SOLIDITY DEVELOPERS PVT LTD.,MUMBAI vs. DCIT-11(2)(2), MUMBAI

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ITA 1787/MUM/2019Status: DisposedITAT Mumbai08 October 2021AY 2012-135 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the delay in filing the appeal was sufficiently explained by the assessee's reliance on initial advice and subsequent expert opinion after penalty and prosecution proceedings were initiated. The Tribunal directed the CIT(A) to condone the delay and decide the appeal on its merits.

What were the facts?

The assessee filed an appeal before the CIT(A) with a significant delay of 1081 days. The CIT(A) dismissed the appeal without adjudicating on merits, solely due to the unexplained delay.

What were the issues?

Whether the delay in filing the appeal before the CIT(A) was justifiable and whether the appeal should be decided on merits.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 43B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘G ‘ BENCH

For Appellant: Shri Pavan Ved
For Respondent: Shri Pankaj Kumar
Hearing: 05/10/2021Pronounced: 08/10/2021

आदेश / O R D E R PER M. BALAGANESH (A.M):

1.

This appeal in A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-18, Mumbai in appeal No.CIT(A)-18/IT-10219/DCIT-11(2)(2)/17-18 dated 05/03/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 10/02/2015 by the ld. Dy. Commissioner of Income Tax-11(2)(2), Mumbai (hereinafter referred to as ld. AO).

M/s. Solidity Development Pvt. Ltd.,

2.

The assessee has raised the following grounds:-

“Being aggrieved by the Appeal Order of the Learned Commissioner of Income Tax (Appeals) - 18 (Hereinafter referred to as the "CIT(A)-18") with regards the assessment order u/s 143(3) of the Act of the Deputy Commissioner of Income Tax - 11 (2) (2), Mumbai, (hereinafter referred to as the "LAO"), this appeal petition is submitted on the following grounds: -

1. On the facts and circumstances of the case and in law, the Learned CIT(A)- 18 has erred in upholding the order of the Learned Assessing Officer ("LAO") assessed u/s 143(3) of the Income Tax Act, on the following; a. The Id. CIT(A)-18 erred in not condoning delay in filing appeal before him. b. The Id. CIT(A)-18 erred in not considering the strong merits of the case which is based on Hon'ble SC decision and this all the more justifies condoning the delay c. Disallowance of interest expense for non-payment of tax deducted at source u/s 40(a)(ia) of the Act, amounting to Rs.3,74,28,580/-. d. Disallowance of Interest paid on delayed profession tax amounting to Rs.2,500/-. e. Disallowance of interest paid on delayed payment of Tax Deducted at Source (TDS) amounting to Rs.37,909/-.

2. The order under appeal is not only bad in law and invalid, but also against the natural law of equity and justice.

3. That the appellant reserves its rights to amend, alter or raise any other additional grounds of appeal before or during the course of appellate proceedings.”

3.

We have heard rival submissions and perused the materials available on record. We find that the assessee had filed its return of income for the A.Y.2012-13 on 28/09/2012 declaring loss of Rs.3,76,24,237/-. This return was processed u/s.143(1) of the Act. Later in the scrutiny assessment proceedings completed u/s.143(3) of the Act on 10/02/2015 a sum of Rs. 3,74,28,580/- representing interest to City Gold Investment Pvt. Ltd. was disallowed u/s.43B of the Act. The ld. AO observed that the assessee has advanced loans to the tune of Rs.37.05 Crores to Well-Groomed Joint Venture without charging any interest on M/s. Solidity Development Pvt. Ltd., one hand, whereas on the other hand, it had paid interest on its borrowings. We find that the ld. AO had made the disallowance of interest u/s.43B of the Act. He also observed that the said interest was subjected to deduction of tax at source but the TDS was not remitted, hence, the interest expenditure becomes alternatively disallowable for violation of provisions of Chapter XVIIB of the Act. Apart from this, the ld. AO also made disallowance of delayed interest on professional tax of Rs.2500/- and delayed interest of TDS of Rs.37,909/- in the assessment.

3.1. The assessee company based on the advice given by the in-house Chartered Accountant sought not to prefer any appeal before the ld. CIT(A) against this assessment order. The ld. AR pointed out that thereafter, when penalty was levied by the ld. AO and that penalty was confirmed by the ld. CIT(A), prosecution proceedings were initiated on the assessee company. This prompted the assessee company to seek a second opinion from a legal expert, who had advised the assessee company to prefer an appeal before the ld. CIT(A) along with delay condonation petition. Hence, the appeal was preferred by the assessee before the ld. CIT(A) with a delay of 1081 days. The ld. CIT(A) did not condone the delay and dismissed the appeal of the assessee as according to him the delay was not properly explained by the assessee.

4.

Being aggrieved, the assessee has preferred appeal before us on the grounds mentioned hereinabove.

5. At the outset, we find that the ld. CIT(A) had not adjudicated the issue on merits of the additions. The appeal has been dismissed by the ld. CIT(A) only on the ground of not condoning the delay thereon. It is not in dispute that there was a delay in filing of appeal by the assessee

M/s. Solidity Development Pvt. Ltd., by 1081 days. But we find that assessee has duly explained the circumstances under which a decision was taken for not preferring any appeal. We also find that the Chartered Accountant who advised the assessee has also filed an affidavit confirming the aforesaid facts which is enclosed in page 13 of the paper book. Subsequently, when the penalty and prosecution proceedings were launched on the assessee, the assessee based on an expert advice (second opinion), decided to file an appeal before the ld. CIT(A). This, in our considered opinion, constitute a reasonable cause, as the law is very well settled that mistake of the Counsel in not suggesting the assessee to prefer an appeal should not result in assessee getting fastened with penal damages together with tax and interest liability thereon. Before us, the ld. AR vehemently argued that the assessee had got a good case on merits and that the said disallowance of interest, among others, cannot be made at all in the hands of the assessee company. But we are not inclined to get into the merits of the additions in this appeal as the ld. CIT(A) had not addressed the merits at all. Considering the totality of facts and circumstances, we direct the ld. CIT(A) to condone the delay in filing of the appeal by the assessee, admit the appeal of the assessee for adjudication and adjudicate the issues on merits. Needless to mention that assessee be given reasonable opportunity of being heard. The assessee is also directed to co-operate with the ld. CIT(A) for expeditious disposal of this appeal and not to take any adjournment except due to unavoidable or exceptional circumstances. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.

M/s. Solidity Development Pvt. Ltd.,

5.

In the result, appeal of the assessee is allowed for statistical purposes.

Order pronounced on 08/10/2021 by way of proper mentioning in the notice board.

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