Tca/428/2020 Of Commissioner Of Income Tax v. Shri Vasavi Gold And Bullion( P) Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 21.12.2020 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.428 of 2020 The Commissioner of IncomeTax, Chennai ...Appellant/Respondent.Vs.Sri Vasavi Gold & Bullion (P)Ltd., Chennai-79 ...Respondent/Appellant APPEAL under Section 260A of the Income Tax Act, 1961against the order dated 04.12.2019 passed by the Income TaxAppellate Tribunal, Madras 'B' Bench, Chennai made inI.T.A.No.326/Chny/2019 for the assessment year 2009-10. Againstthe order f the Deputy Commissioner of Income Tax, CorporateCircle 6(2), Chennai, made in ITA No.88/CIT(A)-15/2016-17 dated28.12.2018 for the assessment year 2009-10. For Appellant : Mr.J.Narayanaswamy, SSCFor Respondent: Mr.J.James for Mr.John Kennady Judgment was delivered by T.S.SIVAGNANAM,J This appeal has been filed by the Revenue under Section260A of the Income Tax Act, 1961 ('the Act' for brevity)challengingtheorderdated04.12.2019madeinI.T.A.No.326/Chny/2019 on the file of the Income Tax AppellateTribunal, Chennai, 'B' Bench ('the Tribunal' for brevity) forthe assessment year 2009-10. 2. The Revenue has filed this appeal by raising thefollowing substantial questions of law : “1. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in holding that the manual appealfiled by the assessee before the CIT(A) isvalid appeal and e-appeal need not be filed https://hcservices.ecourts.gov.in/hcservices/ as mandated and thereby remitting the caseback to the CIT(A) for disposal on merits ? 2. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in ignoring Rule 45 of the Income TaxRules mandating filing of e-appeal witheffect from 01.3.2016 and Board CircularNo.20/ 2016 dated 11.7.2019 extending thetime for filing of e-appeal only till15.6.2016 ? And 3. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in condoning the delay in filing ofappeal even though the assessee had failedto file any petition even for condoning thedefect in non filing of e-appeal?” 3. We have elaborately heard Mr.J.Narayanaswamy, learnedSenior Standing Counsel appearing for the appellant/Revenue andMr.J. James, learned counsel appearing on behalf of Mr.JohnKennady, learned counsel accepting notice for the respondent. 4. The respondent – assessee filed their return of incomeon 30.9.2009 for the assessment year under consideration. Thoughthe assessment was completed initially, the assessment wasreopened subsequently and it was finally concluded by assessmentorder dated 29.3.2016 under Section 143(3) read with Section 147of the Act. 5. As against the said assessment order, the assessee filedan appeal on 25.4.2016 before the Commissioner of Income Tax(Appeals)-15, Chennai [for brevity, the CIT(A)] i.e well withinthe period of limitation of 30 days computed from the date ofthe said assessment order i.e 29.3.2016. Going by the said date,the period of limitation would expire on 28.4.2016. The appealmemorandum was kept pending in the office of the CIT(A) and wasnot taken up disposal till 12.12.2018. On 13.12.2018, the CIT(A)issued a notice to the assessee stating that in terms of Rule 45of the Income Tax Rules, 1962 [for short, the Rules], it ismandatory and compulsory for filing the appeal only by way of e-filing with effect from 01.3.2016. This due date was extendedupto 15.6.2016. 6. It appears from the office records of the CIT(A) thatthe assessee filed an appeal petition in Form No.35 instead ofe-filing the appeal. Therefore, the CIT(A) proposed to treat theappeal as non est and called upon the assessee to state as towhether they filed any appeal electronically and if so, the same https://hcservices.ecourts.gov.in/hcservices/ 6. It appears from the office records of the CIT(A) thatthe assessee filed an appeal petition in Form No.35 instead ofe-filing the appeal. Therefore, the CIT(A) proposed to treat theappeal as non est and called upon the assessee to state as towhether they filed any appeal electronically and if so, the same https://hcservices.ecourts.gov.in/hcservices/ might be brought to the notice of the office of the CIT(A)immediately along with a copy of such e-filed appeal within 10days from the date of receipt of the said notice, failing which,the manual appeal filed would be treated as invalid and disposedof accordingly. 7. It has been stated in the order passed by the CIT(A)that the show cause notice was served on the assessee and thatthe assessee neither filed the e-appeal nor replied to thenotice. Hence, the CIT(A), by order dated 28.12.2018, concludedthat in the absence of any material placed by the assessee tosuccessfully demonstrate that there was no negligence, inactionor want of due diligence involved in not filing the e-appeal,sufficient cause had not been established by the assessee fornot filing the e-appeal and accordingly, the manual appeal filedby the assessee was dismissed in limine. Aggrieved by the same,the assessee preferred further appeal before the Tribunal and itwas allowed by order dated 04.12.2019. Challenging the same, theRevenue is before us by way of this appeal. 8. Mr.J.Narayanaswamy, learned Senior Standing Counselappearing for the Revenue has contended that the Tribunal erredin holding that the manual appeal filed by the assessee beforethe CIT(A) was a valid appeal and that the e-appeal need not befiled as mandated and therefore, the Tribunal erred in remandingthe matter back to the CIT(A) for de novo consideration and fordisposal of the appeal on merits. It is further contended thatthe Tribunal ought to have appreciated that Rule 45 of the Rulesmandated the assessees to file only e-appeals with effect from01.3.2016, which time limit was extended till 15.6.2016 videCircular No.20/2016 dated 11.7.2019. It is also contended thatthe Tribunal ought to have held that the manual appeal filed bythe assessee was non est in view of the embargo under Rule 45 ofthe Rules. It is further contended that the assessee cannotplead ignorance of law especially when they are assisted byprofessionals and that there was no reason for the Tribunal tointerfere with the order passed by the CIT(A). 9. Per contra, Mr.James, learned counsel appearing onbehalf of Mr.John Kennady, learned counsel on record for therespondent – assessee has sought to sustain the order passed bythe Tribunal and contended that the manual appeal in Form No.35was filed well within the period of limitation, that the CIT(A)did not intimate the assessee for over three years, that only on13.12.2018, a notice was sent and that this aspect was rightlytaken note of by the Tribunal while allowing the appeal filed bythe assessee. 10. We have carefully perused the materials placed onrecord. 11. There can be no quarrel over the proposition that oncethe statutory rules mandate a particular procedure, the sameshall be done in such a manner and not in any other manner.However, there are decisions of the Hon'ble Supreme Court,wherein it was held that procedural rules are only hand-mades ofjustice and if there is failure to adhere to the procedure andwhen the same is fitted against a statutory right of appeal,then such statutory right should not be abdicated for technicalreasons. 10. We have carefully perused the materials placed onrecord. 11. There can be no quarrel over the proposition that oncethe statutory rules mandate a particular procedure, the sameshall be done in such a manner and not in any other manner.However, there are decisions of the Hon'ble Supreme Court,wherein it was held that procedural rules are only hand-mades ofjustice and if there is failure to adhere to the procedure andwhen the same is fitted against a statutory right of appeal,then such statutory right should not be abdicated for technicalreasons. 12. We have perused the circular issued by the CentralBoard of Direct Taxes (CBDT) namely Circular No.20/2016 dated26.5.2016 wherein it has been stated that Rule 45 of the Rulesmandated compulsory e-filing of appeals before the CIT(A) witheffect from 01.3.2016 in respect of persons, who were requiredto furnish the return of income electronically. The CBDT furthertook note of the cases of tax payers, who were required to e-file Form 35 and who were unable to do so due to lack ofknowledge about e-filing procedure and/or technical issues ine-filing. The said Circular further stated that the e-verification code (EVC) became operational for verification ofe-appeals from 12.5.2016 for individuals and from 19.5.2016 forother persons. The CBDT also noted that word limit for filinggrounds of appeal and mapping of jurisdiction of the CIT(A) werealso a cause of grievance in some cases. 13. Therefore, the matter was examined by the CBDT andnoting that while the underlying issues relating to e-filing ofappeals had since been addressed and resolved, in order tomitigate any inconvenience caused to the tax payers on accountof the new requirement of mandatory e-filing of the appeals, itwas decided to extend the time limit for filing such e-appeals.In the light of the above, the CBDT directed that e-appeals,which were due to be filed by 15.5.2016, could be filed upto15.6.2016 and that all e-appeals filed within this extendedperiod would be treated as appeals filed in time. The CBDTfurther noted that in view of the extended window for filing e-appeals, taxpayers, who could not successfully e-file theirappeal and filed paper appeals, were required to file an e-appeal in accordance with Rule 45 of the Rules before theextended period i.e. 15.6.2016 and that such e-appeals wouldalso be treated as appeals filed within time. 14. Thus, as could be seen from the said Circular, therewere technical issues in e-filing, which was introduced witheffect from 01.3.2016 in addition to lack of knowledge on thepart of the taxpayers about the e-filing procedure. Moreimportantly, the EVC became operational for verification of e-appeals from 12.5.2016 for individuals and from 19.5.2016 for other persons. Assuming that a person had e-filed their appealwell within the period stipulated under Rule 45 of the Rules,yet the appeal would not have been taken up for verification/scrutiny till 12.5.2016/19.5.2016. 15. In the case on hand, admittedly, the assessee filed theappeal in Form No.35 in the office of the CIT(A) on 25.4.2016well within the period of limitation. There were two optionsavailable to the office of the CIT(A), firstly, to refuse toaccept the manual filing of the appeal citing Rule 45 of theRules. The second option was to receive the appeal and thenreturn the same to the assessee with a covering note statingthat the relevant Rule mandates e-filing of appeal with effectfrom 01.3.2016. Unfortunately, the office of the CIT(A) did notexercise any one of these two options. Therefore, we can safelyhold that the assessee was led to believe that their appeal wasaccepted by the office of the CIT(A). 15. In the case on hand, admittedly, the assessee filed theappeal in Form No.35 in the office of the CIT(A) on 25.4.2016well within the period of limitation. There were two optionsavailable to the office of the CIT(A), firstly, to refuse toaccept the manual filing of the appeal citing Rule 45 of theRules. The second option was to receive the appeal and thenreturn the same to the assessee with a covering note statingthat the relevant Rule mandates e-filing of appeal with effectfrom 01.3.2016. Unfortunately, the office of the CIT(A) did notexercise any one of these two options. Therefore, we can safelyhold that the assessee was led to believe that their appeal wasaccepted by the office of the CIT(A). 16. The assessee was made known that the manual appealfiled in Form 35 would not be entertained only when the noticewas issued by the CIT(A) dated 13.12.2018 and that too, after aperiod of three years. The contents of the show cause noticeclearly show that in so far as e-filing of the appeals isconcerned, the office of the CIT(A)/ jurisdictional CIT(A) wasnot aware as to whether the assessee filed any appealelectronically or not. This is precisely the reason as to why inthe show cause notice, the assessee was informed to bring to thenotice of the office of the CIT(A) as to whether they filed anyappeal or not. 17. Thus, it appears that at the relevant point of time,the process of integration was not put in place. So far ascourts and tribunals are concerned, if there is a defectiveappeal or an appeal has not been presented properly or there isdeficit court fee or there is lack of jurisdiction, the appealpapers would be immediately returned with a memo giving theparty an option to represent the papers after rectifying thedefects. It also appears that at the relevant point of time, theoffice of the CIT(A) did not have any such procedure in place.Considering the peculiar facts and circumstances of the case, weare of the view that the manual appeal filed before the CIT(A)should be decided on merits and not to be thrown out ontechnicality and that too when the assessee was intimated aftera period of three years that their manual appeal filed in FormNo.35 was not acceptable. 18. When it is not disputed that there were severaltechnical issues in e-filing of the appeals coupled with thefact that several assessees or their authorized representativeswere not well acquainted with the procedure for e-filing of the appeals, the benefit can be given in favour of the assesseeespecially when the right of appeal being a statutory right andvaluable right and it should not be denied on technicalities.That apart, we note that the said Circular is a one time measuregranted by the CBDT. Further, the case on hand also pertains toan order of assessment dated 29.3.2016 and the appeal was filedmanually on 25.4.2016 when there were several technical issuesin filing e-appeals apart from lack of knowledge in theprocedure to file e-appeals. 19. Though Mr.J.Narayanaswamy, learned Senior StandingCounsel may be right in contending that the assessee should nottake advantage of the said Circular, since the appeal memorandumalong with certified copy of the assessment order was notreturned to the assessee on time, but was kept pending in theoffice of the CIT(A), the assessee cannot be faulted for notavailing the benefit of the said Circular. We are of theconsidered view that the Tribunal rightly allowed the appealfiled by the assessee and we find no reason to interfere withthe order passed by the Tribunal. 20. In the result, the above tax case appeal is dismissed,the impugned order passed by the Tribunal stands confirmed andthe substantial questions of law raised are answered against theRevenue. No costs. Sd/- Assistant Registrar (CJ Conf.) //True Copy// Sub Assistant Registrar To 1. The Income Tax Appellate Tribunal, 'B Bench, Chennai. 20. In the result, the above tax case appeal is dismissed,the impugned order passed by the Tribunal stands confirmed andthe substantial questions of law raised are answered against theRevenue. No costs. Sd/- Assistant Registrar (CJ Conf.) //True Copy// Sub Assistant Registrar To 1. The Income Tax Appellate Tribunal, 'B Bench, Chennai. 2. The Commissioner of Income Tax, Chennai. 3. The Deputy Commissioner of Income Tax, Corporate Circle 6 (2), Chennai. +1cc to Mr.J.James, Advocate, S.R.No.42383 rr ii (19/01/2021)