Dismissal of Income Tax Appeal for Non-Prosecution without considering on Merits: Kerala HC restores matter to ITAT

The Kerala High Court overturned the dismissal of an Income Tax Appeal by the ITAT for non-prosecution without considering its merits. The appellant, engaged in Software Development and IT-enabled services, contested the denial of deduction under Section 10B as a 100% EOU for assessment years 2007-08 and 2008-09. Despite not receiving notice of hearing or the dismissal order, the appellant filed a belated application for restoration, which was rejected. Citing Section 254 of the Income Tax Act and Rule 24 of ITAT Rules, the court held that ITAT must adjudicate appeals on merits and cannot dismiss for non-prosecution. The Division Bench directed ITAT to restore the appeal and decide on its merits within six months.