M/S. Singara Nilgiri Plantation Co.,Singara Estate,Coonoor, The Nilgiris v. The Deputy Commissioner Of Income Tax,Circle I (1), Ooty

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 24.11.2015 M/s. Singara Nilgiri Plantation Co.,Singara Estate,Coonoor, The Nilgiris... Appellant in all the T.C.As vs. The Deputy Commissioner of Income Tax,Circle I (1), Ooty... Respondent in all the T.C.As. Tax Case Appeals filed under Section 260A of The Income TaxAct, 1961, as against the orders, dated 01.04.2009 and04.11.2010, made in I.T.A.Nos.258 and 259/MDS/2008 andM.P.Nos.298 and 299 of 2009, respectively, on the file of theIncome Tax Appellate Tribunal, Madras 'A' Bench, Chennai, forthe assessment years 2003-04 and 2004-05. Against the order of the Commissioner of Income TaxAppeals-1 Coimbatore dated 22/11/2007 and made in AppealNos.495/2006-2007, 496/2006-2007 respectively. Against theorder of the Deputy Commissioner of Income Tax Circle-I(i)Ootydated 16/1/2007 . Pan GIR No.AAECS 9612c Assessment year 2003-2004, 2004-2005 respectively. Tax Case Appeal Nos.751 and 752 of 2015 have been filed, asagainst the orders, passed by the Income Tax Appellate Tribunal,'A' Bench, Chennai, dated 01.04.2009 and 04.11.2010, for theassessment years 2003-04 and 2004-05, respectively, made inI.T.A.Nos.258 and 259/Mds/2008 and Tax Case Appeal Nos.753 and754 of 2015 have been filed challenging the dismissal of the https://hcservices.ecourts.gov.in/hcservices/ petitions, in M.P.Nos.298 and 299 of 2009, seeking restorationof Appeals, in I.T.A.Nos.258 and 259/Mds/2008. Facts in brief:- 2. The appellant is engaged in the business of manufactureand sale of tea. For the Assessment Year 2003-2004, afterreopening the assessment, under Section 147 of The Income TaxAct, 1961, the respondent had determined the taxable income, atRs.1,94,917/-, as against the reported 'nil income', filed bythe Assessee, on the consideration of brought forward losses, tothe extent of Rs.4,73,930/-. A sum of Rs.5,36,334/- was broughtunder the head 'Income from other sources', while allowing setoff of the current year loss, to the extent of Rs.3,39,313/- . 2.1. The Assessee had filed Appeals before the Commissionerof Income Tax (Appeals)-I, Coimbatore, which had been dismissedby the orders, dated 22.11.2007, holding that the classificationof income under various heads viz., “Business Income” and“Income from Other Sources”, in its return of income, has beenmade by the Appellant, suo-motu, and as it did not emanate fromany fresh action by the Assessing Officer, there can be no causefor grievance and therefore, the Appeals had no merits. Thematters were taken by way of Appeals, to the Income TaxAppellate Tribunal. The Income Tax Appellate Tribunal had alsodismissed the appeals, in I.T.A. Nos. 258 and 259/Mds/2008 bythe order, dated 01.04.2009. Challenging the same, TCA Nos.751and 752 of 2015 have been filed. 2.2.These appeals were dismissed on the technical groundthat the Appeal Memorandum in those cases has been signed by theManager of the firm and not by the Managing Director or any ofthe Partners. Further, it was pointed out that the power ofattorney dated 18.03.2007, gives authorisation to the Manager,only to receive ordinary and registered letters, communications,notices, demands etc., on behalf of the Firm and it did not givepower for signing the return of income and to sign the AppealMemo. 2.3. As the appeals were dismissed on technical grounds andnot on merits, the Assessee filed two petitions for restorationof the two appeals (one in respect of the assessment year 2003-2004 and the other in respect of assessment year 2004-2005). 2.4. The restoration applications filed in, M.P.Nos.298 and299/2009 in ITA. Nos.258 and 259/Mds/2008,had been dismissed bythe common order, dated 04.11.2010. Challenging the said commonorder TCA. Nos.753 and 754 of 2015 had been filed. 2.5. The Appeals, in TCA Nos.753 and 754 of 2015, i.e.,challenging the dismissal of the Miscellaneous Petition Nos. 298 https://hcservices.ecourts.gov.in/hcservices/ 2.3. As the appeals were dismissed on technical grounds andnot on merits, the Assessee filed two petitions for restorationof the two appeals (one in respect of the assessment year 2003-2004 and the other in respect of assessment year 2004-2005). 2.4. The restoration applications filed in, M.P.Nos.298 and299/2009 in ITA. Nos.258 and 259/Mds/2008,had been dismissed bythe common order, dated 04.11.2010. Challenging the said commonorder TCA. Nos.753 and 754 of 2015 had been filed. 2.5. The Appeals, in TCA Nos.753 and 754 of 2015, i.e.,challenging the dismissal of the Miscellaneous Petition Nos. 298 https://hcservices.ecourts.gov.in/hcservices/ and 299 of 2009, includes the dismissal of ITA Nos.258 and259/Mds/2008, on the preliminary issue of maintainability. Thegrounds for challenge are as under:- 1. The Tribunal had committed a mistake inassuming that the Manager/Power of Attorney had nocompetance for signing the return of income, as theTribunal omitted to notice that the return of income,for the assessment year 2004-2005, was signed only bythe Manager/Power of Attorney of the Firm; the returnof income was acted upon by the revenue in terms ofSection 140 of the Act. 2. The Tribunal has given a finding that theManager/Power of Attorney has no authority to signthe Appeal Memo. This finding is incorrect as clause1 and clause 7 of the Power of Attorney givescompetance, not only to sign the return of income,but also to sign the Appeal papers. 3. The Tribunal had omitted to take note of therectified Form No.36, duly signed by the partner ofthe firm, in triplicate in each of the assessmentyear under consideration. 3. In order to appreciate the contentions raised above, itis necessary to look into the reasons adduced by the Tribunal,while dismissing the Miscellaneous Petition Nos. 298 and 299 of2009. Relying upon Sub Rule (1) to Rule 47 and Sub Rule (2) ofRule 45 of the Income Tax Rules 1962, it was held that: (a) inthe case of a Firm, the Appeal Memo has to be signed by theManaging Director or any other partner and not by the Manager;(b) if the Manager is not given power to sign the return ofincome, he cannot sign the Appeal Memo; and (c) as the orderalready passed do not suffer from any mistake apparent on theface of the record, the order cannot be interfered with. 4. Challenging the reasons stated for dismissal of theMiscellaneous Petitions, these appeals have been filed raisingthe following substantial questions of law: “1. Whether the Tribunal is correct in law indismissing the appeals as 'defective' on thepreliminary issue of presentation of statutory FormNo 36 signed by the Manager / Power of AttorneyHolder without giving further opportunity on thefacts and in the circumstances of the case? 2. Whether the Tribunal is correct in law inrejecting the Miscellaneous Petitions filed in termsof Section 245 (2) of the Act for the restoration ofthe appeals even though such prayer was not forreviewing the earlier order which was passed on thepreliminary / technical issue and not on merits? 3. Whether the Tribunal is correct in law inrejecting the appeals as well as the MiscellaneousPetitions filed for restoration of the appeals forthe assessment years under consideration, on theconsideration of the provisions in Section 140 ofthe Act, read with Rule 45 and Rule 47 of the IncomeTax Rules, 1962? 4. Whether the Tribunal is correct in law innot interfering with the earlier order dated1.4.2009 in the proceedings intiated by theappellant U/S 254 (2) of the Act, even though themistakes and errors in the understanding andappreciating the facts of the case were apparent?” 5. Two appeals (TCA Nos.751 and 752 of 2015) are on theissue relating to the dismissal of the Appeal on the preliminaryissue of competance of the person who had signed the AppealMemo. The other two Appeals (TCA Nos.753 and 754 of 2015) are onthe dismissal of the restoration applications filed seekinghearing of the matter on merits. 4. Whether the Tribunal is correct in law innot interfering with the earlier order dated1.4.2009 in the proceedings intiated by theappellant U/S 254 (2) of the Act, even though themistakes and errors in the understanding andappreciating the facts of the case were apparent?” 5. Two appeals (TCA Nos.751 and 752 of 2015) are on theissue relating to the dismissal of the Appeal on the preliminaryissue of competance of the person who had signed the AppealMemo. The other two Appeals (TCA Nos.753 and 754 of 2015) are onthe dismissal of the restoration applications filed seekinghearing of the matter on merits. 6. Whether the Income Tax Appellate Tribunal should haveheard the matter on merits or the Tribunal is right indismissing the Appeals on the technical ground of defect in thefiling of the Appeals is the main issue to be considered inthese Appeals. 7. The learned counsel for the appellant would submit thatthe Tribunal is expected to render substantial justice and thelearned Tribunal is not expected to dismiss the appeals ontechnical grounds, on a procedural aspect and therefore, it is afit case where the matter has to be remanded, with a directionto the Tribunal to decide the matter on merits. 8. The learned counsel for the Revenue had vehementlycontended that, even at the time of filing of the Appeal, theTribunal had issued a defect Memo, on 25.02.2008, stating that https://hcservices.ecourts.gov.in/hcservices/ the Appeal Memo has to be signed by a competent person and aquery was also raised by the Tribunal, on the maintainability ofAppeal, which is allegedly signed by an incompetent person andthe Assesee has been emphasizing that the Manager of theAssessee firm is a competent person to sign the return of incomeand therefore, the case of the Assessee, for remand of thematter, cannot be accepted. 9. Under normal circumstances, this plea of Revenue couldhave been accepted. But, so far as these cases are concerned,the initial mistake is only on the part of the Revenue, inaccepting the return of income filed by the Manager, who isallegedly incompetent and therefore, it would have led theAssessee to form an impression that, when he is competent tofile the return of income, he would also be competent to signthe Memo of Appeal. Therefore, the assessee would have remainedfirm in his contention before the Tribunal, even though theissue relating to the defect in the Memo had been raised. defectmemo was issued. Therefore, just because the Assessee was firmin his contentions, with regard to maintainability, the appealscannot be thrown out inlimine. But, at the same time, themistake once committed by one side cannot be the basis for theother side to commit yet another mistake. 10. Admitedly, the orders of the Income Tax AppellateTribunal are not on merits, but on the preliminary issue ofcompetance of the Manager to sign the Appeal Memos, in respectof the Appeals filed by the Firm. 11. Under Sub Rule (2) to Rule 45 of the Income Tax Rules1962, the grounds of Appeal relating to an assessee shall besigned and verified by the person, who is authorised to sign thereturn of income, under Section 140 of the Income Tax Act, 1961. 12. Under Section 140 of the Income Tax Act, 1961, in thecase of a Firm, the return of income has to be signed by theManaging Partner or where such Managing Partner is not availableor where there is no Managing Partner, by any of the partner(not being a Minor). Under Sub Rule (1) to Rule 47, an appealunder Sub Section (1) or Sub Section (2) of Section 253 to theAppellate Tribunal, the form of appeal, the grounds of appealand the form of verification appended thereto shall be signedonly by the person as mentioned supra in Sub Rule (2) to Rule45. A combined reading of these Rules make it clear that theManager is not the authorized person to sign the Appeal Memos. 12. Under Section 140 of the Income Tax Act, 1961, in thecase of a Firm, the return of income has to be signed by theManaging Partner or where such Managing Partner is not availableor where there is no Managing Partner, by any of the partner(not being a Minor). Under Sub Rule (1) to Rule 47, an appealunder Sub Section (1) or Sub Section (2) of Section 253 to theAppellate Tribunal, the form of appeal, the grounds of appealand the form of verification appended thereto shall be signedonly by the person as mentioned supra in Sub Rule (2) to Rule45. A combined reading of these Rules make it clear that theManager is not the authorized person to sign the Appeal Memos. 13. However, when the Income Tax Department itself, havingacted upon the return of income filed by the Manager, whetherthe Tribunal can dismiss the Appeals on the ground that theManager, having no authority to file the return of income, hasno authority to sign the Appeal Memos and therefore, the appealshad to be dismissed inlimine. This finding on facts, as well as https://hcservices.ecourts.gov.in/hcservices/ on conclusions, is incorrect. Admitedly, it is the Manager, whohas filed the return of income, and he has also signed in theMemorandum of Appeals. The filing of return involves seriouslegal consequences under the statute. Therefore, unlessauthorized by the statute itself, the Manager has no authorityto file the return of income. Incorrectly, the Income TaxDepartment has accepted the return of income filed by theManager. The assessee has also filed the return of income by anincompetent person. But the mistake has been now rectified, bythe Assessee, by presenting a new statutory Form No.36.Consequently, both sides concurring, we feel it appropriate toremand the matters, for fresh disposal, by the Income TaxAppellate Tribunal, on merits, subject to following terms: 1. There shall be an undertaking by the learnedcounsel for the appellant that the issue relating tothe incorrect acceptance of return of income, by theIncome Tax Department, though filed by the Manager,not by the Managing Director / Partner, shall not beagitated, having presented fresh Statutory FormNo.36. 2. The learned counsel for the Appellant /Assessee undertakes to file fresh Appeal Memos,signed by the Managing Partner / Partner, for which,the learned counsel for the Respondent / Revenueshall not raise any objection, as per theundertaking given. 3. On the presentation of the said Appealmemos, the Tribunal shall take the Appeals on file,without raising the issue of limitation and woulddecide the matter, on merits and in accordance withlaw. 14. In the result, TCA Nos.751 and 752 of 2015 stand allowedand the matters are remitted back to the Income Tax AppellateTribunal, for fresh consideration of the matters, on merits. 14.1. TCA.Nos.751 and 752 of 2015 having been allowed, TCANos.753 and 754 of 2015 have become infructuous and therefore,the same stand dismissed as infructuous. Sd/-Assistant Registrar True Copy Sub Assistant Registrar To 1. The Deputy Commissioner of Income Tax, Circle I (1), OotyCircle I (1), Ooty 2. The Income Tax Appellate Tribunal, Madras 'A' Bench, ChennaiMadras 'A' Bench, Chennai 3.The Commissioner of Income Tax, Coimbatore. Coimbatore. +1cc to S.Sridhar, Advocate sr.63671 T.C.A.Nos.751 to 754 of 2015 and M.P.Nos.1 and 1 of 2015 vs[co]srg 22/12/2015