IMAM SYED ABDUL KAMAL NAZAR,CHENNAI vs. ITO, CORPORATE WARD-6(3), CHENNAI

At the time of hearing, the Ld.Counsel for the assessee submitted that appeal filed by the assessee is time barred by 486 days, for which, a petition for condonation of delay in filing of the appeal along with Affidavit has been filed and explained the reasons for filing delay in appeal. The assessee further submitted that the delay of 486 days in filing of the appeal is neither intentional nor to derive any undue benefit, but beyond the control of the assessee, because, the assessee was under wrong understanding of law that there is no need to file appeal against revision order passed by the PCIT, when law provides for challenging consequential order passed by the AO u/s.143(3) r.w.s.263 of the Act. However, when the assessee has approached Mr.T.Banusekar, CA to represent his appeal before the Commissioner of Income Tax, Mr.T.Banuskar, CA enquired the status of appeal against the order passed u/s.263 of the Act, for which, the assessee informed that no appeal was filed, thereafter, assessee was advised by the new Counsel to challenge the order passed by the PCIT u/s.263 of the Act, before the Tribunal and thus, the present appeal has been filed with a delay of 486 days. However, such delay is neither intentional nor to derive any undue benefit. He further submitted that when the assessee decided to file the appeal, it was noticed that the issue involved in appeal is having strong merit in favour of the assessee and thus, in order to render substantial justice, the delay in filing of the appeal may be condoned.

The Ld.DR, on the other hand, strongly opposing the petition filed by the assessee for condonation of delay submitted that the reasons given by the assessee does not come under reasonable cause as provided under the Act, for condonation of huge delay and thus, petition filed by the assessee should not be entertained.

We have heard both the parties and considered the reasons given by the assessee in his petition filed for condonation of delay and after considering relevant reasons, we are of the considered view that the delay of 486 days in filing of the appeal is neither intentional nor to derive any undue benefit. No person in this country would invite huge tax and penalty by not filing an appeal. If a person does not file appeal against any order or decree means, there must be a wrong understanding of law or wrong advice of Counsel who handled the case, otherwise, no person would happily pay taxes when the authorities have imposed taxes on certain income. In this case, on perusal of details available on record, we find that the assessee himself had represented his case before the PCIT through his Accountant, but not through a professional who is well-versed with taxation laws. We, therefore, to this extent agree with arguments of the assessee.

No doubt, ignorance of law is not an excuse, but it cannot be expected from each person, to know laws of this country, more particularly complex laws like Income Tax Act. Moreover, the issue involved in the appeal filed by the assessee is having prima facie merits in favour of the assessee. It is a well settled principle of law by the decision of various Courts, including the decision of the Hon’ble Supreme Court in the case of Collector Land Acquisition Vs. Mst. Katiji & Ors. reported in [1987] 167 ITR 471 that, when technicalities and substantial justice are pitted against each other, then the substantial justice prevails over technicalities. In other words, no appeal can be thrown out of judicial review for technical reasons. Therefore, considering the facts and circumstances of the case and also by following the decision of the Hon’ble Supreme Court in the case of Collector Land Acquisition Vs. Mst. Katiji & Ors. we are of the considered view that there is a merit in the arguments of the assessee for condonation of delay and thus, we condoned the delay in filing of the appeal and admitted the appeal filed by the assessee for hearing.

The brief facts of the case are that Mr.Nazar had filed its return of income for the AY 2016-17 on 27.07.2016 declaring total income of Rs.48,49,810/-. The assessment has been completed u/s.143(3) dated 14.12.2018 and accepted the income declared by the assessee in the return of income filed for the relevant AY without any additions/disallowances.

The Ld.AR for the assessee referring to order passed by the AO u/s.143(3) of the Act, and revision order passed by the PCIT u/s.263 of the Act, submitted that, the assessment order passed by the AO, is neither erroneous nor prejudice to the interest of the Revenue, because, the PCIT has exercised the jurisdiction and set aside the assessment order on the issue of unsecured loans taken from friends and relatives, amounting to Rs.27,70,000/- in light of provisions of Sec.68 of the Act. However, very same issue has been examined by the AO during the course of assessment proceedings and after considering relevant facts noted that amount received by the assessee from friends and relatives is unsecured loan taken in cash and thus, levied penalty u/s.271D of the Act, for contravention of provisions of Sec.269SS of the Act. Since, the issue on which the PCIT exercised his jurisdiction was subject matter of deliberations from the AO, there is no scope for the PCIT to revise the assessment order on very same issue.

The Ld.DR, on the other hand, supporting the order of the PCIT, submitted that the PCIT has invoked the jurisdiction on two issues, i.e. (1) regarding loan taken by the assessee in light of provisions of Sec.2(22)(e) of the Act. The PCIT had also assumed the jurisdiction on the issue of loans taken from friends and relatives. Although, the first issue questioned by the PCIT does not survive, but on the second issue, the PCIT has made out a case and direct the AO to examine the identity, creditworthiness and genuineness of those loans taken from friends and relatives. Therefore, from the above, it is very clear that the assessment order by passed the AO is erroneous in so far as it is prejudice to the interest of the Revenue.

We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. Admittedly, the PCIT had exercised the jurisdiction on the issue of unsecured loans taken from friends and relatives, amounting to Rs.27,70,000/- and directed the AO to examine the loans to ascertain identity, genuineness of the transactions and creditworthiness of the parties. It is also an admitted fact that those unsecured loans taken from friends and relatives were subject matter of deliberations from the AO, during the course of assessment proceedings, u/s.143(3) of the Act, which is evident from the fact that those loans have been considered by the AO in light of provisions of Sec.269SS of the Act, and levied penalty u/s.271D of the Act, amounting to Rs.27,70,000/-, by holding that the assessee has received loans in cash in excess of prescribed limit. From the above, what is clear is that the AO has accepted the fact of amount received by the assessee from his friends and relatives, amounting to Rs.27,70,000/- is loan, which comes under the provisions of Sec.269SS of the Act. Therefore, once a particular receipt has been treated as loans and advances, then the very same receipts cannot be examined in light of provisions of Sec.68 of the Act, to treat the said amount as unexplained credit and income of the assessee. The AO cannot blow hot and cold together. In this case, the AO has considered unsecured loans taken from friends and relatives as cash loans and also levied penalty for contravention of provisions of Sec.263 of the Act. On the other hand, the PCIT has taken up the revision proceedings on very same loans and advances in light of provisions of Sec.68 of the Act. In our considered view, powers exercised by the PCIT u/s.269SS of the Act, is not in accordance with law. It is a well settled principle of law that the PCIT can exercise the powers only in a situation, where the assessment order by passed the AO is erroneous in so far as it is prejudice to the interest of the Revenue. In this case, the assessment order passed by the AO is neither erroneous, because, the issue taken up by the PCIT, has been examined by the AO and further, the assessment order passed by the AO is nor prejudice to the interest of the Revenue, because, the Department has already considered amounts to question as loans and levied penalty u/s.271D of the Act. Further, the assessee had settled the tax dispute under Vivad Se Viswas Scheme, 2020 and paid necessary taxes. Therefore, from the above, it is very clear that there is no prejudice caused to the Revenue.

In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that the PCIT is erred in revision of assessment order u/s.263 of the Act, because the assessment order passed by the AO is neither erroneous nor prejudice to 8 :: the interest of the Revenue. Hence, we quashed the revision order passed by the PCIT u/s.263 of the Act.

In the result, the appeal filed by the assessee is allowed.