Tax Tribunal’s Recall: A Legal Reassessment of Dismissed Appeals

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Case Name:

Smt. Seema Bhattacharya Vs Principal Commissioner of Income Tax-II (High Court of Madhya Pradesh)

Income Tax Appeal No.34 of 2020

Date: 1st December 2020

Key Takeaways:

• The Tribunal can recall an appeal if exceptional conditions are met, even if the tax effect is below the threshold.
• The decision underscores the importance of providing a fair opportunity for both parties to present their case.
• The case highlights the Tribunal’s discretion in handling appeals under specific circumstances outlined in the Board’s Circular.

Issue

Was the Tribunal justified in recalling the appeal under Section 254(2) (of Income Tax Act, 1961) despite the appeal being heard in the presence of both parties?

Facts

• The appeal was initially dismissed by the Tribunal due to a tax effect below the monetary limit set by a Board Circular.
• The Revenue filed an application to recall the dismissal, arguing that the case met exceptional conditions outlined in the Circular.
• The Tribunal agreed to recall the appeal, allowing it to be heard on merits.

Arguments

• Petitioner: Argued that the Tribunal should not have recalled the appeal as it was already heard in the presence of both parties.
• Revenue: Claimed that the appeal met exceptional conditions, justifying its recall for a fair hearing.

Key Legal Precedents

• Section 260A (of Income Tax Act, 1961): Governs appeals to the High Court.
• Section 254(2) (of Income Tax Act, 1961): Allows the Tribunal to amend any order with a mistake apparent from the record.
• Board’s Circular 3 of 2018: Sets monetary limits for appeals but allows exceptions for certain conditions.

Judgement

The court dismissed the appeal, supporting the Tribunal’s decision to recall the appeal. It emphasized that the Tribunal acted within its rights to ensure a fair hearing, especially given the exceptional conditions cited by the Revenue.

FAQs

Q1: Why was the appeal initially dismissed?

A1: The appeal was dismissed because the tax effect was below the monetary limit set by the Board’s Circular.

Q2: What are the exceptional conditions mentioned?

A2: The conditions include cases where a Revenue Audit objection has been accepted by the Department, among others.

Q3: What does this decision mean for future cases?

A3: It reinforces the Tribunal’s ability to recall appeals under exceptional circumstances, ensuring fair hearings.

Q4: Can the Tribunal recall any appeal under Section 254(2) (of Income Tax Act, 1961)?

A4: No, it can only recall appeals if there is a mistake apparent from the record or under specific exceptional conditions.

1. This Appeal under Section 260A (of Income Tax Act, 1961) (for brevity, ‘the IT Act’), is directed against the order dated 07.09.2020 passed by the Income Tax Appellate Tribunal, Jabalpur Bench Jabalpur in M.A. No.04/JAB/2020; whereby, I.T.A. No.225/JAB/2018 dated 07.09.2020 by Revenue was restored.

2. The pleadings and documents on record reveals that the

Tribunal in pursuance to Notification issued by the Central Board of

Direct Taxes under Section 268A (of Income Tax Act, 1961) stipulating that the

‘tax effect’ as computed in terms of Circular 3 of 2018 dated

11.07.2018 being less than 50 lacs, permitted the Department to

withdraw the appeal by order dated 23.08.2019. The withdrawal

was, however, subject to:

“7. It may be clarified that though every care has been

taken by the Registry of the Tribunal in identifying the

listed appeals, it may yet be that some error in working

the tax effect may have occurred. It may also be that an

appeal/s is otherwise saved by the exceptions listed at

para 10 (scope of which stands widened vide

amendment dated 20.08.2018) or para 11 of the Circular.

Similarly, it may be that a CO/s bears an independent

ground/s, raised for adjudication. Accordingly, liberty is

hereby granted to the parties to, where so, move the

Tribunal in this regard, in which case it shall, where

satisfied on merits, recall an appeal/s or, as the case may

be, a CO/s, for being heard on merits. Further, the recall

of an appeal would be accompanied by the recall of the

assessee’s corresponding CO, if any, dismissed along

with. Needless to add, the Tribunal shall, while doing so,

which shall be per a speaking order, grant an opportunity

of hearing to the other side.

8. In the result, all the appeals of the Revenue and

Cross Objections by the assesses stand dismissed.”

3. That, an application under Section 254(2) (of Income Tax Act, 1961) was

filed by the Revenue for recalling the order dated 23.08.2019 and

for restoration of Appeal on the sole ground that the Appeal in

question qualified exceptional condition specified in para 10(c) of

the Board’s Circular which mandates that:

“10. Adverse judgment relating to the following issues

should be contested on merits notwithstanding that the tax

effect entailed is less than the monetary limits specified in

para 3 above, or there is no tax effect:

(c) where a Revenue Audit objection in the case has

been accepted by the Department, or

4. The Tribunal dwelling on the rival contentions, held:

“In the present case, speaking for all the 96

appeals/COs, no counsels, other than those listed, were

present during ‘hearing’. All this is in fact a matter of the

Tribunal’s record. The claim of proper opportunity having

been provided by the Tribunal to the Revenue for raising

objection/s, implicit in the charge of it having not raised

any objection at the time of hearing, is thus a figment of

imagination; the co-author of the impugned order being a

constituent of the Bench that heard the matters. There is,

accordingly, no reference to any argument, by either side,

in the impugned order, much less any mention of

provision of opportunity to raise any specific objection;

the Bench making it clear that the listed matters had been

so on being identified on the basis of the revised monetary

limit qua tax-effect per the recently issued Board circular

of August 8, 2019, enhancing the same for the

maintainability of the Revenues’ appeals before the

Tribunal.

The impugned order is thus not maintainable on this

short ground alone, i.e., non-provision of any opportunity,

or in any case proper opportunity, of being heard. The

Tribunal, while doing so, was acutely conscious of the

legal infirmity of this course; the pitfalls it entailed; and

it’s duty towards the litigants, i.e., the tax payers and the

Revenue. Accordingly, keen to avoid any prejudice being

caused by proceeding in the manner it does, it, even as

made clear earlier in the open court, preempting the

raising of any objection by the Revenue, provided liberty

to the parties to move the Tribunal where any appeal or

CO, not covered u/s 268A (of Income Tax Act, 1961), has nevertheless been

dismissed by it in limine.

The revenue’s applications are thus admissible by

the very terms of the impugned order itself, i.e., the liberty

provided per the impugned order. Though, therefore, the

applications are u/s 254(2) (of Income Tax Act, 1961), its strict parameters, as

normally obtain, would not apply thereto, it is in fact this

liberty which makes the said order legally sustainable in

view of the short shrift given to the due process of hearing,

fundamental to the judicial decision making process and,

thus, to a judicial order. The instant applications, thus,

become the first occasion for the Revenue (assessee) to

object to its’ appeal (CO) being wrongly dismissed u/s

268A, even as contemplated by the impugned order, as

well as the order relied upon by it. The Tribunal is thus

obliged to consider and decide the Revenue’s objection’s

on merits, as the leave granted per the impugned order

itself provides. How, one may ask, does the decision in

Concord Pharmaceuticals Ltd. (supra) assists the

assessee/s under such circumstances; the same, rather, in

view of the position of law as clarified thereby, does that

of the Revenue. Each of the Revenue’s applications are

liable to be allowed, restoring the appeals (along with the

COs’ if any) for being heard on merits, subject to the

satisfaction, after hearing the parties, that the appeals are

not covered by the extant circular/s.”

5. Though the appellant press in service following substantial

question of law:

“Under the garb of rectification under Section

254(2), whether Tribunal was justified in recalling the

appeal, when appeal was heard in the presence of the

appellant and the respondent and when the Tribunal is

not vested with power to recall the appeal.”

However, in the given facts of present case, the substantial

question as proposed does not arise for consideration.

6. It being the fundamental principle for administration of justice

that an act of the Court shall prejudice no man (actus curiae

neminem gravabit). In the case at hand, as there was no occasion for

Tribunal to have considered the merit of ITA No.225/JAB/2018 for

AY 2009-10 and the same could not have been dismissed as

withdrawn being covered by the exceptional conditions contained in

para 10(c) of the Board’s Circular, we do not perceive any

jurisdictional or legal error in the order as would attract the

proposed substantial question of law.

7. Consequently, Appeal fails and is dismissed. No costs.

(Sanjay Yadav) (Vijay Kumar Shukla)

Acting Chief Justice Judge