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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 11.12.2020
+ W.P.(C) 9467/2020

M/S KALRA PAPERS PRIVATE LIMITED. … Petitioner

Through: Mr. Salil Kapoor, Advocate
with Mr. Sumit Lalchandani
and Ms. Ananya Kapoor,
Advocates.
Versus
INCOME TAX OFFICER … Respondent
Through: Mr. Shailendera Singh, Senior
Standing Counsel.

CORAM:
HON’BLE MR. JUSTICE MANMOHAN
HON’BLE MR. JUSTICE SANJEEV NARULA

JUDGMENT

SANJEEV NARULA, J. (Oral)

CM APPL. 30441/2020 (For exemption)

1. Exemption allowed, subject to just exceptions.
2. The application is disposed of.

W.P.(C) 9467/2020
3. The present petition under Article 226 of the Constitution of India is
directed against the order dated 06th November, 2020 [hereinafter referred to
as the ‘Impugned Order’] passed by the Income Tax Appellate Tribunal
[hereinafter referred to as ‘ITAT’] dismissing the Petitioner’s miscellaneous
application bearing M.A. No. 742/DEL/2018 [hereinafter referred to as
‘Miscellaneous Application’] for recall of ex-parte final order dated 24th
July, 2018, allowing Revenue’s appeal being ITA No. 2297/DEL/2014 for
Assessment Year 2009-10.

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4. For the year under consideration, the Petitioner filed its Return of Income
[hereinafter referred to as ‘ROI’] on 31st March, 2010. Based on the survey
under Section 133A of the Income Tax Act, 1961 [hereinafter referred to as
‘the Act’] and other materials, an assessment order dated 28th December,
2011 was framed under Section 143(3) of the Act, making additions to
Petitioner’s income. Aggrieved by the said order, the Petitioner filed an
appeal before the Commissioner of Income Tax (Appeal) [hereinafter
referred to as ‘CIT(A)’]. The said appeal was decided by the CIT(A) in
favour of the Petitioner, and the additions made by the Assessing Officer
were deleted. The Revenue, thereafter, preferred an appeal before the ITAT
on 15th April, 2014 bearing ITA No. 2297/DEL/2014. The said appeal was
heard ex-parte on 5th July, 2018, and finally allowed in favour of the
Revenue vide order dated 24th July, 2018.

5. Aggrieved with the aforesaid ex-parte order, on 3rd December, 2018, the
Petitioner filed the Miscellaneous Application before the ITAT, under
Section 254(2) of the Act, read with Rule 25 of the Income Tax (Appellate
Tribunal) Rules, 1963 [hereinafter referred to as the ‘ITAT Rules’] seeking
setting aside of the ex-parte order and restoration of the appeal. Whilst the
above Miscellaneous Application was pending, the Petitioner also filed an
appeal under Section 260A of the Act before this High Court (being ITA No.
113/2019) and assailed the order dated 24th July, 2018. However, as the
M.A. No. 742/DEL/2018 was still pending before the ITAT, this Court vide
order dated 05th February, 2019, disposed of the said appeal, granting liberty
to the Petitioner to approach this Court in the event the Miscellaneous
Application was not accepted by the Tribunal.

6. Thereafter, the ITAT rejected the Miscellaneous Application vide the

Impugned Order, relevant portion whereof reads as under:

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“3. During the course of his argument, the counsel referred to Rule
25 of the ITAT Rules and vehemently stated that it has been
specifically provided that where an appeal has been disposed of ex-
parte and if later on the appellant/ respondent satisfies the Tribunal
that there was sufficient cause for his non-appearance, the Tribunal
can set aside the ex parte order and restore the appeal.

4. Drawing support from the aforementioned Rule 25, the counsel

stated that on the date of hearing the then arguing counsel was not
well and therefore could not appear for the reason of illness.

5. We have given thoughtful consideration to the contentions made

by the counsel. Facts on record shows that this appeal was first
listed for hearing on 20.06.2016 thereafter frequent adjournments
were taken and most of the time it was from the assessee’s side. The
appeal was finally heard on 5.7.2018 ex parte because more than
two years had elapsed since the first date of hearing. It is not the
case where the appeal was listed for the first time and the assessee
was not aware.

6. The only argument of the counsel was in relation to the ex parte

order whereas the Tribunal has not decided in limine but has
decided by a well-reasoned order of 15 pages. The counsel could
not point out any factual error in the order of the Tribunal.

7. Even, if the order was ex parte, the same is well reasoned and
has considered all the material available on record. As no factual
error has been pointed out, we do not find any reason to recall the
order. Accordingly, the Miscellaneous application file by the
assessee is dismissed.

8. In the result, the miscellaneous application filed by the assessee

is accordingly dismissed.”

7. Mr. Salil Kapoor, learned counsel for the Petitioner, submits that the
impugned order is unjust, illegal, bad in law, and contrary to principles of
natural justice. He submits the Petitioner had sufficient reasons and
reasonable cause for non-appearance on 05th July, 2018. He claims that the
same is disclosed and explained in the affidavit dated 03rd December, 2018,
filed by the Director of the Petitioner-company along with the Miscellaneous
Application. In the said affidavit, it was specifically stated that the non-
appearance was on account of illness of the counsel. The Tribunal,

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unfortunately, while dismissing the Miscellaneous Application, failed to

consider the same. As regards the observation of the Tribunal regarding the
failure of the counsel to point out any factual error in the final order, Mr.
Kapoor argues that the same is completely unwarranted and contrary to Rule
25 of the ITAT Rules. The Petitioner is only required to show that there
existed sufficient cause for non-appearance. The merits or demerits of the
order passed by the Tribunal were not required to be examined at that stage.
He submits that the approach of the Tribunal is contrary to the judgments of
several High Courts dealing with the scope and ambit of Rules 24 and 25 of
the ITAT Rules.

8. Mr. Kapoor also strongly urges that the Petitioner is interested to take
recourse to the amnesty scheme ‘Vivad Se Vishwas 2020’. He states that in
the event the Court were to allow the present petition and restore the appeal
to its original number, Petitioner undertakes to apply under the said scheme.
He submits that the entire endeavour is to put a quietus to the present dispute
and that the Petitioner has every intention to settle the outstanding dues by
taking benefit of the afore-noted scheme.

9. Mr. Shailendera Singh, learned senior standing counsel for the Revenue,
on the other hand, strongly opposes the petition. He submits that the conduct
of the Petitioner exhibits casualness and does not deserve any sympathy. He
claims that the Petitioner had been continuously absent during the course of
hearing, preceding the ex-parte hearing held on 05th July, 2018. In these
circumstances, the Tribunal was justified in deciding the appeal on merits.
He argues that since the ITAT has passed a well-reasoned order after
considering all the material on-record and the contentions advanced in the
appeal, the Petitioner can avail of its remedy by filing an appeal under
Section 260A of the Act and assail the said decision on merits.

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10. We have carefully perused the record and considered the contentions
urged by the learned counsel for the parties, who have been heard at length.
The facts of the present case are not in controversy. On 24th July, 2018, the
Tribunal decided the appeal of the Revenue on merits and ex-parte, as there
was no presence on behalf of the Petitioner. Thereafter, on 03rd December,
2018, the Petitioner filed the Miscellaneous Application under Section
254(2) of the Act read with Rule 25 of the ITAT Rules, wherein
explanations were provided for such non-appearance. It was accompanied by
an affidavit of the Director of the Petitioner-company dated 03rd December,
2018, stating that the non-appearance was on account of the illness of the
counsel. The Petitioner had also filed an affidavit dated 26th October, 2020
of one Mr. Neeraj Bansal, a senior partner of M/s Bansal Neeraj &
Associates Chartered Accountants, which were the authorized
representatives of the Petitioner-company before the assessment and
appellate authorities. It was explained that Mr. Nitin Goel, partner at M/s
Bansal Neeraj & Associates Chartered Accountants, was looking after the
appeal proceedings. He suddenly fell ill on account of dengue fever and was,
therefore, unable to attend the office for 15 days. In these circumstances, he
could not pass on the instructions to his office or to Mr. Neeraj Bansal to
attend the proceedings before the ITAT. To our mind, the Miscellaneous
Application and affidavits filed in support thereof discloses sufficient cause
for non-appearance. The Tribunal, has inappropriately rejected the
Miscellaneous Application, without examining the merits of the said
submissions. Paras 5 and 6 of the Impugned Order, as reproduced above,
reveal that the Tribunal dismissed the Miscellaneous Application merely on
the ground that the Petitioner had sought frequent adjournments before the
matter was finally heard on 05th July, 2018. In this regard, it was also
pointed out that the Miscellaneous Application was filed without much

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delay. In fact, as already noted, the Petitioner had also preferred an appeal
under Section 260A of the Act before this Court, which was disposed of in
the terms stated earlier. Thus, it cannot be said that the Petitioner has shown
laxity in pursuing the said litigation. The presumption of disinterest against
the Petitioner is speculative. The other factor that prevailed upon the
Tribunal was the lapse of time since the first date of hearing. However, the
Tribunal ignored the fact that Petitioner had approached the Tribunal in
December 2018, and thus, the time gap of 2 years between the first date of
hearing and the date of decision cannot be a compelling measure. In our
view, these factors ought not to be viewed in isolation, without taking into
consideration the sufficiency of reasons for non-appearance. The Petitioner
had given a sufficient and cogent explanation for non-appearance of its
Representative, which, however, the Tribunal has failed to take into account.
Besides, in para 6 of the Impugned Order, the Tribunal also went into the
question of merits of the ex-parte decision, by delving into the correctness
of order. This also was an erroneous yardstick for deciding the
Miscellaneous Application. The Tribunal has failed to appreciate that the
Petitioner was seeking the recall of the order dated 24th July, 2018 and
restoration of the appeal, and not the rectification of any mistake apparent on
record. The merits of the case could not have been gone into at the stage of
deciding an application under Rule 25 of the ITAT Rules. Rules 24 and 25
of the ITAT Rules enable the Tribunal to restore the appeal, if a party
appears afterwards and satisfies the Tribunal that there was a sufficient cause
for its non-appearance when the appeal was taken-up for hearing. The
proviso to Rule 25 deals with the situation where the Tribunal has passed an
ex-parte order, due to non-appearance of the Respondent, even though the
order was passed on merits. Thus, we are of the opinion that the reasoning
given in para 6 of the Impugned Order is beyond the scope and ambit of
Rules 25 of the ITAT Rules.

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11. We are satisfied that 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.

12. We are also persuaded to allow the petition, in view of the undertaking
given by the Petitioner that it would apply under the ‘Vivad Se Vishwas’
Scheme in the event the appeal is restored to its original number. The
Petitioner’s undertaking is taken on record and it shall be held bound by the
same.

13. Having regard to the aforesaid facts and circumstances, the present
petition is allowed. The order dated 06th November, 2020 passed in M.A
No.742/DEL/2018 and order dated 24th July, 2018 in ITA No.
2297/DEL/2014 are set aside. The appeal of the Revenue, before the ITAT,
is restored to its original number - ITA No. 2297/DEL/2014.

SANJEEV NARULA, J

MANMOHAN, J
DECEMBER 11, 2020
Nd

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