2021 (1) TMI 171 - HC - Income Tax

Non filling of appeal electronically - Appeal filed manually - Whether appeal cannot be treated as non-est in the eyes of law as appeal was not filed electronically as prescribed under Rule 45 of the Income Tax Rules, 1962? - HELD THAT - In the case on hand, admittedly, the assessee filed the appeal in Form No.35 in the office of the CIT(A) on 25.4.2016 well within the period of limitation. There were two options available to the office of the CIT(A), firstly, to refuse to accept the manual filing of the appeal citing Rule 45 of the Rules. The second option was to receive the appeal and then return the same to the assessee with a covering note stating that the relevant Rule mandates e-filing of appeal with effect from 01.3.2016. Unfortunately, the office of the CIT(A) did not exercise any one of these two options. Therefore, we can safely hold that the assessee was led to believe that their appeal was accepted by the office of the CIT(A). Assessee was made known that the manual appeal filed in Form 35 would not be entertained only when the notice was issued by the CIT(A) dated 13.12.2018 and that too, after a period of three years. The contents of the show cause notice clearly show that in so far as e-filing of the appeals is concerned, the office of the CIT(A)/ jurisdictional CIT(A) was not aware as to whether the assessee filed any appeal electronically or not. This is precisely the reason as to why in the show cause notice, the assessee was informed to bring to the notice of the office of the CIT(A) as to whether they filed any appeal or not. Thus, it appears that at the relevant point of time, the process of integration was not put in place. When it is not disputed that there were several technical issues in e-filing of the appeals coupled with the fact that several assessees or their authorized representatives were not well acquainted with the procedure for e-filing of the appeals, the benefit can be given in favour of the assessee especially when the right of appeal being a statutory right and valuable right and it should not be denied on technicalities.

Summary

Issues:
1. Validity of manual appeal vs. e-appeal under Income Tax Act, 1961
2. Ignoring Rule 45 of Income Tax Rules mandating e-appeal filing
3. Condoning delay in filing appeal

Issue 1 - Validity of manual appeal vs. e-appeal under Income Tax Act, 1961:
The Revenue challenged the Tribunal's decision, arguing that the manual appeal filed by the assessee before the CIT(A) was invalid due to Rule 45 of the Income Tax Rules mandating e-appeal filing from 01.3.2016. The CIT(A) dismissed the manual appeal, stating the assessee failed to demonstrate sufficient cause for not filing an e-appeal. However, the Tribunal allowed the appeal, considering the delayed notice from CIT(A) and technical issues in e-filing appeals. The High Court held that the right of appeal is a statutory and valuable right that should not be denied on technicalities, especially when technical issues and lack of knowledge were prevalent during the filing period.

Issue 2 - Ignoring Rule 45 of Income Tax Rules mandating e-appeal filing:
The Revenue contended that the Tribunal erred in ignoring Rule 45, which mandated e-appeal filing from 01.3.2016, extended to 15.6.2016. The CBDT circular acknowledged technical issues and lack of knowledge among taxpayers regarding e-filing procedures. The High Court noted that the CIT(A) failed to follow the procedure outlined in Rule 45, leading the assessee to believe their manual appeal was accepted. The Court emphasized the importance of not denying the right of appeal on technical grounds, especially considering the circumstances and lack of integration in the filing process.

Issue 3 - Condoning delay in filing appeal:
The Tribunal's decision to allow the appeal was based on the delayed notice from CIT(A) and technical challenges faced by taxpayers in e-filing appeals. The High Court concurred with the Tribunal's decision, emphasizing the significance of the right of appeal and the one-time measure granted by the CBDT to mitigate inconvenience caused by mandatory e-filing. The Court upheld the Tribunal's decision, stating that the assessee should not be faulted for not availing the benefit of the Circular due to the delayed processing of the manual appeal by the CIT(A).

In conclusion, the High Court dismissed the tax case appeal, confirming the Tribunal's decision and answering the substantial questions of law against the Revenue.