IIT INVESTRUST LIMITED ,MUMBAI vs. INCOME TAX OFFICER , 491)(2), , MUMBAI

31. March 2005, we made an\nimpairment of Rs.2,11,45,184/- on BSE Card shown\nunder Fixed Assets As a result, net block as at 31st\nMarch 2005 was reduced to Rs.75,00,000.\n\n3. The Securities and Exchange Board of India (SEBI)\nissued notification dated

Our case was selected for scrutiny for assessment year\n2012-13. The Assessing Officer passed an order dated\n25.11.2014 under section 143(3) of the Act and\ndetermined the refund of Rs 46, 72,720, including\ninterest under section 244A. Our returned income was\naccepted without any modifications.\n\n11.

Thereafter, the Assessing Officer issued a notice dated\n31.03.2017 under section 148 of the Act and our case\nwas re-opened and the Assessing Officer passed an\norder dated 30.11.2017 under section 143(3) r.w.s.147\nof the Act and determined the total income at Rs\n2,29,88,190 after making an addition of Rs\n75,00,000 in respect of write-off of intangible\nassets (BSE card) which is debited to the profit\nand loss account.\n\n11.

2nd reopening for assessment year 2012-13 The\nAssessing Officer once again issued a notice dated\n30.03.2019 under section 148 of the Act and our case\nwas re-opened (2nd reopening); and the Assessing\nOfficer passed an order dated 16.12.2019 under section\n144 r.w.s.147 of the Act and surprisingly, again\nmade an addition of Rs 75.00.000 for the reason\nthat the intangible asset (BSE card) is written-off\nof and debited to the profit and loss account, which is\nnot an allowable expense: the Assessing Officer once\nagain determined the total income at Rs 2,29,88,190\nand raised a demand of Rs 76,99,060.\n\n1. Thereafter, in December, 2019, we appointed\nMessrs R.S. Khandelwal & Associates, Chartered\nAccountant to draft and file appeal to the CIT(A)\nagainst the second re-opening order. We also\nsought professional advice regarding the aforesaid\ndisallowance made by the Assessing Officer. On\ntheir enquiry as to how this figure is arrived at, we\nlooked up the old documents and noticed that\nthe long term capital gains offered by us in\n assessment year 2008-09 was an inadvertent\nerror inasmuch as the cost of acquisition\nought to have been Rs 2,86,45,000 as against\nRs 10,000 claimed in the return of income. The\nsaid inadvertent error did not come to our\nknowledge till February, 2020 inasmuch as we\nwere not aware of this transaction. It is only when we\nsought advice on the issue that too on queries\nraised, we checked our old records and noticed this\nerror. It would not be out of place to mention that\nthere was a change in management of our company\nin the year 2008.\n\n2. Thereafter, in February, 2020, Covid-19 broke out\nand we started working with a skeleton staff. In\nMarch, 2020, WHO declared a pandemic and a\nnationwide lockdown was announced which is on-\ngoing till date. We are still working with skeleton\nstaff and hence, we were not able to seek advice on\nthe aforesaid error and take appropriate action.\nFurther, our aforesaid consultants Messrs R.S.\nKhandelwal & Associates, Chartered Accountant\nwere completely non-functional during the initial\nfew months of the lockdown and later, they adopted\n'work from home' approach for their office, and\ntheir office was virtually non-functional.. They\ncompletely stopped coming to office for the reason\nthat even the Income-tax Appellate Tribunal was\nfunctional virtually and the Income-tax Department\nadopted the faceless approach for CIT(A) and\nassessment proceedings. They also stopped\nphysically meeting anyone due to fears in\nMaharashtra, in particular, in Mumbai. They only\nstarted coming to office after 15 th August 2021, on\ntheir staff being partially or fully vaccinated. It can\nbe appreciated that the issue involved in the appeal\nrequired detailed examination of old records and\nhence, it was not possible for us or for them to\nvirtually attend to this issue.\n\nFurther, you will appreciate that there is absolutely no\nmalafide intention on our part for the aforesaid delay. No\nbenefit would accrue to us on account of not filing of\nappeal within the due date. As mentioned earlier, there\nwas a change in management in the year 2008. The new\nmanagement was not aware of this transaction at all. As\nsuch, you will appreciate that the error of not filing of\nappeal is, on facts, bona fide.” (Emphasis Supplied)\n\n5. On perusal of the above application seeking condonation of\ndelay, it\nis clear that the return of income for the Assessment Year 2008-\n2009, the Assessee had offered to tax Long Term Capital Gains of\nINR.5,19,90,000/- computed as under:\n\nDate of sale\nQuantity\nSales consideration\nCost of acquisition (taken at)\nGain credited to profit and loss account\n23.07.2007\n10,000\nINR.5,20,00,000\nINR. 10,000\nINR.5,19,90,000\n\n6. It is admitted position that return was processed on 26/11/2009\nunder Section 143(1) of the Act. Thereafter, Rectification Order\nunder Section 154 of the Act was passed on 11/08/2010. It is the\ncase of the Assessee that, subsequently, when the records of the\nAssessee was being examined by the tax professional in relation to\nassessment proceedings for the Assessment Year 2012-2013 in\nDecember, 2019, it was discovered that there was inadvertent error\non account of which cost of acquisition of shares sold was incorrectly\ntaken as INR.10,000/- (instead of INR.2,96,45,000/-) while\ncomputing the Long Term Capital Gain of INR.5,19,90,000/- offered\nto tax in the return of income. However, on account of Covid-19\nPandemic the appeal before the CIT(A) could not be filed. Later, the\nAssessee instituted appeal before the CIT(A) on 09/09/2021 after a\ndelay of about 11 years. As evident from the application seeking\ncondonation of delay, before the CIT(A), following submission were\nmade:\n\n"2.\nXX XX\nFurther, you will appreciate that there is absolutely no\nmalafide intention on our part for the aforesaid delay. No\nbenefit would accrue to us on account of not filing of\nappeal within the due date. As mentioned earlier, there\nwas a change in management in the year 2008. The new\nmanagement was not aware of this transaction at all. As\nsuch, you will appreciate that the error of not filing of\nappeal is, on facts, bona fide.\n\nWe, in this regard, submit that Courts have held time\nand again that the jurisdiction to condone the delay\nmust be exercised liberally. It is further held that in\nconsidering the condonation petition, it is to be\nremembered that statutes conferring a right of appeal\nmust be construed in furtherance of justice and the\nprovision limiting the time for bringing an appeal must\nbe liberally interpreted Chamanlal Bros. Ltd. Vs The\nPunjab State 12 SCT 643. The word \"sufficient cause\"\nshould receive liberal construction so as to advance\nsubstantial justice Sandhya Rani Sarkar Vs Sudha Rani\nDebi AIR SC 537. It is held that when substantial justice\nand technical considerations are pitted against each\nother, the cause of substantial justice deserves to be\npreferred-167 ITR 471 (SC).\n\nFurther, it is held in the case of Ashok Automobile\n(Ranchi) Pvt. Ltd. Vs State of Bihar (1988) 174 ITR 566,\n567 (Pat) that the jurisdiction to condone delay should\nbe exercised liberally and matter relating to condonation\nof delay should be judged broadly and not in a pedantic\nmanner.\n\nWhile dealing with the condonation of delay under\nsection 5 of the Limitation Act, 1963, the Supreme\nCourt, in Collector, Land Acquisition Vis. Mst. Katiji\n[(1987) 167 ITR 471, 472-73 (SC)], has held as under:-\n\nThe Legislature has conferred the power to\ncondone delay by enacting section 5 of the\nLimitation Act, 1963 in order to enable the courts\nto do substantial justice to parties by disposing of\nmatters on \"merits\". The expression 'sufficient\ncause' in section 5 is adequately elastic to enable\nthe courts to apply the law in a meaningful\nmanner which subserves the ends of justice that\nbeing the life purpose of the existence of\ninstitution of Courts. It is common knowledge that\nthis court has been making a justifiably liberal\napproach in matters instituted in this court. But\nthe message does not appear to have percolated\ndown to all the other courts in the hierarchy. A\njustifiably liberal approach has to be adopted on\nprinciple.\n\nAnd such a liberal approach is adopted on\nprinciple as it is realised that\n\n(1) Originally, a litigant does not stand to benefit by\nlodging an appeal late.\n\n(2) Refusing to condone delay can result in a\nmeritorious matter being thrown out at the very\nthreshold and cause of justice being defeated. As\nagainst this, when delay is condoned, the highest\nthat can happen is that a cause would be decided\non merits after hearing the parties.\n\n1. 'Every day's delay must be explained' does\nnot mean that a pedantic approach should\nbe made. Why not every hour 's delay,\nevery second's delay? The doctrine must be\napplied in a rational, common sense and\npragmatic manner.\n\n2. When substantial justice and technical\nconsiderations are pitted against each\nother, the cause of substantial justice\ndeserves to be preferred, for the other side\ncannot claim to have vested right in\ninjustice being done because of a non-\ndeliberate delay.\n\n(5) There is no presumption that delay is occasioned\ndeliberately, or on account of culpable negligence\nor on account of malafides. A litigant does not\nstand to benefit by resorting to delay. In fact, he\nruns a serious risk.\n\n(6) It must be grasped that the judiciary is respected\nnot on account of its power to legalise injustice on\ntechnical grounds but because it is capable of\nremoving injustice and is expected to do so.\n\nIn view of the reasons for the delay mentioned\nabove, we submit that we have been prevented\nby reasonable cause in filing the appeal within 30\ndays of receipt of notice of demand and we\ntherefore, on the basis the decisions mentioned\nabove, request you to condone the delay in filing\nthe appeal and admit the appeal to be disposed of\non merits.\"\n\n7. The above submission did not find favour with the CIT(A) and the\napplication seeking condonation of delay as well as the appeal\npreferred by the Assessee were dismissed by the CIT(A) vide Order\ndated, 06/06/2024, holding as under:\n\n\"5. I have carefully examined the application for condonation of\ndelay filed & the reasons stated in the case. It is noted that\nthe appeal against the impugned order under section 154\ndated 11/08/2010 was due on 10/09/2010 and the present\nappeal is filed on 09/09/2021 with the delay of more than\n11 years. The reason cited by the appellant is that the\nappellant came to be aware of certain mistakes on its part\nin accounting for the cost of acquiring the shares of BSE Ltd\nand not claiming the same in computing the capital gains on\nsale of those shares during the assessment year 2008-09,\nconsequent to an assessment under section 147 for AY\n2012-13 made on 16/12/2019 adding Rs.75,00,000 being\nthe cost/value written off against the shares sold earlier.\nThereafter, the appellant cited the disruptions caused by\nCOVID-19 pandemic as a reason till the date of filing this\nappeal.\n\nAs per the stated facts, it is noted that the appellant had\nwritten off an amount of Rs.2,11,45,184 in its books\ntowards the impairment of assets, viz, the BSE Card as on\n31st March 2005, on allotment of shares of BSE Ltd\nconsequent to SEBI notification 20th May 2005 on the BSE\n(Corporatisation & Demutualisation) Scheme, carrying the\ncost of asset @ Rs.75,00,000 only. The appellant had\noffered long term capital gains on sale of shares of BSE Ltd\nduring the AY 2008-09 at Rs.5,19,00,000 after claiming the\ncost of acquisition of shares at Rs.10,000 paid on allotment\nof shares, leaving Rs.75,00,000 being accounted as cost of\nBSE Card & other rights under intangible asset. The\nappellant having sold the shares & offered capital gains in\nthe year 2007-08, relevant to AY 2008-09, written off the\nabove balance of Rs.75,00,000 by debiting to its P&L\naccount for FY 2011-12 & claimed deduction in AY 2012-13.\nThe said claim was disallowed by the AO by taxing the same\nas STCG on sale of BSE membership card vide order u/s\n143(3) rws 147 dated 30/11/2017 and capital expenditure\nwritten off vide order u/s 143(3) rws 147 dated 16/12/2019\nfor AY 2012-13.\n\nIt is further noted that the appellant had not made any\nclaim for deduction of the alleged cost of acquiring the\nshares of BSE Ltd, except for Rs.10,000 in the ITR filed for\nAY 2008-09 and accordingly the returned income of Rs.\n4,46,37,535, which included long-term capital gains of\nRs.5,19,90,000 before setting off the current year and\nbrought forward losses was accepted by the department.\nFurther, the subject matter of rectification in the impugned\norder under section 154 of the Act dated 11/08/2010 does\nnot include any claim relating to the deduction of any cost\nof acquisition and it is merely on giving credit to pre-paid\ntaxes not considered in the processing under section 143(1)\nof Act, which was duly rectified in the impugned order.\n\nIn the above facts and circumstances, the present appeal of\nthe appellant is filed with the ulterior motive of countering\nor nullifying the addition made in the re-assessments for AY\n2012-13 highlighted above by making a new/fresh claim in\nthe assessment year 2008-09, when the same does not\narise from the impugned order under section 154 dated\n11/08/2010 against which this appeal is instituted. It is\nadmitted by the appellant that there was an error in not\nclaiming the actual cost of acquiring the shares of BSE Ltd,\nwhile offering the LTCG for AY 2008-09 and accordingly, the\nappellant had resorted to filing this appeal with the delay of\nmore than 11 years. The appellant had filed appeals against\nthe re-assessment orders dated 30/11/2017 & 13/12/2019\non 22/12/2017& 13/01/2020, respectively, within 30 days\nof order overcoming the disruptions due to COVID-19\npandemic, at least in the second case and taking exception\nof the pandemic only for this appeal, which shows that the\nreason cited for condonation is not genuine. The appellant\nreason that there was an inadvertent error in making a\nclaim or computation of income in the return of income filed\nfor AY 2008-09, which came to light when the reassessment\nfor AY 2012-13 was completed cannot be a bona fide reason\nfor condonation of delay given the fact that by the time the\nstatutory limitation to revise the return or to file the appeal\nhas expired and no valid claim of deduction been made in\nthe ITR or before the assessing authority. Further, a\ndecision to file an appeal for a given assessment year based\non the outcome or progress of assessment for any other\nyear or years cannot be a reason least sufficient reason for\ncondonation of delay. If that be the reason, the limitation\nprescribed in the statute would become redundant leading\nto endless litigation on settled assessments by the\nappellants aiming to negate additions, rectify and correct\ntheir own mistakes, even after a decade as in the present\ncase. As illustrated above, this appeal has been filed with\nulterior motive of making a new/fresh claim of deduction\nand to negate the addition made in the other assessment,\nwhich cannot be permitted under Income tax Act and as\nsuch there is no substantial justice or cause to be served by\ncondoning the delay of more than 4000 days or 11 years.\nIn the above facts and circumstances and for the detailed\nreasoning given above, I do not find any bona fide or\nreasonable cause for the delay of more than 11 years in\nfiling this appeal and accordingly, the request for\ncondonation of the delay in filing the appeal is not acceded\nto and appeal is not admitted.\n\nIn the result the appeal is rejected.”\n\n8. The above order of the CIT(A) has been challenged in appeal before\nthe Tribunal.\n\n9. It is admitted position that in the return of income the Assessee had\nonly claimed deduction for cost of acquisition of shares sold at\nINR.10,000/-. It is also evident on perusal of the Rectification Order,\ndated 11/08/2010, that the subject matter of rectification application\nwas no-grant of advance tax of INR.10,06,00,000/-. Therefore, the\nCIT(A) had rightly hold that issue raised in the appeal filed before\nthe CIT(A) against the Rectification Order passed under Section 154\nof the Act did not arise from the said order. Therefore, the same\ncould not have been entertained by the CIT(A) in appeal against the\nRectification Order. Thus, in effect the claim made by the Assessee\nwas a new/fresh claim of deduction in respect of cost of acquisition\nof shares which was raised belatedly for the first time after a delay\nof more than 11 years and for that reason also the same could not\nbe entertained by the CIT(A). Further, as per the application\nseeking condonation of delay, the reason provided for delay in filing\nappeal was that there was change in the management in the year\n2008 and the mistake was discovered in December, 2019. It is\nadmitted position that as per application seeking condonation of\ndelay the Assessee had provided following treatment in the books of\naccounts for the previous year relevant to the Assessment Year\n2008-2009:\n\n\"Treatment of investments in our books of account for the year\nended 31st March, 2008 On sale of the equity shares of the BSE,\nin our books of account\n\nOpening balance\nAdjusted towards cost of shares of BSE\nTransferred to intangible (fixed assets)\n(BSE card)\nClosing balance\nRs.75,1000\n(Rs 10,000)\nRs.75,00,000\nNil\"\n\nIt is also admitted for the Assessment Year 2012-2013, the Assessee\nhad written off INR.75,00,000/- (treated as intangible/fixed asset in\nthe books of accounts) by debiting the Profit & Loss Account and had\nclaimed deduction for the same in the return of income for the\n Assessment Year 2012-2013. Thus, it cannot be said that the\nconcerned persons of the Assessee-company did not have\nknowledge of the correct facts. The aforesaid claim was reject in the\nassessment/re-assessment proceedings for the Assessment Year\n2012-2013. It is only after the aforesaid disallowance was made that\na different position/stand was sought to be taken by the Assessee to\nclaim the said amount as cost of acquisition of asset sold during the\nprevious year relevant to Assessment Year 2008-2009. This was\ntaken note of by the CIT(A) while concluding that the Assessee had\nfailed to provide a bonafide reason for delay in filing the appeal\nsufficient to condone the delay of 11 years. We concur with the view\ntaken by the CIT(A) as we do not find infirmity in the order passed\nby the CIT(A) holding that the Assessee had failed to provide a\nbonafide or reasonable cause for delay in filing the present appeal.\nThe CIT(A) has correctly observed that the time for filing the revised\nreturn or appeal against the Rectification Order had expired long\nback. No action was taken by the Assessee for 11 years. The tax\nproceedings for the Assessment Year 2008-09 stood concluded. As\ncorrectly observed by the CIT(A), the limitation prescribed as per the\nprovisions of the Act would become redundant leading to endless\nlitigation on settled assessments in case an Assessee is permitted to\nrevise return or rectify its own mistake even after a decade without\nany sufficient cause. In view of the aforesaid, we do not find\ninfirmity in the order passed by the CIT(A) holding that the Assessee\nhad failed to provide a bonafide or reasonable cause for delay in\nfiling the appeal before the CIT(A). Accordingly, we declined to\ninterfere in the order passed by the order passed by the CIT(A) and\nsame is sustained. As a result all the Grounds raised by the Assessee\nare dismissed.\n\n10. In result, the present appeal preferred by the Assessee is dismissed.\n\nOrder pronounced on 09.06.2025.\n\nSd/-\n(Om Prakash Kant)\nAccountant Member\nमुंबई Mumbai; दिनांक Dated : 09.06.2025\nMilan, LDC\n\nSd/-\n(Rahul Chaudhary)\nJudicial Member\n\n", "summary": { "facts": "The Assessee filed an appeal against a Rectification Order (Section 154) for AY 2008-2009, after a delay of approximately 11 years. The Assessee sought condonation of delay, citing an inadvertent error in accounting for the cost of acquisition of shares and disruptions due to the COVID-19 pandemic.", "held": "The Tribunal held that the Assessee failed to provide a bona fide or reasonable cause for the significant delay in filing the appeal. The delay was not condoned, and the appeal was not admitted, leading to its dismissal.", "result": "Dismissed", "sections": [ "154", "143(1)", "55(2)(ab)", "143(3)", "244A", "148", "147" ], "issues": "Whether the delay of over 11 years in filing the appeal against the rectification order was bonafide and sufficiently excused for condonation, and whether the appeal raised an issue arising from the rectification order itself." } }