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Income Tax Appellate Tribunal, “J(SMC
Before: SMT. BEENA PILLAI & SHRI RENU JAUHRI
Per: Smt. Beena Pillai, J.M.: The Present appeal filed by the assessee arise out of order dated 27/11/2024 passed by NFAC Delhi for assessment year 2012-13 on following grounds of appeal:
A.Y. 2012-13 Capco Finance and Investment Private Limited “(1) On the facts and circumstances of the case and in law, the Id. CIT(A)-NFAC erred in not granting condonation of delay in filing an appeal (a) On the facts and circumstances of the case an in law the Id. CIT(A) ought to have considered that section 249(2) of The Income Tax Act, 1961, mentions that the appeal may be admitted if there is a 'sufficient cause' in delay in filing an appeal and the lockdown period, non- functioning of the income tax portal and the non-handling of the assessment order by the appellant staff amounts to 'sufficient cause' in delay in filing an appeal.
(b) On the facts and circumstances of the case and in law, the Id. CIT(A)-NFAC erred in not considering the affidavit filed by the appellant staff who has not handed over the assessment order to the management in time.
(c) On the facts and circumstances of the case and in law, the Id. CIT(A) has not considered that the first notice of hearing was issued by the office of the Id. CIT(A) on 27-04-2022, the appellant filed online reply on 29-04-2022, the second notice of hearing was issued on 22-06-2022 and the appellant replied on 27-06-2022 and again the third notice of hearing was issue on 03-10-2024. The appellant replied оп 10-10-2024. Please refer to table produced by the Id. CIT(A) on page no.2 of the appellant order. The appellant is asking why there a gap in issuing notice of hearing for more then one and half years after the last notice even thought there is a single issue under consideration and the same reply is filed by the appellant in all three notices. Is the delay of more than one and half year by the Id. CIT(A) is pardonable? as the appellant faces pressure of recovery from the department all the time. If yes, the appellant's delay in filing an appeal due to circumstances beyond its control need not be pardoned?
(2) On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer erred in making addition of Rs. 14,00,000 u/s 69 A of (a) On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer ought to have considered that the company name has been struck off from the register of corporate affairs from 03/05/2012 and hence no reassessment proceedings can be conducted on the assessee.
(b) On the facts and in the circumstances of the case and in law, the Ld. NFAC CIT(A) ought to have considered that vide letter dated 07/09/2018, the assessee's Chartered Accountant informed the Ld.AO about the company name struck-off from the register from 03/05/2012. Even with the knowledge that the company is not in existence, the Id. AO passed an order dtd. 21-12-2018 (c) On the facts and circumstances of the case an in law the ld. CIT(A) ought to have considered that in appellant's own case, when the Hon'ble ITAT Mumbai 'SMC 'bench has declared the quantum assessment order and penalty order u/s 271F, both dtd. 16-12-2022, on non-existent company as bad in law for the immediate previous year (AY 2011-12), then the assessment order for next assessment year will have same fate and does not survive.
(d) On the facts and circumstances of the case an in law the Id. CIT(A) ought to have considered that in appellant's own case, when the Hon'ble ITAT Mumbai 'A' bench in ITA.NO.2096/MUM/2022 (Α.Υ: 2012- 13) vide its order dtd. 30-09-2022, has declared the 271(1)(b) penalty order on non-existent company for the same assessment year under consideration right now (AY 2012-13) as bad in law, then the quantum assessment order will have same fate and does not survive.
At the outset the Ld.AR submitted that there was delay of about 2 years in filing appeal before the Ld. CIT(A)’s which was not condoned by holding that assessee did not demonstrate sufficient cause existed for non filing of appeal within due time. The Ld.CIT(A), thus dismissed the appeal in limine. 2.1 On set of the Ld.AR submitted that the assessment order was passed during COVID-19 pandemic. And the date for filing of appeal was during the COVID period. It was submitted that, affidavit of the employee who collected the assessment order received by post in January 2020 is pleased on record. Ld. AR relying on affidavit submitted that the employee kept assessment order in the drawer and forgot to hand over to the Directors of the assessee. Subsequently, when the office remained closed during the COVID-19 pandemic for more than one and half year, causing delay in filing the appeal before Ld.CIT(A). For the sake of convenience the affidavit of the employee relied by Ld.AR is scanned and reproduced as under: “In the matter of the Companies Act, 1956 and of M/s CAPCO FINANCE AND INVESTMENT PRIVATE LIMITED, U65990MH1996PTC099834 This is with respect to your application (Form FTE) dated 16/04/2012 vide SRN B36920411. Notice is hereby given pursuant to sub-section (3) of section 560 of the Companies Act, 1956 that at the expiration of thirty days from the date hereof the name of the M/s CAPCO FINANCE AND INVESTMENT PRIVATE LIMITED unless cause is shown to the contrary, will be struck off from the Register and the said company will be dissolved”
A.Y. 2012-13 Capco Finance and Investment Private Limited 2.2 The Ld.AR the submitted that, thus there was sufficient reason in filing the appeal before the Ld. CIT(A) belatedly. 2.3 On the contrary the Ld.DR relied on orders passed by authorities below. We have produced submissions advanced by both sides in the light of the records filed before us.
It is submitted in the affidavit that, the assessee received assessment order in the month of January 2020. Thus the time. To file appeal before the Ld. CIT(A) expired in the month of February-March 2020. Admittedly, a specific date of receipt is not mentioned therein. However considering the fact that Covid pandemic was at its peak, Hon’ble Supreme Court extended all limitations, which got further was extended subsequently by various orders of Hon’ble Court till 31st May 2021. 3.1 Under such circumstances, such period must be excluded for computing the delay. It is noted that, the present appeal was instituted on 09/11/2021 and therefore delay in filing the appeal would be approximately 160 days or less. 3.2 Having regard to the submissions by the assessee as well as affidavit of Shri Ashok (employee of the assesse), we refer to the decision of Hon’ble Cochin Bench of this Tribunal in the case of Midas Polymer Compounds Pvt. Ltd. dated 25.6.2018, condoned the delay of 2819 days by observing as follows: “6. We have heard the rival submissions and perused the record. There was a delay of 2819 days in filing the appeal before the Tribunal. The assessee has stated the reasons in the condonation petition accompanied by an affidavit which has been cited in the earlier para. The assessee filed an affidavit explaining the reasons and prayed for condonation of delay. The reason stated by the assessee is due to inadvertent omission on the part of Shri A.Y. 2012-13 Capco Finance and Investment Private Limited Unnikrishnan Nair N, CA in taking appropriate action to file the appeal. He had a mistaken belief that the appeal for this year was filed by the assessee as there was separate Counsel to take steps to file this appeal before the ITAT. Therefore, we have to consider whether the Counsel’s failure is sufficient cause for condoning the delay. The Madras High Court considered an identical issue in the case of Sreenivas Charitable Trust v. Dy. CIT (280 ITR 357) and held that mixing up of papers with other papers are sufficient cause for not filing the appeal in time. The Madras High Court further observed that the expression "sufficient cause" should be interpreted to advance substantial justice. Therefore, advancement of substantial justice is the prime factor while considering the reasons for condoning the delay.
6.1 On merit the issue is in favour of the assessee. But there is a technical defect in the appeal since the appeal was not filed within the period of limitation. The assessee filed an affidavit saying that the appeal was not filed because of the Counsel’s inability to file the appeal. The Revenue has not filed any counteraffidavit to deny the allegation made by the assessee. While considering a similar issue the Apex Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) laid down six principles. For the purpose of convenience, the principles laid down by the Apex Court are reproduced hereunder: (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 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. (3) 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner. (4) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot A.Y. 2012-13 Capco Finance and Investment Private Limited claim to have vested right in injustice being done because of a nondeliberate delay. (5) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. (6) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
6.2 When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of nondeliberate delay. In the case on our hand, the issue on merit regarding allowability of deduction u/s. 80IB of the Act was covered in favour of the assessee by the binding Judgment of the jurisdictional High Court. Moreover, no counter-affidavit was filed by the Revenue denying the allegation made by the assessee. It is not the case of the Revenue that the appeal was not filed deliberately. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue. As observed by Apex Court, if the application of the assessee for condoning the delay is rejected, it would amount to legalise injustice on technical ground when the Tribunal is capable of removing injustice and to do justice. Therefore, this Tribunal is bound to remove the injustice by condoning the delay on technicalities. If the delay is not condoned, it would amount to legalising an illegal order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto. Under the scheme of Constitution, the Government cannot retain even a single pie of the individual citizen as tax, when it is not authorised by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalise an illegal and unconstitutional order passed by the lower authority. Therefore, in our opinion, by preferring the substantial justice, the delay of 2819 days has to be condoned.”
3.3 In the present facts, we have examined whether the reason stated by the assessee to seek condonation of delay before Ld.CIT(A) are sufficient to condone the delay and whether, there exists sufficient cause for not presenting the appeal before A.Y. 2012-13 Capco Finance and Investment Private Limited Ld.CIT(A) within the period of limitation. The assessee must show that, it was diligent in taking appropriate steps and the delay was caused, notwithstanding with its due diligence. It is for the party concerned to explain the reasons for delay and it is not the function of concerned authorities often to find cause for delay. The Court/authority thus has to examine whether the sufficient cause was shown by the party for condoning the delay, and whether such cause is reasonable or not. 3.4 In the present case in hand, the assessee explained the delay in filing the appeals before the Ld.CIT(A) was due to ongoing COVID pandemic. However it was subsequently when the office resumed to normally the assessee realised about the lapse. This being the reason, it constitutes sufficient cause for filing the appeal belatedly. In case of People Education & Economic Development Society Vs. ITO reported in 100 ITD 87 (TM) (Chen), it was held that; “when substantial justice and technical consultation are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of non- deliberate delay”. 3.5 The next question that arises is whether delay was excessive or inordinate. There is no question of any excessive or inordinate, when the reason stated by the assessee was reasonable cause for not able to file the appeal before Ld.CIT(A) within the period of limitation. The cause for the delay therefore deserves to be considered, when there exist a reasonable cause, and therefore the period of delay may not be relevant factor. In support, we rely on the decision of Hon’ble Madras High Court in the case of CIT vs. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596)
A.Y. 2012-13 Capco Finance and Investment Private Limited considered the condonation of delay and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Hon’ble Madras High Court thus condoned nearly 21 years of delay in filing the appeal. As compared to 21 years, delay of about 160 days cannot be considered to be inordinate or excessive. 3.6 Hon’ble Madras High Court in the case of Sreenivas Charitable Trust reported in 280 ITR 357 held that, no hard and fast rule can be laid down in the matter of condonation of delay and the Court should adopt a pragmatic approach and the Court should exercise their discretion on the facts of each case keeping in mind that in construing the expression "sufficient cause" the principle of advancing substantial justice is of prime importance and the expression "sufficient cause" should receive a liberal construction. Therefore, this Judgment of the Hon’ble Madras High Court (supra) clearly says that in order to advance substantial justice which is of prime importance, the expression "sufficient cause" should receive a liberal construction. In our opinion of this Tribunal, this decision of Hon’ble Madras High Court is applicable to the present facts of the case. A similar view was taken by Hon’ble Madras High Court in the case of Venkatadri Traders Ltd. v. CIT (2001) 168 CTR (Mad) 81 : (2001) 118 Taxman 622 (Mad). 3.7 We also refer to the decision of Coordinate Bench of this Tribunal in the case of Bajaj Hindusthan Ltd. v. Jt. CIT (AT) reported in 277 ITR 1 condoned the delay of 180 days when, the appeal was filed after the pronouncement of the Judgment of the Hon’ble Supreme Court. It is also to be noted that the A.Y. 2012-13 Capco Finance and Investment Private Limited Revenue has not filed any counter-affidavit opposing the application of the assessee for condonation of delay. Hon’ble Supreme Court in the case of Mrs. Sandhya Rani Sarkar vs. Smt. Sudha Rani Debi reported in AIR 1978 SC 537 held that, non- filing of affidavit in opposition to an application for condonation of delay may be a sufficient cause for condonation of delay. 3.8 In this case, the Revenue has not filed any counter- affidavit opposing the application of the assessee, therefore, as held by Hon’ble Supreme Court, there is sufficient cause for condonation of delay. Hon’ble Supreme Court also observed that; “It does not mean that when the delay was for longer period, the delay should not be condoned even though there was sufficient cause. Condonation of delay is the discretion of the Court/Tribunal. Therefore, it would depend upon the facts of each case. In our opinion, when there is sufficient cause for not filing the appeal within the period of limitation, the delay deserves to be condoned, irrespective of the duration/period.”
3.9 We therefore feel that the reasons assigned by the assessee inability to present the appeal within time before Ld.CIT(A) deserves consideration based on the principles laid down by Hon'ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471. Reliance is placed on following observations by Hon’ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471 wherein, Hon’ble Court observed 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 A.Y. 2012-13 Capco Finance and Investment Private Limited 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.”
Based on the discussions, we condone the delay in filing the appeal before the Ld. CIT(A).
On merits, the Ld.AR submitted that assessee is a company dealing in listed and unlisted securities. For your under consideration assessee did not file any return of income and therefore the Ld.AO issued notice under section 148 of the act on 22/03/2019. The Ld.AR submitted that during the assessment proceedings, assessee informed vide letter dated 07/09/2018 regarding strike off of company with effect from 03/05/2012. The Ld.AR placed reliance on the acknowledgement of said later at page 2 of the paper book. For the sake of convenience the said letter is scanned and reproduced as under:
A.Y. 2012-13 Capco Finance and Investment Private Limited To, Smt. Usha Srinivasan Income Tax Officer-15(1)(3), Room No. 158, Ground Floor Aayakar Bhavan, M. K. Road Mumbai 400 020.
Dear Sir, Sub: Scrutiny assessment proceedings u/s 148 of the 1.T.Act, 1961 in the case of M/s Capco Finance & Investments Pvt. Ltd. for A.Y. 2011-12-showse reg.
PAN: AABCC 8254 A Your Letter No. ITO-15(1)(3)/Capco/18-19 dated 05.07.2018 This is in reference to your above mentioned notice dated 5th July, 2016. I would like to inform you that the I have resigned as the Director of this Company w.e.f. 23rd November, 2002.
I was the Auditor for the company from 1st April, 2004 to 31st March, 2009.
The Company name has been strike off w.e.f. 3rd May, 2012.
The name of Directors of the company is given below: Sr. No. Name of the Director Address of the Director 1. Mr. Arvind Rai C-577, 2nd Floor, New Friends Colony New Delhi – 110065. 2. Mr. Pramod Kumar D-114, 1st Floor, Double Storey Qtrs., West Patel Nagar, New Delhi – 110008. 3. Mr. Sanjay Sharma 811, Meghdoot 94, Nehru Place, New Delhi – 110019.
We have informed the directors about the notice & they are in the process of compiling the details & information required for filing Income Tax Return for the A.Y.201--12.
They have promised us to file the Income tax return by 17th September 2018.
A.Y. 2012-13 Capco Finance and Investment Private Limited Kindly acknowledge the receipt of the same.” 4.1 The Ld.AR submitted that, coordinate bench of this Tribunal for the assessment year 2011-12 and 2012-13 in ITA number 2538 & 2421/MUM/2022 and 2096/MUM/2022 vide orders dated 16/12/2022 and 30/09/2022 respectively, under similar facts and circumstance quashed the assessment proceedings. 4.2 On the contrary the Ld.AR relied on the orders passed by authorities below. We have perused submissions advanced by both sides in the light of records placed before us.
It is an admitted fact that, the assessee informed the revenue authorities regarding assessee’s name being struck off under section 560 (3) of Ministry of corporate affairs vide notice dated 3rd of May 2012. It is also an admitted fact that, the said information was provided to the authorities by assessee vide letter dated 07/09/2018. Despite such intimation the Ld.AO issued notice under section 148 of the act in the name of non- existent company on 29/05/2019. 5.1 It is noted that the strike off of assessee’s name is under section 560 of the 1956 Act. On reading the provisions under section 560 of the 1956 Act, more particularly sub section 5, it is clear that, once a company is dissolved under the said section and on publication of notice in the official gazette, such company is stuck off from the register of the companies and ceases to exist. In contrast, section 250 of 2013 Act, stats that, where a company stands dissolved under section 248, it shall on and from the date mentioned in the notice under sub-section (5) of that section cease to operate as a company and the Certificate of A.Y. 2012-13 Capco Finance and Investment Private Limited Incorporation issued to it shall be deemed to have been cancelled from such date except for the purpose of realising the amount due to the company and for the payment or discharge of the liabilities or obligations of the company. (emphasis supplied) 5.2 Such exception provided u/s. 250(5) of 2013 Act is absent u/s. 250(5) of 1956 Act. Coordinate bench of this Tribunal in assessee’s own case for AY 2011-12 observed and held as under: “3. Having heard both the parties and after perusal of the records, it is noted that the assessment has been framed/made on a non- existent company since the assessee company has been dissolved/struck off from the Register of Registrar of Companies after thirty (30) days from 03.05.2012. Pursuant to the notice u/s 148 of the Act dated 14.11.2018 it has been brought to the notice of AO vide letter dated 07.09.2018 [ITO-15(1)(3)] that the assessee company M/s. Capco Finance & Investment Pvt. Ltd. has been struck off from the Register of Registrar of Companies w.e.f. 11th June, 2012 which was pursuant to the notice of Ministry of Corporate Affairs, Government of India u/s 560(3) of the Companies Act, 1956 (notice dated 03.05.2012) and thus the company stood dissolved from 04.06.2012 (after expiry of thirty (30) days from 03.05.2012). Despite this crucial fact was brought to the notice (dissolving of assessee), the AO has made an addition of Rs.14,00,000/-, in the hands of the assessee company M/s.Capco Finance & Investment Pvt. Ltd.. According to the Ld. AR, since the assessee company is no longer existing after being dissolved from June, 2012, the notice issued by the AO u/s 148 of the Act proposing reopening of the assessment is not valid in the eyes of law as held by the Hon'ble Supreme Court in the case of PCIT Vs. Maruti Suzuki India Ltd wherein the Hon'ble Supreme Court has concurred with the observation of the Hon'ble Delhi High Court in the case of Spice Entertainment, wherein the Hon'ble High Court clarified that "the framing of assessment against a non-existing entity/person" is a jurisdictional defect. The Hon'ble Supreme Court in the case of Maruti Suzuki India Ltd order above on 25.07.2019 held at para no. 33 as under: -
"33 In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was A.Y. 2012-13 Capco Finance and Investment Private Limited fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment. 34 We find no reason to take a different view. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court in relation to the respondent for AY 2011-12 must, in our view be adopted in respect of the present appeal which relates to AY 2012-13. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable."
4. In the light of the aforesaid decision of the Hon'ble Supreme Court (supra), this Tribunal is of the view that the assessment order passed by the AO against non-existent company dated 21.12.2018 despite knowing about it is bad in law. And therefore, is quashed.”
5.3 Understanding the difference between the provisions of Companies Act 1956 with 2013 Act, and relying on the view A.Y. 2012-13 Capco Finance and Investment Private Limited taken by coordinate bench of this Tribunal in assessee’s own case for assessment year 2011-12(supra), we find merit in the arguments raised by the Ld.AR in ground 2(d). Accordingly the ground 2(d) raised by the assessee stands allowed.
As we have quashed the notice issued under section 148 of the act dated 29/05/2019, consequential reassessment order passed by Ld.AO dated 20/12/2019 on a non-existent company stands automatically quashed. Accordingly the grounds raised by the assessee on merits of the addition becomes academic and the stage and is not adjudicated.
In the result appeal filed by the assessee stands allowed on the legal issue raised in ground number 2(d). Order pronounced in the open court on 28/02/2025