Case Law Details
Rajendra Ramjibhai Patel Vs ACIT (ITAT Ahmedabad)
In the case of Rajendra Ramjibhai Patel vs. ACIT before the ITAT Ahmedabad, the appeal concerns a dispute over a draft assessment order for the Assessment Year 2017-18, following a notice issued under section 148 of the Income Tax Act, 1961. The Dispute Resolution Panel (DRP) dismissed the assessee’s objection, deeming it time-barred because Form 35A was signed only by the authorized representative and not by the assessee himself. The assessee, a non-resident individual, had filed a return declaring an income of ₹13,90,590 after claiming certain deductions, but the assessment was reopened due to undisclosed income from surrender values of life insurance policies. The assessing officer subsequently computed a higher income of ₹26,22,705. The appellant challenged the DRP’s decision, arguing that the signing defect was curable and that the objection was filed within the statutory period. The ITAT agreed, citing prior case law that supports rectifying such irregularities. It emphasized the principles of natural justice, directing the DRP to reconsider the objections on their merits. The case highlights the importance of procedural compliance in tax assessments and the authority of appellate bodies to address curable defects in submissions.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Assessee as against the order dated 29.12.2022 passed by Dispute Resolution Panel (hereinafter referred as DRP) as against the draft assessment order passed under section 144C(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2017-18. The majority of the Members of DRP held that Form 35A signed by the Authorized Representative is treated as filed beyond time limit and hence not maintainable.
2. Brief facts of the case is that the assessee is an individual and a Non Resident. The assessee filed his Return of Income for the Asst. Year 2017-18 on 28.02.2022 declaring total income of 13,90,590/- after claiming deduction of Rs.37,016/- under Chapter VI-A of the Act. The above return was filed by the assessee pursuant to the notice dated 31.03.2021 issued u/s. 148 of the Act by the Assessing Officer. The assessee received payments from Bharati AXA Life Insurance Company Ltd. towards surrender value of two Policies issued in the Financial Year 2010-11 wherein the difference of Rs. 12,04,383/- which was not offered for taxation. Therefore the assessment was reopened by issuing a notice u/s. 148 of the Act. The Assessing Officer computed income at Rs.26,22,705/- and demanded tax thereon by way of draft assessment order dated 30.03.2022.
3. Aggrieved against the draft assessment order, the assessee filed objection before the Ld. DRP. The majority Members of the Ld. DRP held that the Form 35A was not signed by the assessee and only his Authorized Representative signed Form 35A which is filed beyond the period of 30 days, since the objection filed by the assessee is not maintainable and liable to be dismissed.
4. Aggrieved against the Rejection order, the assessee is in appeal before us raising the following Grounds of Appeal:
1. The Hon’ble DRP has erred in law and facts of the case in dismissing the application filed by the appellant in Form 35A dated 21.04.2022 by holding it as time barred.
2. The Hon’ble DRP has erred in law and facts of the case by not appreciating that the defect pointed out was a curable defect and should have so held when the appellant had filed corrected Form 35A dated 18.11.2022.
3. The Hon’ble DRP failed to appreciate that treating the appellant’s application in Form 35A as not maintainable rendered the assessment order as time barred.
4. The learned AO has erred in making addition of Rs. 12,04,383/- on account of surrender value of life insurance policy which was already offered to tax by the appellant in his return of income.
5. The learned AO has passed the order without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the learned AO is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
6. The learned AO has erred in law and on facts of the case in levying interest u/s. 234A/B/C/D of the Act.
7. The learned AO has erred in law and on facts of the case in initiating penalty proceedings under various sections of the Act.
8. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.
5. Heard rival submissions at length and perused the materials available on record. As against the draft assessment order, assessee filed its objection in Form 35A with relevant Annexures on 21-04-2022 but not signed by the assessee, since the assessee was NRI not available in India at the time of filing of the above objection. When this defect was pointed out by Ld. DRP. Assessee requested to rectify the defect which is curable u/s. 292B of the Act and filed digitally signed copy by the assessee on 18.11.2022. However majority of the DRP held that it is not a curable defect as per Rule 4 of the DRP Rules, hence dismissed the objection filed by the assessee as not maintainable.
6. In this case, the objection was filed by the assessee well within statutory period of 30 days of passing the draft assessment order which is a curable defect, namely Form No. 35A was signed by the Authorized Representative, since the assessee being an NRI not available in India at the time of filing of this objection. When Ld. DRP brought this defect to the notice of the assessee, the same was rectified by the assessee by affixing digital signature in Form No. 35A before Ld. DRP on 18-1 1-2022. Though the majority members of Ld. DRP held that the objection is filed beyond the period of limitation as per Rule 4 of DRP Rules. In our considered view, the proceedings before the Ld. DRP is extension of the assessment proceedings, since the correctness of the draft assessment order is being challenged before Ld. DRP. When the very same Authorized Representative who appeared before the A.O. in the draft assessment proceedings has signed the objections in prescribed Form 35A, the same is curable defect u/s. 292B of the Act, which was done by the assessee on 18-11-2022, when the assessee was put to notice by the Ld. DRP. Further the assessee also provided valid Letter of Authority in favour of the Chartered Accountant. Thus this is an irregularity and not an illegality which is curable defect u/s. 292B of the Act.
6.1. The Jurisdictional High Court in the case of Rajendra Kumar Maneklal Sheth (HUF) Vs. CIT reported in (1995) 213 ITR 715 wherein it was held that the appellate authorities has power to cure the so called irregularity with regard to the signature in Form No. 35 as follows:
“It is apparent that the AAC has felt that the delay was required to be condoned considering the various judgments which were cited before him, particularly, In view of the fact that the assessee has submitted a revised appeal memo duly signed by him and has prayed that delay, if any, be condoned. This may impliedly mean that the first appeal memo was not duly signed by the applicant. In such circumstance, when the appellate authority has considered the fact that when the revised appeal memo was submitted by the assessee and after considering various decisions, it thought that it was a fit case for condoning the delay as the Department is not likely to suffer any loss or prejudice. The AAC has exercised his discretionary jurisdiction and has condoned the delay and admitted the appeal for adjudication on merits under s. 249(3). For condonation of delay, he has considered the facts stated by the applicant and also the case law cited before him. Further, by admitting the appeal for adjudication on merits, the Department is not likely to suffer any loss or prejudice. Hence, it cannot be said that the discretionary power exercised by the appellate authority in curing the so-called irregularity with regard to signature on the appeal memo, calls for any interference by the Tribunal, particularly when the fresh appeal memo duly signed by the applicant was submitted before it.”
6.2. Similarly, Delhi High Court in the case of Remfry & Sons Vs. CIT reported in (2005) 276 ITR 001 wherein it was held that irregularity is to be cured by giving opportunity of hearing to the appellant as follows:
“Appeal [CIT(A)]-Signing of appeal memo-Memorandum of appeal signed by Authorized Representative of firm-Rule 45 is a procedural rule-Law relating to procedures is to be construed liberally-It would be in the interest of Justice, fairness and equity to provide an opportunity to the assessee to rectify the irregularity committed in regard to compliance of procedural law-Memorandum of appeal signed by a duly authorized person who acts on behalf of the managing partner/partner can be taken as substantial compliance with the provisions of r. 45-Non-adherence of some part of r. 45 may not be a ground for rejecting the appeal and it would be more appropriate for the authorities concerned to grant an opportunity to the assessee to remove the defect-Said Irregularity was curable and could be rectified on the date of filing of the appeal or even subsequent thereto as the appeal was admittedly filed within the period of limitation-Appeal is restored to the CIT(A) for hearing in accordance with law.”
6.3. Further Rule 16 of the ITAT Rules also Authorize the Memorandum of Appeal in Form No. 36 filed by an assessee can be signed by his Authorized Representative with valid authorization from the assessee. Thus in the interest of Principle of Natural Justice, we hereby set aside the order passed by the Ld. DRP and direct it to decide the objection filed by the assessee and pass order on merits by duly giving proper opportunity of hearing to the assessee. Since the case is set aside to the file of Ld. DRP, remaining ground nos. 3 to 8 are not adjudicated, the same are consequential in nature.
7. In the result, the appeal filed by the Assessee is hereby allowed for statistical purpose.
Order pronounced in the open court on 17-10-2024
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