Loading judgment…
Facts
The assessee company, engaged in electronics retail, claimed depreciation on goodwill arising from amalgamation. The AO disallowed this claim, holding that no such asset arose. The CIT(A) upheld the AO's order.
Held
The Tribunal condoned the delay in filing the appeal due to the assessee inadvertently missing notices. On merits, the Tribunal decided to remand the issue of depreciation on goodwill to the CIT(A) for fresh adjudication, considering the Supreme Court's decision in CIT vs. Smifs Securities.
Key Issues
Whether the delay in filing the appeal should be condoned, and if depreciation on goodwill is allowable.
Sections Cited
253, 143(3), 271(1)(c), 32(1), 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SHRI GIRISH AGRAWAL
Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of order 03/08/2023 passed by NFAC, Delhi for assessment year 2017-18 on following grounds of appeal :
“ The Appellant appeals under section 253 of the Income-tax Act (the Act) against the order dated 03.08.2023 passed by the Commissioner of Income-tax (Appeals), under National Faceless Appeal Centre (NFAC) Delhi in appeal against order dated 11.12.2019 passed under section 143(3) of the Act, on the following amongst other grounds each of which is in the alternative and without prejudice to any others Dismissing the appeal filed by the Appellant ex-parte:
1. 1. The National Faceless Appeal Centre ["NFAC"]/ the Commissioner of Income-Tax (Appeals) ["CIT(A)"] has erred in perfunctorily dismissing the appeal filed by the Appellant ex-parte without properly adjudicating the issues on its merits.
2. The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the ex-parte order passed by the NFAC/CIT(A) is bad-in-law, illegal, arbitrary and void-ab-initio and hence ought to be stuck down. Without prejudice to the foregoing: Disallowance of depreciation on Goodwill 3. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) 'CIT(A)' has erred in upholding the assessed total loss at Rs (51,39,99,343) as against returned loss of Rs (64,24,30,178).
4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the disallowance of Rs 12,84,36,835 made by learned AO in respect of depreciation on goodwill which was debited to the profit and loss account of the appellant. Penalty proceeding under section 271(1)(c) of the Act 5. Based on the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding the assessment order passed by learned AO wherein the learned AO has erred in initiating penalty proceedings under Section 271(1)(c) of the Act. The appellant craves leave to add to, amend, alter, vary, omit, or substitute the aforesaid grounds of appeal or add a new ground or grounds of appeal at any time before or at the time of hearing of the appeal as they may be advised.”
2. The assessee is company and filed its return of income for year under consideration on 31/10/2017, declaring total income at nil. During the year, assessee had claimed carry forward of loss amounting to Rs.63,84,38,248/-. 2.1 Subsequently, revised return was filed on 30/03/2019 declaring total income at Rs. Nil, wherein the carry forward loss claimed was Rs.64,24,30,178/-. The case was selected for scrutiny and notice u/s.143(2) of the Act was issued along with notice u/s. 142(1) of the act. In response to the statutory notice, and the queries raised, the assessee filed its reply and submissions to the Ld.AO. 2.2 The Ld.AO noted that, the assessee is engaged in the business of running electronics goods retail network in the name and style of “Croma”. It was noted that the assessee claimed depreciation on intangible – goodwill during the year under consideration. Assessee submitted that the goodwill arouse as result of amalgamation with fully owned subsidiary of assessee company being Infinity Wholesale Pvt. Ltd. During the financial year 2012-13 corresponding to assessment year 2013-14 and the goodwill that arose was accounted for as intangible capital assets on which depreciation was claimed from assessment year 2013- 14 onwards. 2.3 The Ld.AO called for various submissions in respect of the claim which was furnished by the assessee. However, after considering the submissions, the Ld.AO disallowed the depreciation under section 32(1) of the Act by holding that, no asset such as goodwill has arisen in the amalgamation.
A.Y. 2017-18 Infiniti Retail Limited Aggrieved by the order of the Ld.AO assessee preferred the appeal before the Ld. CIT(A).
Before the Ld. CIT(A) assessee was issued notice during COVID period and two notices were issued during the year 2023. Assessee failed to respond to the notice. The Ld.AR submitted that assessee inadvertently missed out to forward the subsequent notice issued during 2023 to its authorised representative and thus an ex-parte order was passed by the Ld.CIT(A) for non appearance. 3.1 It is submitted that, the order by the Ld.CIT(A) was also missed out to be considered by the assessee and therefore there is delay of 427 days in filing this appeal before this Tribunal. The Ld.AR prayed that, based on the application dated 02/12/2024 seeking condonation of delay supported by affidavit of the managing director of the assessee, the delay may be condoned in the interest of justice. 3.2 On the contrary the Ld.DR vehemently opposed the application seeking condonation of delay filed by the assessee. He submitted that, assessee did not appear before the Ld.CIT(A), even though the notices were issued to the registered e-mail ID of the assessee. He thus supported the order passed by the authorities below. We have perused the submissions advance by both sides in the light of record placed before us.
In the present facts as narrated in the affidavit, it is noted that, the assessee prayed for substantiate justice to be prevail over procedural technicalities. The assessee though had received notices issued by the NFAC on various dates two of which was A.Y. 2017-18 Infiniti Retail Limited issued during COVID period. Non appearance by the assessee in respect of those two notices cannot be found fault with as the limitation period stood suspended by the decision of Hon’ble Supreme Court during the COVID period. 4.1 In respect of the last two notice issued on 30/01/2023 and 30/07/2023, it is noted that, the assessee did not furnished any response. The reason stated in the affidavit is that assessee inadvertently missed out to share the notices received to the concerned representative who handled tax matters of the assessee. It is further noted that the order passed by NFAC was also not noted by the assessee and it was only during certain compliances that assessee realised the impugned order was already passed and there was delay of 427 days in filing the present appeal before this Tribunal. 4.2 It is also noted that as soon as assessee realised above the impugned order having passed, it immediately proceeded in filing the present appeal before this Tribunal. What has to be considered in such circumstances is whether the assessee is benefited in any manner by not filing the present appeal before this Tribunal within the period of limitation. It is also to be considered whether, the assessee actually missed out to forward the notices of hearing to the authorised representative. 4.3 There is no doubt that, assessee in a bonafide circumstances inadvertently missed out to forward the notices to the authorised representative. Because of which the order passed by NFAC was also inadvertently missed out. Various courts have observed that, “sufficient cost” must be construed in order to adapt a pragmatic approach where the court could exercise its A.Y. 2017-18 Infiniti Retail Limited discretion towards the advancement of substantial justice Hon’ble Madras High Court in case of Venkatadri Traders Limited vs. CIT(A) reported in (2001) 118 taxmann.com 622 observed that, advancing substantial justice should be of prime importance in the administration of justice and the expression of “sufficient cost” should received a liberal construction. Hon’ble Supreme Court in case of Mrs. Sandhyarani Sarkar vs. Smt. Sudharani Devi reported in AIR 1978 held that non filing of affidavit in opposition to an application for condonation of delay may be a sufficient cause to condone the delay. In the present facts of the case revenue did not filed any counter affidavit opposing the application of assessee. 4.4 Hon’ble Courts has time and again emphasised that condonation of delay is discretion of court/Tribunal. Therefore, it would depend on facts of each case to ascertain the sufficient cost for not able to file the appeal within the period of limitation. In the present facts of the case the assessee inadvertently missed out to take note of the e-mail received from the first appellate authority in respect of notices issued as well as the impugned order being passed. No malafied intension could be made out as the assessee missed out taking cognizance of the notices issued subsequent to the COVID period. 4.5 We therefore are of the opinion that the reason assigned by the assessee for not presenting the appeal before this Tribunal within the period of limitation deserves to be considered based on the principles laid down by the Hon’ble Supreme Court in case of Collector Land Acquisition Vs. MST. Katiji and others reported in A.Y. 2017-18 Infiniti Retail Limited 1987 167 ITR 471. Reliance is placed on the following observations. “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 a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the other courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that :
1. 1. 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. ......................................................1.Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.” Accordingly based on the above prepositions and discussions the delay in filing the present appeal before this Tribunal stands condoned.
5. On merits of the addition challenged before this Tribunal the Ld.AR submitted that only issue challenged is on the claim of depreciation disallowed by the authorities below in respect of the goodwill that was generated due to amalgamation. 5.1 The Ld.AR submitted that, assessee has been claiming this depreciation since assessment year 2013-14. He submitted that, the issue is squarely covered by the decision of Hon’ble Supreme Court in case CIT vs. Smif Securities reported in 2012 24 A.Y. 2017-18 Infiniti Retail Limited taxmann.com 222. The Ld.AR submitted that the Ld.AO himself has allowed the claim during the assessment year 2013-14 and 2014-15. He submitted that it is for the first time the claim was disallowed in the year 2015-16 and for the year under consideration. The Ld.AR also submitted that, appeal is pending before the Ld. CIT(A) for assessment year 2015-16 on identical issue. 5.1 On the contrary, the Ld.DR submitted that, the issue may be remanded to the Ld. CIT(A) for reconsideration as it has not been analysis due to non appearance. He also submitted that, in any event A.Y.2015-16 is pending before the Ld. CIT(A) and accordingly the present year also may be remanded for proper verification. We have perused the submissions advance on both sides in the light of records placed before us.
The Ld.AR did not object for the issue to be remanded to the Ld.CIT(A). In any event the issues needs to be analysed in the light of the decision by Hon’ble Supreme Court in case of CIT vs. Smifs Securities Ltd. (supra). We therefore remand this issue back to the Ld. CIT(A) with the direction to passed the detailed order on merits after considering the submissions advance and evidences filed by the assessee in support of its claim. Accordingly the grounds raised by the assessee stands partly allowed for statistical purposes.
In the result the appeal filed by the assessee stands partly allowed for statistical purposes.