DCIT 2(3)(1), MUMBAI, MUMBAI vs. TATA STEEL LIMITED, MUMBAI

During the appellate proceedings, the learned CIT(A), before entering upon the merits of the additions, examined the maintainability of the appeal from the standpoint of limitation. According to the learned CIT(A), the impugned intimation dated 06.06.2020 had been received by the assessee on 07.06.2020, whereas the appeal came to be filed on 29.07.2020, resulting in a delay of twenty-three days beyond the period prescribed under section 249(2) of the Act. The learned CIT(A) further noticed that in Form No.35 the assessee had indicated that there was no delay in filing the appeal and had not filed any separate application seeking condonation of delay. Proceeding on this premise, the learned CIT(A) held that no sufficient cause had been shown within the

Having recorded the aforesaid conclusion, the learned CIT(A), however, proceeded to observe that, without prejudice to the findings recorded on limitation, the appeal was also being adjudicated on merits. Thereafter, the learned CIT(A) examined each of the substantive grounds raised by the assessee. Upon appreciation of the computation of income, Schedule BP, the reconciliation furnished by the assessee and the material placed on record, he deleted the adjustment of Rs.1,94,09,73,923 made under section 37, holding that the said amount had already been voluntarily added back by the assessee while computing its taxable income and that the adjustment made by the CPC resulted in duplication of the very same disallowance. Insofar as the adjustment under section 36(1)(va) relating to employees’ contribution to PF/ESI was concerned, the learned CIT(A), following the decision of the Hon’ble Supreme Court in Checkmate Services (P.) Ltd., upheld the adjustment. The remaining grounds challenging the scope of adjustment under section 143(1)(a) were also rejected. Thus, while the appeal stood dismissed as barred by limitation, it was simultaneously adjudicated on merits and partly allowed.

The Revenue is aggrieved by the aforesaid course adopted by the learned CIT(A). The grievance raised before us is not directed against the correctness of the findings rendered on the individual

During the course of hearing, the learned Counsel appearing on behalf of the assessee invited our attention to an application filed under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963. It was submitted that although the assessee had partly succeeded before the learned CIT(A), the finding recorded by the learned CIT(A) that the appeal was delayed by twenty-three days is itself contrary to the statutory scheme governing limitation during the relevant period. Elaborating the submissions, the learned counsel drew our attention to the chronology of events and submitted that the impugned intimation under section 143(1) was issued and the appeal was instituted during the period when the limitation prescribed under various fiscal statutes stood extended by virtue of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, the notifications issued thereunder and the suo motu orders passed by the Hon’ble Supreme Court extending limitation in view of the unprecedented disruption caused by the COVID-19 pandemic. According to him, once these statutory

Developing the submissions further, the learned Counsel submitted that the learned CIT(A) proceeded on the erroneous assumption that the normal period prescribed under section 249(2) continued to govern the field, completely overlooking the legislative relaxations and judicial directions which had the effect of extending the period available for instituting appellate proceedings. It was contended that where the appeal itself was filed within the statutorily extended period, there could be neither any delay nor any occasion for filing an application under section 249(3). Thus, the very foundation on which the learned CIT(A) dismissed the appeal as time barred was legally unsustainable.

In support of the Rule 27 application, the learned counsel referred to section 3(1)(b) of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 promulgated on 31.03.2020 and the subsequent Notification No. S.O.2033(E) dated 24.06.2020 issued thereunder, whereby the limitation prescribed for institution of appeals falling within the notified period stood extended up to 31.03.2021. It was submitted that the assessee’s appeal, having been filed on 29.07.2020, squarely fell within the extended period contemplated under the said legislative framework and, therefore, could not have been regarded as barred by limitation.

The learned counsel also placed reliance upon the subsequent Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance promulgated on 29.09.2020, which reiterated the legislative intent of extending the prescribed time limits in view of the prevailing extraordinary circumstances. It was submitted that the legislative relaxations constituted a complete answer to the finding recorded by the learned CIT(A) regarding delay.

Apart from the statutory relaxations, our attention was also invited to the series of suo motu orders passed by the Hon’ble Supreme Court in In Re: Cognizance for Extension of Limitation, whereby the period of limitation prescribed under general as well as special laws stood extended owing to the unprecedented situation arising from the COVID-19 pandemic. It was submitted that these directions, being binding under Article 141 read with Article 142 of the Constitution, equally governed the limitation prescribed under the Income Tax Act and, therefore, the learned CIT(A) could not have ignored their applicability while examining the maintainability of the appeal.

On the strength of the aforesaid statutory provisions and judicial directions, the learned Counsel submitted that the finding recorded by the learned CIT(A) in paragraphs 1.2 to 1.5 of the impugned order, holding that the appeal was delayed by 23 days and dismissing the same as time barred, deserves to be reversed. It was submitted that once the finding regarding limitation is held to be erroneous, the very foundation of the Revenue’s appeal

Without prejudice to the aforesaid submissions, the learned Counsel further submitted that even on the substantive issues, particularly in respect of the adjustment of Rs.1,94,09,73,923 under section 37, the findings recorded by the learned CIT(A) are based entirely upon the contemporaneous material available on record, including the computation of income, Schedule BP, reconciliation statements and the response furnished before the CPC during the processing stage itself. It was, therefore, submitted that even if this Tribunal were to examine the merits independently, the order of the learned CIT(A) would merit no interference.

Per contra, the learned Departmental Representative relied upon the grounds raised by the Revenue and the authorisation memo issued by the Principal Commissioner of Income Tax. He submitted that the learned CIT(A), having categorically held the appeal to be barred by limitation and having declined to condone the delay, could not thereafter have exercised appellate jurisdiction for deciding the appeal on merits. According to him, the findings recorded on merits are without jurisdiction and deserve to be set aside on that ground alone.

We have given our thoughtful consideration to the rival submissions and have carefully perused the material available on

A conjoint reading of the provisions of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 together with Notification No. S.O.2033(E) dated 24.06.2020 leaves no manner of doubt that the time prescribed for filing appeals falling within the notified period stood extended up to 31.03.2021. The appeal filed by the assessee on 29.07.2020, therefore, was well within the extended period contemplated under the statutory framework itself. Once the Legislature had enlarged the period available for instituting the appeal, the question of treating the

Apart from the aforesaid statutory relaxation, the series of suo motu orders passed by the Hon’ble Supreme Court in In Re: Cognizance for Extension of Limitation had also directed extension of limitation prescribed under general as well as special laws in view of the unprecedented disruption caused by the COVID-19 pandemic. These directions were binding upon all judicial and quasi judicial authorities. The learned CIT(A), while deciding the issue of limitation, neither adverted to the aforesaid statutory relaxations nor examined the applicability of the binding directions issued by the Hon’ble Supreme Court. Thus, the conclusion reached by the learned CIT(A) that the appeal was barred by limitation cannot be sustained either on facts or in law.

Accordingly, the finding recorded by the learned CIT(A) in paragraphs 1.2 to 1.5 of the impugned order holding that the appeal was delayed by twenty-three days and dismissing the same as barred by limitation is set aside. We hold that the appeal preferred by the assessee before the learned CIT(A) was well within the period of limitation available under law and, consequently, the Rule 27 application filed by the assessee deserves to be allowed.

Once the aforesaid finding is recorded, the principal grievance raised by the Revenue does not survive. The entire foundation of the Revenue’s appeal rests upon the premise that the learned CIT(A), after declining to condone the delay, lacked jurisdiction to adjudicate the appeal on merits. However, once it is held that the appeal before the learned CIT(A) was itself within limitation and that no delay existed in the eye of law, the very basis of the Revenue’s challenge disappears. The adjudication undertaken by the learned CIT(A) on the merits of the additions cannot, therefore, be faulted on the jurisdictional ground canvassed by the Revenue.

Even otherwise, we find that the Revenue has consciously confined its challenge only to the jurisdictional aspect. No ground has been raised disputing the factual findings recorded by the learned CIT(A) while deleting the adjustment of Rs.1,94,09,73,923, nor has any grievance been made with regard to the appreciation of the documentary evidence forming the basis of such conclusion. Be that as it may, since elaborate submissions were addressed before us on the merits of the principal addition and the learned counsel had also taken us through the entire material forming part of the paper book as well as the findings recorded by the learned CIT(A), we have independently examined the correctness of the said findings also.

The principal dispute on merits relates to the adjustment of Rs.1,94,09,73,923, comprising provision for impairment of Property, Plant and Equipment amounting to Rs.1,87,36,37,646

We have independently examined the findings recorded by the learned CIT(A) on the aforesaid issue in the light of the material placed before us. From the record, it is evident that immediately upon receipt of the notice proposing adjustment under section 143(1)(a), the assessee had furnished its response before the Centralised Processing Centre specifically pointing out that the provision for impairment of Property, Plant and Equipment amounting to Rs.1,87,36,37,646 and provision for capital advances amounting to Rs.6,73,36,277 had already been voluntarily disallowed by it while computing the taxable income in the original return itself. The assessee had further explained that these amounts formed part of the aggregate additions reflected in Schedule BP under the head “Any other item or items of additions under sections 28 to 44DA” and, therefore, any further adjustment on the very same items would inevitably result in duplication of the disallowance.

The learned CIT(A), after examining the computation of income, Schedule BP, the reconciliation statements, the response furnished before the CPC as well as the supporting documentary evidence, has recorded a categorical finding that the impugned disallowance did not represent an expenditure which had escaped disallowance in the computation of income. On the contrary, the material on record clearly established that these very amounts had already been added back by the assessee while computing its taxable income and the adjustment carried out by the CPC merely duplicated what had already stood disallowed by the assessee itself. The learned CIT(A) further observed that the difficulty arose

Having carefully examined the material forming part of the paper book as well as the findings recorded by the learned CIT(A), we find ourselves in agreement with the aforesaid conclusion. The reconciliation furnished by the assessee establishes a complete nexus between the impugned adjustments and the aggregate additions already reflected in Schedule BP. Significantly, this explanation was not conceived for the first time during the appellate proceedings but had been consistently put forth even at the stage of processing before the CPC. Thus, the factual foundation accepted by the learned CIT(A) emanates from contemporaneous material forming part of the assessment record itself and not from any fresh evidence introduced subsequently.

It is equally significant that the Revenue, while preferring the present appeal, has not challenged these factual findings by raising any specific ground nor has any material been brought before us to demonstrate that the reconciliation accepted by the learned CIT(A) suffers from any factual infirmity. No attempt has been made to show that the impugned amounts were not included in the computation of income or that the figures reflected in Schedule BP do not correspond with the reconciliation furnished by the assessee. In the absence of any material contradicting the

Once it is demonstrated from the computation of income itself that the assessee had voluntarily disallowed the aforesaid amounts while computing its taxable income, there remained no occasion for making a second adjustment while processing the return under section 143(1). Such duplication has the inevitable effect of reducing the returned loss beyond what had been declared by the assessee in accordance with law. The adjustment made by the CPC, therefore, could not be sustained, and the learned CIT(A), in our considered opinion, has correctly appreciated both the factual matrix and the documentary evidence while directing deletion of the adjustment of Rs.1,94,09,73,923.

We, therefore, find no infirmity in the conclusion reached by the learned CIT(A) in deleting the adjustment comprising provision for impairment of Property, Plant and Equipment amounting to Rs.1,87,36,37,646 and provision for capital advances amounting to Rs.6,73,36,277. The order of the learned CIT(A), to this extent, is affirmed.

In view of the foregoing discussion, the Rule 27 application preferred by the assessee is allowed. The finding recorded by the learned CIT(A) holding that the appeal was barred by limitation is set aside and it is held that the appeal before the learned CIT(A) was filed within the period of limitation available under law. Consequently, the very foundation of the grievance raised by the

In the result, the Rule 27 application filed by the assessee is allowed and the appeal of the Revenue is dismissed.