ITAT has powers to set aside ex-parte order irrespective to final order if decided on merits: High Court, Delhi

ITAT has powers to set aside ex-parte order irrespective to final order if decided on merits: High Court, Delhi

The High Court of Delhi (HC) ruled that the Income Tax Appellate Tribunal (ITAT) can set aside ex-parte order irrespective of the fact that the final order on appeal was decided on merits

M/s Kalra Paper Private Limited (Petitioner) filed a writ petition before the HC under Article 226 of the Constitution of India, seeking directions against the order dated 6 November 2020 passed by the Income Tax Appellate Tribunal (ITAT) [Respondent].

The petitioner filed an income tax return and based on the survey made under Section 133A of the Income Tax Act, 1961 (IT Act) and taking other materials/details in consideration an assessment order was framed under Section 143(3) of the IT Act wherein certain additions were made to the income of the petitioner.

Being aggrieved from the impugned order, the petitioner filed an appeal before the Commissioner of Income Tax (Appeal) [CIT(A)]. It passed a decision in favour of the petitioner and the additions made by the respondent were deleted.

The Revenue Officer filed an appeal before the ITAT against the order of CIT(A) whereby ex-parte order was passed and finally allowed in favour of the Officer. Petitioner, being dissatisfied with the ex-parte order of the ITAT, filed a Miscellaneous Application before the ITAT, under Section 254(2) of the IT Act, read with Rule 25 of the Income Tax (Appellate Tribunal) Rules, 1963.

The petition sought to set aside the ex-parte order of ITAT and further requested for the restoration of the appeal. The miscellaneous application filed by the petitioner was dismissed by the Respondent, on the basis that the ex-parte order is well reasoned and was based on material available on record.

The petitioner filed a writ petition before the HC challenging the order of ITAT and requested the HC to set aside the said order. The averments made in the petition were that the ex-parte order was arbitrary and bad in law. The petitioner also showed an inclination to take recourse to 'Vivad se Vishwas 2020' scheme and requested the Court to restore the appeal. The petitioner was willing to clear the outstanding dues by seeking the benefit of the said scheme.

The matter was listed before the division bench of Justices Manmohan and Sanjeev Narula. The Judges observed that there was a sufficient reason for non-appearance of the petitioner before the ITAT when the appeal was taken up for hearing. There was no mala fide intention of the petitioner in not attending the said hearing.

The HC held, "The assessee was prevented by sufficient cause from appearing before the ITAT when the appeal was taken up for hearing. Further, the Tribunal has taken into consideration such reasons which were not germane for deciding the Miscellaneous Application. The sufficiency of the cause, which was the only factor to be examined, has been ignored by the Tribunal. If sufficient cause is shown, the Tribunal is obligated to consider the same and make an order setting aside the ex-parte order, irrespective of the fact that the final order decided the appeal on merits".

The HC ruled in favour of the petitioner and held that the ITAT ought to set aside ex-parte order, irrespective of the fact that the final order had been passed on merits in the appeal. It allowed the petition based on the undertaking given by the Petitioner under the 'Vivad Se Vishwas 2020' Scheme and it restored the appeal to its original number.