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Income Tax Appellate Tribunal, BANGALORE BENCHES “C”, BANGALORE
Before: Shri George George K, JM & Ms.Padmavathy S, AM
O R D E R
Per Padmavathy S, AM :
This appeal at the instance of the assessee is directed against the CIT(A)’s order dated 18.11.2021. The relevant assessment year is 2018- 2019.
The grounds raised
read as follows:-
1. The learned Commissioner of Income-Tax (Appeals) has erred in dismissing the appeal and thereby confirming the Intimation made U/S 143(1) of the Act. The Intimation made by the learned Assessing Officer being bad in law and void-ab-initio was required to be quashed instead of being confirmed. 2.1 The learned CIT(A)-11, Bangalore has erred in rejecting the appeal filed by the appellant by not condoning the delay in filing the appeal holding that the appellant has failed to substantiate reasonable cause for inordinate delay in filing the appeal. The action of the CIT(A), being wholly erroneous, both on facts and law and also against principles of natural . M/s.Karle Infrastructure Private Limited. justice are to be negated. 2.2 In any case and without further prejudice, the learned CIT(A)-11, Bangalore has erred in not appreciating the facts of the case that the appellant was prevented from reasonable and sufficient cause from filing of appeal with in the due date prescribed. The delay in filing the appeal is neither intentional nor deliberate and same should have appreciated and delay in filing the appeal would have been condoned. 3.1 In any case and without prejudice, the learned CIT(A)- 11, Bangalore would have disposed the appeal on merits of the case. 3.2 The learned AD IT (CPC) has erred in disallowing the employees contribution to PF and ESI paid well within the due date prescribed under the respective Act. There being no delay in making the payment. The disallowance made being erroneous is to be deleted.
4. In view of the above and on the grounds to be adduced at the time of hearing, it is requested that the impugned orders passed by the authorities below be quashed or at least the CIT(A)-11, Bangalore be directed to admit the appeal by condoning the delay in filing the appeal or the disallowance made u/s 36(1)(va) of the Act be deleted.”
Brief facts of the case are as follows: For the assessment year 2018-2019, the return of income was filed on 29.10.2018, declaring a loss of Rs.50,81,93,865. The assessee was served with an intimation u/s 143(1)(a) of the I.T.Act determining the total loss at Rs.50,74,35,707. The reason for the difference between the returned loss and the assessed loss u/s 143(1) of the I.T.Act was on account of disallowance of sum of Rs.5,01,794 being late remittance of employees’ contribution to PF and ESI under the respective Acts. The assessee filed its response objecting to the proposed adjustments by stating that the employees contribution to PF and ESI was remitted well within the extended due date for filing return of income. The assessee thereafter
. M/s.Karle Infrastructure Private Limited. received the intimation u/s143(1) dated 01.10.2019. In the intimation though the loss declared by the assessee was not accepted, the refund claimed by assessee was accepted.
4. In the appeal filed by the assessee before the CIT(A) there was a delay of about 229 days. The assessee submitted before the CIT(A) with regard to the delay that (i) The delay in filing the appeal is not intentional but due to reasonable and sufficient cause. (ii) An affidavit to this effect is filed. (iii) The delay in filing the appeal is due to reasonable and sufficient cause. The assessee prayed that the delay may kindly be condoned and appeal may kindly be admitted for hearing.
However, the CIT(A) rejected the delay condonation petition filed by the assessee relying on various decisions held that there is no ‘sufficient cause’ for inaction on the part of the assessee. The CIT(A) went ahead and dismissed the appeal of the assessee, without going into the merits of the issue raised in the appeal.
Aggrieved by the order of the CIT(A) the assessee is in appeal before the Tribunal.
6. The assessee filed a paper book with copies of condonation petition filed before the CIT(A) and the Affidavit. The Ld AR submitted that since the refund claimed was accepted in the intimation u/s.143(1), the assessee presumed that the loss declared was also accepted. Later when the assessee handed over the books of accounts of subsequent years to the Chartered
. M/s.Karle Infrastructure Private Limited. Accountant (CA) in the month of May’20, who verified the various compliances under the Income Tax, came across this intimation. The CA immediately advised the assessee to file an appeal after noting the fact that the returned loss of the assessee was not accepted and the assessee upon advice from the CA filed the appeal on 17.06.2020. The Ld AR submitted there is no intentional delay on the part of the assessee in filing the appeal and the delay is due to reasonable cause which may be condoned.
7. The Ld DR on the other hand supported the actions of the CIT(A) in not condoning the delay
8. We have heard the rival submissions and perused the materials on record. Out of the delay of 229 days in filing the appeal before the CIT(A), the actual delay to be condoned is 139 days as for the balance 90 days from 20/03/2020 to 17/06/2020 there is no delay considering the provisions of section 3(1)(b) of the Taxation and Other Laws (Relaxation and Amendments of Certain Provisions) Act 2020. We will therefore consider whether the bona fide belief of the assessee, that the employee contribution of PF and ESI was accepted in the intimation 143(1) since the refund was accepted, is a sufficient cause for the delay.
9. On merits, 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 before the CIT(A) saying that the appeal was not filed basis the bona fide belief of the assessee that there is no issue under dispute in the intimation u/s.143(1). We notice that the Revenue has not filed any counter-affidavit to deny the claim made by the assessee.
. M/s.Karle Infrastructure Private Limited.
10. We notice that the coordinate bench of the Tribunal in the case of Equipment Fabricators vs DCIT (ITA No.386/Bang/2021) in a similar case of delayed payment of employee contribution of PF and ESI, had taken a view favourable to the assessee in condoning the delay of 508 days. The Hon’ble Tribunal in this case held that 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 non deliberate delay. The Hon’ble Tribunal held that “7. On merits, 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 before the CIT(A) saying that the appeal was not filed because of the Accountant’s inability to file the appeal. The Revenue has not filed any counter-affidavit 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, common sense and pragmatic manner. (4) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be . M/s.Karle Infrastructure Private Limited. preferred, for the other side cannot 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.
8. 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 merits regarding allowability of deduction u/s. 36(1)(va) r.w.s. 43B of the Act was covered in favour of the assessee by the order of the Tribunal. 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 508 days has to be condoned.
The next question may arise whether 508 days was excessive or inordinate. There is no question of any excessive or inordinate when the reason stated by the assessee was a reasonable cause for not filing the . M/s.Karle Infrastructure Private Limited. appeal. We have to see the cause for the delay. When there was a reasonable cause, the period of delay may not be relevant factor.
In fact, the Madras High Court in the case of CIT v. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596) considered the delay of condonation 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. Accordingly, the Madras High Court condoned nearly 21 years of delay in filing the appeal.
When compared to 21 years, 508 days cannot be considered to be inordinate or excessive. Furthermore, the Chennai Tribunal by majority opinion in the case of People Education and Economic Development Society (PEEDS) v. ITO (100 ITD 87) (Chennai) (TM ) condoned more than six hundred days delay. It is pertinent to mention herein that the view taken by the present author in that case was overruled by the Third Member.
The Madras High Court in the case of Sreenivas Charitable Trust (supra) 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 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 this case, the issue on merit regarding granting of deduction u/s. 36(1)(va) r.w.s. 43B of the Act is covered in favour of the assessee by the Judgment of the Madras High Court. Therefore, for the purpose of advancing substantial justice which is of prime importance in the administration of justice, the expression “sufficient cause” should receive a liberal construction. In our opinion, the above Judgment is also squarely applicable to the facts of this case. A similar view was taken by the Madras High Court in the case of Venkatadri Traders Ltd. v. CIT (2001) 168 CTR (Mad) 81 : (2001) 118 Taxman 622 (Mad).
The Mumbai Bench of this Tribunal in the case of Bajaj Hindusthan Ltd. v. Jt. CIT (AT) (277 ITR 1) has condoned the delay of 180 days . M/s.Karle Infrastructure Private Limited. when the appeal was filed after the pronouncement of the Judgment of the Apex Court. Furthermore, the Revenue has not filed any counter- affidavit opposing the application of the assessee for condonation of delay. The Apex Court in the case of Mrs. Sandhya Rani Sarkar vs. Smt. Sudha Rani Debi (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. In this case, the Revenue has not filed any counteraffidavit opposing the application of the assessee, therefore, as held by the Apex Court, there is sufficient cause for condonation of delay. The Supreme Court observed that when the delay was of short duration, a liberal view should be taken. It does not mean that when the delay was for longer period, the delay should not be condoned even though there was sufficient cause. The Apex Court did not say that longer period of delay should not be condoned. 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 has to be condoned irrespective of the duration/period. In this case, the non-filing of an affidavit by the Revenue for opposing the condonation of delay itself is sufficient for condoning the delay of 508 days.
In case the delay is not condoned, it would amount to legalise an illegal and unconstitutional order. The power given to the Tribunal is not to legalise an injustice on technical ground but to do substantial justice by removing the injustice. The Parliament conferred power on this Tribunal with the intention that this Tribunal would deliver justice rather than legalise injustice on technicalities.
Therefore, when this Tribunal is empowered and capable of removing injustice, in our opinion, the delay of 508 days has to be condoned and the appeal of the assessee has to be admitted and disposed of on merits. In view of the above, we condone the delay of 508 days in filing the appeal and admit the appeal for adjudication”.
11. We respectfully follow the principles laid down by the decision of the coordinate bench that in construing the expression “sufficient cause” the principle of advancing substantial justice is of prime importance and the . M/s.Karle Infrastructure Private Limited. expression “sufficient cause” should receive a liberal construction. Therefore in our considered view assessee’s bona fide belief based on the fact that since the refund amount claimed is accepted there is no issue under dispute in the intimation is a sufficient cause for the delay in filing the appeal before the CIT(A). We therefore condone the delay of 139 days in filing the appeal and admit the appeal for further adjudication on merits. The assessee’s ground on this issue is allowed
12. On merits of the case, it was stated that the assessee had paid the employees’ contribution to PF and ESI prior to the due date of filing of the return u/s 139(1) of the I.T.Act. Therefore, it was submitted that the assessee is entitled to deduction of employees’ contribution to PF and ESI having regard to the provisions of section 43B of the I.T.Act. In this context, the assessee relied on the judgment of the Hon’ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT, reported in 366 ITR 408 (Kar.). The CIT(A), however, rejected the appeal of the assessee. The CIT(A) did not go into the merits of the case and dismissed as there was a delay in filing the appeal which the CIT(A) did not condone.
Aggrieved, assessee has filed this appeal before the Tribunal. The learned AR submitted that an identical issue was decided in favour of the assessee by the Tribunal in the case of M/s. Shakuntala Agarbathi Company Vs. DICT in (order dated 21.10.2021).
The learned Departmental Representative supported the orders of the Income Tax Authorities.
We have heard the rival submissions and perused the material on record. On identical facts, the Bangalore Bench of the Tribunal in the case
. M/s.Karle Infrastructure Private Limited. of M/s. Shakuntala Agarbathi Company Vs. DCIT (supra) by following the dictum laid down by the Hon’ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra)¸ had held that the assessee would be entitled to deduction of employees’ contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) of the I.T.Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. The relevant finding of the ITAT in the case of M/s. Shakuntala Agarbathi Company Vs. DCIT (supra), reads as follows:
“7. We have heard rival submissions and perused the material on record. Admittedly, the assessee has remitted the employees' contribution to ESI before the due date for filing of return u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. v. DCIT reported in 366 ITR 408 (Kar.) has categorically held that the assessee would be entitled to deduction of employees' contribution to ESI provided the payment was made prior to the due date of filing of return of income u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court differed with the judgment of the Hon'ble Gujarat High Court in the case of CIT v. Gujarat State Road Transport Corporation reported in 366 ITR 170 (Guj.). The Hon'ble High Court was considering following substantial question of law:- "Whether in law, the Tribunal was justified in affirming the finding of Assessing Officer in denying the appellant's claim of deductions of the employees contribution to PF/ESI alleging that the payment was not made by the appellant in accordance with the provisions u/s 36[1][va] of the I.T.Act?" 7.1 In deciding the above substantial question of law, the Hon'ble High Court rendered the following findings:- "20. Paragraph-38 of the PF Scheme provides for Mode of payment of contributions. As provided in sub para (1), the employer shall, before paying the member, his wages, deduct his contribution from his wages and deposit the same together with his own contribution and other charges . M/s.Karle Infrastructure Private Limited. as stipulated therein with the provident fund or the fund under the ESI Act within fifteen days of the closure of every month pay. It is clear that the word "contribution" used in Clause (b) of Section 43B of the IT Act means the contribution of the employer and the employee. That being so, if the contribution is made on or before the due date for furnishing the return of income under sub-section (1) of Section 139 of the IT Act is made, the employer is entitled for deduction.
The submission of Mr.Aravind, learned counsel for the revenue that if the employer fails to deduct the employees' contribution on or before the due date, contemplated under the provisions of the PF Act and the PF Scheme, that would have to be treated as income within the meaning of Section 2(24)(x) of the IT Act and in which case, the assessee is liable to pay tax on the said amount treating that as his income, deserves to be rejected.
With respect, we find it difficult to endorse the view taken by the Gujarat High Court. WE agree with the view taken by this Court in W.A.No.4077/2013.
In the result, the appeal is allowed and the substantial question of law framed by us is answered in favour of the appellant-assessee and against the respondent-revenue. There shall be no order as to costs." 7.2 The further question is whether the amendment to section 36[1][va] and 43B of the Act by Finance Act, 2021 is clarificatory and declaratory in nature. The Hon'ble Supreme Court in the recent judgment in the case of M.M.Aqua Technologies Limited v. CIT reported in (2021) 436 ITR 582 (SC) had held that retrospective provision in a taxing Act which is "for the removal of doubts" cannot be presumed to be retrospective, if it alters or changes the law as it earlier stood (page 597). In this case, in view of the judgment of the Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. v. DCIT (supra) the assessee would have been entitled to deduction of employees' contribution to ESI, if the payment was made prior to due date of filing of the return of income u/s 139(1) of the I.T.Act. Therefore, the amendment brought about by the Finance Act, 2021 to section 36[1][va] and 43B of the . M/s.Karle Infrastructure Private Limited. I.T.Act, alters the position of law adversely to the assessee. Therefore, such amendment cannot be held to be retrospective in nature. Even otherwise, the amendment has been mentioned to be effective from 01.04.2021 and will apply for and from assessment year 2021-2022 onwards. The following orders of the Tribunal had categorically held that the amendment to section 36[1][va] and 43B of the Actby Finance Act, 2021 is only prospective in nature and not retrospective. (i) Dhabriya Polywood Limited v. ACIT reported in (2021) 63 CCH 0030 Jaipur Trib. (ii) NCC Limited v. ACIT reported in (2021) 63 CCH 0060 Hyd Tribunal. (iii) Indian Geotechnical Services v. ACIT in 2018 (order dated 27.08.2021). (iv) M/s.Jana Urban Services for Transformation Private Limited v. DCIT in ITA No.307/Bang/2021 (order dated 11th October, 2021) 7.3 In view of the aforesaid reasoning and the judicial pronouncements cited supra, the amendment by Finance Act, 2021 to Sec.36[1][va] and 43B of the Act will not have application to relevant assessment year, namely A.Y. 2019- 2020. Accordingly, we direct the A.O. to grant deduction in respect of employees' contribution to ESI since the assessee has made payment before the due date of filing of the return of income u/s 139(1) of the I.T.Act, It is ordered accordingly.” 8.1 Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon’ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees’ contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee and the disallowance made by the Assessing Officer is deleted.
. M/s.Karle Infrastructure Private Limited. 9. In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 21st day of March, 2022.