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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the orders of Learned Commissioner of Income Tax (Appeals) / National Faceless Limrass Construction Private Limited Appeal Centre, Delhi [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] dated 30.01.2023 for the A.Y. 2013-14, wherein the addition made by the AO at Rs. 6,58,24,976/- u/s 41(1) of the Act, was confirmed.
The brief facts of the case are that, the assessee is a company engaged in the business of construction. The assessee has filed the return of income for the year under consideration on 01.10.2013 declaring total loss at Rs. 51,858/-. The case was selected for scrutiny under CASS by issuing notice u/s 143(2) of the Act dated 02.09.2014 was issued and duly served on the assessee on 23.09.2014. Subsequently, notice u/s 142(1) of the Act were also issued alongwith questionnaire on various dates including 12.02.2013, 27.07.2015, 18.08.2015, 09.09.2015 and 12.10.2015. Therefore, show cause notice dated 11.02.2016 and 22.02.2016 was issued, but nobody attended and no details were filed. Again one more opportunity was given to the assessee by email on 09.03.2016 asking to file the details on 11.03.2016. Accordingly, the AO proceeded ex-parte and completed the assessment and made the addition of Rs. 6,58,24,976/-.
Limrass Construction Private Limited 3. Aggrieved by the order of AO, assessee preferred the appeal before Ld. CIT(A) and Ld. CIT(A) has dismissed the appeal of the assessee ex-parte and confirmed the addition made by AO. Hence, the assessee is in appeal before us and has raised the following grounds of appeal:-
1. The Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC). Delhi, seriously erred in law and on the facts and in the circumstances of the case in arbitrarily confirming the Impugned Ex- party Assessment Order Dated: 22-03-2016, passed by the Learned Income Tax Officer, Ward 1(2)(2), Mumbai, making Alleged Additions aggregating to Rs. 11,59,37,212/-, resulting in Disputed Alleged Demand of Rs.5,11,34,642/-, as follows:
(a) U/s. 68 of the Income Tax Act, 1961,as 'unexplained cash credit', Rs.5,01,12,236/- on account of increase in Trade Liabilities during the Year being Difference in Closing Balance of Trade Liabilities of Rs.11,59,37,212/- and Opening Balance of Trade Liabilities of Rs.6,58,24,976/- (i.e. Rs. 11,59,37,212/-Minus Rs.6,58,24,976/-) as per Audited Financial Statements, Allegedly in view of not substantiating with details and documentary evidence and in the absence of not ascertaining the correct and true Liability
(b) U/s.41(1) of the Income Tax Act, 1961, Rs. 6,58,24,976/- being Opening Balance of Trade Liabilities, as per Audited Financial Statements, Allegedly in the absence of details and ageing analysis, and in view of failure to establish that the Liabilities exist thereby by invoking the Limitation Act, 1963.;
(c) Allegedly Arbitrarily Disallowing 50% of Addition/s during the Year to 'Work-in-Progress'(WIP) i.e. Difference in Closing WIP of Rs. 5,69,19,747/- Page | 3 Limrass Construction Private Limited reported in Audited Balance Sheet at Year End and Opening WIP of Rs.4,79,65,943/- (5,69,19,747/- MINUS Rs.4,79,65,943/-) at Rs. 89,53,803/- which works out to Rs.44,76,902/-, in the absence of documentary evidence, and thereby arbitrarily restricting the Closing Balance at Year End, of 'Work-in-Progress' reported in Audited Financial Statements at Rs. 5,69, 19,746/- to Rs. 5,24,42,844/- (i.e Rs. 5,69, 19,746/-Minus Rs.44,76,902/-,)
The Trade Creditors and the Work in Progress being in the Ordinary Course of Business and being running and alive Accounts of Redevelopment of Building 'Lucky Mansion, which is still Under Construction' (IOD and CC having been received only in the Year 2022) and, being Fully Substantiated with documentary evidence/s, the Alleged Addition/s and Alleged Disallowance/s BE Deleted.
2. Your Appellant Denies any Alleged Liability to levy of Interest/s U/ss.234A, 234B, 234C and other applicable Provisions of the Act. The same be directed to be Deleted and/or Re-worked out as per the outcome of this Appeal, being consequential.
Your Appellant craves leave, to add to, vary, amend, alter or modify, the aforesaid Grounds and / or adduce further evidence before or at the time of Hearing.
4. It is brought to our notice that there is delay of 864 days in filing the appeal before the Tribunal and assessee has filed an application for seeking condonation of delay alongwith affidavit and the same are extracted below:-
“3. The Impugned CIT(A) Order was passed on 30-01-2023 The Appeal before Your Honors was required to be Filed within 60 Days from the passing of the Limrass Construction Private Limited CIT(A) Order, i.e. on or before 28-03-2023.. the Appeal is being Filed on 11- 08-2025. Hence there is a Delay in Filing the Appeal of 868 Days i.e. 2 Years and 138 Days.
The Appeal Before Your Honors was Filed on 11-08-2025 contesting: (A) IMPUGNED EX-PARTE ORDER Dated: 30-01-2023, Bearing DIN & Order No : ITBA/NFAC/S/250/2022-23/1049246017(1), Passed U/S 250 of the Income Tax Act, 1961, by Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi ; (B) In the matter of IMPUGNED EX-PARTY ASSESSMENT ORDER Dated: 22-03-2016, passed by the Learned Income Tax Officer, Ward: 1(2)(2), Mumbai; making Alleged Additions aggregating to Rs. 11,59,37,212/-, resulting in Disputed Alleged Demand of Rs.5,11,34,642/- 5. I, am making this Affidavit for filing before the Hon'ble Income Tax Appellate Tribunal in respect of A.Y.2013-14, giving the reasons for delay in filing of an Appeal and Condonation of delay.
6. Your Appellant was prevented by reasonable cause from filing the Appeal on time, in view of the following genuine and bonafide circumstances, beyond the Control Your Appellant, there being neither any deliberate default nor contumacious conduct nor disregard to Our Legal and Statutory Obligations: 7. It is Most Humbly and Respectfully Stated that, there was neither any deliberate default nor contumacious conduct nor disregard to Our Legal and Statutory Obligations and as such the Circumstances were beyond the control of the Appellant Company.
8. It is pertinent that, the Appellant Company would not be benefitted in any manner in deliberately delaying the Appeal Filing as it has suffered both in Business frontier as well as with the Impugned Assessment Ordered, confirmed by the Learned CIT (A).
9. Your Honors are Most Humbly and Respectfully Requested to CONDONE the Delay in Filing Appeal and take the Appeal Filed on record, and dispose- off the Appeal on Merits and Oblige.”
5.9.5. From the Year 2010 to the Year 2025 i.e. till date, Your Appellant was deep into the Project which entailed several hardships from Tenants, as well due to Governmental Procedural Delays and Several severe Litigation. 5.9.6. A detailed Chart of several hardships from Tenants as well due to Governmental Procedural Delays and Several severe Litigation is Filed herewith.
We have heard both the parties on the application for seeking condonation of delay. At the outset, Ld. AR on behalf of the assessee submitted that the delay in filing the appeal before the Tribunal was neither due to any deliberate default nor because of any contumacious conduct and as such the circumstances were beyond the control of the assessee. The assessee put reliance upon the judgment of the Hon'ble Supreme Court in the case of Collector, Land Acquisition Vs. MST. Katiji & Ors., [1987] 167 ITR 471 (SC), dated 19.02.1987, was pleased to hold regarding the condonation of delay as under:
“The Legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits”. The expression “sufficient cause” employed by the Legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making of justifiably liberal approach in And such a liberal approach is adopted on principle as it is realized that:
Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties.”
7. It is therefore, Ld. AR submitted that there is sufficient cause for condonation of delay and requested to condone the delay and the matter may be restored to the file of Ld. CIT(A) for fresh adjudication of the case.
The Ld. DR on the other hand opposed the submission of Ld. AR and submitted that the assessee has failed to show sufficient cause for condonation of delay and the appeal is liable to be dismissed. In support of his argument, Ld. DR relied on the decision of Hon’ble Madras High Court in the case of Royal Stiches (P.) Ltd. vs. DCIT (2023) 156 taxmann.com 361 (Madras HC) wherein the Hon’ble High Court has held as under:- “5. We are not convinced with the reasons adduced in the affidavits filed in support of these petitions for condoning the inordinate delay of 1072 days. It is trite law that where a case has been presented in the Court beyond Page | 7 Limrass Construction Private Limited limitation, the petitioner has to explain the Court as to what was the "sufficient cause" which means an adequate and enough reason which prevented him to approach the Court within limitation. In this connection, reference may be made to the following decisions of the Hon'ble Supreme Court:
(a) Basawaraj v. Land Acquisition Officer, (2013) 14 SCC 81: "9. Sufficient cause is the cause for which the defendant could not be blamed for his absence. The meaning of the word "sufficient" is "adequate" or "enough", inasmuch as may be necessary to answer the purpose intended. Therefore, the word "sufficient" embraces no more than that which provides a platitude, which when the act done suffices to accomplish the purpose intended in the facts and circumstances existing in a case, duly examined from the viewpoint of a reasonable standard of a cautious man. In this context, "sufficient cause" means that the party should not have acted in a negligent manner or there was a want of bona fide on its part in view of the facts and circumstances of a case or it cannot be alleged that the party has "not acted diligently" or "remained inactive". However, the facts and circumstances of each case must afford sufficient ground to enable the court concerned to exercise discretion for the reason that whenever the court exercises discretion, it has to be exercised judiciously. The applicant must satisfy the court that he was prevented by any "sufficient cause" from prosecuting his case, and unless a satisfactory explanation is furnished, the court should not allow the application for condonation of delay. The court has to examine whether the mistake is bona fide or was merely a device to cover an ulterior purpose. (See Manindra Land and Building Corpn. Ltd. v. Bhutnath Banerjee [AIR 1964 SC 1336], Mata Din v. A. Narayanan [(1969) 2 SCC (b) Ajay Dabre v. Pyare Ram 2023 SCC Online SC 92: '13. This Court in the case of Basawaraj v. Special Land Acquisition Officer while rejecting an application for condonation of delay for lack of sufficient cause has concluded in Paragraph 15 as follows: "15. The law on the issue can be summarised to the effect that where a case has been presented in the court beyond limitation, the applicant has to explain the court as to what was the "sufficient cause" which means an adequate and enough reason which prevented him to approach the court within limitation. In case a party is found to be negligent, or for want of bona fide on his part in the facts and circumstances of the case, or found to have not acted diligently or remained inactive, there cannot be a justified ground to condone the delay. No court could be justified in condoning such an inordinate delay by imposing any condition whatsoever. The application is to be decided only within the parameters laid down by this Court in regard to the condonation of delay. In case there was no sufficient cause to prevent a litigant to approach the court on time condoning the delay without any justification, putting any condition whatsoever, amounts to passing an order in violation of the statutory provisions and it tantamounts to showing utter disregard to the legislature."
Therefore, we are of the considered opinion that the High Court did not commit any mistake in dismissing the delay condonation application of the present appellant.' Thus, it is crystal clear from the above legal proposition that the discretion to condone the delay has to be exercised judiciously based on facts and circumstances of each case and that, the expression 'sufficient cause' cannot be liberally interpreted, if negligence, inaction or lack of bona fides is attributed to the party. In the present case, the Page | 9 Limrass Construction Private Limited petitioner/appellant has not given 'sufficient cause' for condoning the huge delay of 1072 days in filing the appeals.
6. It is also to be pointed out that the appeals were filed along with condone delay petitions in the year 2012 itself. By order dated 14-9-2012, notice was ordered to the respondent in the condone delay petitions. Subsequently, on two occasions, in March, 2015, the matter stood adjourned for filing counter by the respondent. Thereafter, nothing moved and the appellant has not taken any step to follow up the same, till June 2023. Now, they suddenly woke up from slumber like Rip Wan Winkle and prayed to condone the delay in filing the appeals. Such callous and lackadaisical attitude on the part of the appellant, cannot be countenanced by this court. The Supreme Court in Pundlik Jalam Patil v. Executive Engineer, Jalgaon Medium Project [(2008) 17 SCC 448], observed that the courts help those, who are vigilant and "do not slumber over their rights". Therefore, we are not inclined to condone the delay of 1072 days in filing the appeals.
Thus, for the reasons stated above, these miscellaneous petitions fail and are accordingly, dismissed. Consequently, the tax case appeals are rejected at the SR stage itself. No costs.”
We have considered the arguments of both the parties and examined the record. The facts of the judgment of Hon’ble Madras High Court in case of Royal Stitches (P) Ltd. vs. DCIT (supra) are distinguishable from the facts and circumstances of the present case. The judgment of Hon’ble Supreme Court in the case of Collector, Land Acquisition Vs. MST. Katiji & Ors. (supra) relied by Ld. AR is applicable to the case in hand. Since the assessee has filed detailed application and affidavit in support of condonation of delay and no contradictory facts Page | 10 Limrass Construction Private Limited has been brought on record by the revenue to the effect that contents of the application supported by affidavit are false, we find it expedient in the interest of justice that the assessee has shown sufficient cause for condonation of delay in filing the appeal before us. Hence, the delay in filing the appeal is accordingly condoned.
Further on merit, it was argued on behalf of the appellant/assessee that the notice issued by the Ld. CIT(A) were never received or served upon the assessee and as such they could not present its case before the Ld. CIT(A) who proceeded ex parte and decided the appeal without giving effective opportunity of hearing to the assessee. Therefore, the impugned order suffers from illegality and liable to be set aside. The Ld. DR on the other hand supported the judgment of the Ld. CIT(A) stating that there is no merit in the appeal and same is liable to be dismissed.
We have considered the rival submissions. Section 250 sub section 2(a) of "the Act" provides as under:
“Section 250 (2) The following shall have the right to be heard at the hearing of the appeal: - a. The appellant, either in person or by an authorised representative;”
Limrass Construction Private Limited 12. It is evident from the provision that the hearing to be given is not a formality but an effective hearing is sine qua non for the purpose of upholding the principal of natural justice. We have examined the impugned order and in para no. 7 of the Ld. CIT(A) observed as under: “7. The first notice for hearing was issued on 15.12.2020 fixing the date of hearing on 28.12.2020. However, there was no response to this notice. Thereafter, subsequent notices dated 05.07.2021, 07.07.2022, 03.11.2022, 14.11.2022, 23.11.2022, 01.12.2022 and 14.12.2022 were issued fixing the hearings on various dates. However, it is observed that the assessee has neither complied to nor attended in response to any of these notices. It is also noticed that the assessee has not elaborated on the above grounds in the statement of facts filed along with the grounds of appeal. In view of these facts, it is clear that the assessee is not serious in pursuing his appeal. Therefore, the appeal of the assessee is dismissed for lack of prosecution.”
13. It is thus evident from the contents of the impugned order extracted above that no effective opportunity of hearing has been given and there is no proof that the notice sent on various dates were duly served or brought to the notice of the appellant/assessee. It is evident from the grounds taken in the appeal and also argued on behalf of the assessee that for the same reasons mentioned in the affidavit of the assessee seeking the condonation of delay, the assessee could not present its case before the AO and Ld. CIT(A) and the assessment order is also ex- parte. It was therefore submitted by the Ld. AR that it will be in the Limrass Construction Private Limited interest of natural justice, if the case is remitted to the file of AO for fresh adjudication after giving opportunity of hearing to the assessee.
14. We have considered the above submissions and in the given facts as discussed above, we are of the considered opinion that the assessee has satisfactorily explained the reasons for non-appearance and failure to present its case before the AO as well as before the Ld. CIT(A), and both the Ld. Authorities below has passed the orders including the impugned order without an effective representation of the assessee during the hearing at the time of passing of the assessment order as well as impugned order which has resulted into miscarriage of justice.
15. For these reasons, we are of the considered opinion that matter needs to be restored to the file of the AO for deciding afresh after giving effective hearing to the assessee who shall present its case before the AO within 60 days. The impugned order of Ld. CIT(A) is accordingly set aside and appeal filed by the assessee is allowed for statistical purposes in above terms.
In the result, appeal filed by the assessee is allowed for statistical purposes in above terms.