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

[ITA No.137/Ind/2019] [Vinayak Care Solutions Pvt. Ltd. ]

आयकर अपील�य अ�धकरण, इ�दौर �यायपीठ, इ�दौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE

BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER

ITA No.137/Ind/2019 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.

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days. Ld. counsel for the assessee submitted that though

the appellate order was passed by the Ld. Commissioner of

Income Tax, (Appeals)-II, on 08.02.2016 yet the advocate at

Bhopal did not take proper care regarding filing of 2nd

appeal before the Hon'ble Tribunal and avoided the same

on one ground or the other by given false assurances

regarding filing of writ petition against the appellate order.

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

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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]

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

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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.

available on record. We find that after receiving the

appellate order, the advocate at Bhopal did not take proper

care regarding filing of 2nd appeal before the Tribunal and

avoided the same by given false assurances regarding filing

of writ petition against the appellate order. In support of

the same the assessee has also filed affidavit. Therefore,

the appeal was submitted late with a separate application

for condonation of delay with prayer to admit the appeal by

condoning the delay as the advocates did not attend the

hearing on any date though the assured from time to time

which resulted into the present delay. So far as the

judgment of Hon'ble Supreme Court passed in case of CIT

vs. Hapur Pilkhuwa Development Authority (SLP 4

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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

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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.

Mahaveer Prasad Jain vs. CIT (1988) 172 ITR 331(MP) held

as under:

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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."

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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

[ITA No.137/Ind/2019] [Vinayak 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”.

Hawkins Cookers Ltd vs. State of MP (WP no.15783, 15787

& 15788) Judgment dt. 04.11.2019 (MP) held as under:

[ITA No.137/Ind/2019] [Vinayak Care Solutions Pvt. Ltd. ]

issue of condonation of delay, In paras 14 and 15 observed as under:- "14. We have considered the respective submissions. The law of limitation is founded on public policy. The legislature does not prescribe limitation with the object of destroying the rights of the parties but to ensure that they do not resort to dilatory tactics and seek remedy without delay. The idea is that every legal remedy must be kept alive for a period fixed by the legislature. To put it differently, the law of limitation prescribes a period within which legal remedy can be availed for redress of the legal inj ury. At the same time, the courts are bestowed with the power to condone the delay, if sufficient cause is shown for not availing the remedy within the stipulated time. 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." 9. The meaning to be assigned to the expression "sufficient cause" occurring in Section 5 of the 1963 Act should be such so as to do substantial justice between the parties. The existence of sufficient cause depends upon facts of each case and no hard and fast rule can be applied in deciding such cases. 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

[ITA No.137/Ind/2019] [Vinayak 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. 12. In view of the above, the impugned order dated 10.05.2019 (Annexure P/4) is set aside. The delay of four months in filing reference application is condoned by holding that there was sufficient cause for condonation of delay. As a result, the writ petition is allowed and the matter is remitted to the Board/respondent No.2 to re-decide the reference application in accordance with law.

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.

[ITA No.137/Ind/2019] [Vinayak Care Solutions Pvt. Ltd. ]

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

[ITA No.137/Ind/2019] [Vinayak 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

company was engaged in Marketing & Trading of drugs

and medicines at Shahpura, Bhopal. The registered office

of the company initially at in the State of M.P. and the

same was later on shifted to Mumbai in 2005. As the

registered office of the company is located at Mumbai not

[ITA No.137/Ind/2019] [Vinayak Care Solutions Pvt. Ltd. ]

only the directors are also residing in Mumbai but the

entire establishment and all the documents & accounts

were also being maintained in Mumbai. Return of income

was filed declaring the same at Rs.4,07,450/-. However, the

PAN allotted to the company was not transferred hence the

assessment proceedings were taken up by the ITO, Bhopal.

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

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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/-.

Commissioner of Income tax (Appeals)-II, Bhopal. The

assessee company forwarded the notices received from the

Commissioner of Income tax (Appeals)-II to its Advocate

but he did not attend the hearings on any date though

assured from time to time. The Commissioner of Income

tax (A) dismissed the appeal on all the grounds based on

statement of facts narrated in the assessment order.

learned Commissioner of Income tax(A) erred in not 15

[ITA No.137/Ind/2019] [Vinayak 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,

[ITA No.137/Ind/2019] [Vinayak 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

[ITA No.137/Ind/2019] [Vinayak 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.

the authorities below.

material available on record. We find that the learned

Commissioner of Income tax(A) did not afford reasonable

opportunity and pass the order 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. Ld.

CIT(A) did not consider the fact that business was closed 18

[ITA No.137/Ind/2019] [Vinayak 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.

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statistical purposes only.

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

Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER

Indore; �दनांक Dated : 20/02/2020 Patel/PS

Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order

Assistant Registrar, Indore