VINAYAK CARE SOLUTATION (P) LTD.,MUMBAI vs. THE OTO WARD 3(2), BHOPAL

Assessment Year: 2011-12 Vinayak Care Solutions Pvt. ITO-3(2) Ltd. Bhopal बनाम/ 115, Atlanta Estate Vs. Goregaon, Mulund Link Road, Goregaon (E), Mumbai (Appellant) (Revenue ) P.A. No.AABCV8500G Appellant by S/Shri Sumit Nema & P.D. Nagar ARs Revenue by Shri K.G. Goyal, DR Date of Hearing: 10.02.2020 Date of Pronouncement: 20.02.2020 आदेश / O R D E R PER KUL BHARAT, J.M: This appeal by the assessee is directed against order of the CIT(A)-2, Bhopal dated 08.02.2016 for the assessment year 2011-12.

[ Care Solutions Pvt. Ltd. ]

There being reasonable and sufficient case, the appeal was submitted late with a separate prayer to admit the appeal by condoning the delay on the part of the counsel. In support of the same assessee has also filed affidavit wherein it has also been submitted that such delay was occurred on account of extreme failure on the part of its counsel due to gross negligence as well improper handling of appellate matters. Ld. counsel submitted that for the gross negligence of the AR of the assessee, appeal could not [ Care Solutions Pvt. Ltd. ] be filed in time. Ld. counsel submitted that a lenient view may be adopted. Ld. counsel place reliance on various case laws as under:-

S.N Particulars (Citations) o 01 ) Vedabi alias Vijayantbai Patel vs. Shantaram Patel (2002) 253 ITR 798 SC) -, 02) Mahavir Prasad Jain vs. CIT (1988) 172 ITR 331 (MP) 03) M/s. Mihani Network vs. CCCE (2014) 23 ITJ 621 (MP) 04) M/s. Jetu Steels vs. DCIT (2012) 19 ITJ 616 (MP) 05) Hawkins Cookers Ltd vs. State of MP (WP no.15783, 15787 & 15788) Judgment dt. 04.11.2019 (MP) 06) Sujata Verma vs. ITO (2012) 20 IT} 5 (Indore Bench) 07) Narayan Balmukund Dubey vs. CIT (2016) 28 ITJ 348 (Indore Bench) 08) M/s. Emsons Organics Ltd vs. DCIT (Appeal No.1088 to 1092/CHD/2 0 18) [Chandigarh Bench) 09) M/s. Bhagwati Colonizers Pvt. Ltd, Mansa (Appeal No.169/Amr/2015) [Amritsar Bench]

3. On the other hand, Ld. Sr. DR opposed the submissions of the assessee and submitted that the delay should not be condoned as under the Limitation Act, each day’s delay has to be explained. Learned Sr. DR for the assessee also relied

[ Care Solutions Pvt. Ltd. ] on the decision of Hon'ble Supreme Court passed in case of CIT vs. Hapur Pilkhuwa Development Authority (SLP No.26127/2018) on 27.8.2018.

[ Care Solutions Pvt. Ltd. ] No.26127/2018) on 27.8.2018 as relied by the Ld. DR is concerned, the facts are distinguishable because the Hon'ble Supreme Court did not condone the delay of the appeal of the Revenue due to misleading statement given before the Hon’ble Court. In the present case, the contention of the assessee is that the delay occurred due to negligence of the advocate. Hon'ble’ Supreme Court in the case of Vedabi alias Vijayantbai Patil vs. Shantaram Patil (2002) 253 ITR 798(SC) held as under:

In exercising discretion under section 5 of the Limitation Act the courts should adopt a pragmatic approach. A distinction must be made between a case where the delay is inordinate and a case where the delay is of a few days. Whereas in the former case the consideration of prejudice to the other side will be a relevant factor so the case calls for a more cautious approach but in the latter case no such consideration may arise and such a case deserves a libe- ral approach. No hard and fast rule can be laid down in this regard. The court has to exercise the discretion on the facts of each case keeping in mind that in construing the expression "sufficient cause", the principle of advancing substantial justice is of prime importance. In our view in this case, the approach of the learned civil judge is wholly erroneous and his order is unsustainable. It is evident that the discretion under section 5 of the Limitation Act is exercised by the civil judge in contravention of the law laid down by this court, that the 5

[ Care Solutions Pvt. Ltd. ] expression "sufficient cause" should receive liberal construction, in a catena of decisions (see State of West Bengal v. Administrator, Howrah Municipality, AIR 1972 SC 749 ; [1972] 1 SCC 366 and Smt. Sandhya Rani Sarkar v. Smt. Sudha Rani Debi, AIR 1978 SC 537 ; [1978] 2 SCC 116). The High Court in exercising its jurisdiction under section 115 of the Civil Procedure Code, failed to correct the jurisdictions error of the appellate court. For the aforementioned reasons, we set aside the impugned order of the High Court as well as that of the Civil Judge Amalner (the appellate Court) condone the delay of seven days in filing the appeal, restore the appeal to the file of the civil judge and direct the learned Civil Judge, Amalner, to decide the appeal on the merits.

[ Care Solutions Pvt. Ltd. ] party may be a villager or may belong to a rural area and may have no knowledge of the court's procedure. After engaging a lawyer, the party may remain supremely confident that the lawyer will look after his interest. At the time of the hearing of the appeal, the personal appearance of the party is not only not required but hardly useful. Therefore, the party having done everything in his power to effectively participate in the proceedings can rest assured that he has neither to go to the High Court to inquire as to what is happening in the High Court with regard to his appeal nor is he to act as a watchdog of the advocate that the latter appears in the matter when it is listed. It is no part of his job. Mr. A.K. Sanghi stated that a practice has grown up in the High Court of Allahabad amongst the lawyers that they remain absent when they do not like a particular Bench. May be we do not know, he is better informed in this matter. Ignorance in this behalf is our bliss. Even if we do not put our seal of imprimatur on the alleged practice by dismissing this matter, which may discourage such a tendency, would it not bring justice delivery system into disrepute ? What is the fault of the party who, having done everything in his power and expected of him, has to suffer because of the default of his advocate? If we reject this appeal, as Mr. A. K. Sanghi invited us to do, the only one who would suffer would not be the lawyer who did not appear but the party whose interest he represented. The problem that agitates us is whether it is proper that the party should suffer for the inaction, deliberate omission or misdemeanour of his agent. The answer obviously is in the negative. May be that the learned advocate absented himself deliberately or intentionally. We have no material for ascertaining that aspect of the matter. We say nothing more on that aspect of the matter. However, we cannot be a party to an innocent party suffering injustice merely because his chosen advocate defaulted. Therefore, we allow this appeal, set aside the order of the High Court, both dismissing the appeal and refusing to recall that order. We direct that the appeal be restored to its original number in the High Court and be disposed of according to law."

[ Care Solutions Pvt. Ltd. ]

4. Following the aforesaid decision, this application is allowed. Miscellaneous Petition No. 191 of 1981 is restored. As the petition can now be disposed of only by the Central Administrative Tribunal, the registry is directed to arrange to send the record of the case to the Tribunal. No order as to costs. 6. Further, the Hon'ble M.P. High Court in the case of M/s.

Jetu Steels vs. DCIT (2012) 19 ITJ 616 (MP) held as under:

“8. Having considered the submissions made by the Ld. counsel for the parties, we are of the view that the substantial question of law requires to be answered in favour of the assessee and against the revenue. We find that in the application seeking condonation of delay, the appellant assessee had clearly stated that the business of the appellant a proprietorship firm was being run in the name and style of a partnership firm viz. M/s. Jetu Seels having two partner Dilip Birani and Anil Birani. The said firm was dissolved w.e.f. 28.11.2008. It has been further stated that the order of CIT(A) was served on the appellant on 22.01.2010. However, the same was misplaced because of voluminous paper work involved pertaining to partnership period owning to dissolution of the firm and it could not be handed over to the counsel for filing the appeal on account of strain of the dissolution of the firm, joint family separation and constant heavy losses. In support of reasons stated in the applications, an affidavit of Dilip Birani, proprietor of appellant firm and affidavit of R.S. Pasari, Manager of the firm were file. The said averments were not controverter by the respondent by filing any counter affidavit. However, the Tribunal vide its order dated 16.12.2011 dismissed the appeal by holding that the 8

[ Care Solutions Pvt. Ltd. ] appellant had failed to show any reasonable cause for condonation of delay.

9. Ongoing through the order of the tribunal, it is clear that the tribunal has not gone into the reasons stated by the appellant and has dismissed the application in a slipshod manner. On due consideration of the said reasons, we are of the view that the reasons assigned in the application seeking condonation of delay are sufficient reasons and are forming a reasonable cause for condonation of delay.

10. In the circumstances, we hold that the tribunal has erred in recording the finding that the assessee has utterly failed to show any reasonable cause for condonation of delay. On the other hand, as observed, the assessee had sufficiently explained the delay in filing the appeal before the Tribunal and had made out a case for condonation of delay in filing the appeal. As a result, we answer the question in favour of the assessee and condoned the delay”.

15. The expression "sufficient cause" employed in Section 5 of the Indian Limitation Act, 1963 and similar other statutes is elastic enough to enable the courts to apply the law in a meaningful manner which sub serves the ends of justice. Although, no hard and fast rule can be laid down in dealing with the applications for condonation of delay, this Court has justifiably advocated adoption of a liberal approach in condoning the delay of short duration and a stricter approach where the delay is inordinate- Collector (L.A.) v. Katiji (1987) 2 SCC 107, N. Balakrishnan v. M. Krishnamurthy (1998) 7 SCC 123 and Vedabai v. Shantaram Baburao Patil (2001) 9 sec 106."

10. The Supreme Court in Oriental Aroma Chemical Industries Ltd. (supra) and R.B. Ramlingam v. R.B. Bhavaneswari, (2009) 2 SCC 689 noticed that the Courts should adopt liberal approach where delay is of short period whereas the proof required should be strict where the delay is inordinate. Further, it was also observed that judgments dealing with the condonation of delay may not lay down any standard or objective test but is purely an individualistic test. The court is required to examine while adjudicating the matter relating to condonation of delay on 10

[ Care Solutions Pvt. Ltd. ] exercising judicial discretion on individual facts involved therein. There does not exist any exhaustive list constituting sufficient cause. The petitioner is required to establish that in spite of acting with due care and caution, the delay had occurred due to circumstances beyond his control and was inevitable.

11. We find that the explanation furnished by the petitioner, as noticed hereinbefore, being plausible, leads to the conclusion that there was sufficient cause for delay in filing the reference application. Once that was so, the application for condonation of delay ought to have been allowed.

8. Thus, on consideration of above facts and circumstances in the light of aforesaid case laws, we are of the view that delay deserves to be condoned as for the mistake of advocate, the justice should not be deprived of.

Accordingly, we condone the delay subject of cost of Rs.10,000/- to be deposited in the account of Central Government.

[ Care Solutions Pvt. Ltd. ]

9. Now, we take up the matter. The assessee has raised following grounds of appeal:

“1.That the learned Commissioner of Income tax(A) erred in law in not affording reasonable opportunity of being heard while adjudicating the appeal in an exparte manner. He ought to have considered the facts and circumstances of the case viz. closure of Bhopal office and pendency of application for transfer of case records to Mumbai being reasonable and sufficient cause for nonattendance. There was no reason to avoid the hearing when huge demand was created. The appellate order so passed without considering the fact that business was closed due to losses and audited balance sheet and profit & loss account were placed on record along with certain details is, unjustified, improper, bad in law and deserves to be quashed.

2. That the learned Commissioner of Income tax (A) ought to have considered that in written submissions explaining the reasons for fall in gross profit and increase in direct expenses besides increased cost of material which resulted into reduction of gross profit to 33.18%. Just because in A.Y. 2009-10 & 2010- 11, the gross profit was 37.96% and 41.98%, the application of GP rate of 41 % in the year under appeal ignoring the audited accounts along with tax audit report u/s. 44AB of the Act and explanations given was unjustified and Bad in law.

3. That the learned Commissioner of Income tax (A) ought to have considered that relevant records such as purchase bills, stock registers showing quantitative details, bills and vouchers etc. could not be produced because they were shifted to Mumbai due to closure of office at Bhopal. There being no proper

[ Care Solutions Pvt. Ltd. ] communication from the counsel of the appellant, such records could not be produced. In fact because of closure of business, the stock were disposed of by allowing higher discount and commission which resulted in reduction of gross profit rate hence application of GP rate of 41 % and its confirmation by rejecting the book results is unjustified and bad in law.

4. That the learned Commissioner of Income tax (A) further erred in law in confirming the adhoc disallowance of various expenses equal to 10% under each head ignoring normal increment in salary to staff, petrol, conveyance and travelling expenses etc. Such expenses were mainly related to marketing team of the company who effected total turnover over Rs. 468.76 lacs hence annual increment to them was inevitable. Disallowance on adhoc basis without appreciating the nature of business and increase in index cost is unjustified and bad in law.

5. The appellant further craves leave to add, alter, and/or to amend the aforesaid grounds of appeal as when necessary

Request was made for transfer the case records to Mumbai but due to technical reasons i.e. without prior transfer of PAN and proper compliance could not be made before the Assessing officer resulting in to passing of assessment order by the ITO, Bhopal. The local counsel at Bhopal did not properly attend the hearings and submitted partial details though assured to the assessee. Due to incomplete information the Income tax officer passed the order u/s 143(3) of the Act determining total income at Rs.50,97,350/- by making following additions ;_ a) Gross profit on total turnover of Rs.468.76 lacs was 14

[ Care Solutions Pvt. Ltd. ] determined at Rs.192.19 lacs i.e. 41% as against

33.18% disclosed by the appellant thereby addition ofRs.36,65,070/- was made. b) By rejecting the books of accounts, establishment expenses to the extent of 10% were disallowed on adhoc basis at Rs.10,07,830/-.

12. Ld. counsel for the assessee submitted that the learned Commissioner of Income tax(A) erred in not 15

[ Care Solutions Pvt. Ltd. ] affording reasonable opportunity of being heard while adjudicating the appeal in an ex-parte manner. Ld. CIT(A) did not consider the facts and circumstances of the case viz. closure of Bhopal office and pendency of application for transfer of case records to Mumbai being reasonable and sufficient cause for nonattendance. There was no reason to avoid the hearing when huge demand was created. The appellate order so passed without considering the fact that business was closed due to losses and audited balance sheet and profit & loss account were placed on record along with certain details is, unjustified, improper, bad in law and deserves to be quashed. Ld. Commissioner of Income tax (A) did not consider that in written submissions explaining the reasons for fall in gross profit and increase in direct expenses besides increased cost of material which resulted into reduction of gross profit to 33.18%. Further,

[ Care Solutions Pvt. Ltd. ] Ld. Commissioner of Income tax (A) did not consider that relevant records such as purchase bills, stock registers showing quantitative details, bills and vouchers etc. could not be produced because they were shifted to Mumbai due to closure of office at Bhopal. There being no proper communication from the counsel of the assessee, such records could not be produced. In fact because of closure of business, the stock were disposed of by allowing higher discount and commission which resulted in reduction of gross profit rate hence application of GP rate of 41 % and its confirmation by rejecting the book results is unjustified. Also the learned Commissioner of Income tax (A) did not appreciate the facts in confirming the adhoc disallowance of various expenses equal to 10% under each head ignoring normal increment in salary to staff, petrol, conveyance and travelling expenses etc. Such expenses were mainly related to marketing team of the [ Care Solutions Pvt. Ltd. ] company who effected total turnover over Rs. 468.76 lacs hence annual increment to them was inevitable.

Disallowance on adhoc basis without appreciating the nature of business and increase in index cost is unjustified.

Ld. CIT(A) did not consider the facts and circumstances of the case viz. closure of Bhopal office and pendency of application for transfer of case records to Mumbai being reasonable and sufficient cause for nonattendance. Ld. CIT(A) did not consider the fact that business was closed 18

[ Care Solutions Pvt. Ltd. ] due to losses and audited balance sheet and profit & loss account were placed on record along with certain details and relevant records such as purchase bills, stock registers showing quantitative details, bills and vouchers etc. could not be produced because they were shifted to Mumbai due to closure of office at Bhopal as there being no proper communication from the counsel of the assessee, such records could not be produced. In view of these facts and in the interest of justice, the present matter deserves to be reconsidered at the level of the Ld. CIT(A) who will afford reasonable opportunity of being heard to the assessee and the assessee is also directed to cooperate with the Ld. CIT(A) by filing the relevant evidences and written submissions in support of the claim. Accordingly, we set aside the order of the Ld. CIT(A) and the grounds raised in the assessee’s appeal are allowed for statistical purposes only.

[ Care Solutions Pvt. Ltd. ]

Order was pronounced in the open court on 20 .02.2020.