Facts of the Case

The Revenue filed an appeal before the Delhi High Court challenging the order of the Income Tax Appellate Tribunal (ITAT), whereby the Tribunal had allowed the assessee’s application seeking recall of an earlier ex parte order passed in ITA No. 2189/Del/1997 relating to Assessment Year 1993-94.

The assessee had approached the Tribunal requesting recall of the ex parte order on the ground that it could not remain present at the time of hearing due to sufficient cause. After considering the reasons furnished, the Tribunal accepted the explanation and recalled the ex parte order, restoring the appeal for fresh adjudication.

Aggrieved by the Tribunal’s decision, the Revenue challenged the order before the High Court contending that the Tribunal lacked authority to recall its earlier order.

 

Issues Involved

  1. Whether the Income Tax Appellate Tribunal has the power to recall and set aside an ex parte order passed in the absence of a party.
  2. Whether recalling an ex parte order amounts to impermissible review of the Tribunal’s earlier decision.
  3. Whether Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 authorizes restoration of an appeal disposed of ex parte upon sufficient cause being shown.
  4. Whether any substantial question of law arose from the Tribunal’s order recalling the ex parte decision.

 

Petitioner’s Arguments (Revenue)

The Revenue argued that the Tribunal had no jurisdiction to review or recall its final order.

Reliance was placed upon the decision in J.N. Sahni v. Income Tax Appellate Tribunal & Others (2002) 257 ITR 16, wherein it was observed that under Section 254(2), the Tribunal possesses only the power to amend or rectify mistakes and not the power to review or recall its order.

It was contended that:

  • The Tribunal’s authority is confined to rectification of mistakes apparent from the record.
  • Recall of an entire order effectively amounts to review.
  • The Income Tax Appellate Tribunal does not possess any inherent power of review.
  • What cannot be done directly cannot be achieved indirectly through Section 254(2).

 

Respondent’s Arguments (Assessee)

The assessee contended that the Tribunal had not exercised any power of review.

It was argued that:

  • The ex parte order was passed due to absence of the assessee for reasons beyond its control.
  • Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 specifically empowers the Tribunal to set aside an ex parte order where sufficient cause for non-appearance is established.
  • Restoration of an appeal under Rule 24 is distinct from review of a concluded decision.
  • The Tribunal rightly exercised its statutory power after being satisfied regarding the cause of non-appearance.

 

Court Order / Findings

The Delhi High Court dismissed the Revenue’s appeal and upheld the Tribunal’s order.

The Court observed that the decision in J.N. Sahni v. ITAT concerned rectification under Section 254(2) and did not deal with the specific issue of recalling an ex parte order under Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963.

The Court examined Rule 24, which provides that where an appeal has been disposed of ex parte and the appellant subsequently satisfies the Tribunal that there was sufficient cause for non-appearance, the Tribunal shall set aside the ex parte order and restore the appeal.

The Court referred to several decisions of the Supreme Court, including:

  • Commissioner of Income Tax, Madras v. S. Chenniappa Mudaliar (1969) 74 ITR 41 (SC)
  • Hukumchand Mills Ltd. v. Commissioner of Income Tax (1967) 63 ITR 232 (SC)
  • M/s J.K. Synthetics Ltd. v. Collector of Central Excise (AIR 1996 SC 3527)
  • Income Tax Officer, Cannanore v. M.K. Mohammed Kunhi (1969) 71 ITR 815 (SC)
  • Grindlays Bank Ltd. v. Central Government Industrial Tribunal (1981) 2 SCR 341

The Court held that the statutory scheme and Rule 24 specifically authorize restoration of appeals disposed of ex parte when sufficient cause for absence is shown.

Accordingly, recalling such an order does not amount to review of the merits of the earlier decision but is an exercise of a specific statutory power granted under the Rules.

 

Important Clarification

The judgment clearly distinguishes between:

Review of an Order

  • Reconsideration of the merits of a concluded decision.
  • Not ordinarily available to the Tribunal unless specifically conferred by statute.

Recall of an Ex Parte Order

  • Restoration of an appeal where a party demonstrates sufficient cause for absence.
  • Specifically permitted under Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963.
  • Does not amount to review of the original decision.

The Court clarified that Rule 24 empowers the Tribunal to recall an ex parte order and restore the matter for hearing, and exercise of such power cannot be treated as a review prohibited by law.

 

Sections Involved

  • Section 255, Income-tax Act, 1961
  • Section 254(2), Income-tax Act, 1961
  • Rule 24, Income Tax (Appellate Tribunal) Rules, 1963

 

 Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2004:DHC:12863-DB/BCP25052004ITA1922004_105401.pdf

 

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