2005 (1) TMI 44 - HC - Income Tax

Power of tribunal manifest injustice - Whether the Tribunal was correct in dismissing the appeal and the miscellaneous petition filed by the Revenue against the order of the Appellate Commissioner setting aside the penalty levied on the ground that the annexures and the form filed along with the appeal memo did not disclose the correct number of the impugned order without providing the Revenue an opportunity to rectify the defect and considering the matter on merits by recording a finding on the controversy before it when a specific ground as to the challenge to the penalty order had been made in the appeal memo filed by the Revenue. - decision of the Tribunal produces manifest injustice to the Revenue and therefore, the question of law raised by the Revenue requires to be answered in the affirmative and against the assessee.

Issues Involved:
1. Whether the Tribunal was correct in dismissing the appeal and the miscellaneous petition filed by the Revenue against the order of the Appellate Commissioner setting aside the penalty levied.
2. Whether the Tribunal should have provided the Revenue an opportunity to rectify defects in the memorandum of appeal.

Issue-wise Detailed Analysis:

1. Dismissal of Appeal and Miscellaneous Petition:
The Revenue appealed against the Tribunal's decision to dismiss their appeal and miscellaneous petition concerning the Appellate Commissioner's order that set aside the penalty levied under section 271(1)(c) of the Income-tax Act, 1961. The Tribunal dismissed the appeal because the memorandum of appeal did not disclose the correct number of the impugned order and the form attached was related to the quantification of total income under section 143(3) of the Act, not the penalty order. The Tribunal noted that the appeal seemed to have been filed mechanically and without proper application of mind, causing unnecessary trouble for the assessee and wasting the Tribunal's time.

2. Opportunity to Rectify Defects:
The Revenue contended that the Tribunal should have allowed them an opportunity to correct the mistakes in the memorandum of appeal under rule 12 of the Income-tax (Appellate Tribunal) Rules, 1963. Rule 12 provides the Tribunal with the discretion either to reject a memorandum of appeal if it is not in the prescribed form or to return it for amendment within a specified time. The Tribunal, however, chose to exercise its discretion to reject the appeal rather than returning it for correction. The Revenue argued that this was an erroneous exercise of discretion, which resulted in manifest injustice.

Legal Framework and Tribunal's Discretion:
Section 253(2) of the Act authorizes the Commissioner of Income-tax to direct the Assessing Officer to file an appeal to the Appellate Tribunal. Sub-section (6) mandates that the appeal be in the prescribed form and verified in the prescribed manner. Rule 47 of the Income-tax Rules, 1962, specifies the form of appeal, while Rule 12 of the Income-tax (Appellate Tribunal) Rules, 1963, vests the Tribunal with the discretion to reject or return a defective memorandum of appeal for amendment.

Court's Decision:
The court observed that the Tribunal's discretion under Rule 12 should be exercised to aid substantial justice. The Tribunal should have returned the appeal papers to the Revenue for correction, especially when the mistake was acknowledged as genuine and not mala fide. The court noted that the Tribunal's decision produced manifest injustice to the Revenue.

Order:
1. The question of law raised by the Revenue was answered in their favor and against the assessee.
2. The order passed by the Income-tax Appellate Tribunal in Appeal No. 221/Bang/1996, dated April 22, 2002, was set aside.
3. The matter was remanded back to the Tribunal with a direction to allow the Revenue to amend the memorandum of appeal as per Rule 12.
4. If the Revenue fails to comply with the Tribunal's directions, the Tribunal is at liberty to dismiss the appeal.

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