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Khushalchand B. Daga Vs. T.K. Surendran, 4th Income-tax Officer, A-1 Ward and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberMisc. Petition No. 945 of 1969
Judge
Reported in[1972]85ITR48(Bom)
ActsIncome Tax Act, 1922 - Sections 33(4) and 35; Income Tax Appellate Tribunal Rules, 1946 - Rule 24; Income Tax Appellate Tribunal (Amendment) Rules, 1948
AppellantKhushalchand B. Daga
RespondentT.K. Surendran, 4th Income-tax Officer, A-1 Ward and ors.
Appellant AdvocateF.S. Nariman, Adv.
Respondent AdvocateR.J. Joshi, Adv.
Excerpt:
.....october, 1961, dismissing his appeal for default of appearance was bad in law and could never be passed in view of the aforesaid supreme court judgment, and, secondly, in the alternative, the said order suffered from a mistake apparent on the face of the record which should be rectified and on either of these grounds the petitioner sought a rehearing of his appeal on merits. alternatively, counsel contended that the said order of the tribunal clearly suffered from a mistake apparent on the face of the record and the same may be rectified by restoring the appeal to the file and fixing it for rehearing. the tribunal did not accept the petitioner's contention that its previous order dated 24th october, 1961, was a nullity but held that it was an order with jurisdiction but contained a..........october, 1961, dismissing his appeal for default of appearance was bad in law and could never be passed in view of the aforesaid supreme court judgment, and, secondly, in the alternative, the said order suffered from a mistake apparent on the face of the record which should be rectified and on either of these grounds the petitioner sought a rehearing of his appeal on merits. at the hearing of the application counsel for the petitioner reiterated the two-fold submission before the tribunal. in the first place, he urged that rule 24 of the appellate tribunal rules, 1946, as amended in 1948, having been declared ultra vires as being repugnant to section 33 (4) of the act by the supreme court, the tribunal's order dated 24th october, 1961, dismissing the petitioner's appeal for default of.....
Judgment:

Tulzapurkar, J.

1. This writ petition raises the question whether the order passed by the Income-tax Appellate Tribunal on 24th October, 1961, dismissing the petitioner's appeal for default of his appearance is without jurisdiction and, therefore, a nullity or the said order is merely an erroneous or illegal order with jurisdiction The facts giving rise to the petition may briefly be stated :

For the assessment year 1955-56 (accounting year 1954-55) the petitioner as the karta of Hindu undivided family filed his income-tax return on 31st January, 1956, showing therein a loss of Rs. 2,16,945. Along with the return he also filed the balance-sheet, profit and loss account and several other statements. Notice under section 23 (2) and section 22 (4) of the Income-tax Act, 1922, fixing the hearing on 20th January, 1960, was served on the petitioner on 13th January, 1960. The hearing was adjourned from time to time and finally it was fixed on 15th February, 1960, but as the petitioner could not remain present and as his application for adjournment was refused, the 1st respondent (4th Income-tax Officer, A-I Ward), proceeded with assessment ex parte and he passed his best judgment assessment order on that day under section 23 (4) whereby he assessed the petitioner's income at Rs. 3,88,177. Against the said best judgment assessment order of the 1st respondent, the petitioner on 12th April, 1960, filed an appeal to the Appellate Assistant Commissioner, being Appeal No. APR-66. On 13th April, 1960, the petitioner filed an application before the 1st respondent under section 27 of the Act for cancellation of the ex parte assessment order which application was rejected on 6th June, 1960. On 21st November, 1960, the Appellate Assistant Commissioner partly allowed the appeal and the total income as assessed by the 1st respondent was reduced by Rs. 54,000. On 25th January, 1961, the petitioner preferred an appeal to the Income-tax Appellate Tribunal, being Appeal No. ITA. 10236 of 1960-61, against the Appellate Assistant Commissioner's order dated 21st November, 1960. The hearing of the appeal was fixed on 24th October, 1961, and notice thereof was served upon the petitioner on 4th October, 1961. For certain reasons set out in paragraph 19 of the petition neither the petitioner nor his tax adviser could appear before the Tribunal on the aforesaid date. The Tribunal dismissed the appeal for default of appearance and not on merits. It passed the following order on 24th October, 1961 : 'When this appeal was called nobody put in appearance on behalf of the appellant. We have satisfied ourselves that the notice of hearing was served on the appellant as early as on October 4, 1961. We, therefore, dismiss the appeal for default.'

2. According to the petitioner, the aforesaid order of the Tribunal was not served upon him nor on his tax adviser and he come to know of the said order for the first time on 4th January, 1968, when one of his representatives learnt about this order while he was making search of the records of the assessment proceedings for the assessment year 1955-56 in connection with certain refund voucher. After the petitioner learnt about this order from his representative in the aforesaid manner, the petitioner made an application to the Tribunal on 29th January, 1968, for setting aside the said order dated 24th October, 1961, and seeking a rehearing of the appeal on merits. On 17th April, 1968, the Tribunal rejected the application on the ground that there had been enormous delay in filing the application for restoration; the Tribunal did not accept the petitioner's case that it was on 4th January, 1968, that he came to know about the dismissal of his appeal. Thereafter, on 24th February, 1969, the Supreme Court delivered its judgment in the case of Commissioner of Income-tax v. Chenniappa Mudaliar confirming the decision of the Madras High Court in the same matter to the effect that rule 24 of the Appellate Tribunal Rules, 1946, as amended in 1948, in so far as it enabled dismissal of an appeal before the Tribunal for default of appearance of the appellant was ultra vires being repugnant to section 33 (4) of the Act. Relying on the aforesaid decisions of the Supreme Court the petitioner on 23rd June, 1969, preferred a miscellaneous application before the Tribunal for setting aside the Tribunal's order dated 24th October, 1961, and seeking a rehearing of his appeal on merits. Though the application was stated to be for rectification of a mistake under section 35 of the Act, a two-fold submission was put forward by the petitioner in his said application : first, that the order dated 24th October, 1961, dismissing his appeal for default of appearance was bad in law and could never be passed in view of the aforesaid Supreme Court judgment, and, secondly, in the alternative, the said order suffered from a mistake apparent on the face of the record which should be rectified and on either of these grounds the petitioner sought a rehearing of his appeal on merits. At the hearing of the application counsel for the petitioner reiterated the two-fold submission before the Tribunal. In the first place, he urged that rule 24 of the Appellate Tribunal Rules, 1946, as amended in 1948, having been declared ultra vires as being repugnant to section 33 (4) of the Act by the Supreme Court, the Tribunal's order dated 24th October, 1961, dismissing the petitioner's appeal for default of appearance was a nullity and as such the petitioner's appeal filed on 25th January, 1961, was in law still undisposed of and the same continued to remain on the file of the Tribunal and that the same should be disposed of after hearing the parties. Alternatively, counsel contended that the said order of the Tribunal clearly suffered from a mistake apparent on the face of the record and the same may be rectified by restoring the appeal to the file and fixing it for rehearing. It was also submitted that since the petitioner came to know of the said order dated 24th October, 1961, for the first time on 4th January, 1968, the application for rectification was within time. The Tribunal by its order dated 5th September, 1969, dismissed the said application. The Tribunal did not accept the petitioner's contention that its previous order dated 24th October, 1961, was a nullity but held that it was an order with jurisdiction but contained a mistake apparent on the face of the record, which could be rectified under section 35 of the old Act or section 254(2) of the new Act, 1961, but the application for rectification was barred by limitation, inasmuch as it had been made clearly after the expiry of 4 years. The Tribunal reiterated its view that it was not possible for it to accept the petitioner's case that he had come to know of the order dated 24th October, 1961, on 4th January, 1968, as alleged by him - which case had already been rejected by it on an earlier occasion while dismissing the petitioner's application dated 29th January, 1968, for restoration of the appeal. The petitioner has challenged before me both the orders of the Tribunal dated 24th October, 1961 (dismission the petitioner's appeal for default of appearance) and 5th September, 1969 (dismissing the petitioner's miscellaneous application dated 23rd June, 1969).

3. Mr. Nariman for the petitioner raised three contentions in support of the petition. In the first place, he contended that, in view of the Supreme Court judgment in Commissioner of Income-tax v. S. Chenniappa Mudaliar the Tribunal has no jurisdiction or power to dismiss the petitioner's appeal for default of his appearance and as such the order passed by the Tribunal on 24th October, 1961, should be regarded as a nullity and the Tribunal should be directed to rehear the appeal. secondly, he contended that assuming that the Tribunal's order dated 24th October, 1961, was not a nullity, even so in view of rule 24 of the Appellate Tribunal Rules having been held to be ultra vires, the Tribunal should have in exercise of its inherent powers directed a rehearing of the appeal, for, a court of tribunal cannot allow any part to suffer because of its own wrong or mistake. Thirdly, he contended that even if the Tribunal's order dated 24th October, 1961, was regarded as a mere erroneous order with jurisdiction and even if the petitioner's miscellaneous application was to be treated as an application for rectification of a mistake apparent on the face of the record, the mistake could have been and should have been rectified by the Tribunal under section 254(2) of the new Act, inasmuch as, under the latter part of that provision, where the mistake was sought to be rectified at the instance of an assessee, there was no question of any bar of limitation; and in this behalf he relied upon the difference between the two provisions, one under section 35 of the old Act. He, therefore, urged that the impugned orders were liable to be quashed.

4. On behalf of the respondents, Mr. Joshi in the first place urged that the petitioner was guilty of laches since by the present petition preferred on 18th December, 1969, he was seeking to quash the Tribunal's order dated 24th October, 1961, and as such on that ground alone the petitioner should be denied relied. He further pointed out that in the earlier application preferred on 29th January, 1968, for setting aside the ex parte assessment as well as in the latter miscellaneous application preferred on 23rd June, 1969, the Tribunal had rightly rejected the petitioner's case that he had come to know of the order dated 24th October, 1961, as late as on 4th January, 1968, and had proceeded on the basis that he must have learnt about the said order when the same had been immediately sent to him by registered post and on that basis it should be held by this court that the petitioner has approached this court after inordinate delay. On merits he tried to support the view of the Tribunal that the Tribunal's order dated 24th October, 1961, dismissing the petitioner's appeal for default of appearance was not a nullity but was an erroneous order with jurisdiction - an order containing an error apparent on the face of the record needing rectification - and, according to him, the Tribunal was right in coming to the conclusion that the petitioner's miscellaneous application for rectification of a mistake was barred by limitation, inasmuch as the case was covered by section 35 of the old Act and not by section 254(2) of the new Act. In the circumstances, he contended that the petition should be dismissed.

5. In support of his contention that the petitioner should not be granted any relief because of inordinate delay on his part in approaching this court. Mr. Joshi relied on a decision of the Supreme Court in Tilokchand Motichand v. H. B. Munshi, Commissioner of Commercial Taxes, where the Supreme Court has expressed the view that stale claims should not be pointed out that in that case the petitioner, who was placed in a similar situation, was held to be not entitled, after a lapse of a number of years, to take advantage of the Supreme Court decision in a Gujarat case where certain provisions of an enactment had been struck down. It may be obtained in the case and even there two judges of the court took a contrary view on the point of laches. Therefore, in my view, each case will have to be considered on its own facts, though the general principle enunciated in that case has, of course, to be borne in mind. Having regard to the facts and circumstances of the present case, I do not think that the petitioner should be denied the relief sought by him on the ground of laches, if he is otherwise found entitled to it. It is true that the petitioner is seeking to set aside the order passed by the Tribunal on 24th October, 1961, but, at the same time, it cannot be forgotten that he is also seeking to set aside the latest order passed by the Tribunal on 5th September, 1969, whereby his miscellaneous application was rejected by the Tribunal and this has been done by approaching this court on 18th December, 1969. It is also true that the Tribunal has held in one of the earlier proceedings that the petitioner had come to know of the order dated 24th October, 1961, soon after the passing of the order and not on 4th January, 1968, as alleged by the petitioner. By assuming that the petitioner had come to know of the impugned order dated 24th October, 1961, soon after that order had been passed, it is clear that so long as the Supreme Court had not struck down rule 24 of the Income-tax Appellate Tribunal Rules as being repugnant to section 33 (4) of the Act, the petitioner could get his appeal restored to the file only by making out a case of his having been prevented by sufficient cause from remaining present on the date of hearing and this step he did take, though belatedly, on 29th January, 1968. He could move Tribunal for getting a rehearing of his appeal on the ground of the Tribunal's order dated 24th October, 1961, being a nullity only after 24th February, 1969, when the Supreme Court delivered its judgment in the case of Commissioner of Income-tax v. S. Chenniappa Mudaliar holding rule 24 of the Appellate Tribunal Rules to be ultra vires. It is true that by its judgment the Supreme Court confirmed the decision of the Madras High Court that the said rule 24 was ultra vires. But before the Supreme Court finally decided the point there were conflicting judgments of different High Court on the question as to whether an appeal could be dismissed by the Tribunal for default of the appellant and it is only after a final pronouncement was made by the Supreme Court on 24th February, 1969, that the petitioner could have moved the Tribunal. This the petitioner did on 23rd June, 1969, by preferring miscellaneous application and that application was dismissed by the Tribunal on 5th September, 1969, whereafter the petitioner has approached this court on 18th December, 1969. In view of these facts, it is not possible to find the petitioner guilty of inordinate delay or laches as suggested by Mr. Joshi. Therefore, the petition cannot be dismissed on the alleged ground of laches.

6. Coming to the merits, I find considerable force in the contention raised by Mr. Nariman that the Tribunal's order dated 24th October, 1961, dismissing the petitioner's appeal for default of appearance was an order passed without jurisdiction and, therefore, a nullity. Though in its order passed on 24th October, 1961, the Tribunal did not refer to rule 24 of the Appellate Tribunal Rules, 1946, as amended in 1948, the order dismissing the petitioner's appeal for default of appearance had obviously been passed by the Tribunal under the said rule 24, inasmuch as it is that rule 24 alone which enabled the Income-tax Tribunal to dismiss any appeal for default. Rule 24, as amended in 1948, ran as follows :

'Where on the day fixed for hearing or on any other day to which the hearing may be adjourned, the appellant does not appear when the appeal is called on for hearing, the Tribunal may in its discretion, either dismiss the appeal for default or may hear it ex parte.'

7. The rule contained no provision for restoration of an appeal dismissed for default. The validity of this rule came up for consideration before the Supreme Court in the case of Commissioner of Income-tax v. S. Chenniappa Mudaliar and reading it in the context of the language used in section 33 (4) of the Income-tax Act, the Supreme Court held the said rule to be invalid and ultra vires being repugnant to section 33 (4) of the Act. After considering the scheme of the provisions of section 33 and 66 of the Act, the court observed as follows :

'It follows from all this that the Appellate Tribunal is bound to give a proper decision on question of fact as well as law which can only be done if the appeal is disposed of on the merits and not dismissed owing to the absence of the appellant..... Thus, looking at the substantive provisions of the Act there is no escape from the conclusion that under section 33 (4) the Appellate Tribunal has to dispose of the appeal on the merits and cannot short-circuit the same by dismissing it for default of appearance.'

8. In view of the aforesaid decision of the Supreme Court, it is clear that rule 24 must be regarded as being non est and that, at all times material, section 33 (4) had been in operation requiring the Tribunal to dispose of the appeal before it on merits. The power to dismiss an appeal for default not being there in the Tribunal, the Tribunal obviously could never have passed its impugned order dated 24th October, 1961; in other words, it was an order passed by the Tribunal without any jurisdiction and in fact contrary to the mandatory provision contained in section 33 (4) of the Act. It is well-settled that a decree or order passed by a court without jurisdiction or any order passed by a Tribunal without jurisdiction is a nullity and its invalidity could be set up even in collateral proceedings. If necessary, reference may be made to a decision of the Supreme Court in Kiran Singh v. Chaman Paswa. Justice Venkataraman at page 121 of the report :

'It is a fundamental principle well-established that a decree passed by a court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon even at the stage of exemption and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties.'

9. In the present case, in view of the aforesaid decision of the Supreme Court on which reliance has been placed by Mr. Nariman, there could be no doubt that the impugned order of the Tribunal dated 24th October, 1961, would not only be without jurisdiction but also contrary to the mandatory provision contained in section 33 (4) of the Act which required the Tribunal to decided the appeal on merits irrespective of whether the appellant was present or absent and as such the same will have to be regarded as a nullity.

10. In its order passed on 5th September, 1969, the Tribunal has curiously taken the view that the order passed on 24th October, 1961, was not a nullity but an order with jurisdiction containing an illegality or mistake apparent on the face of the record needing rectification under section 35 of the Act. In paragraphs 6 and 7 of its order the Tribunal has stated thus :

'The only point that remains for consideration, therefore, is whether as a result of the decision of the Supreme Court in the said case of Commissioner of Income-tax v. Chenniappa Mudaliar the assessee is entitled to say that the ex parte order passed by the Tribunal on October 24, 1961, is a nullity and, therefore, the Tribunal has to deal with the appeal filed by the assessee afresh.

In our opinion, it is difficult to accept the submission as made by Shri Kolah before us. It is not possible to say that the order passed by the Tribunal on October 24, 1961, is a nullity. The said order passed by the Tribunal was an order which the Tribunal could pass, though, subsequently, it may be found that the order as passed was not correct.'

11. After expressing the above view, the Tribunal has referred to a number of decision of various High Court with a view to show that an order containing illegality or error apparent on the face of the record is required to be rectified under section 35 of the Act. It is impossible to accept the view of the Tribunal that the impugned order dated 24th October, 1961, was an order which the Tribunal could pass and that as a result of the Supreme Court decision a mistake or illegality crept into it or that by reason of the Supreme Court decision the said order was subsequently discovered to be incorrect. It is not a case where by reason of certain legal view having been taken by the Supreme Court, the Tribunal's earlier order dated 24th October, 1961, because an erroneous order or illegal order, but by striking down rule 24 of the Appellate Tribunal Rules as invalid and ultra vires being repugnant to section 33 (4) of the Act, the Supreme Court must be regarded as having decided a jurisdictional fact against the Tribunal in regard to its powers to deal with appeals before it, in that it held that the Tribunal has no jurisdiction or power to dismiss any appeal before it for default of appearance of appellant and that notwithstanding the non-appearance of appellants the Tribunal must decided appeals before it on merits. In view of this position the impugned order will have to be regarded as a nullity.

12. Mr. Joshi tried to support the view of the Tribunal by mainly relying on the decision of the Madhya Pradesh High Court in Commissioner of Income-tax v. Harnandrai Shrikishan Akodia which according to him comes very near to the facts of the present case. He pointed out that in that case the Madhya Pradesh High Court has taken the view that where the Appellate Tribunal dismissed an appeal for default, although there was no power to restore the appeal, the order of dismissal, which was incompetently passed, could be rectified by the Tribunal under section 35 of the Income-tax act. In the first place, it must be pointed out that the question whether the Tribunal's order dismissing an appeal for default of appearance is a nullity or not did not arise for determination before the Madhya Pradesh High Court and as such the decision will have no bearing on the issue before us. Secondly, what had happened in the case was that the Tribunal had dismissed an assessee's appeal for default of his appearance under rule 24 and when the assessee filed a miscellaneous application for restoration of his appeal, the Tribunal rectified the order of dismissal for default and restored the appeal to file under section 35 (2) on the ground that there was sufficient cause which had prevented the appellants or their representative from attending before the Tribunal on the date fixed for hearing the appeal; on these facts a specific question was referred to the High Court by way of reference under section 66 (2) of the Act, whether the Appellate Tribunal had the power and jurisdiction to restore the assessee's appeal which had been dismissed under rule 24 for default of appearance of the assessee and the High Court answered that question by stating that although there was no power to restore the assessee's appeal which had been dismissed under rule 24 for default of appearance, the order of dismissal which was incompetently passed could be rectified under section 35 of the Act. It is thus clear that the aspect, whether the Tribunal's order dismissing an appeal for default of appearance is a nullity or not and if so whether it will at all require rectification under section 35 of the Act or not, was not considered by the Madhya Pradesh High Court in that case. This decision, therefore, cannot avail the respondents. The other decisions referred to by the Tribunal in its order were not even pressed into service by Mr. Joshi, as obviously those decisions really dealt with orders of the Tribunal containing mistakes or errors apparent on the face of the record. The view of the Tribunal, therefore, that the impugned order dated 24th October, 1961, was a mere erroneous order or was an illegal order passed with jurisdiction cannot be accepted.

13. Even if it were assumed for the purpose of argument that the Tribunal's order dated 24th October, 1961, was not a nullity but an erroneous order, in view of the Supreme Court decision that rule 24 was invalid and ultra vires being repugnant to section 33 (4) of the Act, the Tribunal, in my view, ought to have set aside the said impugned order in exercise of its inherent powers and should have reheard the appeal on merits, without going into the question as to whether the application for rectification of the mistake was within time or not, for, after all, no court or tribunal can allow a party to suffer for its own mistake. That the court or tribunal has such inherent power to correct its own mistake is well-settled. In Sub-Divisional Officer (Compensation Officer), Mirzapur v. Raja Srinivasa Prasad Singh it has been observed by the Supreme Court as follows :

'Every court and tribunal is entitled to reopen a proceeding which has proceeded ex parte, not because a party has failed to appear but because as notice has not been sent to the necessary party. A decision reached behind the back of a necessary party to whom notice must be sent is not binding upon such a party and the court may in such a case reopen the proceeding to give the party a chance to state its case.'

14. The decision was followed by the Allahabad High Court in the case of Income-tax Officer, Lucknow v. S. B. Singar Singh & Sons, where the Allahabad High Court held as follows :

'Even when express power to review its orders is not conferred by a statute, a court or a tribunal has inherent jurisdiction to rectify a wrong committed by itself when that wrong causes prejudice to a party for which that party is not responsible.'

15. It is true that in the present case the petitioner or his representative did not remain present on 24th October, 1961, in spite of notice having been served upon him but that is beside the point. On that day in dismissing the appeal for default of appearance the Tribunal undoubtedly committed a mistake as according to the Supreme Court the Tribunal had no power to do so but it was under an obligation to decide the appeal on merits under section 33 (4) and that mistake on the part of the Tribunal would obviously cause serious prejudice to the petitioner in the matter of prosecuting efficiently the further remedies by way of reference to the High Court and an appeal to the Supreme Court. In my view, therefore, the Tribunal ought to have directed the appeal to be reheard on merits, even on the basis that its previous order dated 24th October, 1961, was an erroneous order or an order containing an error apparent on the face of the order.

16. In view of the conclusion which I have reached on the first two submission made by Mr. Nariman, I do not think it is necessary to go into the question as to whether the miscellaneous application preferred by the applicant for rectification of the mistake was barred by limitation or not.

17. In the result, I make the rule absolute in term of prayers (a) and (b) to the extent that the Tribunal' orders dated 24th October, 1961, and 5th September, 1969, are set aside and the Tribunal is directed to hear the petitioner's appeal being I.T.A. No. 10236 of 1961/62 on merits and dispose of the same according to law.

18. No order as to costs.


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