RATNALA VANAJAKSHI,VISAKHAPATNAM vs. THE INCOME TAX OFFICER, WARD-1, VIZIANAGARAM

Succinctly stated, the assessee had filed her return of income for the assessment year 2013-14 declaring an income of Rs. 4,45,020/-. Subsequently, the assessment was framed by the AO under section 143(3) of the Income-tax Act, 1961 (for short, "the Act"). Thereafter, the AO reopened the concluded assessment vide a notice issued under section 148 of the Act, and framed the assessment vide his order passed under section 143(3) r.w. Section 147 of the Act, dated 28.12.2018.

During the course of the assessment proceedings, the AO observed that the assessee had failed to satisfactorily explain the source of cash deposits aggregating to Rs. 70,61,846/- made prior to the commencement of her liquor business. As an amount of Rs. 20,00,000/- had already been added in the original assessment, the AO made a further addition of the balance amount of Rs. 50,61,846/- under section 69 of the Act and framed the assessment vide his order passed under section 143(3) r.w section 147 of the Act, dated 28.12.2018, determining the income of the assessee at Rs. 84,15,770/.

Aggrieved, the assessee carried the matter in appeal before the Addl./JCIT (A), who, on verification of “Form No.35”, observed that the appeal had been described as one filed against an order passed under section 154 of the Act. However, the order enclosed along with the appeal and available on record was the assessment order passed under section 143(3) r.w. Section 147 of the Act. The Addl./JCIT (A) further observed that no rectification order under section 154 was available on record.

The CIT(A), on the aforesaid reasoning, without examining the issues raised by the assessee on the merits, held that the appeal was deficient and advised the assessee to file an appeal against the appropriate order. Accordingly, the CIT(A) held the assessee's appeal to be deficient and dismissed it.

The assessee, aggrieved with the CIT(A) order, has carried the matter in appeal before us.

We have heard the Ld. Authorised Representatives of both parties, perused the orders of the authorities below and considered the material available on record.

Shri. GVN Hari, learned Authorised Representative of the assessee at the threshold of the hearing of the appeal, submitted that the Ld. CIT(A) has adopted a highly technical approach in dismissing the appeal. The Ld. AR submitted that the assessee had enclosed, along with the memorandum of appeal in “Form 35,” only the reassessment order passed under Section 143(3) r.w. Section 147 of the Act. Elaborating on his contention, the Ld. AR submitted that the date of the order, the assessment year, the AO, the tax demand and every other relevant detail mentioned in “Form No.35” corresponded only to the reassessment order. It was further submitted that the revised grounds of appeal as well as detailed “written submissions” filed before the CIT(A) specifically challenged the reassessment order dated 28.12.2018. The Ld. AR submitted that considering the aforesaid facts, there could not have been any doubt regarding the order sought to be challenged. It was further submitted that mentioning section 154 in “Form No.35” was merely an inadvertent typographical error which was curable in nature, and the CIT(A), instead of summarily dismissing the appeal, ought to have afforded an opportunity to the assessee appellant to rectify the mistake and adjudicated the appeal on the merits.

Per Contra, the Ld. Departmental Representative (for short, “DR”) supported the order of the CIT(A).

We have heard the Ld. Authorised Representatives in the backdrop of the orders of the authorities below.

We find that the controversy before us lies in a narrow compass, i.e., whether the CIT(A) was justified in dismissing the appeal as deficient solely because section 154 was mentioned in “Form No.35”, notwithstanding the fact that the appeal was otherwise directed against the reassessment order passed under Section 143(3) r.w Section 147 of the Act.

As is discernible from the record, it is evident, viz. (i) the order enclosed with “Form No.35” is the reassessment order dated 28.12.2018 passed under section 143(3) r.w. Section 147 of the Act; (ii). the date of the order, assessment year, Assessing Officer and tax demand mentioned in “Form No.35” correspond only to the reassessment order;

We are of a firm conviction that in the backdrop of the aforesaid facts there was never any real ambiguity regarding the order intended to be challenged, and the incorrect mention of section 154 in “Form No.35” is evidently a clerical or typographical error.

It is well settled that the right of appeal is a valuable statutory right, and procedural requirements are intended to facilitate adjudication on the merits and should not ordinarily defeat substantive rights. Also, we are of the view that the curable defects in the memorandum of appeal ought to have been permitted to be rectified by the CIT(A) as the same causes no prejudice to the opposite party.

However, we find that in the present case, the CIT(A), instead of granting an opportunity to the assessee to correct the inadvertent mistake in “Form No.35”, dismissed the appeal itself. Such an approach, in our considered opinion, is hyper- technical and has resulted in the denial of adjudication of the assessee's statutory appeal on the merits.

We are of firm conviction that an appellate authority exercises quasi-judicial powers and is expected to adopt a justice-oriented approach. In our view, once it was evident from the record that the impugned order enclosed with the appeal was the reassessment order dated 28.12.2018 and that the assessee had challenged the additions made therein, the CIT(A) ought to have permitted correction of the clerical mistake and proceeded to adjudicate the appeal on the merits.

Considering the aforesaid facts, we are of the view that since the issues raised by the assessee challenging the reassessment order have not been examined at all by the CIT(A), therefore, in all fairness and in the interest of justice, the matter requires to be restored to the file of the CIT(A) for fresh adjudication.

We thus, in terms of our aforesaid deliberations, set aside the impugned order passed by the Addl./JCIT (Appeals) and restore the matter to his file with the directions, viz. (i). to treat the appeal as one filed against the assessment order dated 28.12.2018 passed under section 143(3) r.w section 147 of the Act; (ii). to permit the assessee to rectify the inadvertent clerical error, if considered necessary; (iii) to adjudicate all the grounds of appeal on the merits in accordance with law after affording adequate opportunity of hearing to both the parties; and (iv) to pass a reasoned speaking order in accordance with law.

Before parting, we make it clear that we have not expressed any opinion on the merits of the additions made by the AO, and all issues are left open for consideration by the CIT(A).

In the result, the appeal of the assessee is allowed for statistical purposes in terms of our aforesaid observations.