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Income Tax Appellate Tribunal, “A” BENCH KOLKATA
Before: SHRI SANJAY GARG & SHRI GIRISH AGRAWAL
Present for: Appellant by : Shri Dilip Chatterjee, Advocate Assessee by : Shri D. K. Sonawal, CIT, DR Date of Hearing : 24.11.2022 Date of Pronouncement : 09.02.2023 O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the revision order u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), by Ld. CIT-14, Kolkata vide M.No.CIT-14/Kol/263/DB/2014- 15/3175-3177 dated 30.03.2015 passed against the assessment order by ITO, Ward-37(1), Kolkata u/s.143(3) of the Act dated 19.03.2013.
At the outset, we note that the appeal is delayed by 1914 days. The present appeal was filed on 09.09.2020 which was during the period of Covid-19 Pandemic. In view of the decision of Hon’ble Supreme Court in the case of Suo moto Writ Petition (C) No. 3 of 2020 dated 10.01.2022 by which the period from 15.03.2020 to 28.02.2022 has been directed to be excluded for the purpose of limitation. Vide this order a further period of 90 days has been granted for providing
Deepak Bajaj, AY 2010-11 the limitation from 01.03.2022. In the present case, registry has noted a delay of 1914 days. After considering the period relating to Covid-19 Pandemic comprising of 142 days, it leads to a delay of 1772 days. Ld. Counsel of the assessee submitted before the Bench that delay for filing the appeal is neither willful nor attributable to any extraneous or ulterior motive on the part of the assessee and the assessee is not benefitted in any way from delayed filing of this appeal. Ld. Counsel for the assessee submitted that income-tax matters of the assessee were being looked after by the Chartered Accountant of the assessee and the assessee was not aware of anything as to when the appeal is to be filed as the assessee was not kept informed by the said counsel. Ld. Counsel submitted that the delay in filing of appeal has happened purely due to circumstances and reasons totally beyond the control of the assessee and is wholly attributable to the failure on the part of the counsel of the assessee, to act diligently and as per law in the matter of filing the appeal which he has hopelessly failed to do and therefore the assessee cannot be punished for the wrongs done or mistake on the part of the counsel of the assessee. Besides, ld. Counsel submitted that the assessee met with an accident causing serious injuries and fracturing several bones due to which the assessee remained bed ridden, thereby suffering adversely. In order to prove his averments, ld Counsel took us through the affidavit filed, medical certificates and other records. Ld. Counsel submitted that delay in filing the appeal may kindly be condoned so that appeal of the assessee could be heard on merit. In defense of his arguments, ld. Counsel relied on the following decisions: i) M/s Midas Compounds vs. ACIT in for AY 2006-07 dated 25.06.2018
Deepak Bajaj, AY 2010-11 ii) Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi & Ors. Reported in [1979] 118 ITR 507 (SC) iii) Mercedes Benze Education Academy vs. ITO in v) Vijay Visin Meghani vs. DCIT (2017) 398 ITR 250 (Bom) vi) CIT vs. KSP Shanmugavel Nadai & Ors. (153 ITR 596 ) (Madras- High Court) vii) Orbit Dealmark Pvt. Ltd. vs. ITO in ITA No. 513/Kol/2020 for AY 2012-13 dated 22.04.2022 wherein the Co-ordinate Bench has condoned the delay of 1535 days for the reason that the assessee was suffering from lungs infection and diabetic and other oldage ailments and assessee was not advised properly by the legal consultant who was claimed to have forgotten to file the appeal and lockdown due to outbreak of Covid-19 and extension of limitation period by the Hon’ble Apex court taking the suo-moto writ petition (Civil) No. 3 of 2020 dated 8.3.2021 condoning the delay under all case here. The appeals were required to be filed with the specific period.
Ld. Counsel also submitted that in all the above decisions, the Hon’ble judicial forums have condoned the delay by holding that the tax consultants or advocates’ failure is a reasonable cause and delay has to be condoned. Ld. Counsel also relied on the decision of Hon’ble Supreme Court in the case of Collector Land Acquisition vs. MST Katji & Ors. (167 ITR 471). Ld. Counsel thus, submitted that considering all these facts and particularly the failure of the counsel of the assessee to file the appeal before the Tribunal and the facts of the assessee, having met with fatal accident, fracturing several bones and having remained bed ridden for years, constituted a reasonable
Deepak Bajaj, AY 2010-11 cause and prayed before the bench that the same may kindly, be condoned.
Ld. D.R. on the other hand, strongly opposed the arguments and contentions as put forward by the ld. Counsel and argued that as the delay of such inordinate long time of 1914 days needs to be explained. Ld. D.R. submitted that the assessee could not prove any reasonable, genuine and sufficient cause for delay in filing the appeal and therefore the condonation petition may be dismissed.
Having heard the rival contentions and after perusing the material on record including case laws cited before us, the undisputed position of facts as gathered from the records is that there is a delay of 1914 days in filing of appeal by the assessee (after considering the days covered by Pandemic of Covid-19) which was attributed to the failure of the counsel of the assessee who was handling and looking after the tax matters of the assessee. We also note that during this period, the assessee met with an accident fracturing several bones and also remained bed ridden for a long time. We have also perused the condonation application relating the sequence of reasons explaining the delay in filing the appeal. Taking into account the circumstances of the case, we find that in the late filing of appeal, there are reasons which were explained before us. In our opinion, delay in filing the appeal deserved to be condoned in the interest of justice and fair play so that the appeal can be heard on merits. Case of the assessee finds support from various decisions as cited before us, a few of which are discussed hereinafter. In the case of Collector Land Acquisition vs. MST Katji & ors. (supra), Hon’ble Apex Court has laid down following principles:
“i) Ordinarily a litigant does not stand to benefit by lodging an appeal in late
Deepak Bajaj, AY 2010-11 ii) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this when delay in condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties, iii) Every day’s delay must be explained does not mean that a pedantic approach should be made, why not every hour’s delay, every second’s delay? The doctrine must be applied in a rational; common sense and pragmatic manner, iv) When substantial justice and technical consideration are pitted against each other; the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay in fact he runs a serious risk, v) There is no presumption that delay is occasioned deliberately or on account of culpable negligence or on account of mala fides. A litigant does not stand to benefit by resorting to delay, vi) It must be grasped that the judiciary is respected removing injustice and is expected to do so.” 5.1. We have also perused the ratio laid down in the various decisions as referred to above and find that the failure or delay on the part of the counsel of the assessee to file an appeal was held to be a reasonable cause which renders the delay to be condoned. Accordingly, in the interest of justice and fair play, we are inclined to condone the delay and admit the appeal for adjudication.
Assessee has filed grounds of appeal which are argumentative in nature and elaborate. Direction was given to the assessee vide order sheet dated 05.09.2022, to file precise grounds. In compliance to the said direction, revised precise grounds of appeal were filed on 16.09.2022 which are nine in number. From the perusal of the first seven grounds vide ground nos. 1 to 7, we note that assessee has assailed the revisionary proceedings u/s. 263 of the Act for the assumption of jurisdiction by the Ld. Pr. CIT and passing an order
Deepak Bajaj, AY 2010-11 challenging it as invalid and bad in law being neither erroneous nor prejudicial to the interest of the revenue. Further, in ground no. 8, assessee has raised the issue relating to TDS and service tax which according to the assessee relates to earlier years, not arising out of current year not considered by Ld. Pr. CIT in the revisionary proceeding. Ground no. 9 relates to issue of service tax which according to the assessee was not claimed/debited in the P&L Account for the year under consideration, not considered by the Ld. Pr. CIT in the impugned revisionary proceedings.
6.1. It is noted from record that assessee has also taken four additional grounds filed on 26.07.2022 and pleaded for their admission. From the perusal of these additional grounds, we note that ground nos. 1, 2 and 3 are nothing but repetition of the original ground taken by the assessee vide ground nos. 1 to 7. Further, ground no. 4 refers to the issue of service tax shown in the Balance Sheet as at 31.03.2010. We note that this is also a repetition of ground nos. 8 and 9 in the original appeal memo and made of peripheral arguments in nature. Accordingly, we do not find any reason to admit these additional grounds and thus application for their admission is dismissed.
Brief facts of the case are that assessee filed its return of income on 01.04.2011 reporting total income at Rs.9,43,459/-. Assessee is engaged in the business of producing motion picture. Case of the assessee was selected for scrutiny through CASS which was completed u/s. 143(3) of the Act after making certain disallowance/addition with assessed income at Rs.13,88,460/-. Subsequently, Ld. Pr. CIT on examination of the material on record, found that the assessment order passed u/s. 143(3) of the Act dated 19.03.2013 is erroneous and prejudicial to the interest of revenue on the following three issues:
Deepak Bajaj, AY 2010-11 “i) Expenses amounting of Rs.l,80,53,232/- was paid to different parties as Artist's remuneration, Technicians remuneration, Studio hire charges, furniture hire charges, equipment hire charges, car hire charges and location hire charges without deduction of tax at source. However, as per balance sheet TDS liability of Rs.18,42,097/- as on 31.03.2010 was not paid during the previous year relevant to the A.Y. 2010-11. Hence, such expenses of Rs.l,80,53,232/- is liable to disallowed as per provision of Section 40(a)(ia) of the I.T. Act. But A.O. failed to do so. ii) As per details of TDS ( Form 16) for the F.Y. 2009-10, an amount of Rs.2,80,56,536/- was received on account of program sales while in the P/L a/c. such receipt has been disclosed to Rs.2,55,42,234/- resulting in undisclosed receipt to the tune of Rs.25,14,302/- which is liable to be added back to the returned income. But A.O. failed to do so. iii) As per balance sheet as at 31.03.2010 Service Tax liabilities of Rs. 35,00,000/- as at 31.03.2010 was not paid till audit of accounts. Hence as per provision of Section 43B of the Act. Such sum of Rs.35,00,000/- is not allowable and required to be added back. But A.O. failed to do so.”
First issue relates to claim of expenses by the assessee towards artist’s remuneration, technician’s remuneration, Studio hire charges, furniture hire charges, equipment hire charges, car hire charges and location hire charges, all in total amounting to Rs.1,80,53,232/-. On this, according to Ld. CIT, assessee has shown TDS liability of Rs.18,42,097/- as on 31.03.2010 shown in the Balance Sheet which was not paid during the year under consideration. Therefore, according to Ld. CIT, these expenses are liable to be disallowed u/s. 40(a)(ia) of the Act which Ld. AO has failed to do so. On this issue, assessee submitted before the Ld. CIT, out of these expenses “almost 50% of the amount are reimbursed expenses and as such the entire amount cannot be added back.” In this respect, ld. Counsel for the assessee, Shri Dilip Chatterjee referred to the balance Sheet for the three years ended as at 31.03.2008, 31.03.2009 and the year under consideration, as at 31.03.2010 placed in the paper book, to demonstrate that the TDS liability shown in the Balance Sheet is coming from the Balance sheet as at 31.03.2008 and does not relate to the year under consideration. For an amount of Rs.9489/- which Deepak Bajaj, AY 2010-11 according to him, is on account of liability for audit and accounts, though included in the TDS liability.
On the second issue which relates to difference in the amount of receipt included in the P&L Account at Rs.2,55,42,234/- as against an amount of Rs.2,80,56,536/- received by the assessee on account of programme sales appearing in Form 26AS. Ld. CIT noted that the difference has resulted in undisclosed receipt for an amount of Rs.25,14,302/- which the Ld. AO failed to add back to the returned income in the assessment. To this effect, Ld. Counsel for the assessee submitted in the revisionary proceeding that the amount of credit towards programme sales given by Zee News Ltd. was Rs.2,81,49,856/- as appearing in Form 26AS updated till 18.07.2013. According to the assessee, this amount included the component of service tax. Assessee followed the exclusive method in its accounting and thus credited the amount excluding service tax in the P&L Account. It was thus submitted that the difference is on account of inclusion of service tax which appeared in the Form 26AS for the amount received by the Zee News Ltd. less TDS done thereon. Ld. CIT observed that claim of assessee is not supported by any evidence.
Before us, Ld. Counsel reiterated the submissions made before the Ld. CIT that in accounting for the revenue, only net receipts were taken excluding the amount of service tax and that the accounts of the assessee are audited. He also referred to the tax audit report in Form 3CD and pointed at clause 21 to demonstrate that service tax is not passed through P&L Account.
Deepak Bajaj, AY 2010-11 11. On the third issue, which relates to amount of service tax of Rs. 35 lakh reported in Balance Sheet as on 31.03.2010, Ld. CIT observed that this has not been paid and, therefore, according to the provisions of section 43B of the Act, it is not allowable, which the Ld. AO failed to add back. In this respect, assessee submitted before the Ld. CIT that in computing income, assessee does not consider service tax as expenditure in the P&L Account. It follows exclusive method of accounting which is duly reported in the tax audit report and, therefore, no disallowance can be made by applying the provisions of section 43B of the Act.
11.1.Before us also, ld. Counsel submitted that this amount of Rs. 35 lakh towards service tax liability coming from the preceding years reported in the Balance Sheet as at 31.03.2008 and does not relate to the year under consideration.
On all the three issues, ld. CIT, DR supported the order of Ld. CIT and submitted that assessee has not submitted any evidence and supporting documents to substantiate its claim. Therefore, there is no prejudice caused to the assessee when ld. CIT has directed the AO to examine the issue afresh and pass the assessment order accordingly.
We have heard the rival contentions and perused the material available on record. From the paper book, we note that assessee has placed on record, its balance sheet for the three years, noted above. From the three Balance Sheets, we depict the relevant details in respect of the issues raised by the ld. CIT for invoking the revisional proceedings, the same is as under:
Deepak Bajaj, AY 2010-11 Sl. Particulars For the year 31.03.2009 31.03.2010 No. ended as at 31.03.2008 1. ServiceTax Liability Rs. 35,00,000 - Rs.35,00,000 2. TDS Rs.18,32,608 - Rs.18,42,097 3. Liability for Audit Rs. 11,300 Rs.22,330 - fees (2007-08) 4. Other current - Rs.53,10,278 - liability 5. Sundry creditors - - Rs.25,99,031 Total Rs.53,43,908 Rs.53,32,608 Rs.79,41,128
From the details contained in the above table, in respect of the third issue relating to tax liability of Rs. 35 lakhs, which according to Ld. CIT is to be disallowed u/s. 43B of the Act, we note that it is an item reported in the Balance Sheet, coming from the Balance Sheet as on 31.03.2008. Further, this amount has not been claimed as an expenditure in computing income from business of the assessee. On referring to section 43B of the Act, we note that certain deductions are allowed only on actual payment. In this section, a deduction which otherwise is allowable under this Act is subjected to the condition of actual payment for its allowability for the purpose of computing the income under the head, profit and gains of business and profession. From the above factual matrix, we note that assessee is following the exclusive method of accounting in respect of service tax as noted in its tax audit report. Assessee has not claimed any expense towards service tax liability but has reported it in its Balance Sheet. The same amount of Rs. 35 lakh is shown from the balance Sheet on 31.03.2008 to the Balance Sheet for the year under consideration. In view of this factual matrix, we find force in the submission of the Ld. Counsel and disregard the observation and consideration
Deepak Bajaj, AY 2010-11 arrived at by the Ld. CIT for invoking the revisionary proceeding on this issue.
Further, in respect of the second issue for the difference between receipt disclosed in the P& L Account and the amount appearing in Form 26AS, assessee has demonstrated that the difference is on account of inclusion of service tax by the payer of this receipt after subjecting it to TDS. Considering this verifiable fact duly explained by the assessee, we do not find any reason that revisionary proceeding is justified to hold the order being erroneous and prejudicial to the interest of revenue on this issue also.
The first issue relating to various expenses totalling to Rs.1,80,53,232/- claimed by the assessee and no TDS deposited thereon despite reporting of TDS liability of Rs.18,42,137/- in the balance sheet as at 31.03.2010, we note that assessee has submitted that “almost 50% of the amount are reimbursed expenses and as such the entire amount cannot be added back”. However, for such a claim of the assessee, nothing has been placed on record, ‘by way of any evidence or document’. Also, we note that in the table above, for the three years, assessee has reported TDS liability of Rs.18,32,608/- in its Balance Sheet as at 31.03.2008 and then Rs.18,42,097/- in the Balance Sheet as at 31.03.2010. There is nothing on record to appreciate the fact about the deposit of this TDS liability and also the extent to which TDS has been done on these expenses claimed by the assessee. The mere assertion by the assessee which also is general in nature that “almost 50% of this amount is reimbursed expenses” does not justify its claim
Deepak Bajaj, AY 2010-11 made before the ld. CIT as well as before us. Accordingly, this being an issue purely on facts which can be verified from the records of the assessee, we find it proper to sustain the order of Ld. CIT(A) on this specific issue for the purpose of examination and verification of the details and documents which may be placed by the assessee to substantiate its claim. Accordingly, on the first issue raised by the Ld. CIT in the revisionary proceeding as noted above, we hold the order of Ld. CIT u/s. 263 as justifiable. For the other two issues raised by the Ld. CIT do not justify the revisionary proceeding invoked by the Ld. CIT in the order passed u/s. 263 of the Act. Accordingly, the appeal of the assessee is partly allowed.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 09th February, 2023.