2025 (4) TMI 1384 - HC - Income Tax

Belated filling of appeal before CIT(Appeals) - petitioner had filed an appeal in Form No.35 manually - HELD THAT - As petitioner had filed the appeal within the extended time on 15.06.2016 as per Circular No. 20/2016 dated 26.05.2016 the appeal could not have been dismissed on the ground of delay. The impugned order passed by CIT(Appeals) is hereby quashed and set aside. The matter is remanded to CIT(Appeals) to decide the same on merits in accordance with law after giving an opportunity of hearing to the petitioner.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the appeal filed by the petitioner before the Commissioner of Income Tax (Appeals) (CIT(A)) was barred by delay under Section 249(2)(b) of the Income Tax Act, 1961, and if so, whether the delay was condonable under Section 249(3) of the Act.

- Whether the petitioner's filing of a manual appeal prior to the electronic filing within the extended time as per Circular No. 20/2016 dated 26.05.2016 was properly considered by the CIT(A).

- Whether the CIT(A) erred in dismissing the appeal on the ground of inordinate delay without considering the merits of the appeal.

- Whether principles of natural justice were complied with in the appellate proceedings, particularly with respect to the petitioner's opportunity to explain the delay in filing the appeal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of dismissal of appeal on ground of delay under Section 249(2)(b) and condonation under Section 249(3)

Relevant Legal Framework and Precedents:

Section 249(2)(b) mandates that an appeal to the CIT(A) must be filed within 30 days from the date of service of the demand notice under Section 143(3). Section 249(3) empowers the CIT(A) to admit an appeal after the expiry of the prescribed period if satisfied that the appellant had sufficient cause for not filing the appeal within time. The Income Tax Rules, 1962, particularly Rule 45, prescribe e-filing of appeals from 01.03.2016. Circular No. 20/2016 extended the time limit for e-filing appeals to 15.06.2016 for certain categories of taxpayers.

Court's Interpretation and Reasoning:

The CIT(A) dismissed the appeal on the ground that the petitioner's electronically filed appeal dated 15.06.2016 was delayed by 88 days beyond the statutory 30-day period from the date of service of the demand notice (28.03.2016). The petitioner had declared in Form No. 35 that there was no delay in filing the appeal (Column 14) and did not provide reasons for delay (Column 15). The CIT(A) held that this factual inaccuracy and absence of reasons precluded condonation of delay under Section 249(3). Further, the petitioner did not disclose the earlier manual filing of the appeal dated 22.04.2016 during the appellate proceedings.

The Court noted that the statutory provisions are mandatory and the CIT(A) is not obliged to issue any separate notice to explain delay. The statutory mechanism to explain delay is embedded in Form No. 35 itself. The CIT(A) found no sufficient cause for delay and therefore dismissed the appeal.

Key Evidence and Findings:

The petitioner's manual appeal was filed on 22.04.2016, within the 30-day period, but was not brought on record before the CIT(A). The electronically filed appeal on 15.06.2016 was beyond the 30-day limit but within the extended time allowed by Circular No. 20/2016 for certain categories. The CIT(A) found the petitioner's declaration in Form No. 35 factually incorrect and no reasons stated for delay.

Application of Law to Facts:

The Court observed that the petitioner's failure to disclose the manual appeal filing during appellate proceedings led to dismissal on delay grounds. However, the petitioner had indeed filed the manual appeal within the statutory period and also filed electronically within the extended time. The Court held that the appeal ought not to have been dismissed on delay grounds without considering the merits.

Treatment of Competing Arguments:

The petitioner argued that the appeal was filed within the extended time as per Circular No. 20/2016 and should be decided on merits. The respondents relied on the absence of reasons for delay in Form No. 35 and the incorrect declaration to justify dismissal. The Court found merit in the petitioner's argument given the manual filing and extended time provisions.

Conclusions:

The Court concluded that the CIT(A) erred in dismissing the appeal solely on delay grounds without considering the merits, especially since the petitioner had filed the manual appeal within time and electronic appeal within extended time.

Issue 2: Consideration of manual appeal filed prior to electronic appeal and its impact

Relevant Legal Framework and Precedents:

Rule 45 of the Income Tax Rules mandates e-filing of appeals from 01.03.2016. Circular No. 20/2016 provided an extended time limit for e-filing appeals for certain taxpayers who could not successfully e-file or had filed paper appeals.

Court's Interpretation and Reasoning:

The CIT(A) did not consider the manual appeal filed on 22.04.2016 as it was not brought on record during appellate proceedings. The Court observed that had this fact been disclosed, the appeal would have been admitted as filed within the extended time limit and decided on merits.

Key Evidence and Findings:

The petitioner's letter and submissions before the Court revealed the existence of the manual appeal filed within time, which was not disclosed earlier.

Application of Law to Facts:

Since the petitioner had filed a manual appeal within the statutory period and the extended time under Circular No. 20/2016 applied to paper appeals, the appeal should have been admitted and heard on merits.

Treatment of Competing Arguments:

The respondents argued that the manual appeal was not disclosed and thus not considered. The Court emphasized that non-disclosure led to dismissal but the procedural lapse should not prejudice the substantive rights of the petitioner.

Conclusions:

The Court held that the manual appeal filing within time was a crucial fact and the appeal ought to have been admitted and decided on merits.

Issue 3: Compliance with principles of natural justice in appellate proceedings

Relevant Legal Framework and Precedents:

Principles of natural justice require that a party be given a fair opportunity to present their case and explain any delay or irregularity. Form No. 35 provides columns for declaring delay and reasons, serving as a built-in safeguard.

Court's Interpretation and Reasoning:

The CIT(A) relied on the petitioner's declarations in Form No. 35 and the absence of reasons for delay to dismiss the appeal. The Court noted that no separate notice to explain delay is mandated by the Act, and the Form itself is the mechanism to comply with natural justice.

Key Evidence and Findings:

The petitioner did not mention delay or reasons in Form No. 35, which the CIT(A) treated as non-compliance with procedural safeguards.

Application of Law to Facts:

The Court found that the procedural safeguards were embedded in the Form and the petitioner's failure to comply led to dismissal. However, since the petitioner had filed a manual appeal within time, the procedural lapse should not be fatal.

Treatment of Competing Arguments:

The respondents submitted that natural justice was complied with via Form No. 35. The petitioner argued that the manual appeal filing was not considered, which affected their rights.

Conclusions:

The Court accepted that natural justice principles were embedded in the statutory procedure but emphasized that the petitioner should be given an opportunity to be heard on merits given the manual filing within time.

3. SIGNIFICANT HOLDINGS

"Considering the above submissions and the undisputed fact that the petitioner had filed the appeal within the extended time on 15.06.2016 as per Circular No. 20/2016 dated 26.05.2016, the appeal could not have been dismissed on the ground of delay."

"The impugned order dated 18.02.2022 passed by CIT(Appeals) is hereby quashed and set aside. The matter is remanded to CIT(Appeals) to decide the same on merits in accordance with law after giving an opportunity of hearing to the petitioner."

Core principles established include:

- The mandatory time limit for filing appeals under Section 249(2)(b) must be adhered to, but sufficient cause for delay may be considered under Section 249(3).

- The statutory mechanism for explaining delay is embedded in Form No. 35, and failure to disclose delay or reasons therein may lead to dismissal.

- However, where a manual appeal was filed within time and not disclosed during appellate proceedings, the appeal should not be dismissed on delay grounds without considering the merits.

- Principles of natural justice are satisfied by the procedural safeguards in Form No. 35 and the opportunity for personal hearing, but substantive rights must not be prejudiced by procedural lapses.

Final determinations:

The Court quashed and set aside the order dismissing the appeal on delay grounds and remanded the matter to the CIT(A) for fresh adjudication on merits after affording the petitioner a fair hearing.