufficient cause” matters, not merits.
  • Even a well-reasoned ex-parte order can be recalled if justified.
  • Rule 25 ensures fair opportunity of hearing.
  • Tribunal cannot impose additional conditions beyond statute.
  • Natural justice overrides procedural rigidity.

Link to download the order - https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:3559-DB/SVN11122020CW94672020_185229.pdf

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