MSEB HOLDING COMPANY LIMITED,MUMBAI vs. PRINCIPAL COMMISSIONER OF INCOME TAX 1, MUMBAI

PER OM PRAKASH KANT, AM PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against revision order This appeal by the assessee is directed against revision order This appeal by the assessee is directed against revision order

dated 27/03/2017 passed by the dated 27/03/2017 passed by the Ld. Commissioner of Income Commissioner of Income-tax-

1, Mumbai [in short the Ld. CIT] for assessment year 2012 short the Ld. CIT] for assessment year 2012 short the Ld. CIT] for assessment year 2012-13,

raising following grounds: raising following grounds:

1: 1 The Principal Commissioner of Income 1: 1 The Principal Commissioner of Income-tax has erred in passing tax has erred in passing the Order dated 27 March 2017 u/s. 263 of the Income the Order dated 27 March 2017 u/s. 263 of the Income the Order dated 27 March 2017 u/s. 263 of the Income-tax Act, 1961.

1: 2 The Principal Commissioner of Income The Principal Commissioner of Income-tax has erred in holding has erred in holding that the Assessment Order dated 23 March 2015 passed by the that the Assessment Order dated 23 March 2015 passed by the that the Assessment Order dated 23 March 2015 passed by the Assessing Officer was erroneous and prejudicial to the interests of Assessing Officer was erroneous and prejudicial to the interests of Assessing Officer was erroneous and prejudicial to the interests of revenue.

1: 3 The Appellant submits that the impugned Order u/s. 263 of the 1: 3 The Appellant submits that the impugned Order u/s. 263 of the 1: 3 The Appellant submits that the impugned Order u/s. 263 of the Principal Commissioner of Incom Commissioner of Income-tax be struck down.

this appeal was filed with a delay of 272 days. The Learn this appeal was filed with a delay of 272 days. The Learn this appeal was filed with a delay of 272 days. The Learned counsel

of the assessee referred to the affidavit filed by of the assessee referred to the affidavit filed by Managing Director Managing Director of

assessee company wherein he assessee company wherein he has submitted that delay was not submitted that delay was not

‘deliberate’ or ‘contumacious contumacious’ but it was on account of a mistaken but it was on account of a mistaken

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understanding of law. In his affidavit, he understanding of law. In his affidavit, he has mentioned that mentioned that

initially on receipt of the initially on receipt of the impugned order, it was decided in it was decided in

discussion with the advising discussion with the advising Chartered Accountants that there s that there was

no financial implication no financial implication and so there was no requirement of filin there was no requirement of filing

the appeal, however later on the appeal, however later on the advice of other of other Chartered

Accountant, the assessee the assessee decided to file the appeal against the to file the appeal against the

impugned order. The impugned order. The Ld. counsel accordingly submitted that delay accordingly submitted that delay

in filing the appeal might be condoned. in filing the appeal might be condoned.

the delay. He submitted the delay. He submitted that provisions of section 253(3) of the Act of section 253(3) of the Act

providing limitation in in filing in the appeal to the ITAT, to the ITAT, are plain and

unambiguous. The assessee was very well aware that limitation for unambiguous. The assessee was very well aware that limitation for unambiguous. The assessee was very well aware that limitation for

filing the appeal before the filing the appeal before the Tribunal would expire beyond 60 days ribunal would expire beyond 60 days

from the date of the from the date of the communication of the order of the Ld. CIT of the order of the Ld. CIT(A),

but the assessee took a cons but the assessee took a conscious decision not to file appeal against cious decision not to file appeal against

the impugned order because according to the assessee the the impugned order because according to the assessee the the impugned order because according to the assessee there was no

financial implication financial implication. He submitted that there is no excuse for is no excuse for

ignorance of the law. Further ignorance of the law. Further, he submitted that the assessee ha the assessee had

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not produced any advice of the dvice of the Chartered Accountant Chartered Accountants for not to file

the appeal against the impugned order on the ground of no the appeal against the impugned order on the ground of no the appeal against the impugned order on the ground of no

financial implication. Therefore financial implication. Therefore, now the assessee cannot take the the assessee cannot take the

plea of mistaken understanding of law for making request for plea of mistaken understanding of law for making request for plea of mistaken understanding of law for making request for

condoning of the de condoning of the delay in filing of the appeal. A . Accordingly, he

submitted that appeal might be not admitted for submitted that appeal might be not admitted for adjudication adjudication and

might be dismissed in limine. dismissed in limine.

delay in filing the appeal by 272 days. For ready refer delay in filing the appeal by 272 days. For ready refer delay in filing the appeal by 272 days. For ready reference, it is

relevant to reproduce the affidavit filed by the managing director of relevant to reproduce the affidavit filed by the managing director of relevant to reproduce the affidavit filed by the managing director of

the assessee company, as under: the assessee company, as under:

AFFIDAVIT

I, Mr. Arvind Singh of Mumbai, Indian inhabitant having Permanent I, Mr. Arvind Singh of Mumbai, Indian inhabitant having Permanent I, Mr. Arvind Singh of Mumbai, Indian inhabitant having Permanent Account Number (PAN] AENPS1459J residing at 29 Account Number (PAN] AENPS1459J residing at 29-Amber, St Floor, Amber, St Floor, Narayan Dabholkar Marg, Malabar Hill, Mumbai Narayan Dabholkar Marg, Malabar Hill, Mumbai- Narayan Dabholkar Marg, Malabar Hill, Mumbai-400006 and working with 'MSEB Holding Company Limited' ['MSEBHCL] having working with 'MSEB Holding Company Limited' ['MSEBHCL] having working with 'MSEB Holding Company Limited' ['MSEBHCL] having its office at 3/4 Floor, Hongkong Bank Building, Mahatma Gandhi its office at 3/4 Floor, Hongkong Bank Building, Mahatma Gandhi its office at 3/4 Floor, Hongkong Bank Building, Mahatma Gandhi Road, Fort, Mumbai, 400 093, India hereby solemnly affirm and Road, Fort, Mumbai, 400 093, India hereby solemnly affirm and Road, Fort, Mumbai, 400 093, India hereby solemnly affirm and declare as under: nder:-

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• no immediate financial implications ascended out of no immediate financial implications ascended out of the Order passed u/s. 263 by the PCIT; • that an alternate remedy of filing an appeal to 'the that an alternate remedy of filing an appeal to 'the Commissioner of Income-tax(Appeals) - -2 - Mumbal' was available with MSEBHGL in case the order was available with MSEBHGL in case the order pursuant to the directions of the PCIT was passed pursuant to the directions of the PCIT was passed hereby making additions to the income as assessed hereby making additions to the income as assessed earlier. 5. THAT an Order dated 21 December 2017 THAT an Order dated 21 December 2017 was passed u/s. was passed u/s. 143(3) r.w.s 263 of the 143(3) r.w.s 263 of the Income-tax Act, 1961 thereby re tax Act, 1961 thereby re- assessing the total income of MSEBA 28,40,26,976/ assessing the total income of MSEBA 28,40,26,976/ assessing the total income of MSEBA 28,40,26,976/- by making addition of Rs. 2,63,99,502/ addition of Rs. 2,63,99,502/-. 6. THAT subsequently on further discussions with the THAT subsequently on further discussions with the THAT subsequently on further discussions with the tax consultants consultants our attention was drawn to the law prevailing on the was drawn to the law prevailing on the subject and on the deci subject and on the decision Jurisdictional Bombay High Court in Jurisdictional Bombay High Court in the case of Herdillia Chemicals the case of Herdillia Chemicals Ltd. v. CIT reported in (1997) 90 reported in (1997) 90 taxman 314 wherein it was held that only such appeals wh taxman 314 wherein it was held that only such appeals wh taxman 314 wherein it was held that only such appeals which

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have not attained finality by virtue of earlier orders of revisional have not attained finality by virtue of earlier orders of revisional have not attained finality by virtue of earlier orders of revisional or appellate authorities are maintainable. or appellate authorities are maintainable. 7. THAT in view of the fact there has been a delay of 232 days in THAT in view of the fact there has been a delay of 232 days in THAT in view of the fact there has been a delay of 232 days in filing an appeal to the Income filing an appeal to the Income-tax Appellate Tribunal. tax Appellate Tribunal. 8. THAT the said delay wa THAT the said delay was not deliberate or contumacious but on s not deliberate or contumacious but on account of a account of a mistaken understanding of law

I further declare that the above statements are true and correct and I further declare that the above statements are true and correct and I further declare that the above statements are true and correct and to the best of my knowledge and belief to the best of my knowledge and belief”

assessee referred the name of the assessee referred the name of the Chartered Accountant Chartered Accountants who

advised the assessee company in the matters of the advised the assessee company in the matters of the advised the assessee company in the matters of the Income-tax Act,

1961. Thereafter, in Para 4 the assessee submitted that appeal in Para 4 the assessee submitted that appeal in Para 4 the assessee submitted that appeal

against the impugned order of Ld. CIT against the impugned order of Ld. CIT was not filed in view of was not filed in view of

internal discussion that internal discussion that firstly, there was no immediate financial no immediate financial

implication and secondly, and secondly, alternate remedy of filing appeal against alternate remedy of filing appeal against

the consequent order of the Assessing Officer would be available the consequent order of the Assessing Officer would be available the consequent order of the Assessing Officer would be available.

5.1 Thus, it was a conscious it was a conscious decision by the assessee not to file decision by the assessee not to file

appeal against the impugned revision order of the CIT. The assessee appeal against the impugned revision order of the CIT. The assessee appeal against the impugned revision order of the CIT. The assessee

changed his mind only when the consequent assessment order was changed his mind only when the consequent assessment order was changed his mind only when the consequent assessment order was

passed by the assessing officer on 21/12/2017 assessing officer on 21/12/2017, and and which was not

favourable to the asse favourable to the assessee. The contention of the assessee that ssee. The contention of the assessee that

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delay has occurred due to mistaken understanding of the law under delay has occurred due to mistaken understanding of the law under delay has occurred due to mistaken understanding of the law under

advise by the Chartered Accountant Chartered Accountants.

5.2 In the case of n the case of Mariambai and Anr Vs Hanifbai and anifbai and Anr, Hon’ble Madhyapredesh High Court on 26th th March 1963 Hon’ble Madhyapredesh High Court

(reported in AIR 1967 MP 107 AIR 1967 MP 107) rejected the plea of mistaken rejected the plea of mistaken

advice of Ld. Counsel as sufficient cause for condoning delay in Counsel as sufficient cause for condoning delay in Counsel as sufficient cause for condoning delay in

filing appeal. The facts of the matter are that The facts of the matter are that a senior counsel, KB. a senior counsel, KB.

Hifazat Ali, advised the defendants to present their appeal in the Hifazat Ali, advised the defendants to present their appeal in the Hifazat Ali, advised the defendants to present their appeal in the

Court of the District Judge, Mandleshwar Court of the District Judge, Mandleshwar and they did so. On his and they did so. On his

part, the counsel has filed an affidavit to say that "at that time I was part, the counsel has filed an affidavit to say that "at that time I was part, the counsel has filed an affidavit to say that "at that time I was

under the impression that th under the impression that the appeal would lie to the District e appeal would lie to the District

Court" and, therefore. "I advised and prepared the memo of first Court" and, therefore. "I advised and prepared the memo of first Court" and, therefore. "I advised and prepared the memo of first

appeal and asked defendent defendent to go and present the same to the to go and present the same to the

District Judge. Nimar, at Mandleshwar" District Judge. Nimar, at Mandleshwar"

5.3 There was a difference of opinion between two There was a difference of opinion between two There was a difference of opinion between two Hon’ble Judges,

Justice Newaskar. J. and Tare, J. on the question whether, in the Justice Newaskar. J. and Tare, J. on the question whether, in the Justice Newaskar. J. and Tare, J. on the question whether, in the

circumstances of this case, there is sufficient cause within the circumstances of this case, there is sufficient cause within the circumstances of this case, there is sufficient cause within the

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meaning of Section 5 Section 5 of the Limitation Act for extension of the of the Limitation Act for extension of the time

prescribed for filing this appeal. prescribed for filing this appeal.

5.4 Hon’ble Justice Newaskar J relying upon Hon’ble Justice Newaskar J relying upon Hon’ble Justice Newaskar J relying upon Phoolabhai v.

Ashabhai, First Appeal No. 42 of 1954. dated 3 Ashabhai, First Appeal No. 42 of 1954. dated 3 Ashabhai, First Appeal No. 42 of 1954. dated 3-12-1957 (MP).

which followed the view taken in Krishnarao v. Trimbak, ILR (1938) which followed the view taken in Krishnarao v. Trimbak, ILR (1938) which followed the view taken in Krishnarao v. Trimbak, ILR (1938)

Nag 409 (AIR 1938 Nag 150); Nag 409 (AIR 1938 Nag 150); Hemraj Dhannalal Firm v. Ambaram Hemraj Dhannalal Firm v. Ambaram.

1961 MPLJ 343: (AIR 1961 MadhPra 336' and the observations of 1961 MPLJ 343: (AIR 1961 MadhPra 336' and the observations of 1961 MPLJ 343: (AIR 1961 MadhPra 336' and the observations of

the Privy Council in Rajendra Bahadur v. Rajeswar Bali Rajendra Bahadur v. Rajeswar Bali, AIR 1937

PC 276. took the view that each and every mistake committed by a PC 276. took the view that each and every mistake committed by a PC 276. took the view that each and every mistake committed by a

counsel is not a just ground for extending limitation, that, to be a counsel is not a just ground for extending limitation, that, to be a counsel is not a just ground for extending limitation, that, to be a

ground available for the purpose, the advice given by the Counsel ground available for the purpose, the advice given by the Counsel ground available for the purpose, the advice given by the Counsel

should be sustainable as one which could be enterta should be sustainable as one which could be enterta should be sustainable as one which could be entertained by a

competent legal practitioner exercising reasonable care and that, competent legal practitioner exercising reasonable care and that, competent legal practitioner exercising reasonable care and that,

where the provision of law governing the point is in itself, or for any where the provision of law governing the point is in itself, or for any where the provision of law governing the point is in itself, or for any

other reason, incapable of bearing any other interpretation, the other reason, incapable of bearing any other interpretation, the other reason, incapable of bearing any other interpretation, the

mistake of a counsel is not sufficient caus mistake of a counsel is not sufficient cause within the meaning e within the meaning

of Section 5 of the Limitation Act. of the Limitation Act.

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5.5 Hon’ble Judge Tare. J. held that there was sufficient cause in Hon’ble Judge Tare. J. held that there was sufficient cause in Hon’ble Judge Tare. J. held that there was sufficient cause in

delayed filing of appeal. His conclusion is as under: ppeal. His conclusion is as under:

"Therefore, I am of opinion "Therefore, I am of opinion that if a legal adviser in the that if a legal adviser in the confused state of law prevailing in the different regions of a confused state of law prevailing in the different regions of a confused state of law prevailing in the different regions of a State commits a mistake on his impression of the regional law, State commits a mistake on his impression of the regional law, State commits a mistake on his impression of the regional law, his act might amount to some sort of negligence, yet it would his act might amount to some sort of negligence, yet it would his act might amount to some sort of negligence, yet it would not amount to gross negligence so as not amount to gross negligence so as to deserve a censure by to deserve a censure by refusal to extend time." refusal to extend time."

opinion between two Judges opinion between two Judges, the Hon’ble High Court the Hon’ble High Court [through

Hon’ble Justice Pandey Hon’ble Justice Pandey] held the broad principles for existence of held the broad principles for existence of

sufficient cause as under: sufficient cause as under:

“4. Having heard the counsel at some length 4. Having heard the counsel at some length, I am inclined to I am inclined to agree with the view taken by Newaskar, J. agree with the view taken by Newaskar, J. agree with the view taken by Newaskar, J. In Ramlal v. Rewa Coalfields L Rewa Coalfields Ltd., AIR 1962 SC 361, the Supreme Court ., AIR 1962 SC 361, the Supreme Court quoted with approval the following statement of the Madras quoted with approval the following statement of the Madras quoted with approval the following statement of the Madras High Court in Krishna v. Chathappan, (1896) ILR 13 Mad 269 High Court in Krishna v. Chathappan, (1896) ILR 13 Mad 269 High Court in Krishna v. Chathappan, (1896) ILR 13 Mad 269 (FB):

"Section 6 gives the Court a discretion which in respect of gives the Court a discretion which in respect of gives the Court a discretion which in respect of jurisdiction is to be exercised in the way in which judicial jurisdiction is to be exercised in the way in which judicial jurisdiction is to be exercised in the way in which judicial power and discretion ought to be exercised upon principles power and discretion ought to be exercised upon principles power and discretion ought to be exercised upon principles which are well understood; the words sufficient cause which are well understood; the words sufficient cause which are well understood; the words sufficient cause receiving a liberal construction receiving a liberal construction so as to advance substantial so as to advance substantial

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justice when no negligence nor inaction nor want of bona justice when no negligence nor inaction nor want of bona justice when no negligence nor inaction nor want of bona fides is imputable to the appellant." fides is imputable to the appellant."

The statement of law, which has been accepted by the The statement of law, which has been accepted by the The statement of law, which has been accepted by the Supreme Court, implies that though 'sufficient cause' has to Supreme Court, implies that though 'sufficient cause' has to Supreme Court, implies that though 'sufficient cause' has to be liberally cons be liberally construed, there will be no sufficient cause where trued, there will be no sufficient cause where negligence or inaction or want of bona fides is imputable to negligence or inaction or want of bona fides is imputable to negligence or inaction or want of bona fides is imputable to the appellant. In AIR 1937 PC 276. the Privy Council the appellant. In AIR 1937 PC 276. the Privy Council the appellant. In AIR 1937 PC 276. the Privy Council observed:

"Mistaken advice given by a legal practitioner may in the "Mistaken advice given by a legal practitioner may in the "Mistaken advice given by a legal practitioner may in the circumstances of a particul circumstances of a particular case give rise to sufficient cause ar case give rise to sufficient cause within the section though there is certainly no general within the section though there is certainly no general within the section though there is certainly no general doctrine which saves parties from the results of wrong doctrine which saves parties from the results of wrong doctrine which saves parties from the results of wrong advice."

In view of these observations, the appellants cannot rely In view of these observations, the appellants cannot rely In view of these observations, the appellants cannot rely merely upon the erroneous advice given t merely upon the erroneous advice given to them by their o them by their counsel. They have to show something more to be able to They have to show something more to be able to They have to show something more to be able to establish that there was sufficient cause. In this connection I establish that there was sufficient cause. In this connection I establish that there was sufficient cause. In this connection I may point out that the absence of a detracting consideration may point out that the absence of a detracting consideration may point out that the absence of a detracting consideration like gross negligence or want of good faith on the part of like gross negligence or want of good faith on the part of like gross negligence or want of good faith on the part of the counsel is not enough, though if it be present, it would counsel is not enough, though if it be present, it would counsel is not enough, though if it be present, it would destroy the claim that there was sufficient cause. In AIR destroy the claim that there was sufficient cause. In AIR destroy the claim that there was sufficient cause. In AIR 1937 PC 276 (supra), the Privy Council indicated what more 1937 PC 276 (supra), the Privy Council indicated what more 1937 PC 276 (supra), the Privy Council indicated what more is required in the context of a counsel giving wrong advice. is required in the context of a counsel giving wrong advice. is required in the context of a counsel giving wrong advice. This is what the This is what the Board staled:

''The Chief Court's refusal to admit the appeal was based ''The Chief Court's refusal to admit the appeal was based ''The Chief Court's refusal to admit the appeal was based on the view that counsel did not exercise due care and on the view that counsel did not exercise due care and on the view that counsel did not exercise due care and

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attention and acted with gross negligence in the matter'. If attention and acted with gross negligence in the matter'. If attention and acted with gross negligence in the matter'. If this opinion be correct, their Lordships will assume that in this opinion be correct, their Lordships will assume that in this opinion be correct, their Lordships will assume that in the present case it would suffice to justify the dismissal of sent case it would suffice to justify the dismissal of sent case it would suffice to justify the dismissal of the appeal. It clearly involves however that the view taken the appeal. It clearly involves however that the view taken the appeal. It clearly involves however that the view taken was not such as could have been entertained by a was not such as could have been entertained by a was not such as could have been entertained by a competent practiti competent practitioner exercising reasonable care oner exercising reasonable care"

In view of these observations, the appell In view of these observations, the appellants, to be able to ants, to be able to establish that there was sufficient cause grounded on establish that there was sufficient cause grounded on establish that there was sufficient cause grounded on wrong advice given by their counsel, have to show: wrong advice given by their counsel, have to show: wrong advice given by their counsel, have to show:

(i) that it wa (i) that it was given by a competent practitioner

(ii) that the practitioner, in giving the advice, exercised (ii) that the practitioner, in giving the advice, exercised (ii) that the practitioner, in giving the advice, exercised reasonable care; and reasonable care; and

(iii) that the advice given by him is founded on a view (iii) that the advice given by him is founded on a view (iii) that the advice given by him is founded on a view which could, in the circumstances of the case, be taken by which could, in the circumstances of the case, be taken by which could, in the circumstances of the case, be taken by any competent legal practitioner exercising reasonable any competent legal practitioner exercising reasonable any competent legal practitioner exercising reasonable care. ”

6.1 After considering the facts of the case in the light of the above fter considering the facts of the case in the light of the above fter considering the facts of the case in the light of the above

principle, the Hon’ble High Court principle, the Hon’ble High Court (supra) even rejected the plea for even rejected the plea for

sympathy observing as under: sympathy observing as under:

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an appeal, cannot be extended simply because the an appeal, cannot be extended simply because the an appeal, cannot be extended simply because the appellant's case is hard and calls for sympathy nor will the appellant's case is hard and calls for sympathy nor will the appellant's case is hard and calls for sympathy nor will the Courts extend the period of limitation out of benevolence to Courts extend the period of limitation out of benevolence to Courts extend the period of limitation out of benevolence to the party seeking relief. the party seeking relief.

6.2 When we examine the facts of the instant case in the light of When we examine the facts of the instant case in the light of When we examine the facts of the instant case in the light of

the principle laid down above, we find that though the assessee has the principle laid down above, we find that though the assessee has the principle laid down above, we find that though the assessee has

referred to name of the referred to name of the Chartered Accountant and submitted that and submitted that

delay was due to mistaken understanding of the law however no delay was due to mistaken understanding of the law however no delay was due to mistaken understanding of the law however no

copy of the advice given by the copy of the advice given by the Chartered Accountant Chartered Accountant has been filed

before us. Even If it is presumed that such an advice was given by before us. Even If it is presumed that such an advice was given by before us. Even If it is presumed that such an advice was given by

the Chartered Accountant Chartered Accountant, it was not with the reasonable was not with the reasonable care. By

way of challenging the impugned order challenging the impugned order within the limitation period, within the limitation period,

there was a possibility of setting aside that order by the there was a possibility of setting aside that order by the there was a possibility of setting aside that order by the Tribunal,

which the assessee has simply forgone. Further, which the assessee has simply forgone. Further, had the assessee had the assessee

chosen filing of appeal against the impugned order, the option of appeal against the impugned order, the option of appeal against the impugned order, the option of

pursuing the appeal against the assessment order consequent to the appeal against the assessment order consequent to the appeal against the assessment order consequent to

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the order under 263 of the the order under 263 of the Act by the assessee would would have been still

been available. The defense defense of mistake of the law is only available if of mistake of the law is only available if

the provision is capable of being interpreted into different manners, the provision is capable of being interpreted into different manners, the provision is capable of being interpreted into different manners,

but in this case the provisions of the act are plain and simple and it but in this case the provisions of the act are plain and simple and it but in this case the provisions of the act are plain and simple and it

was for the assessee to choose the option of the filing appeal against was for the assessee to choose the option of the filing appeal against was for the assessee to choose the option of the filing appeal against

the order under section 263 of the the order under section 263 of the Act or only against the or only against the

assessment order consequent to the order under section 263 of the assessment order consequent to the order under section 263 of the assessment order consequent to the order under section 263 of the

Act. The assessee has taken a conscious call for not to file the The assessee has taken a conscious call for not to file the The assessee has taken a conscious call for not to file the

appeal against impugned against impugned and now can’t take a plea that it was due and now can’t take a plea that it was due

to negligence on the part of the to negligence on the part of the Chartered Accountant Chartered Accountant or due to

mistaken understanding of law. mistaken understanding of law.

6.3 Here in the instant case the assessee Here in the instant case the assessee exercised exercised the option of

choosing of the alternative alternative forum i.e. the Assessing Officer and this the Assessing Officer and this

was a conscious decision taken was a conscious decision taken after deliberations on the issue deliberations on the issue and

not bonafide mistake not bonafide mistake. In view of above discussion, discussion, we are of the

opinion that the assessee has failed to explain the existence of he assessee has failed to explain the existence of he assessee has failed to explain the existence of

‘sufficient cause’ for con for condoning delay in filing the appeal. doning delay in filing the appeal.

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6.4 The appeal filed by the assessee is not admitted and rejected The appeal filed by the assessee is not admitted and rejected The appeal filed by the assessee is not admitted and rejected

in limine without giving any finding on the grounds raised by the without giving any finding on the grounds raised by the without giving any finding on the grounds raised by the

assessee.

6.5 The appeal of the assessee of the assessee in ITA No. 1181/Mum/2018 is in ITA No. 1181/Mum/2018 is

accordingly rejected as ed as unadmitted.

3374/Mum/2019 for assessment year 2012 3374/Mum/2019 for assessment year 2012-13, arising out of 13, arising out of

assessment order passed under section 143(3) of the assessment order passed under section 143(3) of the assessment order passed under section 143(3) of the Act on

23/03/2015. The grounds raised in the appeal are reproduced as 23/03/2015. The grounds raised in the appeal are reproduced as 23/03/2015. The grounds raised in the appeal are reproduced as

under:

“1: 1 The Commissioner of Income 1: 1 The Commissioner of Income-tax (Appeals) has erred in tax (Appeals) has erred in confirming the action of the Assessing Officer in disallowing the confirming the action of the Assessing Officer in disallowing the confirming the action of the Assessing Officer in disallowing the expenditure relating to 'Employees' remuneration and benefits' expenditure relating to 'Employees' remuneration and benefits' expenditure relating to 'Employees' remuneration and benefits' of Rs. 11,72,241/ of Rs. 11,72,241/- and 'Other expenses' of Rs. 61,65,946/ and 'Other expenses' of Rs. 61,65,946/- incurred by the Appellant. ncurred by the Appellant.

1: 2 The Appellant submits that considering the facts and 1: 2 The Appellant submits that considering the facts and 1: 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject circumstances of its case and the law prevailing on the subject circumstances of its case and the law prevailing on the subject the expenditure relating to 'Employees' remuneration and the expenditure relating to 'Employees' remuneration and the expenditure relating to 'Employees' remuneration and benefits' of Rs. 11,72,241/ benefits' of Rs. 11,72,241/- and 'Other expenses' o and 'Other expenses' of Rs.

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61,65,946/- incurred by it were wholly and exclusively for the incurred by it were wholly and exclusively for the purpose of its business and are allowable as such and the purpose of its business and are allowable as such and the purpose of its business and are allowable as such and the stand taken by the Assessing Officer in this regard is stand taken by the Assessing Officer in this regard is stand taken by the Assessing Officer in this regard is erroneous.

1: 3 The Appellant submits that the Assessing Officer be 1: 3 The Appellant submits that the Assessing Officer be 1: 3 The Appellant submits that the Assessing Officer be directed to grant deduction for expenditure incurred by the ed to grant deduction for expenditure incurred by the ed to grant deduction for expenditure incurred by the Appellant and to re Appellant and to re-compute its total income and tax thereon compute its total income and tax thereon accordingly.” ”

the lower authorities and the submissions the lower authorities and the submissions of the assessee made of the assessee made

before us, are that the are that the assessee filed return of income on return of income on 29/09/2012 declaring loss of ₹2,01,96,98,634/-. The case was 29/09/2012 declaring loss of . The case was

selected for the scrutiny assessment and statutory notices u selected for the scrutiny assessment and statutory notices u selected for the scrutiny assessment and statutory notices under

the Income-tax Act, 1961 ( tax Act, 1961 (in short ‘the Act’) wer ) were issued and

complied complied complied with. with. with. The The The assessee assessee assessee company company company is incorporated is incorporated on is incorporated on on

31/05/2005 and is wholly 31/05/2005 and is wholly-owned by government of Maharashtra. d by government of Maharashtra.

The company hold shares of three subsidiary companies namely old shares of three subsidiary companies namely old shares of three subsidiary companies namely

Maharashtra State State State Power Power Power Generation Generation Generation Company Company Company Limited Limited Limited;

Maharashtra State ate Electricity Electricity Transmission Transmission Co Co Ltd Ltd and and

Maharashtra State Electricity Distribution Company Limited Electricity Distribution Company Limited Electricity Distribution Company Limited. The

assets and liabilities of the erstwhile MSEB assets and liabilities of the erstwhile MSEB have been distributed have been distributed

MSEB Holding Co. Ltd. 16 ITA Nos. 1181/M/2018 & 3374/M/2019 ITA Nos. 1181/M/2018 &

among three demerged entities and the assessee is engaged in the three demerged entities and the assessee is engaged in the three demerged entities and the assessee is engaged in the

business of the hold business of the holding the investments in three operating ing the investments in three operating

companies and letting out properties owned by it to the and letting out properties owned by it to the and letting out properties owned by it to the

subsidiaries.

8.1 For the year under consideration, the assessee filed return of For the year under consideration, the assessee filed return of For the year under consideration, the assessee filed return of income on 29/09/2012 declaring total loss of ₹2,01,96,98, income on 29/09/2012 declaring total loss of 2,01,96,98,630/-

which consisted of income under the head “income from house which consisted of income under the head “income from house which consisted of income under the head “income from house property” at ₹25,76,37, 25,76,37,002/- and income under the head “profit and income under the head “profit and gains of business and profession” at loss of ₹2,27,73, and gains of business and profession” at loss of 2,27,73,35,636/-.

During the year under consideration, the assessee debited ex During the year under consideration, the assessee debited ex During the year under consideration, the assessee debited expenses of ₹2,33,67,98,824/- - to the profit and loss account, on the count of to the profit and loss account, on the count of

employee remuneration and benefit, administration and general employee remuneration and benefit, administration and general employee remuneration and benefit, administration and general

expenses, finance cost, depreciation and net prior period expenses, expenses, finance cost, depreciation and net prior period expenses, expenses, finance cost, depreciation and net prior period expenses,

but in the return of income only expenses to the but in the return of income only expenses to the but in the return of income only expenses to the extent of ₹2,30,15,17,081/- were claimed were claimed. The return of income filed by the The return of income filed by the

assessee was selected for the scrutiny and in the assessment order assessee was selected for the scrutiny and in the assessment order assessee was selected for the scrutiny and in the assessment order

dated 23/03/2015 passed under section 143(3) of the dated 23/03/2015 passed under section 143(3) of the dated 23/03/2015 passed under section 143(3) of the Act, the

Assessing Officer disallowed, the expenses to the ex Assessing Officer disallowed, the expenses to the ex Assessing Officer disallowed, the expenses to the extent of

MSEB Holding Co. Ltd. 17 ITA Nos. 1181/M/2018 & 3374/M/2019 ITA Nos. 1181/M/2018 &

₹2,32,04,98,824/- on the ground that no business activity was on the ground that no business activity was on the ground that no business activity was

carried out by the assessee during the year under consideration carried out by the assessee during the year under consideration carried out by the assessee during the year under consideration. On

further appeal, the Ld. CIT(A) disallowed expenses to the extent of , the Ld. CIT(A) disallowed expenses to the extent of , the Ld. CIT(A) disallowed expenses to the extent of

₹2,30,15,22,345/-. Out of the disallowance confirmed by the . Out of the disallowance confirmed by the . Out of the disallowance confirmed by the CIT(A),

the assessee has challenge the assessee has challenged disallowance to the extent of disallowance to the extent of

₹73,38,187/-in the grounds raised. in the grounds raised. A chart of expenses debited in A chart of expenses debited in

profit and loss account, claimed in the return of income, disallowed profit and loss account, claimed in the return of income, disallowed profit and loss account, claimed in the return of income, disallowed

by the Assessing Officer, disallowed by the Ld. CIT(A) and Assessing Officer, disallowed by the Ld. CIT(A) and Assessing Officer, disallowed by the Ld. CIT(A) and

challenged by the assessee in the grounds raised before the ITAT is by the assessee in the grounds raised before the ITAT is by the assessee in the grounds raised before the ITAT is

reproduced as under: reproduced as under:

Particulars Expenditure Claimed in the Disallowance Disallowed Disallowed by by Grounds debited to the debited to the return of by the the CIT(A) the CIT(A) before the Profit & Loss Profit & Loss income Assessing ITAT Account Officer Employees’ 11,72,241 11,72,241 11,72,241 11,72,241 11,72,241 11,72,241 remuneration benefits (Salary) & Administration 2,12,11,961 49,11,961 49,11,961 49,11,961 49,11,961 49,11,961 and General expenses Finance Cost 2,29,41,84,158 2,29,41,84,158 2,29,41,84,158 2,29,41,84,158 2,29,41,84,158 2,29,41,84,158 02 (Interest and Finance charges) Depreciation 1,89,76,479 0 1,89,76,479 0 0 as per books of accounts Net prior- 12,53,985 12,48,7213 12,53,985 12,53,985 12,53,985 12,53,985 period expenses Total 2,33,67,98,824 2,33,67,98,824 2,30,15,17,081 2,32,04,98,824 2,30,15,22,345 2,30,15,22,345 73,38,187

MSEB Holding Co. Ltd. 18 ITA Nos. 1181/M/2018 & 3374/M/2019 ITA Nos. 1181/M/2018 &

8.2 Regarding the issue of disallowance of Administration and the issue of disallowance of Administration and the issue of disallowance of Administration and expenses to the extent of ₹49,11,961/-, the General expenses to the extent of , the Ld. counsel of

the assessee submitted that this issue is covered in favour of the the assessee submitted that this issue is covered in favour of the the assessee submitted that this issue is covered in favour of the

assessee in its own case for assessment year 2011 assessee in its own case for assessment year 2011 assessee in its own case for assessment year 2011-12 in ITA No.

3999 and 2492/Mum/2016. 3999 and 2492/Mum/2016. The Ld. DR on the other hand relied DR on the other hand relied

on the order of the lower authorities. on the order of the lower authorities.

dispute and perused the relevant material on record. dispute and perused the relevant material on record. dispute and perused the relevant material on record.

The ground no. 1.1 relates to disallowance of ₹ ₹11,72,241/- in 9.1 The ground no. 1.1 relates to disallowance of

relation to employee remuneration and benefits. It was claimed relation to employee remuneration and benefits. It was claimed relation to employee remuneration and benefits. It was claimed

before us that said expenses a before us that said expenses are the routine expenses re the routine expenses of salaries

paid to its employees, which one has to perforce incur to keep to its employees, which one has to perforce incur to keep to its employees, which one has to perforce incur to keep the

company going. It was further submitted that issue relating to going. It was further submitted that issue relating to going. It was further submitted that issue relating to

disallowance of employee remuneration and benefit incurred to disallowance of employee remuneration and benefit incurred to disallowance of employee remuneration and benefit incurred to

keep the assessee company ru keep the assessee company running was being allowed by the Ld. nning was being allowed by the Ld.

CIT(A) in earlier years and was not disputed CIT(A) in earlier years and was not disputed by the by the Income-tax

department before the ITA department before the ITAT in any of the earlier years. The in any of the earlier years. The Ld.

counsel further submitted that issue of disallowance of day further submitted that issue of disallowance of day further submitted that issue of disallowance of day-to-day

MSEB Holding Co. Ltd. 19 ITA Nos. 1181/M/2018 & 3374/M/2019 ITA Nos. 1181/M/2018 &

expenditure incurred to kee expenditure incurred to keep the assessee company running p the assessee company running has

been covered in favour of the assessee in been covered in favour of the assessee in its own case for

assessment year 2011 assessment year 2011-12 in ITA No. 3999 and 3492/Mum/2016. 3999 and 3492/Mum/2016.

The relevant finding of the coordinate bench of the The relevant finding of the coordinate bench of the Tribunal Tribunal (supra)

is reproduced as under: is reproduced as under:

i. CIT v. Rajendra Prasad Moody [115 ITR 419 (SC.)) CIT v. Rajendra Prasad Moody [115 ITR 419 (SC.)) CIT v. Rajendra Prasad Moody [115 ITR 419 (SC.)) ii. R.B. Bansilal Abirchand Spg. & Wug. Mills v. CIT (81 ITR 34 . Bansilal Abirchand Spg. & Wug. Mills v. CIT (81 ITR 34 . Bansilal Abirchand Spg. & Wug. Mills v. CIT (81 ITR 34 (Bom.) (FB) (Bom.) (FB) iii. F. E. Dinshaw Ltd. v. CIT (36 ITR 114 (Bom.)] F. E. Dinshaw Ltd. v. CIT (36 ITR 114 (Bom.)] iv. Delhi Cloth & General Mills Co. Ltd. v. CIT (85 ITR (Delhi)] Delhi Cloth & General Mills Co. Ltd. v. CIT (85 ITR (Delhi)] Delhi Cloth & General Mills Co. Ltd. v. CIT (85 ITR (Delhi)] v. CIT v. Dalmia Cement Ltd. (254 ITR 377) CIT v. Dalmia Cement Ltd. (254 ITR 377) vi. CIT v. Navsari Cotton and Silk Mills L CIT v. Navsari Cotton and Silk Mills Ltd. (135 |TR 546) td. (135 |TR 546) vii. Ravi Marketing (P) Ltd. v. CIT 280 ITR 519) Ravi Marketing (P) Ltd. v. CIT 280 ITR 519) viii. CIT v. Malayalam Plantations Ltd. (53 ITR 140) CIT v. Malayalam Plantations Ltd. (53 ITR 140) CIT v. Malayalam Plantations Ltd. (53 ITR 140) 9. Assessee further submitted that in view of the foregoing and Assessee further submitted that in view of the foregoing and Assessee further submitted that in view of the foregoing and considering the facts and circumstances of the assessee's case and considering the facts and circumstances of the assessee's case and considering the facts and circumstances of the assessee's case and the law on the law on the subject, the expenditure incurred by the assessee subject, the expenditure incurred by the assessee during the year under consideration was allowable while computing year under consideration was allowable while computing year under consideration was allowable while computing its total income its total income for the year as it was not necessary that profits for the year as it was not necessary that profits should be earned by each and every expenditure. Considering the should be earned by each and every expenditure. Considering the should be earned by each and every expenditure. Considering the submissions of the assessee the ns of the assessee the Ld.CIT(A) allowed the claim of the Ld.CIT(A) allowed the claim of the

MSEB Holding Co. Ltd. 20 ITA Nos. 1181/M/2018 & 3374/M/2019 ITA Nos. 1181/M/2018 &

assessee and we see no infirmity in the decision of the Ld.CIT(A) in assessee and we see no infirmity in the decision of the Ld.CIT(A) in assessee and we see no infirmity in the decision of the Ld.CIT(A) in allowing the claim of the assessee. Hence, allowing the claim of the assessee. Hence, this ground is dismissed. this ground is dismissed.

9.2 Respectfully following the finding of the Respectfully following the finding of the Tribunal Tribunal (supra), the

expenses claimed on employee remuneration and benefit being expenses claimed on employee remuneration and benefit being expenses claimed on employee remuneration and benefit being

essential for existence essential for existence of the assessee company and running activity and running activity

of holding investment in subsidiaries, the finding of the Ld. CIT(A) of holding investment in subsidiaries, the finding of the Ld. CIT(A) of holding investment in subsidiaries, the finding of the Ld. CIT(A)

on the issue in dispute is set aside and the on the issue in dispute is set aside and the disallowance made by disallowance made by

the Assessing Officer of the said expenses is deleted. The ground the Assessing Officer of the said expenses is deleted. The ground the Assessing Officer of the said expenses is deleted. The ground

No. 1.1 of the appeal is accordingly allowed. No. 1.1 of the appeal is accordingly allowed.

challenged disallowance of administrative and general expense challenged disallowance of administrative and general expense challenged disallowance of administrative and general expenses of ₹49,11,961/- and prior period expenses of and prior period expenses of ₹12,53,985/ 985/- totalling to ₹61,65,946/-. Under the head administrative and general expenses, Under the head administrative and general expenses, Under the head administrative and general expenses, in the profit and loss account amount of ₹2,12,11, in the profit and loss account amount of 12,11,961/- has been

debited. The assessee has reported that this amount included debited. The assessee has reported that this amount included debited. The assessee has reported that this amount included ₹1,63,00,000/-for property tax, under ‘Rent for property tax, under ‘Rent, rates and taxes’ and , rates and taxes’ and

therefore same was considered separately against the income from therefore same was considered separately against the income from therefore same was considered separately against the income from house property. Therefore, balance amount of ₹49, house property. Therefore 49,11,961/- was

only claimed against administrative and general expenses which only claimed against administrative and general expenses which only claimed against administrative and general expenses which

MSEB Holding Co. Ltd. 21 ITA Nos. 1181/M/2018 & 3374/M/2019 ITA Nos. 1181/M/2018 &

was disallowed by the Assessing Officer and upheld by the Ld. was disallowed by the Assessing Officer and upheld by the Ld. was disallowed by the Assessing Officer and upheld by the Ld.

CIT(A). The ITAT (supra) (supra) has allowed claim of the assessee of has allowed claim of the assessee of

expenses despite the objection of the revenue that no busine expenses despite the objection of the revenue that no busine expenses despite the objection of the revenue that no business

activity was carried out activity was carried out. The relevant para has already been . The relevant para has already been

reproduced while adjudicating ground no. 1.1 of the appeal. reproduced while adjudicating ground no. 1.1 of the appeal. reproduced while adjudicating ground no. 1.1 of the appeal. since

the expenses has been allowed by the ITAT (supra) for maintaining the expenses has been allowed by the ITAT (supra) for maintaining the expenses has been allowed by the ITAT (supra) for maintaining

infrastructure of the company, respectfully following the sa infrastructure of the company, respectfully following the sa infrastructure of the company, respectfully following the same the

expenses on General and administrative on General and administrative claimedin in the year under

consideration are allowed being incurred for the purpose of the consideration are allowed being incurred for the purpose of the consideration are allowed being incurred for the purpose of the

maintaining investment holding activity of the assessee company. maintaining investment holding activity of the assessee company. maintaining investment holding activity of the assessee company.

In regard to prior period Expenses of ₹12,53, 10.1 In regard to prior period Expenses of 12,53,985/-, the Ld.

counsel submitted that issue in dispute is covered in favour of the submitted that issue in dispute is covered in favour of the submitted that issue in dispute is covered in favour of the

assessee in its own case for assessment year 2007 assessee in its own case for assessment year 2007-08 and 2008 08 and 2008-09

in ITA No. 2406/Mum/2011 and 7831/Mum/2011. The relevant in ITA No. 2406/Mum/2011 and 7831/Mum/2011. The relevant in ITA No. 2406/Mum/2011 and 7831/Mum/2011. The relevant

finding of the Tribunal Tribunal (supra) is reproduced as under: der:

“43. We have heard the rival contentions and perused the material “43. We have heard the rival contentions and perused the material “43. We have heard the rival contentions and perused the material available on record. On examination of the audited Profit & Loss account available on record. On examination of the audited Profit & Loss account available on record. On examination of the audited Profit & Loss account of the assessee for the impugned assessment year and more particularly of the assessee for the impugned assessment year and more particularly of the assessee for the impugned assessment year and more particularly Schedule-O to the Profit & Loss account, O to the Profit & Loss account, we have noticed that while the we have noticed that while the assessee had offered prior period income of Rs. 91,28,99,951, it has also assessee had offered prior period income of Rs. 91,28,99,951, it has also

MSEB Holding Co. Ltd. 22 ITA Nos. 1181/M/2018 & 3374/M/2019 ITA Nos. 1181/M/2018 &

claimed prior period expenditure of Rs.11,89,244. Therefore, the claim of claimed prior period expenditure of Rs.11,89,244. Therefore, the claim of claimed prior period expenditure of Rs.11,89,244. Therefore, the claim of the assessee was very much before the Assessing Officer. When the the assessee was very much before the Assessing Officer. When the the assessee was very much before the Assessing Officer. When the Assessing Officer accepts the prior period income offered by the assessee fficer accepts the prior period income offered by the assessee fficer accepts the prior period income offered by the assessee with reference to the audited Profit & Loss account, logically, he should with reference to the audited Profit & Loss account, logically, he should with reference to the audited Profit & Loss account, logically, he should also have allowed assessee's claim of prior period expenditure. In view of also have allowed assessee's claim of prior period expenditure. In view of also have allowed assessee's claim of prior period expenditure. In view of the aforesaid, we do not find any infirmity the aforesaid, we do not find any infirmity in the order of the learned in the order of the learned Commissioner (Appeals) on this issue. Ground no.1 is dismissed. Commissioner (Appeals) on this issue. Ground no.1 is dismissed. Commissioner (Appeals) on this issue. Ground no.1 is dismissed.”

10.2 In the year under consideration also prior period income the year under consideration also prior period income the year under consideration also prior period income

offered has been accepted accepted and net prior period Expenses have been and net prior period Expenses have been

disallowed, therefore following the finding of the disallowed, therefore following the finding of the Tribunal Tribunal (supra),

the disallowance made by the Assessing Officer is deleted. the disallowance made by the Assessing Officer is deleted. the disallowance made by the Assessing Officer is deleted.

appeal are allowed.

to adjudicate upon and accordingly dismissed as infructuous. to adjudicate upon and accordingly dismissed as infructuous. to adjudicate upon and accordingly dismissed as infructuous.

3374/M/2019 allowed allowed partly, partly , whereas whereas appeal appeal in in ITA ITA No. No.

1181/M/2018 is rejected as unadmitted. 1181/M/2018 is rejected as unadmitted.

Order pronounced under Rule 34(4) of Order pronounced under Rule 34(4) of the ITAT Rules, the ITAT Rules,

1963 on 30/11/2022. /2022.

MSEB Holding Co. Ltd. 23 ITA Nos. 1181/M/2018 & 3374/M/2019 ITA Nos. 1181/M/2018 &

Sd/- Sd/ Sd/- (ABY T VARKEY ABY T VARKEY) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 30/11/2022 Dragon Legal/Rahul Sharma, Sr. P.S. Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file.

BY ORDER, BY ORDER, //True Copy// (Sr. Private Secretary) (Sr. Private Secretary) ITAT, Mumbai ITAT, Mumbai