(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 130, 131 & 132---Appeal---Procedure for disposal of appeal---Appeal cannot be dismissed in default without going into the merits of the case either by the first appellate authority or by the Appellate Tribunal.

The A.A.C. which includes the C.I.T. (Appeals) has to give a notice of the date fixed for the hearing of appeal to the appellant and to the Income Tax Officer, against whose order the appeal has been preferred: He may adjourn the hearing of appeal from time to time and may also allow the appellant to file any new ground of appeal, not already taken by him. He may even ask for such particulars as he may require respecting matters arising in the appeal/or cause further enquiry to be made by the I.T.O. Finally, as under section 132(1)(a)(i), the A.A.C. can either set aside the assessment and direct the assessment to be made afresh after making such further enquiry as he may direct or he may confirm, reduce, enhance or annul the assessment. These are the only courses of action available to the A.A.C./C.I.T. (appeals) under the Ordinance. Nowhere has he been authorised to dismiss the appeal for non-prosecution or for non-appearance.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 131 & 132---Income Tax Rules, 1982, 8.173---Appeal---Non appearance---Appellate Authority (Appellate Assistant Commissioner) if sufficient cause is shown cannot recall the order passed in absence of either party.

(c) Income Tax Ordinance (XXXI of 1979)---

----Ss. 134 & 135---Disposal of appeal---Scope and powers of Appellate Tribunal---Income Tax Appellate Tribunal is not empowered to dismiss appeal in default for non-appearance of either party.

From the perusal of sections 134 and 135 of the Income Tax Ordinance, 1979 it is clear that the AAC/CIT (Appeals) is not empowered to order dismissal of appeal in default, when the appeal is otherwise filed in the prescribed form and in the prescribed manner. For that matter even the Income Tax Appellate Tribunal does not appear to be empowered to dismiss an appeal in default when either party or both the parties do not appear on the date of hearing fixed, the Tribunal has to proceed ex parte against the party or parties who have not appeared on the date of hearing, and has to go into the merits of the case, as available on record, and decide the appeal on the strength of such facts/material provided therein. It is clearly laid down in rule 20(2) that where on the day fixed for hearing or any other day to which the hearing is adjourned the appellant or the respondent does not appear, the Tribunal may proceed ex parte and decide the appeal on merits. In the explanation to this rule, the word `appear' has been described to mean appear in person or through an authorised representative.

M/s. Willayat Flour Mills Lyalipur v. CIT, Rawalpindi; 1973 PTD 530; S. Chenniappa Mudaliar v. CIT (1964) 10 Tax 220; Ravula Suba Rao v. C.I.T. (1955) 27 I T R 164; Shri Bhagwandas Radha ICishan v. C.I.T. (1952) 22 I T R 104 and Manufacturance Co. of Canada v. C.I.T. (1930) 611 T R 321 ref.

(d) Income Tax Appellate Tribunal Procedure Rules, 1981---

----Rr. 12 & 32---Compliance with Rr. 12 & 32 is directory in nature and the Tribunal would decide on the facts and circumstances of each case separately as to whether non-compliance with Rules was deliberate or inadvertent-- Position, however, will be different in a case where an appeal has been held to be competent and maintainable .and then the Tribunal has no powers to dismiss an appeal in default or non-prosecution and Tribunal has to go into the merits of each case and decide an appeal on the basis of material on record.-- [RA. No. 17 (IB) of 1989-90 overruled].

RA. No:17 (IB) of 1989-90 overruled.

1990 P T D (Trib.) 260 fol.

Nemo for Appellant.

Muhammad Jehangir Khan, D.R. for Respondent.

Date of hearing: 22nd January, 1991.

ORDER

JUNEJO M. IOBAL (ACCOUNTANT MEMBER).---This appeal, relating to the charge year 1987-88, filed at the instance of the assessee appellant, a registered firm, contests the order of the learned CIT (Appeals), Sargodha, passed by him, on 16-10-1988, in Income Tax Appeal No.806, dismissing the appeal for non-prosecution.

2. A notice fixing the date of hearing of the appeal for 22-1-1991 was despatched to the appellant under a resgistered cover, at the address indicated in the memorandum of appeal. None has, however, put in an appearance; nor has any application for adjournment been moved before us. The appellant has, therefore, been proceeded against ex parte and the appeal has been taken up for disposal on merits.

3. Mr. Muhammad Jehangir Khan, the learned DR representing the respondent, has submitted that the appellant was not interested in pursuing its case, as rightly pointed out by the learned C.I.T.(A), that it was a fit case to be dismissed in default for lack of interest on the part of the appellant which is so very obvious as none has appeared even before the Tribunal today.

4. This appeal has raised an interesting issue as to whether an appeal can be dismissed in default without going into the merits of the case, either by the first appellate authority or by the Tribunal. In this context, we have to refer to the relevant provisions of the Income Tax Ordinance, 1979 (hereinafter referred to as the Ordinance), on the point. We, therefore, reproduce below, for the facility of reference, sections 130, 131 and 132,of the Ordinance, dealing with the disposal of appeals by the appellate Assistant Commissioner of Income Tax, which includes a Commissioner of Income Tax (A) as provided under section 5(1)(a) of the Ordinance:-

130. Form of appeal and limitation:-

(1) Every appeal under section 129 shall be in the prescribed form and shall be verified in the prescribed manner, and shall be accompanied by a fee of twenty-five rupees.

(2) The appeal shall be presented within thirty days of the following date, namely;

(a) Where the appeal relates to any assessment or penalty, the date of service of the notice of demand relating to the said assessment or penalty, as the case may be; and

(b) in any other case, the date on which intimation of the order to be appealed against is served.

(3) The Appellate Assistant Commissioner may admit an appeal after the expiration of the period specified in subsection (2) if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within that period.

131. Procedure in appeal.--(1) The Appellate Assistant Commissioner shall give notice of the day fixed for the hearing of the appeal to the appellant and to the Income Tax Officer against whose order the appeal is preferred and may adjourn the hearing of the appeal from time to time.

(2) The Appellate Assistant Commissioner may, before the hearing of an appeal, allow an appellant to file any new ground of appeal not specified in the grounds of appeal already filed by him on being satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable.

(3) The Appellate Assistant Commissioner may, before disposing of any appeal, call for such particulars as he may require respecting the matters arising in the appeal or cause further inquiry to be made by the Income Tax Officer.

(4) The Appellate Assistant Commissioner shall not admit any documentary material or the Income Tax Officer, unless he is satisfied that the appellant was prevented by sufficient cause from producing such material or evidence before the Income Tax Officer.

132. Decision in appeal.--(1) .In disposing of an appeal, the Appellate Assistant Commissioner may;

(a) in the case of an order of assessment (i) set aside the assessment and direct the assessment to be made afresh after making such further inquiry as the Appellate Assistant Commissioner may direct or the Income Tax Officer thinks fit;

(ii) Confirm reduce, enhance or annul the assessment;.

(b) in the case of an order imposing a penalty, confirm, set aside or cancel such order or enhance or reduce the penalty; and

(c) in any other case, pass such order as he thinks fit.

(2) The Appellate Assistant Commissioner shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has been given a reasonable opportunity of showing cause against such enhancement or reduction, as the case may be.

(3) Where, as the result of an appeal, any change is made in the assessment of a firm or an 'association of persons is ordered to be made, the Appellate Assistant Commissioner may authorised the Income Tax Officer to amend accordingly any assessment made on any partner of the firm or any member of the association.

(4) On the disposal of an appeal, the Appellate Assistant Commissioner shall communicate the order passed by him to the appellant and to the Income Tax Officer and the Commissioner.

5. A perusal of the above provisions of the Ordinance makes it abundantly clear that the learned AAC which includes the CIT (Appeals) has to give a notice of the date fixed for the haring of appeal to the appellant and to the Income Tax Officer, against whose order the appeal has been preferred. He may adjourn the hearing of appeal from time to time and may also allow the appellant to file any new ground of appeal, not already taken by him: He may even ask for such particulars as he may require respecting matters arising in the appeal or cause further enquiry to be made by the ITO. Finally, as A provided under.section-132(1)(a)(i), the AAC can either set aside the assessment and direct the assessment to be made afresh after making such further enquiry as he may direct or he may confirm, reduce, enhance or annul the assessment. These are the only courses of action available to the AAC/CIT (appeals) under the Ordinance. Nowhere, has he been authorised to dismiss the appeal for non-prosecution or for non-appearance. The Income Tax Rules, 1982, also do not provide for any power to recall the order if sufficient cause is shown to the satisfaction of the AAC for non-appearance, as is the case provided under rule 20 of the Income Tax Appellate Tribunal Rules, 1981, which is reported below:-

Rule 20. Hearing of appeal.--(1) On the day fixed, or on any other day to which the hearing is adjourned, the appellant shall be heard in support of the appeal. The Tribunal shall then, if necessary hear the respondent against the appeal and in such case the appellant shall be entitled to reply.

(2) Where on the day fixed for hearing, or any other day to which the hearing is adjourned, the appellant or the respondent does not appear, the Tribunal may proceed ex parte and decide the appeal on merits.

(3) Where on the day fixed for hearing or any other day to which the hearing is adjourned, both the parties remain absent when the appeal or application is called on for hearing the Tribunal may, in its discretion, decide the appeal on merits on the basis of the record available to it:

Provided that the Tribunal may recall the order passed under this rule if the party .in default applies within thirty days of the date of communication of the order, and satisfies the Tribunal that he was prevented by any sufficient cause from appearing when the appeal or application was called on for hearing.

Explanation.--In this rule, the word `appear' means appear in person or through an authorised representative.

6. It would also be very appropriate to refer to sections 134 and 135 of the Ordinance dealing with the appeals to the Appellate Tribunal and disposal thereof in order to appreciate the scope and powers of the Tribunal and to see whether it is empowered to dismiss an appeal in default for non-appearance of the appellant on the date fixed for hearing before the Tribunal. The relevant reprovisions read as under:-

134. Anneal to the Appellate Tribunal.---(1) An assessee objecting to an order passed by an Appellate Assistant Commissioner under sections 111 or 132, or subsection (2) of section 148 or an order/made by the Appellate Assistant Commissioner under section 156 having the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee may appeal to the Appellate Tribunal against such order.

(2) The Commissioner may if he objects to any order passed by an Appellate Assistant Commissioner under section 132 direct the Income Tax Officer to appeal to the Appellate Tribunal against such order.

(3) Every appeal under subsection, (1) or subsection (2) shall be riled within sixty days of the date on which the impugned order is communicated to the assessee or the Commissioner, as the case may be.

(4) The Appellate Tribunal may admit an appeal after the expiration of the period specified in subsection (3) if it is satisfied that the appellant was prevented by sufficient cause from presenting it within that period.

(5) An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner and shall except in the case of an appeal under subsection (2) be accompanied by a fee of one' hundred rupees.

(6) Notwithstanding that an appeal has been filed under this section, tax shall, unless recovery thereof has been stayed by the Appellate Tribunal, be payable in accordance with the assessment made in the case.

135. Disposal of anneals by the Appellate Tribunal.--(1) The Appellate Tribunal may, before disposing of any appeal, call for such particulars a it may require respecting the matter arising in the appeal or causes further enquiry to be made by the Income Tax Officer.

(2) The Appellate Tribunal shall give both parties to the appeal an opportunity of being heard either in person or through an authorised representative.

(3) If the Appellate Tribunal is not satisfied that the assessment or the order which is the subject of the appeal ought to be interfered with, it shall reject the appeal.

(4) If the Appellate Tribunal is satisfied that an assessment which is the subject of appeal--

(a) ought to be reduced or annulled, it shall reduce or annul the assessment accordingly; or

(b) is insufficient, it shall enhance the assessment accordingly; or

(c) ought to be set aside, it shall set aside the assessment and direct the Income Tax Officer to make a fresh assessment.

(5) If the Appellate Tribunal is satisfied that an order which is the subject of appeal, out to be interfered with, it shall cancel or vary the order accordingly and shall issue such consequential directions as the case may require.

Explanation.--In the case of an order imposing a penalty, the power to vary the order shall include the power to enhance the penalty.

(6) The Appellate Tribunal shall not enhance an assessment or a penalty or reduce the amount of refund, unless the assessee has been given a reasonable opportunity of showing cause against such enhancement or reduction, as the case may be.

(7) Where, as the result of an appeal, any change is made in the assessment of a firm or an association of persons or a fresh assessment of a firm or an association of persons is ordered to be made, the Appellate Tribunal may authorise the Income Tax Officer to amend accordingly any assessment made on any partner of the firm or any member of the association, as the case may be.

(8) The Appellate Tribunal shall communicate its order to the assessee and to the Commissioner.

(9) Save as provided in section 136 an order passed by the Appellate Tribunal on appeal shall be final.

7. From the perusal of the above provisions of law, it is clear that the AAC/CIT (Appeals) is not empowered to order dismissal of appeal in default, when the appeal is otherwise filed in the prescribed form and in the prescribed manner. For that matter even the income Tax Appellate Tribunal does not appear to be empowered to dismiss an appeal in default when either party or both the parties do not appear on the date of hearing fixed, the Tribunal has to proceed ex parte against the party or parties who have not appeared on the date of hearing, and has to go into the merits of the case, as available on record, and decide the appeal in the light of such facts/material provided therein. It is clearly laid down in rule 20(2) ibid that where on the day fixed for hearing or any other day to which the hearing is adjourned the appellant or the respondent does not appear, the Tribunal may proceed ex parte and decide the appeal on merits. In the explanation to this rule, the word `appear' has been described to mean appear in person or through an authorised representative. It would be worthwhile to refer to a decision of the Lahore High Court at this juncture, where rule 24 of the repealed ITAT Rules, 1948, came under scrutiny, to dismiss the appeal for default of appearance. It was held by their Lordships of the Lahore High Court in the case of M/s. Willayat Flour Mills, Lyallpurs v. CIT, Rawalpindi, reported as 1973 PTD 530 that the said rule 24 was ultra vires the provisions of section 33(4) of the Income Tax Act, 1922 and that the order of dismissal of appeal on technical ground of default was not valid in law. In arriving at this conclusion, their Lordships drew support from a decision of the special Bench of the Madras High Court in the case of S. Chenniappa Mudaliar v. CIT, reported as (1964) 10 Tax 220. In this regard, the following cases were also referred to by their Lordships of the Lahore High Court:--

(I) (1955) 27 ITR 164, Ravula Suba Rao v. CIT.

(II) (1952) 22 ITR 104, Shri Bhagwandas Radha Kishan v. CIT.

(III) (1930) 61 ITR 321 Manufacturance Co. of Canada v. CIT.

8. In view of the above proposition of law, as brought out by numerous decisions of both Pakistan and Indian jurisdiction, we are of the view that the learned CIT (Appeals) erred in dismissing the appeal preferred before him and therefore remand the appeal to him to examine it on merits and decide the same in accordance with law.

9. Before parting with the present appeal we would like to observe that it was decided by a Full Bench of this Tribunal in R.A.No.17 (IB) 1989-90, decided on 13-3-1990 that compliance with Rules 12/32 of the Income Tax Appellate Tribunal Rules, 1981 was a sine qua non and that those not complying with these Rules would have their appeals declared as incompetent and non-maintainable. However, this ruling was overruled by larger Bench of the Tribunal in a case reported as 1990 PTD (Trib.) 260, wherein it was held that compliance with Rules 12 and 32 of the Rules was directory in nature and the Tribunal would decide on the facts and circumstances of each case separately as to whether non-compliance with Rules was deliberate or inadvertent.

10. Position would be different in a case where an appeal has been held to be competent and maintainable. Then, the Tribunal has not powers to dismiss an appeal in default or non-prosecution. The Tribunal has to go in to the merits of each case and decide an appeal on the basic of material on record.

M.B.A./1602/T Order accordingly.