The Kerala High Court restored the matter to Income Tax Appellate Tribunal ( ITAT ) as the tribunal had dismissed the Income Tax Appeal for non-prosecution without considering its merits.
The appellant was engaged in Software Development and Export of IT enabled services for which it had claimed deduction under Section 10B as a 100% EOU. For the assessment years 2007-08 and 2008-09, the claim for deduction was denied. In the first appeal, the appellant raised an alternate contention for deduction under Section 10A of the IT Act, in the event, the claim under Section 10B was not allowed. This alternate ground was allowed by the First Appellate Authority for the assessment year 2008-09, but was rejected by the same authority for the assessment year 2007- 08.
Against the rejection by the First Appellate Authority, the appellant preferred an appeal before the Income Tax Appellate Tribunal. The said appeal however came to be dismissed for non-prosecution. It is the case of the appellant that he received neither the notice of hearing before the Appellate Tribunal nor the dismissal order of the Appellate Tribunal. When he eventually got a copy of the said dismissal order of the Appellate Tribunal, he preferred an application for restoration of the appeal, but the said application was also dismissed as belated.
The Single Judge who considered the matter, although noticed the provisions of Section 254 of the Income Tax Act, read with Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963, and found that the Appellate Tribunal was statutorily obliged to consider the appeal on merits, and did not have the power to dismiss the appeals filed before it for non-prosecution, nevertheless proceeded to dismiss the writ petition on the ground that the miscellaneous application preferred by the appellant for restoration of the appeal, was itself belated.
The bench found that another Division Bench of this Court, in the decision reported in Uzhuva Service Co-operative Bank Ltd. v. Income Tax Officer and others has, in an almost identical situation, found that the Income Tax Appellate Tribunal acting under Section 254 of the Income Tax Act, 1961, cannot dismiss an appeal preferred by an assessee for non-prosecution. The court found that in terms of the provisions of Section 254 of the Income Tax Act, the Appellate Tribunal was statutorily obliged to consider all appeals on merits and the dismissal for non-prosecution, without considering the merits of the appeal, was not legally sustainable.
Further notice that in the said case also, the assessee had filed an application for the restoration of the appeal beyond the statutory period prescribed under the Income Tax (Appellate Tribunal) Rules. The situation, therefore, was not different from what arises in the instant case, the bench noted.
The Division Bench of the Kerala High Court comprising Justice Dr. Jayasankaran Nambiyar and Justice Syam Kumar V.M. allowed this writ appeal by setting aside the impugned judgment of the Single Judge, as well as the orders of the Income Tax Appellate Tribunal that were challenged in the writ petition. The bench directed the Appellate Tribunal to restore the appeal on its file and pass orders on merits after hearing the appellant, within an outer time limit of six months from the date of receipt of a copy of this judgment.
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