KARIMNAGAR MILK PRODUCER COMPANY LIMITED,HYDERABAD vs. DCIT, CIRCLE-1, KARIMNAGAR

Succinctly stated, the assessee company which is engaged in the business of procuring, processing and sale of milk and milk products had filed its return of income for A.Y 2017-18 on 06/11/2017, declaring an income of Rs. 18,00,490/-. Subsequently, the case of the assessee company was selected for scrutiny assessment U/s. 143(2) of the Act.

During the course of the assessment proceedings, it was observed by the A.O. that the assessee company in the course of its business procured milk and processed the same into milk (toned etc.), and was also into manufacturing of milk by-products such as 3 ITA 1388/Hyd/2024

The A.O. based on the aforesaid facts, observed that the manufactured items, sales of the assessee company could not be correlated quantitatively with the purchases of raw materials, wastages etc. in the absence of the required details, viz., (i) day-to-day manufacturing account that was not being maintained regarding processing of milk and manufacture of milk by-products; (ii) day-to- day manufacturing account, quantitative consumption account with quantitative details of consumption in respect of processing of milk and manufacture of milk by-products were not being maintained; and (iii) stock book or register was not being maintained. Apart from that,

On further appeal, the CIT(A) vide his order dated 15.09.2020 scaled down the quantum addition made by the A.O to Rs. 32,12,480/- and thus, partly allowed the appeal.

Thereafter, the A.O. vide his order U/s. 270A of the Act, dated 23.03.2022 imposed a penalty of Rs. 7,74,504/- U/s. 270A of the Act.

Aggrieved, the assessee company assailed the penalty imposed by the A.O u/s 270A of the Act before the CIT(A). As the appeal filed by the assessee company involved a delay of 36 days, therefore, the assessee company had filed before him an application seeking condonation of the same. However, the CIT(A) did not find favor with the explanation of the assessee company regarding the reasons

The assessee company being aggrieved by the order of the CIT(A) has carried the matter in appeal before us.

We have heard the Ld. Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.

Smt. S. Sandhya, the Learned Authorized Representative of the assessee company (in short, “ld.AR”), at the threshold of hearing, submitted that the present appeal involves a delay of 27 days. Elaborating on the reasons leading to the delay, the ld.AR submitted that the same had occasioned for the reason that during the relevant period i.e., September, 2024 the wife of the Managing Director of the assessee company, viz. Sri P. Shankar Reddy had expired. The ld.AR to buttress her aforesaid claim had drawn our attention to the “affidavit” filed by Sri P. Shankar Reddy (supra), wherein it was deposed by him that during the relevant period i.e., on 27/09/2024 his wife Smt. Muthireddy Devamma, who had remained seriously ill, had passed away. Our attention was also drawn to the “death certificate” of Smt. Muthireddy Devamma (supra). The ld.AR submitted that as the delay in filing the appeal had crept in for a bona fide reason and not on account of any lackadaisical approach of the assessee company, therefore, the same in all fairness be condoned.

Per contra, the Learned Departmental Representative (in short “Ld. Ld. DR”) did not seriously object to the seeking of condonation of the delay involved in the filing of the present appeal.

We have thoughtfully considered the explanation of the assessee company regarding the reasons leading to the delay in filing the 12 ITA 1388/Hyd/2024

Apropos the impugned order before us, we find that the CIT(A) had dismissed the appeal by declining to exercise the discretion vested him under sub-section (3) of section 249 of the Act and not condoning the delay of 36 days (sic) involved in the appeal that was filed by the assessee company before him.

Although, we principally concur with the CIT(A) that an assessee appellant ought to remain vigilant regarding filing the appeals before various forums within the time prescribed under the statute, but, we are unable to persuade ourselves to the declining by him to condone the delay involved in the appeal filed by the assessee company. We say so, for the reason that the assessee company had explained before the CIT(A) that there was a delay of 34 days in filing the appeal before him, for the reason that its Chartered Accountant had remained pre- occupied with the medical treatment of his ailing father. Ostensibly, the assessee company had stated before the CIT(A) that as its counsel during the relevant period for the aforesaid compelling reasons did not 13 ITA 1388/Hyd/2024

As is discernible from the record, the CIT(A) had declined to accept the aforesaid explanation of the assessee company regarding the reasons leading to the delay in filing the appeal. It was observed by him that as the assessee company had failed to place on record the details of communication or documentary evidence to support its aforesaid explanation, therefore, the same did not merit acceptance.

We have thoughtfully considered the observations of the CIT(A) based on which he had declined to condone the delay in filing of the appeal before him.

Although, we principally concur with the CIT(A) that the assessee company ought to have remained vigilant regarding filing the appeal before him within the prescribed period, but at the same time, we are of the firm conviction that the explanation of the assessee company could not have been summarily discarded by him for the reason that it had failed to provide the details of communication or documentary evidence to support its explanation regarding the delay in filing of the appeal. As the delay involved in the appeal filed before the CIT(A) is not inordinate and is further backed by justifiable reason, therefore, we are of the firm conviction that the CIT(A) instead of dismissing the same on the ground of limitation ought to have judicially exercised the discretion vested with him under sub-section (3) of section 249 of the Act, and after condoning the delay disposed of the appeal on merits. Also, we find that the CIT(A) had though observed that the explanation of the assessee company regarding the delay in filing the appeal before him was being rejected as it was not corroborated with supporting documentary evidence, but we find that there is no whisper in his order which would reveal that he had at any stage called upon the assessee company to substantiate its explanation based on supporting documentary evidence/material. Our aforesaid view that a liberal and judicious approach should be adopted while considering the application filed by an assessee-

We thus, in terms of our aforesaid deliberations set-aside the order of the CIT(A) and restore the matter to his file with a direction to condone the delay and dispose of the appeal on the merits of the case. Needless to say, the CIT(A) shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee company. The Grounds of Appeal Nos.3 and 4 are allowed in terms of our aforesaid observations.

As we have restored the matter to the file of the CIT(A) for fresh adjudication, therefore, we refrain from dealing with the contentions

The Grounds of Appeal Nos. 1, 2 and 6 being general are dismissed as not pressed.

Resultantly, the appeal filed by the assessee company is allowed for statistical purposes in terms of our aforesaid observations.

िनधाŊįरती/The Assessee : Karimnagar Milk Producer Company Limited, 9-9-1, Padmanagar, Karimnagar, Telangana-505002. 2. राजˢ/ The Revenue : DCIT, Circle-1, Karimnagar, Telangana. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. िवभागीयŮितिनिध, आयकरअपीलीयअिधकरण, हैदराबाद / DR, ITAT, Hyderabad 5. The Commissioner of Income Tax 6. गाडŊफ़ाईल / Guard file