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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, 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 order dated 25.03.2019 of Learned Pr. Commissioner of Income Tax [hereinafter referred to as the “PCIT”], passed under section 263 of the Income Tax
1. That on the facts and in the circumstances of the case, the order u/s 263 passed by ld Pr CIT-5, Mumbai is bad in law and bad in facts.
2. That on the facts and in the circumstances of the case, the ld Pr CIT-5, Mumbai erred in not recording own satisfaction in respect of assessment order passed by the ld AO is erroneous so as it prejudicial the interest of revenue as per provision of section 263 of the Act.
3. That on the facts and in the circumstances of the case, the ld Pr CIT-5, Mumbai grossly erred in setting aside the assessment order passed by the u/s 144 r.w.s. 147 of the Act particularly when the issue relating to valuation of closing stock was not subject matter, for which assessment was reopened the 4. That on the facts and in the circumstances of the case, the ld Pr CIT-5, Mumbai erred in issuing direction in the order are not only contrary to provision of law but also against the principle of natural justice, 5. That the petitioner may kindly be permitted to raise any additional or alternative grounds at or before the time of hearing.
The brief facts of the case are that the assessee has e-filed its return of income for A.Y. 2010-11 on 15.10.2010 declaring total income of Rs. M/s. C. M. Bright Bars Pvt. Ltd. 9,07,340/-. Subsequently the case was reopened on the basis of information from Income Tax (Inv.) Wing and assessment was completed u/s 143(3) r.w.s. 147 of the Act on 28.03.2014. Again the case was reopened and notice u/s 148 of the Act was issued after recording the reason. The assessee has not presented the case in pursuance of notice u/s 148 of the Act and assessment was completed u/s 144 of the Act on 27.12.2016. Ld. PCIT however not being satisfied with the impugned assessment order as finding it erroneous and prejudicial to the interest of revenue, and directed the AO to pass afresh assessment order after making necessary inquiry into the issue and also by giving proper opportunity to the assessee.
The assessee has challenged the impugned order passed by Ld. PCIT passed u/s 263 of the Act. We have heard Ld. AR and Ld. DR. We have noticed that there is delay of 1802 days in filing appeal, which are enumerated in the written submissions of assessee as under:-
A) Working delay period in filing of appeal.
Before Covid delay (25.05.2019 to 20.03.2020) - 301 days Covid period (21.03.2020 to 28.02.2022 - 710 days Page | 3 Total delay period - 1802 days
Assessee has moved an application for seeking condonation of delay. The contents of application are extracted below:-
1] That I am Jugraj Chunilal Sanghvi is directors in the Company CM Bright Bars Pvt Ltd. and all the business affairs and other matter relating to company were under my supervision. Therefore I am key person of company. The other director is my wife who has no knowledge of financial affairs of company. 2] That due to heavy financial losses in our business, we are not in condition to repay bank loan and accordingly the bank had obtained the possession of properties which were mortgaged for loan and me with my wife & family had to shift on rented house. The only source of income for our family was business running through our company and the whole business was completely destroyed and cause such damages which are not repairable and put me and my family in hand to mouth situation as we have lost our source of livelihood and also our shelter. 3] Meanwhile my elder daughter got married and after marriage was not permitted by in-laws to pursue her Job as she become helpless and not able to support the family financially. Subsequently, her in laws tortured her mentally, totally ignored by husband and their marital relationship is irretrievably broken and there is no possibility of a further reunion. It is not possible to continue her matrimonial life with her dignity and individuality as a woman. After suffering from mental taurma and depression since long time in her marriage, she become separated and got divorced. 4] That me and my family were not only financially but also emotionally break down as our financial & family problems adversely impact my mental and physical health. I was struggling through many health issues and also hospitalized many times and due to mental & financial stress was suffered from heart attack and doctor advised me to take complete rest and live in M/s. C. M. Bright Bars Pvt. Ltd. tension free environment. That being an elder member of family, my wife & children are completely dependent on me and looking to cost of living in Mumbai city, it is very difficult to survive. 5] Meanwhile on the basis of some information, had initiated 147 proceeding against our company for A.V 2010-11 and passed the assessment order on 28/03/2014 u/s 143(3) r.w.s 147 and made the addition of Rs. 6,79,91,686/- against our company. Simultaneously, the department had also opened the case of A.Y 2009-10 & 2011-12. 6] Further due to shifting the office, some of the files of documents of business transactions were misplaced and due to stress of debt or other financial issues leaves me feeling depressed or anxious accordingly the compliances of the query raised by the Ld AO were not supplied in proper manner. 7] Subsequently the Ld AO had again initiated the reassessment proceeding (second round of 148) and passed the assessment order u/s 144 r.w.s 147 of the Act on 27/12/2016 and made the addition of Rs. 16,35,327/- against our company. 8] Thereafter the notice of revision proceeding u/s 263 of the Act was issued by the PCIT, Mumbai on 05/03/2019 against the assessment order dated 27/12/2016. That on 25/03/2019, the PCIT, Mumbai had passed the order u/s 263 and accordingly issued the direction for assessment. 9] That on 25/06/2019, the Ld AO had passed the assessment order u/s 144 r.w.s 263 of the Act and made the addition of Rs. 1,78,07,998/- against our company. 10] The department had created huge demand against our company in multiple year through multiple proceeding Further, I have visited the offices of many Chartered Accountants and legal counsels in Mumbai and discussed the cases with them and requested to prepare my cases and to provide appropriate remedy in accordance with provision of Income Tax Law but looking to my financial position, the high amount of fees demanded by them cannot be afforded by me as I was disappointed from everywhere feeling totally lost & failure person. 11] Meanwhile, the whole world was put down to its knees due to the outbreak of the Covid-19 pandemic in the beginning of 2020. In the wake of Page | 5 M/s. C. M. Bright Bars Pvt. Ltd. such an extreme situation and the difficulties that might be faced by litigants in filing petitions/applications/suits/appeals/all other proceedings within the prescribed period of limitation, the Hon'ble Supreme Court of India on March 23, 2020, took suo moto cognizance of the situation and the challenges faced by the Country on account of Covid-19 pandemic and passed Order dated March 23, 2020 in Suo Moto Writ (Civil) No. 3 of 2020, titled as In Re: Cognizance For Extension Of Limitation, extending the period of limitation in all cases in proceedings in all Courts/Tribunals throughout the Country with effect from March 15, 2020 till 28/02/2021. The Hon'ble Supreme Court exercised this power under Article 142 read with Article 141 of the Constitution of India and declared that their order is a binding order within the meaning of Article 141 on all Courts/Tribunals and authorities. 12] Subsequently, one of my friend had suggested the name of newly become Chartered Accountant and also charged nominal fees for preparing my cases and accordingly I approached him and submitted the details of all assessment orders and he had advised me to file an appeal before the Ld CITA) and accordingly I have furnished the documents & information for preparation of appeal to him. The Chartered Account had prepared the documents and accordingly filed appeal before the Ld CIT(A) against the assessment order passed by the Ld AO in respect of each year.
Ld. AR on behalf of the assessee relied on the decision of Coordinate Bench of ITAT in the case of M/s. C. M. Alloys Pvt. Ltd. Vs. ACIT in - 32/Mum/2024 dated 10.05.2024 wherein the condonation of delay was allowed in the same situation.
On the other hand, Ld. DR opposed the arguments of Ld. AR and submitted that no sufficient cause was given for granting condonation of delay.
M/s. C. M. Bright Bars Pvt. Ltd.
We have considered the rival submissions and perused the application for seeking condonation of delay. We find that there is delay of 710 days on account of covid period i.e. 21.03.2020 to 28.02.2022 and 301 days delay ad 701 days delay were before and after covid period. Thus, the total delay is 1802 days. The application seeking condonation of delay is supported by affidavit of the assessee. No contrary material has been placed on record by the revenue to contradict the contents of the assessee’s application.
The Hon’ble Supreme Court in Suo Moto Writ Petition (Civil) No. 3 of 2020 vide order dated 10.01.2022, was pleased to direct the condonation of delay on account of covid pandemic and extended limitation period for judicial and quasi judicial proceedings from March 15, 2020 to February 28, 2022.
The Hon’ble Supreme Court has further allowed the filing of the proceedings whatever it may be within the limitation period starting the limitation from 01.03.2022. The appeal was instituted before the Tribunal on 08.08.2024. The other reasons mentioned in the application supported by affidavit, in our opinion, makes out sufficient cause for condonation of delay in filing the present appeal.
M/s. C. M. Bright Bars Pvt. Ltd. 10. The right of appeal is a statutory right granted to the appellant/assessee. The statutory right cannot be denied to an assessee unless there is inordinate delay or gross negligence on the part of the assessee. It is settled law that the rules and procedure is handmade of justice and the adjudicating authorities should not deny a statutory right of appeal on technical grounds.
Nothing contrary has been brought on record by the respondents which may contradict and falsify facts alleged by the appellant in support of seeking condonation of delay. 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 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:
M/s. C. M. Bright Bars Pvt. Ltd.
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.”
In similar situation, the Ld. Coordinate Bench of ITAT in the case of sister concern M/s. C. M. Alloys Pvt. Ltd. Vs. ACIT in - 32/Mum/2024 dated 10.05.2024 has condoned 2170 days delay on similar facts.
In the facts and circumstances as discussed above and because of the law laid down by the Hon’ble Supreme Court in Collector, Land Acquisition Vs. MST. Katiji & Ors (supra),we are of the considered opinion that there was sufficient cause for condoning the delay for filing the appeal before the Tribunal by the assessee. Accordingly, the application for conodonation of delay is allowed.
On merit it is argued that Ld. PCIT has passed an ex-parte order which is evident from para 3 of the impugned order and it was argued that in the interest of natural justice the assessee be given an opportunity of being heard which is mandatorily required by the law. Para 3 of the order of Ld. PCIT is extracted below:-
M/s. C. M. Bright Bars Pvt. Ltd.
3. In the above factual background, notice u/s 263 was issued on 05-03-2019 thereby providing the assessee opportunity of being heard on 11/03/2019. Inspector was deputed to served the said notice u/s 263 of the I.T.Act. to the address of the assessee. Inspector reported that from local enquiry it is known that since long the premise is closed, hence the said notice was served by affixture on 08/03/2019. However, nobody appeared on behalf of the assessee nor was any application for adjournment filed. No written submission was filed either. Under the circumstances, I am constrained to decide the proceedings ex- parte on the basis of the material available on record.
On perusal of provision u/s 263 of the Act, it is evident that the [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. Nothing has been brought to our notice that the concerned authority has duly served the notice u/s 263 of the Act to the assessee. It is stated in the impugned order of Ld. PCIT that an inspector was deputed to serve the notice u/s 263 of the Act to the address of assessee. Inspector reported that from local enquiry it is known that since long the Page | 10 M/s. C. M. Bright Bars Pvt. Ltd. premise is closed, hence the said notice was served by affixation on 08/03/2019. No proof of affixation has been placed on record to prove the service of the notice upon the assessee. It is mandatory requirement of law that the assessee be given an opportunity of being heard before passing an order u/s 263 of the Act. It is evident from the above discussion that the authorities have failed to establish the service of notice upon the assessee before proceeding u/s 263 of the Act.
For the above reasons, the impugned order of the Ld. PCIT is not sustainable in the eyes of law and accordingly set aside with the directions to restore the case of the appellant on the file of Ld. PCIT who shall dispose the same on merit after duly considering the material brought on record by the appellant and an opportunity be given to the assessee of effective hearing. The appellant/assessee shall present its case before the Ld. PCIT within 90 days of this order.
In the result, appeal filed by the assessee is allowed for statistical purposes.