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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI SANJAY GARG & SHRI OM PRAKASH KANT
This appeal by the assessee is directed against order dated 25.02.2019 passed by the Ld. Commissioner of Income-Tax
M/s Fouress Engineering (India) Pvt. Ltd. 2 ITA No. 1427/M/2021 (Appeals)-10, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2013-14 raising following grounds :
1. Learned CIT (A) erred in not allowing sum of Rs. 157663 and Rs. 109160 totaling Rs. 266843 being Extra Bonus of 12.67% i.e. paid @20% against provision for 8.33% for YE 31.03.2012 which has paid & liability crystilised in AY 13-14 only. Appellant prays to Allow same as liability crystilised in AY 2013-14 only 2. 2) Learned CIT (A) erred is not allowing sum of Rs. 353934 being Professional Charges pertaining to YE 31.03.12 but bills are dt. to AY 2013-14 and received in AY 13-14 hence liability crystilised in AY 2013-14. Appellant prays to allow same as liability crystilised in AY 2013-14 3. 3) Learned CIT (A) erred is not allowing sum of Rs. 416600 being commission on sale which was due on full payment received against sales. Appellant prays that payment was received AY 13-14 hence payment of commission became due in AY 13-14 only. Hence prays to Allow same as liability crystilised in AY 2013-14 4. 4) Learned CIT (A) erred in not allowing sum of Rs. 143459 being transport charges liability for which crystilised in AY 13-14 only. Appellant prays to Allow same as liability crystilised in AY 2013-14 2. On perusal of the record, it is seen that this appeal has been filed with a delay of 802 days. The impugned order of the Ld. CIT(A)
M/s Fouress Engineering (India) Pvt. Ltd. 3 ITA No. 1427/M/2021 was served upon the assessee on 29.03.2019 and therefore, this appeal was due for filing before 60 days from the date of service of the impugned order i.e. 28.05.2019 whereas this appeal has been filed on 17.08.2021. The Ld. counsel of the assessee filed an affidavit from the Director of the Company wherein he has admitted that the delay was on account of misplacing of the order of the Ld. CIT(A) by one of the employee of the company, who received the order. He further submitted that due to non-receipt of the order, the Chartered Accountant of the Company inquired from the office of the Ld. CIT(A) and when he found that order was already served upon the assessee, the assessee found out name of the person from the post office as on whom the order was served. The person Shri Dayanand K. Salian, who is working as peon admitted the fact of the receipt of said order and explained that the bag in which he kept the copy of the said order, was lost in travel and due to fear of loss of job, he could not report the same to the company. The Ld. counsel further submitted that appeal fee was deposited on 27.03.2020
M/s Fouress Engineering (India) Pvt. Ltd. 4 ITA No. 1427/M/2021 thereafter, the delay was happened due to other factor like due to pandemic, lockdown imposed, medical problems at the end of the Authorized Representative (AR) who was engaged for filing the appeal etc. The Ld. counsel of the assessee submitted that delay from the period from 23.03.2020 is covered by the order of the Hon’ble Supreme Court in Writ Petition No. 3 of 2020. In respect of period prior to pandemic, the Ld. counsel submitted that due to unavoidable circumstances, appeal could not be filed and there was no malafide intention in delay in the filing of appeal. Accordingly, he submitted that delay in filing the appeal might be condoned.
The Ld. Departmental Representative (DR) on the other hand, objected for condoning the delay. According to him there was no reasonable cause for delay in filing the appeal.
We have heard rival submissions of the parties and perused the material available on record including affidavits filed by the assessee and concerned peon Shri Dayanand K. Salian. It is an M/s Fouress Engineering (India) Pvt. Ltd. 5 ITA No. 1427/M/2021 admitted fact there is a delay in filing the present appeal by 802 days. We also find that Hon’ble Supreme Court vide order dated 10.01.2022 in Miscellaneous Application No. 21 of 2022 in MA No. 655 of 2021 in Suo-motu writ petition No. 3 of 2020 has extended the period of limitation as prescribed under any general or special laws in respect of all judicial/quasi-judicial proceedings till 01.03.2022 and further held that in the event of actually balance period of limitation remaining w.e.f. 01.03.2022 is greater than 90 days, that longer period shall apply. The relevant finding of the Hon’ble Supreme Court is reproduced as under :
“5. Taking into consideration the arguments advanced by learned counsel and the impact of the surge of the virus on public health and adversities faced by litigants in the prevailing conditions, We deem it appropriate to dispose of the M.A. No. 21 of 2022 with the following directions: i. The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any M/s Fouress Engineering (India) Pvt. Ltd. 6 ITA No. 1427/M/2021 general or special laws in respect of all judicial or quasi- judicial proceedings. ii. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022. iii. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply. iv. It is further clarified that the period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under Sections 23 (4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.”
We also find that u/s 253(5) of the Income Tax Act, 1961 (in short ‘the Act’), the Tribunal may admit an appeal filed beyond the period of limitation, where it is satisfied that their exist a sufficient
M/s Fouress Engineering (India) Pvt. Ltd. 7 ITA No. 1427/M/2021 cause on the part of the assessee for not presenting the appeal within prescribed time. The explanation of the assessee therefore becomes relevant to determine whether the same reflects sufficient and reasonable cause on his part in not presenting the present appeal within the prescribed time.
5.1 In the case of Collector, Land Acquisition, Anantnag & Anr. V. Mst. Katiji & Others (1987) 2 SCC 107, the Hon’ble Supreme Court has held that the expression ‘sufficient cause’ employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner to sub-serves the ends of the justice that being the life-purpose of the existence of the institution of the Court. It was further held by the Hon’ble Supreme Court that such liberal approach is adopted on one of the principles that refusing to condone delay can result is a meritorious matter being thrown out at the very threshold and cause on justice being defeated. As against this, when delay is condoned, the highest that can happen is that a M/s Fouress Engineering (India) Pvt. Ltd. 8 ITA No. 1427/M/2021 cause would be decided on merit after hearing the parties. The other principle laid down the Hon’ble Supreme Court is that when substantial justice and technical considerations are pitted against each other, the cause of the sufficient justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. The Hon’ble Supreme Court has further held that there is no presumption that delay is occasioned deliberately or on account of culpable negligence, or on account of malafide. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. In the instant case, applying the same principles, we find that there is a reasonable and sufficient cause on the part of the assessee in not filing the appeal and there is no culpable negligence or malafide on the part of the assessee. Considering the facts of the case, we find that there exists sufficient and reasonable cause for condoning the delay in filing the present appeal. In the light of aforesaid discussion, in exercise of powers u/s 253(5) of the Act, we hereby condone the M/s Fouress Engineering (India) Pvt. Ltd. 9 ITA No. 1427/M/2021 delay in filing the present appeal and the appeal is admitted for adjudication on merit.
The brief facts of the case are that the assessee filed return of income on 30.09.2013 declaring total income of Rs.7,20,91,820/-. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Act were issued and complied with. The Assessing Officer in assessment order dated 08.03.2016 passed u/s 143(3) of the Act, assessed the total income at Rs.9,13,75,690/- after making certain additions/disallowances. The additions made included prior period expenses of Rs.11,80,816/- and disallowance u/s 14A of Rs.6,51,056/-. On further appeal, the Ld. CIT(A) partly allowed the appeal of the assessee.
Aggrieved with the additions sustained, the assessee is in appeal before the Tribunal raising grounds as reproduced above.
Before us, the assessee filed a Paper Book containing pages 1 to 32.
M/s Fouress Engineering (India) Pvt. Ltd. 10 ITA No. 1427/M/2021
We have heard rival submissions of the parties and perused the relevant material on record. We find that the ground 1 to 4 of the appeal relate to the disallowance of prior period expenses, details of which is as under:
Bonus ex-gratia of Rs.2,66,843/- 2. Professional charges of Rs.3,53,934/- 3. Commission on sale of Rs.4,16,600/- and 4. Transport charges of Rs.1,43,459/- 9.1 It is the contention of the assessee that all these expenses were crystallized the year under consideration and therefore, the assessee has rightly claimed in the present year. Regarding the Ground No. 1 of disallowance of bonus expenses, the assessee submitted that for the year ending on 31.03.2012, the assessee provided bonus/ex-gratia @ 8.33% to its employees which was payable on Dussehra i.e., October/November 2012. However, due to agitation and unrest of employees, the Management decided to enhance the payment of bonus/ex-gratia @ 20% instead 8.33% as M/s Fouress Engineering (India) Pvt. Ltd. 11 ITA No. 1427/M/2021 provided in books and sanctioned by the Director vide letter dated 01.11.2012 and was paid accordingly. The Ld. counsel submitted that by the time of this decision taken, the balance sheet for year ending 31.03.2012 was already approved by the AGM and return of income for assessment year 2012-13 was also filed and therefore this bonus/ex-gratia payment of Rs.2,68,843/- has been claimed in the year under consideration on payment basis.
Contra, the Ld. DR relied on the order of lower authorities.
We have heard rival submissions of the parties on the ground No. 1 of the appeal. We find that this issue-in-dispute was also raised in before the Tribunal in for assessment year 2011-12. The Tribunal (supra) has allowed in favour of the assessee observing as under:
“13. We have considered the rival submission of the parties and perused the order of authorities below. During the assessment, the Assessing Officer noted that assessee claimed an expenditure of Rs. 6,26,228/- as Prior Period Expenses. The assessee was asked to substantiate the payment of Prior Period expenses. The assessee filed its M/s Fouress Engineering (India) Pvt. Ltd. 12 ITA No. 1427/M/2021 reply dated 27.02.2014. In the reply the assessee contended that as per Bonus Act, bonus was paid @ 8.33% for Financial Year 2009-10. However, the bonus was declared @ 20% after completion of balance- sheet and the profit declared for Financial Year 2009-10. The difference is debited to the current year account and hence, the liability is debited to current financial year 2010-11. The bonus was declared in October/November 2010; hence, difference of bonus is paid as ex-gratia to the employee of the company. The contention of the assessee was not accepted by Assessing Officer as the assessee is following the mercantile system of accounting. The Ld. CIT(A) concurred with the finding of Assessing Officer holding that the expenses do not pertain to the year. The assessee has clearly brought out on record that bonus was declared in October/November 2010 and the difference of bonus was paid as ex- gratia to the employee. The bonus was declared by management of the assessee after completion of the balance-sheet on the profit prevailing for Financial Year 2009-10. Thus, the assessee was entitled to debit the difference from the current Financial Year i.e. 2010-11.
14. The Hon'ble Delhi High Court in case of CIT Vs. Exxon Mobile Lubricants (P) Ltd. (supra) while considering the ground related with Prior Period Expenditure held that when the liability of the assessee under agreement had arisen and accrued in August 2002 when agreement was executed, therefore, the liability of the assessee to pay for the period January 2002 to March 2002 arose and crystallized in August 2002. If the assessee had shown the Prior Period Expenses and the Assessing Officer had not excluded while working out the current year taxable income than there was no reason on the part of Assessing Officer to disallow only one part of the Prior Period Adjustment i.e. Prior Period Expenditure. It was held that the addition by Assessing Officer
M/s Fouress Engineering (India) Pvt. Ltd. 13 ITA No. 1427/M/2021 was not sustainable. We have noted that the facts of the present case in principle are similar.
The Hon'ble Supreme Court in case of Non-such Tea State Ltd. Vs CIT (supra) held that when the liability to pay is crystallized in the year of approval, therefore, deductable in computing the profit from the period ending when liability was crystallized. Further, the Hon'ble Supreme Court in case of Saurashtra Cement & Chemical Industry Vs CIT 213 ITR 523 (Guj) held that merely because the expenses related to a transaction of an earlier year does not become a liability payable in the earlier year unless it can be said that the liability was determined and crystallized in the year in question.
In view of the above legal position, the liability to make the ex-gratia payment was crystallized during the year under consideration. In our view, the assessee was entitled for deduction of the said Prior Period Expenses. In the result, this ground of appeal is allowed.” 11.1 The issue-in-dispute in the year under consideration being similar to what has been decided by the Tribunal (supra), respectfully following the finding of the Tribunal, the claim of the assessee is held to be crystallized in the year under consideration and accordingly allowed. The ground No. 1 of the appeal of the assessee is allowed.
M/s Fouress Engineering (India) Pvt. Ltd. 14 ITA No. 1427/M/2021
The ground No. 2 of the appeal relates to disallowance of professional charges of Rs.3,53,934/-, which was paid to consultant Shri K. Balakrishna Rao against bills dated 06.08.2012 for the period July, 2011 to March, 2012. The Ld. counsel submitted that all the bills are dated 06.08.2012 and received by assessee on after 06.08.2012. Even though they pertaining to AY 2012-13, they were not provided in the books for AY 2012-13 as bills itself were received after 06.08.2012 i.e. in AY 2013-14. He submitted that Tax Deducted at Source (TDS) on the same in the financial year corresponding to assessment year 2013-14.
The Ld. DR on the other hand, relied on the order of lower authorities.
We are of the opinion that evidently when bills were not received by the assessee, though the work was completed in the financial year corresponding to assessment year 2012-13, the liability was crystallized only after the receipt of the bills and M/s Fouress Engineering (India) Pvt. Ltd. 15 ITA No. 1427/M/2021 therefore, the assessee is justified in claiming the same in the assessment year 2013-14 i.e. current assessment year. The Ground of appeal of the assessee is accordingly allowed.
15. The ground No. 3 of the appeal relate to disallowance of commission on sale amounting to Rs.4,16,600/-. The Ld. counsel of the assessee submitted that this commission was to be paid in connection with sale of Rs.83,32,000/-. The Ld. counsel of the assessee submitted that commission @ 5% was paid to J.K. Industrial Corporation for obtaining sale orders and for recovery of payment. As the sale proceeds was received on 04.08.2011, therefore, the commission on sales was accordingly crystallized in the year under consideration and not in the year of the sale. We find that the Ld. CIT(A) has also held the claim of the assessee as justifiable, however, directed the AO to verify the fact and ascertain the amount as otherwise payable.
M/s Fouress Engineering (India) Pvt. Ltd. 16 ITA No. 1427/M/2021
16. We are of the view that if the Assessing Officer has not already verified then we direct him to verify the payment and allow in view of finding of the Ld. CIT(A). This ground is allowed for statistical purposes.
The Ground No. 4 of the appeal relates to liability of transport charges of Rs.1,43,459/- disallowed by the Assessing Officer.
Before us, the Ld. counsel of the assessee submitted that the said charges were paid to the transporter subject to the condition that goods are delivered in good condition and report by the customer for the same. The Ld. counsel submitted that the goods of the assessee i.e. industrial valve being of sophisticated nature so even damage to the thread of valve will also make the valve unfit for purpose and customer report was essential. In view of the absence of the report of the customers, the expenses were not booked in assessment year 2012-13 and only after receipt of the relevant report expenses were booked in the year under consideration.
M/s Fouress Engineering (India) Pvt. Ltd. 17 ITA No. 1427/M/2021
The Ld. DR on the other hand relied on the order of lower authorities.
We have heard rival contention of the parties. In our opinion, the expenses have been crystallized only after receipt of the report from the customer as stipulated in the contract for transport charges with the transporter. Accordingly, the claim of the assessee of transport charges in the year under consideration is allowed. Further, we are of the view that in the earlier assessment year as well in current assessment year, the assessee has reported taxable income and rate of tax being unaltered, therefore, the entire exercise of assessing in the year under consideration for AY 2012-13 or in AY 2013-14 is Revenue neutral. The Ground No. 4 of the appeal of the assessee is accordingly allowed.
Ground No. 5 of the appeal was not pressed by the Ld. counsel of the assessee and accordingly, same is dismissed as infructuous.
M/s Fouress Engineering (India) Pvt. Ltd. 18 ITA No. 1427/M/2021
In the result, the appeal filed by the assessee is allowed partly for statistical purposes.
Order pronounced in the open Court on 18/05/2022.