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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM
per the date prescribed in the respective Act and the cases laws relied on by the authorities below is squarely applicable in the present facts of the case.
After hearing the submissions of ld. DR and considering the documents available on record, in respect of disallowance made u/s.80P(2)(d) of the Act and carry forward loss, we find from the statement of facts submitted by the assessee before the CIT(A) that the assessee is obtaining loan from Government for attaining the objects.
The assessee keeps the fund in the manner of fixed deposit till the distribution of the said funds to the eligible recipients. However, it is not clear from the orders of the authorities below that how much amount was kept as surplus fund and how much amount has been kept for the distribution to the eligible recipients and which has not been distributed till the date and kept as fixed deposit out of loan funds.
Therefore, this matter is sent back to the file of AO to determine as to whether the assessee had actual surplus funds which has been made as fixed deposit. The AO is also directed to examine the source of fixed deposit. If it is found that the fixed deposit has not been made from surplus funds or it has been made from the own funds which were kept for marketing assistance not immediately disposable in the form of marketing assistance to craftsmen and are also not available for otherwise use by the assessee, the AO is directed to give the benefit of deduction u/s.80P(2)(d) of the Act to the assessee. Needless to say, the assessee shall be given reasonable opportunity of hearing. The assessee is also directed to cooperate with the AO for early disposal of the case.
This ground of appeal of the assessee is allowed for statistical purposes.
13. With regard to disallowance of ESI & EPF contributions, we find that the ld. DR before us relied on the decision of Hon’ble Delhi High Court in the case of Bharat Hotel Ltd. (supra) and submitted that this issue should be restored to AO for verification. After hearing both the sides, perusing the entire materials available on record and the orders of authorities below, we noticed that the assessee has not deposited the contribution of EPF and ESI within the due date as specified in that particular Act. We found substance in the submissions of the ld. DR that Section 36(1)(va) of the Act deals with the deduction in respect of the sum received by the assessee from any of his employees to which the provisions of sub-section 2(24)(x) of the Act applies, provided such sum is credited by the assessee to the employee’s account in relevant fund on or before the due date. The ‘due date’ is defined under the Explanation to section 36(1)(va) of the Act by stating that the due date referred under the relevant Act and certainly not the due date for filing the return. We also found that this very similar issue has also been decided by this bench of the Tribunal in the case of Milind Gupta, order dated 27.09.2019, wherein the Tribunal has restored the issue to the file of AO to examine the contributions made with reference to the dates when they were actually made and grant relief to such of claim which qualified for such relief in terms of prevailing provisions of the Act. Accordingly, the issue in the present appeal, being similar to the issue decided by the Tribunal in the case cited supra, we also restore this issue to the file of AO to decide the same in the terms as observed by the Tribunal cited above.
Thus, the ground of appeal of the assessee is allowed for statistical purposes.
Thus, is allowed for statistical purposes.
In appeal of the assessee i.e for assessment year 2015-2016, there are mainly three grounds have been raised by the assessee, namely, (i) against the addition of Rs.18,02,122/- towards interest earned assessed as income from other sources; (ii) against the addition of Rs.1,13,818/- made on adhoc basis and (iii) against the addition of Rs.1,15,770/- made on account of presumptive basis.
In this appeal, the ground raised against the addition made u/s.80P(2)(d) of the Act is similar to the ground raised by the assessee for the assessment year 2014-2015, wherein we have already to sent to the file of AO with the observations as stated above, therefore, this ground of appeal of the assessee is allowed for statistical purposes.
With regard addition made on adhoc basis, we find that during the course of assessment proceedings, the AO noticed that the assessee has incurred expenses under different heads i.e. packing materials, miscellaneous expenses and printing and statutory expenses but the assessee was failed to furnish the documentary evidence in support of his claim but these are the incidental expenses to be incurred by the assessee considering to the nature of business of the assessee but for want of production of desired evidence of expenses, the AO has rightly disallowed 10% of the total expenditure incurred which has been upheld by the CIT(A) also. We also observe that if the assessee was unable to produce the required document before the AO, he had an opportunity to produce the same in support of his claim of expenses debited into the profit and loss account under the aforesaid heads before the CIT(A) but the assessee could not do so. Therefore, the CIT(A) has rightly upheld the action of AO. Accordingly, we do not see any reason to interfere with the observations of the CIT(A) in this regard and we uphold the same. This ground of appeal of the assessee is dismissed.
With regard ground raised by the assessee against the addition made on account of presumptive basis, it was observed by the AO during the course of assessment proceedings that the assessee has claimed the expenses as allowable expenditure claimed u/s.37(1) of the Act, however, the AO disallowed the same stating that the expenditure claimed by the assessee does not relate to the business of the assessee towards earning of the income as per Section 37(1) of the Act. It is also not an incidental expenses to earn the income of the assessee which rightly been confirmed by the CIT(A). Accordingly, we do not see any reason to interfere with the observations of the CIT(A) in this regard and we uphold the same. This ground of appeal of the assessee is dismissed.
Thus, is partly allowed for statistical purposes.
Now, a procedural issue comes before us that though the hearing of the present appeals were concluded on 20.02.2020, however, this order is being pronounced much after the expiry of 90 days from the date of conclusion of hearing. We find that Rule 34(5) of the Income tax Appellate Tribunal Rules, 1962, which envisages the procedure for pronouncement orders, provides as follows:
34(5) The pronouncement may be in any of the following manners: - (a) The Bench may pronounce the order immediately upon the conclusion of hearing. (b) in case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date of pronouncement. (c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board.
As such, “ordinarily”, the order on an appeal should be pronounced by the Bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression “ordinarily” has been used in the said rule itself. This rule was inserted as a result of directions of Hon’ble High Court in the case of Shivsagar Veg Restaurant vs ACIT (2009) 319 ITR 433 (Bom), wherein, it was, inter alia, observed as under:
“We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now),all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment”.
In the rules so framed, as a result of these directions, the expression “ordinarily” has been inserted in the requirement to pronounce the order within a period of 90days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any “extraordinary” circumstances.
We also find that the aforesaid issue has been answered by a coordinate Bench of the Tribunal viz; ITAT, Mumbai ‘F’ Bench in DCIT, Central Circle-3(2), Mumbai vs JSW Limited & ors (ITA No.6264/Mum/18 dated 14.5.2020, wherein, it was observed as under:
“ 9. Let us in this light revert to the prevailing situation in the country. On 24th March,2020, Hon’ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon’ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that “In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Hon’ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020”. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the corona virus “should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure...”. The term ‘force majeure’ has been defined in Black’s Law Dictionary, as ‘an event or effect that can be neither anticipated nor controlled’ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an “ordinary” period.
In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only inconsonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon’ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon’ble Bombay High Court itself has, vide judgment dated 15th April2020, held that directed “while calculating the time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”. The extraordinary steps taken suo motu by Hon’ble jurisdictional High Court and Hon’ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words“ ordinarily”, in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. “
Respectfully following the above judicial decision of Hon’ble Bombay High Court and the Tribunal, we are of the considered view that the period during which the lockdown was in force shall stand excluded for the purpose of working out the time limit for pronouncement of orders, as envisaged in Rule 34(5) of the Appellate Tribunal Rules, 1963.”
In the result, appeal of the assessee i.e is allowed for statistical purposes and ITA No.393/CTK/2020 is partly allowed for statistical purposes.