Facts of the Case

The assessee, an individual salaried employee working in the software development domain, filed her return of income for Assessment Year 2014-15 declaring total income of ₹4,86,41,526. The return was processed under Section 143(1) by CPC, Bengaluru, accepting the returned income and raising a demand of ₹2,08,52,720. Subsequently, it was claimed by the assessee that due to a clerical and inadvertent error, salary income of ₹4,86,41,526 was reported instead of the actual salary of ₹3,61,253. Aggrieved, the assessee filed an appeal before the Addl./JCIT(A) after a substantial delay of more than 3,200 days. The CIT(A) refused to condone the delay and dismissed the appeal solely on the ground of limitation without examining the merits. The assessee carried the matter in appeal before the Tribunal.

Issues Involved

Whether the delay in filing appeal before the CIT(A) deserved to be condoned, whether dismissal of appeal solely on technical grounds of limitation without adjudication on merits was sustainable, and whether an assessee could be penalised for a bona fide clerical error in reporting salary income resulting in an excessive tax demand.

Petitioner’s Arguments

The assessee contended that the delay in filing appeal was unintentional and occurred due to complete reliance on her tax consultant under the e-assessment regime and lack of awareness of tax intricacies. It was submitted that the incorrect salary figure was reported due to a clerical mistake and that all correct documentary evidence such as Form-16, Form-12BA, Form-26AS and TRACES certificates were available on record. Reliance was placed on judicial precedents including Collector, Land Acquisition vs. Mst. Katiji and Inder Singh vs. State of Madhya Pradesh to contend that technicalities should not defeat substantial justice and that the merits of the case should not be ignored on limitation alone.

Respondent’s Arguments

The Revenue supported the order of the CIT(A) and contended that the delay in filing appeal before the first appellate authority was inordinate and not satisfactorily explained, justifying dismissal of the appeal as not maintainable.

Court Order / Findings

The ITAT Kolkata observed that the assessee was a salaried employee and the error in reporting salary income was prima facie clerical and inadvertent. The Tribunal noted that the CIT(A) dismissed the appeal purely on the ground of delay without examining the merits of the case. The Tribunal held that an assessee should not be penalised for mistakes committed by a tax consultant and that only real income can be brought to tax. Considering the principles laid down by the Supreme Court in Collector, Land Acquisition vs. Mst. Katiji and other binding precedents, the Tribunal held that substantial justice must prevail over technicalities. The order of the CIT(A) was therefore set aside and the matter was remanded to the Assessing Officer for de novo assessment after granting proper opportunity of hearing to the assessee.

Important Clarification

The Tribunal clarified that appellate authorities must decide matters on merits and should not dismiss appeals solely on technical grounds of limitation where bona fide reasons are demonstrated. Clerical errors in return filing, when supported by authentic documentary evidence, should not result in taxation of income which was never earned. Only real income can be assessed under the Income-tax Act.

Final Outcome

The appeal filed by the assessee was partly allowed for statistical purposes. The order of the CIT(A) was set aside and the matter was restored to the Assessing Officer for fresh assessment de novo after providing reasonable opportunity of being heard to the assessee and considering the correct income supported by documentary evidence.

Source Link- https://itat.gov.in/public/files/upload/1767178974-s4MSDT-1-TO.pdf

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