2021 (4) TMI 1060 - AT - Income Tax

Maintainability of appeal being signed digitally - CIT(A) dismissing the appeal holding that the Form No.35 has been not verified by the Managing Director nor any other Director and hence the appeal is not valid - HELD THAT - Admittedly, the provisions of Sec. 140 r.w. Rule 45 do require a managing director/director to sign and verify the appeal, but merely for the reason that on account of an inadvertent mistake the same had been digitally signed by the appellant company itself cannot justify the summarily rejection of the appeal by treating the same as invalid without confronting the said infirmity to the appellant. It is a settled canon of interpretation of procedural law that normally its non-adherence does not result in illegality which would render the appeal incompetent, unless such non-compliance related to a substantive provision and had caused prejudice to the other party and may have the effect of taking away a settled right. In fact, we are of the considered view that law relating to procedure may always not prove fatal to the proceedings initiated by the assessee and it would be in the interest of justice, fair and equitable to provide an opportunity to the assessee to rectify the irregularity in regard to compliance to the procedural rules unless the non-compliance to the procedure is of such a nature that it necessarily creates a bar or takes away a substantive right vested in the other side. Accordingly, in a case where the appeal is filed in accordance with the form but is not signed by the person specified under Rule 45, we are of the considered view that in all fairness the appellant should be granted an opportunity to correct this error rather than dismissing of the appeal as not maintainable when the same is otherwise complete in all respects and has been filed within the prescribed period of limitation. To sum up, the nonadherence of some part of the rule per se may not be a ground for rejecting the memorandum of appeal and it will be more appropriate for the appellate authority concerned to have granted an opportunity to the assessee to remove the defect, if any, provided the appeal was in substantial compliance to the provisions of Rule 45 and has been filed within the period of limitation. In all fairness the appeal of the captioned assessee merits to be restored to the file of the CIT(A) who shall after affording an opportunity to the assessee appellant to correct the aforesaid error, therein, dispose off the appeal on the basis of a speaking order in accordance with law

Summary

Issues:
1. Validity of appeal verification process by the assessee.
2. Disallowance of long-term capital loss on sale of shares.
3. Disallowance of interest expense under section 37(1) of the Act.
4. Disallowance of bad debts written off.
5. Disallowance under section 14A r.w.r. 8D of the I.T. Act.
6. Disallowance of interest expense under section 36(1)(iii) of the Act.
7. Addition of disallowed expenditure to book profit under section 115JB of the Act.

Issue 1: Validity of appeal verification process by the assessee:
The appeal was dismissed by the CIT(A) due to the Form No. 35 not being verified by the managing director or any other director of the company. The ITAT found that the appeal was digitally signed by the director but contained a typographical error in mentioning the company's name. The ITAT held that this was a curable irregularity and should not have led to the dismissal of the appeal without providing an opportunity to rectify the mistake. The ITAT referred to procedural laws and previous judgments to emphasize that such errors should not render the appeal invalid and that the appellant should have been given a chance to correct the mistake. The appeal was restored to the file of the CIT(A) for fresh adjudication.

Issue 2: Disallowance of long-term capital loss on sale of shares:
The appellant contested the disallowance of long-term capital loss on the sale of shares, arguing that it should be considered a genuine and deductible loss. The ITAT did not provide a specific ruling on this issue in the summarized judgment.

Issue 3: Disallowance of interest expense under section 37(1) of the Act:
The appellant challenged the disallowance of interest expense under section 37(1) of the Act, claiming it should be allowed as a deductible revenue expense. The ITAT did not provide a specific ruling on this issue in the summarized judgment.

Issue 4: Disallowance of bad debts written off:
The appellant contended that the bad debts written off should be allowed as deductible business expenditure under section 36(1)(vii) of the I.T. Act or as business loss under section 29 of the Act. The ITAT did not provide a specific ruling on this issue in the summarized judgment.

Issue 5: Disallowance under section 14A r.w.r. 8D of the I.T. Act:
Multiple grounds were raised regarding disallowances made under section 14A r.w.r. 8D of the I.T. Act. The appellant argued against the disallowances made by the AO and the CIT(A), stating that certain expenses were already disallowed, and the disallowance should not exceed the total exempt dividend income earned. The ITAT did not provide a specific ruling on this issue in the summarized judgment.

Issue 6: Disallowance of interest expense under section 36(1)(iii) of the Act:
The appellant disputed the disallowance of interest expense under section 36(1)(iii) of the Act, claiming that no disallowance was warranted. The ITAT did not provide a specific ruling on this issue in the summarized judgment.

Issue 7: Addition of disallowed expenditure to book profit under section 115JB of the Act:
The appellant objected to the addition of disallowed expenditure to the book profit computed under section 115JB of the Act, arguing that such disallowance has no application to book profit. The ITAT did not provide a specific ruling on this issue in the summarized judgment.

In conclusion, the ITAT primarily focused on the validity of the appeal verification process by the assessee and directed the appeal to be restored for fresh adjudication. The other issues raised by the appellant regarding various disallowances were not specifically addressed in the summarized judgment.