VANIGOTA SUGAR TRADING COMPANY ,VIJAPUR vs. INCOME TAX OFFICER, WARD-1 & TPS , BIJAPUR

We have perused the above Affidavit along with the copy of the Order dated 05/12/2024 of the ITAT, Panaji Bench, Panaji filed by the assessee to justify the delay and we are satisfied that there is no malafide intention on the part of the assessee in filing the appeal belatedly before us. It is to be noted that u/s 253(5) of the Act, the Tribunal may admit the appeal filed beyond the period of limitation where it has established that there exists a sufficient cause on the part of the assessee for not presenting the appeal within the prescribed time. The explanation therefore, becomes relevant to determine whether the same reflect Vanigota Sugar Trading Company, Vijaypur Page 7 of 19 sufficient and reasonable cause on the part of the assessee in not filing these appeals within the prescribed time.

1 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 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.

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. 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 legalize 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 Vanigota Sugar Trading Company, Vijaypur Page 8 of 19 by condoning the delay on technicalities. If the delay is not condoned, it would amount to legalizing 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 authorized by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalize an illegal and unconstitutional order passed by the lower authority.

3 Further, in the case of People Education & Economic Development Society Vs/ ITO reported in 100 ITD 87 (TM) (Chen), wherein 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”. 4.4 5. Now the brief facts of the case are that the ld. PCIT on examination of records noted that the assessee firm had deposited cash in SBNs of Rs.45,00,000/- during the demonetization periods in its current bank account. The ld. PCIT was of the opinion that when the case was selected for scrutiny specifically for examining cash deposited during the demonetization period it was necessary for AO to examine the source of cash deposited and carry out necessary investigation in accordance with law. Further, the ld.PCIT was of the opinion that the AO should have analyzed the bank account and trend of cash receipts along with cash sales and the stock register during the specified period. Further, the AO ought to have also examine the cash sales and ascertained the cash in hand as on 08.11.2016 after examination of books, specially by obtaining the cash book. As the AO had not conducted necessary enquiries and thus order passed by the AO is erroneous and prejudicial to the interest of revenue and accordingly the show cause notice was issued on 14.03.2022 giving the assessee an opportunity to explain why the assessment order shall not be revised u/s. 263 of the Act. 5.1 The ld. PCIT held that as the assessee has failed to furnish satisfactory explanation regarding the source of cash deposited in the bank accounts during the demonetization period not only during the assessment proceedings but even in response notice u/s. 263 of the Act, the amount of unexplained cash deposits should have been added to the assessee income. Considering these facts, the ld. PCIT held that the assessment order is erroneous and prejudicial to the interest of revenue in terms of section 263 of the Act and accordingly, set-aside the assessment order and directed the AO u/s. 263 of the Act to make the fresh assessment in accordance with law. Vanigota Sugar Trading Company, Vijaypur Page 10 of 19 6. Aggrieved by the revisionary order passed u/s. 263 of the Act dated 25.03.2022, the assessee has filed the present appeal before this Tribunal. The assessee has also filed a paper book comprising 63 pages containing therein various documents/records/statements /notices/order/confirmation/ return/statements relied upon by the assessee firm. 7. Before us, the ld. A.R. of the assessee vehemently submitted that the ld. PCIT ought to have appreciated that the cash deposits of Rs.45,00,000/- were out of the sale proceeds of the assessee which were duly recorded in the books of accounts and duly taken into the consideration while computing the income under the act. Further, ld.A.R. submitted that source of deposit of cash of Rs.45,00,000/- in the bank account had also been examined by the ADIT (Inv), Unit-II, Belagavi and also by the AO during the course of assessment proceedings and therefore the impugned order passed U/s 263 was uncalled for and unwarranted. Lastly the ld.A.R. submitted that as the twin conditions for invoking provisions of section 263 of the Act are not satisfied and therefore the order passed by ld.PCIT is illegal and bad in law. 8. The ld.D.R. on the other hand supported order of the ld. PCIT and submitted that as the AO had not examined the source of cash deposited during demonetization period & therefore the ld. PCIT has correctly held that the AO has not conducted necessary enquiries and accordingly not made the additions required as per law. 9. We have considered the rival contentions and perused the order of the ld. PCIT as well as of the AO. According to provisions of section 263 of the act, the ld. PCIT may call for and examine the record of any proceeding under the Income Tax Act and if he considers that any order passed therein by the AO is erroneous in so far as it is prejudicial to the interests of the revenue, the ld. PCIT may after giving the assessee an Vanigota Sugar Trading Company, Vijaypur Page 11 of 19 opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. Further, the Hon’ble Supreme Court has held that the pre- requisite to exercise of juri iction by the commissioner suo moto under it, is that the order of the Assessing Officer is erroneous in so far as it is prejudicial to the interest of revenue. The commissioner has to be satisfied with twin conditions, namely ( i ) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interest of Revenue. If one of them is absent – if the order of the AO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue- recourse can not be had to section 263(1) of the Act. [Malabar Industrial Co. Ltd v. CIT (2000) 243 ITR 83.]

1 Further, the term ‘erroneous’ has not been defined under the Act. The Apex Court in the above case also held that an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. Further, the phrase 'prejudicial to the interests of the revenue' is not an expression of art and is also not defined in the Act. The various High Courts had treated loss of tax as prejudicial to the interests of the revenue. If due to an erroneous order of the AO the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. There must be some grievous error in the Order passed by the AO, which might set a bad trend or pattern for similar Vanigota Sugar Trading Company, Vijaypur Page 12 of 19 assessments, which on abroad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration. Further, what is erroneous and prejudicial to the interest of the revenue is judicially tested by plethora of decisions however, the scope was further extended by introduction of explanation 2 to section 263 which is inserted by the Finance Act, 2015 with effect from 01/06/2015. This explanation empowers the PCIT from 01.06.2015 to invoke the provision of section 263 to the assessment order to be erroneous in so far as it is prejudicial to the interest of the revenue, if, in the opinion of the Principal CIT,- (a) the order is passed without making inquiries or verification which should have been made;

2 The Hon’ble High Court of Delhi in the case of Commissioner of Income-tax-XIII v. Ashish Rajpal reported in (Del-HC) (2010) 320 ITR 674 had magnificently extracted the parameters and principles laid down by the Courts which govern the exercise power by the Commissioner under the provisions of section 263 of the Act-

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The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file