HANSABEN AMRATLAL GANDHI,SURAT vs. THE ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, SURAT

When substantial justice and technical considerations are pitted against each other , 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 non- deliberate delay- presumption that delay is occasioned deliberately, or on account of 5. There is no on account of mala fides: A litigant does not stand to culpable negligence, or benefit by resorting to delay: In fact he runs & serious risk 6 It must be grasped that judiciary is respected not on account of its power to on technical grounds but because it is capable of removing legalize injustice injustice and is expected to do so. justice-oriented approach from this perspective , there was sufficient Making cause for condoning the delay in the institution of the appeal. The fact that it was the State which was seeking condonation and not & private party was altogether irrelevant: The doctrine of equality before law demands that all litigants, including the State as a litigant, are accorded the same treatment and the law is administered in an even handed manner. There is no warrant for according step motherly treatment when the State' is the applicant praying for condonation of delay: In fact experience shows that on account of an impersonal machinery (no one in charge of the matter is directly hit or hurt by the judgment sought to be subjected to appeal) and the inherited bureaucratic methodology imbued with the note-making, file pushing, and passing-on-the-buck ethos, delay on its part is less difficult to understand though more difficult to approve: In any event, the State which represents the collective cause of the community , does not deserve litigant-non-grata status. The Courts therefore have to be informed with the spirit and of the provision in the course of the interpretation of the philosophy expression "sufficient cause So also the same approach has to be evidenced in its application to matters at hand with the end in view to do even handed justice on merits in preference fo the approach which scuttles & decision on merits. Turning to the facts of the matter giving rise to the present appeal, we are satisfied that sufficient cause exists for the delay: The order of the High Court dismissing the before it as time barred, is therefore, set aside: Delay is condoned: And appeal the matter is remitted to the High Court The High Court will now dispose of the appeal on merits after affording reasonable opportunity of hearing to both the sides. Appeal is allowed accordingly. No costs. 6 In the light of above cited judgments, if we examined the facts of the present the order of CIT (A) dated 11.11.2013 was received by the case, we find that assessee on 18.12.2013. However, the said order was misplaced by the assessee due to her old age of 82 years and she was suffering from symptoms of forgetfulness, lack of concentration & disorientation and dementia: She used to forget the person whom she regularly meets. Due to these reasons, she forget the order of CIT (A) and misplaced it, which was only found by her son when he was cleaning her papers. Therefore , in such circumstances, we observe that the assessee has sufficiently explained that the assessee was prevented bY sufficient and bonafide and reasonable cause in filing the appeal within the prescribed time limit. Further reliance is placed on the decision of Hon'ble Gujarat High Court in the case of Jayvant Singh Vaghela V ITO [2013] 40 taxmann.com 491 (Guj) wherein it was held that it is cardinal principle of law that normally by and large the appeals are required to be decided on the merits rather than dismissing the same on technical ground, like delay etc: unless there is gross negligence on the part of the assessee and/or there was any malafide intention on the part of the assessee in not preferring the appeal within the period of limitation and/or in filing the appeals belatedly. We do not find any malafide intention of the assessee in not filing of appeal in time. Further , the Hon ble Jurisdictional High Court in above case (supra) has laid down the cardinal principle of law that normally by and large the appeals are required to be decided on the merits rather than dismissing the same on technical ground like delay etc: In the case of Ornate Traders Pvt: Ltd: ITO 312 ITR 93 (Bom) wherein the Hon ble Bombay High Court has observed that the court would condoned the delay in all appeals where the delay is less than a year and which has been reasonably explained. Accordingly, the explanation given by the assessee having found reasonable one, the High Court condoned the delay in filing the appeal vide para 33 of the order wherein it has been held that the notice of Motion No. 2281 of 2008 filed by the assessee is allowed: The Hon ble Supreme Court in the case of N: N: Balakrishnan Krishnamurthy (1998) 7 SC 124 (SC} wherein it was observed that condonation of delay is matter of discretion of the court The Hon ble Supreme Court, further observed that the length of the delay is immaterial: The acceptability of the explanation is the only criteria for condcning the delay: In a given case, delay of the shortest period of time may be un-condonable due to unacceptable explanation, whereas, in certain other cases, delay of a long period can be condoned, if the explanation is satisfactory. In every case of delay, there might be some omissions of negligence on the part of the assessee Maxtor mind such omissions /negligence has to be weighed in the light of exist circumstances of each case: It would be the negligence of commission is a byproduct of a deliberate attempt with mala-fide intention for delay the process of the litigation which could give some benefit to the litigant, then probably process of litigation which would view some benefit with the litigant then probably that delay would not deserved to be condoned: However, if no mala-fide can be attributed to the delay, that delay will be condonable: Thus, it appears to Us that due to illness and forgetfulness of the assessee due to memory loss, the delay in filing of appeal has been occurred, which appears to be a reasonable cause in the light of aforesaid facts and judicial pronouncements discussed above: Therefore, on the facts of the present case, and judicial pronouncements as cited by the learned counsel for the assessee and relied by US, we are of the considered opinion that the assessee has been able to demonstrate sufficient cause and reasons for filing an appeal before the Tribunal: Therefore, we deem it fit to condone the delay of 815 days and admit the appeal and to be decided on merit in accordance with law. 7 Ground no. 4 82 relates to confirmation of the penalty under section 271(1) (c) of the Act amounting to Rs: 1,79,460/-. 8 Briefly stated facts are that there was search and seizure operation carried out on 07.11.2006 in the case of Shri Sanjay Sadadiwalaand consequence survey conducted at 7 Bhakti Vedant society Surat wherein books of accounts belonging to the assessee were impounded: Ex-consequenti, notice under section1 53C was issued on 08.02.2008, in response to which the assessee filed her return of income on 31.07.2008. The assessee was asked to explain each case impounded and belonging to her but no explanation was filed: The seized Page No.16 of BF-13 showed the expenses towards renovation of house at 1 /1201,_ KakajiStreet Nanpura, Surat at Rs.10,45,200/ Therefore , show cause notice issued on 19.09.2008 which was replied vide letter dated Nil received by the AO on 06.10.2008, but has not filed specific reply with regard to renovation expenses, hence, the AO treated the same as unexplained expenditure and initiated penalty proceedings under section 271(1Jc) of the Act for furnished inaccurate particulars of income and thereby concealing particulars of income: The AO also issued show cause notice under section 274 read with section 271(1)c) of the Act for furnished inaccurate particulars of income of Rs.10,45,200/ Aggrieved with order, the assessee has filed an appeal before CIT (A) on quantum addition, who vide his order dated 06.04.2010 has dismissed the appeal of the assessee: Accordingly, the AO issued show-cause notice. The AO considered the reply of the assessee and not found acceptable the same: Accordingly, after relying on some case laws, the AO levied penalty of Rs.3,13,560/- being 100% of tax sought to be evaded of Rs.10,45,200/ - 9 Being, aggrieved, the assessee filed an appeal before the Ld. CIT (A): The has made detailed submissions before the CIT (A) which have been assessee reproduced by the CIT (A) in his appellate order: The CIT (A) has also observed that the order dated 30.04.2013 in quantum appeal from Tribunal has also come, wherein the tribunal in para 8 as held as under:

We have heard the rival submissions and perused the material on record. It is undisputed fact that the addition has been made by the Assessing Officer on the basis of material seized during the course of search of Shri Sanjay /. Sadadiwala. It is also the fact that the revenue has relied only on the basis of the seized material without bringing any other tangible evidence On record in support of the addition: The assessee before uS has submitted that she had incurred an expense of Rs.4,47,000/- in the next year (A.Y.2005-06) and has also placed a copy of account at page 6 of the paper book filed before uS The Ld.D.R could not controvert the aforesaid submission of the assessee by bringing any contrary material on record: It is also the fact that the material on which the estimate been made was dated 13.12.2002, whereas the search had taken place on 07.11.2006. The assessee has also not been in a position to support her contention with any tangible evidence that the seized document was an estimate and not the details of actual expenditure. Considering the totality of the facts, we are of the view that in the present case the entire amount of Rs. 10,45,200/- cannot be added to the income but the credit of expenses incurred by the assessee amounting to Rs.4,47,000/- needs to be granted to the assessee: It is also a fact that the Ld CIT(A), while confirming and upholding the order of the Assessing Officer; has passed a very cryptic order: In view of these facts; we are of the view that to be fair to both sides and to meet the ends of justice, the addition be restricted only to the extent of Rs.5,98,200/- (Rs.10,45,200/- less Rs.4,47,000/-)"

The CIT (A) has observed that the addition of Rs.5,98,200 /- sustained by the fact finding appellate authority on facts and that addition of Rs.4,47,000 /- which to the expenditure incurred in subsequent year: It was admitted by the pertains before the Honourable ITAT that the expenditure to the extent of appellant Rs.5,98,000 / - was incurred in assessment year 2004-05 and balance Rs.4,47,000 /- in the assessment year 2005-06 and copy of account was also submitted before the Tribunal: Now the position is that the said expenditure was not disclosed by the appellant in the return of income nor admitted during the course of the assessment proceedings for which addition was made and the penalty was also levied: Therefore, the CIT (A) opinioned that the levy of penalty in respect quantum addition confirmed to the extent of Rs. 5, 98, 200 is justified which was confirmed and for the rest of the amount as that addition itself does not survive for assessment year in question, the penalty under section 271(1)(c) also did not justified and the same was directed to be deleted to that extent: 11 Being, aggrieved the assessee filed this appeal before the Tribunal: The Id. Counsel for the assessee submitted that the assessee owned a building which was acquired in 1965 but damaged in 2001 due to earthquake, when there were cracks: She decided to renovate it and obtained estimate from Shri Mahesh Builders vide letter dated 13.12.2002 (PB 10 -11) This has been referred to as BF-13 Page -16. Total estimate figure was at Rs.10,45,200/_ This amount has been considered is spent but not recorded in the books of accounts, hence addition was reduced to Rs.5,98,200 / considering that the amount of Rs.4,47,000/- was spent in assessment year 2005-06. The learned counsel for the assessee drew our attention to Page -16 and submitted that if one looks at the paper following word are there "is to be made "work to be done there will be done pipe and tap to be put construction will have to be done as mentioned above. All these words indicate work to be done in future. Therefore, this paper cannot be considered reflecting any payment that the evidence between Bill and estimate is that former is supported by voucher and later by ad-hoc figures What is however, importantly that the so-called paper is dated 13.12. 2002 and falls in A.Y. 2003-04. In any case, even if this paper is regarded as reflecting payments made, then also it would fall in AY. 2003-04, hence, there is no concealment of income during the Year under consideration: Beside, there is vagueness in initiation of penalty as the AO has not given any clear finding as to whether it is for furnishing inaccurate particulars as could be seen from the copy of concealment or notice under section 271(I)C) In support of this contention, the learned counsel for the assessee place reliance in the case of New Sorathia Engi jineering Co. 282 ITR 642 (Guj) wherein it was held that the Assessing Officer should be clear as to whether he is for furnishing inaccurate particulars of income or for levying penalty concea iling particulars of income: Therefore, in view of these facts, the penalty confirmed by the CIT (A) is required to be deleted: The learned Counsel also placed reliance on various case laws in support of this contention: 12 Per contra, the Id. DR submitted that the seized paper found during the course of search has clearly mentioned the quantum of expenditure incurred for the purpose of renovation of house at Rs. 10,45,200/- is not incurred in respect of various repair work to be carried out. The assessee has shown the expenditure on the renovation at Rs.4,47,000/-as incurred and accounted for during the next year i.e. A.Y. 2005-06. Therefore, the Tribunal has rightly held the balance expenditure of Rs.5,98,200/- incurred during assessment year under consideration which has not been recorded in the books of accounts. Since the fact, finding body has confirmed the finding recorded by lower authorities Therefore, the AO and CIT (A) has rightly reduced the penalty in commensurate to the findings of the Tribunal. Therefore, the findings recorded by the learned CIT (A) is required to be upheld.

We have considered the facts, the rival submissions and perused the material on record. We find that the learned counsel for the assessee submitted that the existing building was damagedand therefore, the assessee wanted to demolish and reconstruct the same, so the assessee had approached to Shri Builders for its estimate, therefore the documents seized is an estimate: However, at the same time, we find that the assessee had incurred Rs.4,47,000/-during the financial year 2004-5 and the same was accounted for in the balance sheet: Therefore, it is evident that the assessee has incurred the expenditure mention on the seized paper not before assessment year 2005-06. We have also gone through the order of Tribunal, wherein the Tribunal observed as follows It is also the fact that the material on which the estimate has been made was dated 13.12.2002, where this search has taken place on 07.11.2006. The assessee has also not been in a position to support his contention with any tangible evidence that the seized document was an estimate and not the details of actual expenditure: Considering the totality of the facts, we are of the view that the in the present case the credit of the expenditure incurred by the assessee amounting to Rs.4,47,000 / - needs to be granted to the assessee_ 14. Thus the finding of the Tribunal clearly makes out a case of default as contemplated under section 271 (1) (c) of the Act. Be that as it may be, we are, therefore, of the considered opinion that the CIT (A) has rightly restricted the penalty to quantum addition sustained by the Tribunal: 15. We further find that the Explanation to section 271 (I) (c) provides that the penalty would be deemed to attract where in respect of a fact material to the computation of income either no explanation is offered, or explanation offered is found to be false: In this case, the assessee has offered explanation during the course of appellate proceedings but it was not found acceptable. The assessee had offered explanation and the said explanation offered was found to be false and accordingly its case is covered by Clause (A) of Explanation 1 to section 271(1)c) of the Act. Clause (B) of Explanation 1 to section 271(1)c) of the Act provides that where the assessee is not able to substantiate its explanation and fails to prove that such explanation is bonafide and all the facts relating to the same have been disclosed, penalty is leviable. As the claim of the assessee that no expenditure has been incurred is not substantiated without any tangible evidence that the assessee had not incurred actual expenditure during the year under consideration on the renovation of her house: This being the factual position, therefore penalty under section 271(1) (c) is leviable: Based on the above facts of the case; we are of the considered opinion that CIT (A) was right in confirming the penalty under section 271(1 J(c) of the Act: The learned counsel for the assessee relied on various judicial decision, but each and every case is different on facts. Hence, there cannot be any precedent of facts Since, on the facts of the case establish the fault of the assessee as mentioned under section 271(1 )c) of the Act, therefore, the decision which are different on facts cannot be made applicable to present case, hence , wc not dealing without each set-aside same being distinguishable on facts. Before parting with, we may mention that The learned Counsel has placed reliance in the case of New Sorathia Engi jineering Co. 282 ITR 642 (Gui) that notice US 271(1 Jc) was vague. However, we find from the grounds of appeal as taken by the assessee, that no such ground has been raised before Tribunal with regard to vagueness of notice under section 271(1 )c) hence, we are not adjudicating on this point as same is not before Us. In view of this matter, the penalty as sustained by the CIT (A) is therefore, confirmed Accordingly, Ground No.1 and 2 of appeal is therefore, are dismissed. 14 In the result, the appeal of the assessee stands dismissed. The order pronounced in the open Court on 2 3 ~0) 20 / (CM: GARG) JUDICIAL MEMBER (O.P. MEENA) ACCOUNTANT MEMBER Ha/ Surat, f4did5 Dated: 23 01 20 1 ? Copy of order forwarded to- Assessee/AO /Pr. CIT / CIT (A)/ITAT (DR)/Guard file of ITAT: By order Assistant Registrar, Surat