2025 (1) TMI 909 - AT - Income Tax

Delay in filing the appeal before CIT(A) - appeal filed belatedly by the assessee by 2176 days beyond the time prescribed u/s. 249(2) - assessee has made legal challenge on merits before ld. CIT(A) to applicability of MMR to the assessed income against application of normal rate of taxation - main contention of the assessee that the assessee was not aware of the processing of the return by CPC u/s 143(1) and it is only when the notice of demand for recovery issued by department was received by the assessee, the assessee came to know of the outstanding demand against the assessee - Revenue has claimed that the said processing of return u/s. 143(1) and intimation was uploaded on IT e-portal, the same shall be deemed to be the service of intimation u/s. 143(1) HELD THAT - CIT(Appeals) has not made any enquiry as to the manner in which the service of intimation u/s. 143(1) was effected by the Revenue on the assessee. He has simply dismissed the appeal of the assessee on the ground that there is a huge delay of 2176 days in filing of the appeal before ld. CIT(A) beyond the time prescribed u/s. 249(2) of the Act, and the assessee could not submit sufficient/ justifiable cause for delay in filing this appeal belatedly with ld. CIT(A). This requires investigation of facts which can be ascertained only after enquiry. We direct the ld. CIT(Appeals) to make enquiry as to the manner in which the service was effected by the Revenue of the Intimation u/s. 143(1) of the Act on the assessee, and to arrive at the finding/conclusion whether service of intimation u/s 143(1) effected by CPC was in compliance to section 282 of the 1961 Act read with Rule 127 of the 1962 Rules. As decided in Munjal BCU Centre of Innovation and Enterpreneurship, Ludhiana 2024 (3) TMI 479 - PUNJAB HARYANA HIGH COURT as held that merely uploading of the communication(notice) in the Income Tax department e-portal is not sufficient mode of communication keeping in view principles of natural justice which are inherent in income tax proceedings as also keeping in view provisions of Section 282 of the 1961 Act and Rule 127 of the 1962 Rules. When technicalities are pitted against advancement of substantial justice, then the court will lean towards advancement of justice. Thus, restoring back the matter back to the file of ld. CIT(Appeals) to firstly decide afresh on the application for condonation of delay supported by affidavit filed by assessee before ld. CIT(A), keeping in view the provisions of section 282 of 1961 Act read with Rule 127 of the 1962 Rules. Appeal of the assessee is allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The legal judgment from the Income Tax Appellate Tribunal (ITAT) Agra Bench primarily revolves around the following core legal issues:

• Whether the delay of 2176 days in filing the appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] can be condoned.
• Whether the income of the assessee trust should be taxed at the Maximum Marginal Rate (MMR) or at the normal rate applicable to individuals, considering the trust's status as a Private Discretionary Trust.
• Whether the intimation under Section 143(1) of the Income Tax Act, 1961, was properly served to the assessee, thus affecting the computation of the limitation period for filing the appeal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of Delay in Filing the Appeal

• Relevant Legal Framework and Precedents: The legal framework involves Section 249(2) of the Income Tax Act, which prescribes the time limit for filing an appeal. The court also considered precedents related to the condonation of delay, emphasizing the need for a bona fide reason for such delays.
• Court's Interpretation and Reasoning: The court noted that the CIT(A) dismissed the appeal solely on the grounds of delay without examining the merits. The assessee argued that the delay was due to a lack of awareness about the intimation, which was only discovered upon receiving a recovery notice.
• Key Evidence and Findings: The assessee provided an affidavit and explanations for the delay, asserting that the intimation was not effectively communicated.
• Application of Law to Facts: The court directed the CIT(A) to investigate whether the intimation was served in compliance with Section 282 of the Act and Rule 127 of the Income Tax Rules, which govern the service of notices.
• Treatment of Competing Arguments: The court balanced the need for procedural compliance with the principles of natural justice, indicating that substantial justice should prevail over procedural technicalities.
• Conclusions: The court remanded the matter to the CIT(A) to reconsider the condonation of delay after proper inquiry into the service of the intimation.

Issue 2: Taxation Rate Applicable to the Trust

• Relevant Legal Framework and Precedents: Section 164(1) of the Income Tax Act was pivotal, which outlines the taxation of discretionary trusts. The assessee relied on CBDT Circular No. 6/2012, which clarifies the taxation of private discretionary trusts.
• Court's Interpretation and Reasoning: The court did not delve into the merits of this issue due to the procedural hurdle of the delay in filing the appeal.
• Key Evidence and Findings: The trust was created by a will, with identifiable beneficiaries, arguing for taxation at the normal rate applicable to individuals rather than MMR.
• Application of Law to Facts: The court acknowledged the arguments but deferred the substantive examination pending the resolution of the procedural issue.
• Treatment of Competing Arguments: The court noted the competing interpretations of Section 164(1) but focused on procedural aspects.
• Conclusions: The court instructed the CIT(A) to address this issue on merits if the delay is condoned.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "When technicalities are pitted against the advancement of substantial justice, then the court will lean towards advancement of justice."
• Core Principles Established: The judgment underscores the importance of ensuring procedural fairness and the effective communication of notices to taxpayers. It also highlights the judiciary's inclination to favor substantive justice over procedural technicalities.
• Final Determinations on Each Issue: The appeal was allowed for statistical purposes, with the matter remanded to the CIT(A) to investigate the service of the intimation and reconsider the condonation of delay. The substantive issue of the appropriate tax rate for the trust remains open for determination upon resolving the procedural aspects.