M/S KARUTURI GLOBAL LTD vs. DEPUTY COMMISSIONER OF INCOME-TAX

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WP/25597/2019HC KarnatakaKAHC01016329201904 July 2019Bench: S.SUJATHA8 pages
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What did the High Court hold?

The High Court held that the ITAT indeed lacked the power to condone delays beyond six months in filing a miscellaneous petition under Section 254(2) of the Act. However, it found that approaching the High Court under Articles 226 and 227 of the Constitution for condonation of delay beyond the statutory period was justifiable, citing a Division Bench decision in M/s. Practice Strategic Communications India Private Limited vs. The Commissioner of Service Tax, Bangalore. The Court acknowledged that while the reasons for the 497-day delay might be unsatisfactory, the dismissal of the original appeal for non-prosecution, without deciding on merits, resulted in a failure of justice. Therefore, the delay was condoned subject to the petitioner depositing costs of Rs. 5,000/-. The writ petition was allowed, setting aside the ITAT's orders, and the proceedings were restored to the ITAT for fresh consideration.

What were the facts?

The petitioner, M/s Karuturi Global Ltd, is challenging an order passed by the Income Tax Appellate Tribunal (ITAT) under Section 254(2) of the Income Tax Act, 1961, for Assessment Year 2011-12. The petitioner's original appeal before the ITAT was dismissed for non-representation. Subsequently, the petitioner filed a miscellaneous petition with a delay of 497 days to recall the dismissal order. The ITAT dismissed this miscellaneous petition, primarily on the ground that it lacked the competency to condone delays beyond six months as per the proviso to Section 254(2). The petitioner then invoked writ jurisdiction under Articles 226 and 227 of the Constitution of India to quash the ITAT's order.

What were the issues?

1. Whether the ITAT has the power to condone a delay exceeding six months in filing a miscellaneous petition under Section 254(2) of the Income Tax Act, 1961? (Question of law) 2. Whether the dismissal of the original appeal for non-prosecution, without deciding on merits, constitutes a failure of justice that warrants condonation of delay in filing a miscellaneous petition? Assessee's Contentions: The petitioner argued that the ITAT's dismissal of the appeal for want of prosecution was contrary to the rules, as the Tribunal is bound to decide appeals on merits irrespective of the assessee's appearance. They relied on the judgment in Smt. Ritha Sabapathy vs. Deputy Commissioner of Income Tax (2019) 308 CTR (Mad) 417. The petitioner contended that the delay in filing the miscellaneous petition was due to miscommunication and should be condoned. Revenue's Contentions: The revenue argued that even if the ITAT had no power to condone delay beyond six months, the reasons provided by the petitioner were not sufficient. They pointed out the ITAT's observation that the miscellaneous petition was filed negligently and without rectifying defects.

Which sections of the Income-tax Act were involved?

Section 254(2),Section 143(3),Section 144C,Section 143(2)

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 4TH DAY OF JULY, 2019 BEFORE THE HON’BLE MRS. JUSTICE S. SUJATHA WRIT PETITION No.25597/2019 (T-IT)

BETWEEN:

M/S KARUTURI GLOBAL LTD NO.204 EMBASSY CENTRE 11, CRESENT ROAD BANGALORE – 560 001 REP BY ITS DIRECTOR ANITHA KARTURI.

... PETITIONER

(BY SMT. VANAJA M.R., ADVOCATE)

AND:

DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-4(1)(1) 6TH BLOCK, 80FT ROAD B.M.T.C. COMPLEX KORAMANGALA BANGALORE – 34.

... RESPONDENT

(BY SRI. E.I. SANMATHI., ADVOCATE FOR R-1)

THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER PASSED BY THE INCOME TAX APPELLATE TRIBUNAL UNDER SECTION 254[2] OF THE ACT FOR THE ASSESSMENT YEAR 2010-11 IN THE MISCELLANEOUS PETITION [M.P.] NO.325/BANG/2018 DATED:25.01.2019 [ANNEXURE-C]

THIS PETITION COMING ON FOR PRELIMINARY HEARING THIS DAY, THE COURT MADE THE FOLLOWING:

ORDER The petitioner has challenged the order passed by the Income Tax Appellate Tribunal (‘Tribunal’ for short) under Section 254(2) of the Income Tax Act, 1961 (‘Act’ for short) relating to the assessing year 2011-12 in Miscellaneous Petition (MP) No.325/Bang/2018 dated 25.01.2019.

2.

The petitioner is a company engaged in the business of floriculture, ISP Services, trading activity of retail flower business an project services. It appears that the petitioner company has filed its return of income for the assessment year 2011-12 on 30.11.2011 declaring the income of Rs.67,26,631/-.

3.

On the draft assessment order passed under Section 143(3) r/w Section 144C of the Act pursuant to notice issued under Section 143(2) of the Act, the

3 petitioner had approached Dispute Resolution Panel (DRP) and filed its objections, which came to be disposed of exparte on 24.11.2015.

4.

Being aggrieved, petitioner filed the appeal before the Tribunal, which came to be dismissed on the ground that there was no representation by the assessee on the date of hearing. Further the petitioner had filed miscellaneous application before the Tribunal under Rule 24 of the Income Tax Appellate Tribunal Rules, 1963 (‘Rules’ for short) to condone the delay of 497 days.

5.

Tribunal dismissed the said miscellaneous application mainly on the ground that there is no competency for the Tribunal to condone the delay beyond 6 months. Hence this writ petition.

6.

Learned counsel appearing for the petitioner placing reliance on the judgment of Division Bench of

4 the High Court of Madras in the case of SMT. RITHA SABAPATHY vs. DEPUTY COMMISSIONER OF INCOME TAX reported in (2019) 308 CTR (MAD) 417 submitted that Tribunal dismissed the appeal for want of prosecution is contrary to the Rules itself. The binding responsibility of the Tribunal is to decide the appeal on merits irrespective of the appearance of the assessee or his counsel. In such circumstances, it was incumbent on the Tribunal to allow the miscellaneous petition.

7.

However, in view of the statutory limitation provided under the proviso to Section 254(2) of the Act, the Tribunal was not competent to condone the delay beyond six (6) months. Hence, the only remedy available to the petitioner is to invoke the writ jurisdiction under Articles 226 and 227 of Constitution of India seeking for condonation of delay in filing the miscellaneous petition.

5 8. The reasons assigned by the petitioner for not appearing before the Tribunal on 22.11.2016 due to some miscommunication between the petitioner company and its Chartered Accountant is obviously sufficient explanation. On considering the same, the delay caused in filing the miscellaneous petition requires to be condoned and the matter has to be remanded back to the Tribunal for fresh consideration.

9.

Learned counsel for the revenue would submit that even assuming the Tribunal had no power to condone the delay beyond six (6) months, the reasons assigned by the petitioner cannot be construed as sufficient reasons. The Tribunal considering the same, has categorically observed that the miscellaneous petition was filed in a negligent manner and without rectifying the apparent defects.

10.

Heard the learned counsel appearing for the respective parties and perused the material on record.

11.

Indisputably, the miscellaneous petition was filed with the delay of 497 days before the Tribunal and the Tribunal has no power to condone the delay beyond 6 months, if so, the petitioner approaching this Court under Articles 226 and 227 cannot be held to be unjustifiable. The Division Bench of this Court in identical circumstances in the case of M/S.PRACTICE STRATEGIC COMMUNICATIONS INDIA PRIVATE LIMITED vs. THE COMMISSIONER OF SERVICE TAX, BANGALORE reported in ILR 2016 KAR 4493 has held that remedy available to the assessee to seek for condonation of delay beyond the statutory period of limitation is only under Article 226 and 227 of Constitution of India. In the circumstances, the writ petition deserves to be entertained.

12.

As regards the reasons assigned by the petitioner to condone the delay of 497 days may be unsatisfactory, but the same requires to be considered

7 in the light of disposal of the original appeal by the Tribunal for non prosecution. It is well settled law that Tribunal is bound to dispose of the matter on merits even in the absence of the appearance of the assessee or its counsel. It is thus clear that the dismissal of the appeal for non prosecution has resulted in failure of justice, which necessarily requires to be rectified. Hence, considering the same, the delay of 497 days in filing the miscellaneous petition has to be condoned subject to imposing costs of Rs.5,000/- to the petitioner.

13.

Accordingly, writ petition stands allowed setting aside the impugned orders at Annexures-A and C dated 22.11.2016 and 25.01.2019 passed by the Tribunal. The proceedings are restored to the file of Tribunal for fresh consideration subject to petitioner depositing the cost of Rs.5,000/- before the Tribunal. Since the parties are represented through their learned

8 counsel, they are directed to appear before the Tribunal on 29.07.2019 without expecting any notice and shall receive further orders.

With aforesaid observations writ petition stands disposed of.

Sd/- JUDGE

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