BHAGYALAXMI STEEL ROLLING MILL,MEHSANA vs. THE ITO, WARD-1, MEHSANA

On receipt of the said order, Hasmukh Rambhai Patel, one of the partners of the applicant firm instructed their accountant, Mr. Dilipbhai Ranjithhai Rami, to send the same to the office of their Chartered Accountant, CA Virendra C. Shah for filing an appeal before the Hon'ble Income Tax Appellate Tribunal. Unfortunately, the aforesaid instruction skipped attention of the accountant and same could not be forwarded to the office of the Chartered Accountant owing to March ending workload. Thereafter, when the applicant firm Steel Rolling Mill vs. ITO] A.Y. 2018-19 - 3 – received the penalty notice u/s 270A dated 29.11.2024 for A.Y. 2018- 19 (copy attached herewith), the partner of the applicant firm handed over the said notice to the accountant for forwarding the same to the Chartered Accountant for necessary response and also enquired regarding the ITAT appeal for A.Y. 2018-19 to the accountant. On such enquiry, the accountant was reminded of the order of the Id. CIT(A) and realized his mistake that he forgot to forward the aforesaid order to the office of the Chartered Accountant, and hence, immediately on realization of the same, the order along with the other appeal papers were compiled and necessary signatures were obtained and were forwarded to the office of the Chartered Accountant, who in turn forwarded the same to Adv. Rushin Patel at Ahmedabad for filing purpose and ultimately, the appeal could be filed on 17.02.2025.

It is also pertinent to note that, the appeal has been filed within the prescribed period of two months from coming to know of the inadvertent lapse of non-filing the appeal.

It is because of such circumstances a delay of 293 days has occurred in filing the appeal by the applicant. Affidavit of Mr. Dilipbhai Ranjitbhai Rami affirming the aforesaid facts on oath is attached herewith. The applicant most humbly requests that this delay may kindly be condoned, keeping in mind that there was no mala fide intention in delayed filing of the same and the circumstances under which the delay has occurred may kindly be considered as a reasonable cause and the appeal may kindly be taken up for adjudication in the interest of justice.

The applicant relies on the judgement of the Hon'ble Supreme Court in the case of N. Balakrishnan v/s. M. Krishnamurthy (1998) 7 SCC 123 (copy attached herewith), wherein it was held that, in absence of anything showing malafide or deliberate delay as a dilatory tactic, delay should normally be condoned. It further held that, length of delay is no matter, acceptability of the explanation is the only criterion and that there is no presumption that delay in approaching the court is always deliberate. The words "sufficient cause" should receive a liberal construction so as to advance substantial justice.

Ld. DR vehemently opposed the condonation of delay.

Having heard both the parties, we find that the assessee has demonstrated sufficient cause for the delay in filing of the present appeal. The delay has been shown to be attributable to his Accountant who on oath has stated to have failed to deliver the order of the CIT(A) to the Chartered Accountant of the assessee for filing appeal before the ITAT. The Ld.DR has been unable to point out any infirmity in the explanation or demonstrate the same to be false.

Courts have been unanimous in holding that the word ‘sufficient cause’ as per section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice and that merely because there is some lapse of the litigant concerned, that alone is not enough to shut the door of justice to him. That as long as the explanation of the assessee does not smack of malafides or it is not put forth as part of a dilatory strategy, the court must show utmost consideration and when there Steel Rolling Mill vs. ITO] A.Y. 2018-19 - 5 – is reasonable ground to think that the delay was occasioned by the party deliberately to gain time, then the court should lean against acceptance of the explanation. While holding so, the courts have considered that ordinarily a litigant does not stand to benefit by lodging an appeal late and by refusing the condonation of delay it can result in a meritorious matter being thrown out at the very threshold, defeating the cause of justice. That when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred. It has also been noted that there is no presumption that delay is occasioned deliberately, or on account of culpable negligence. A litigant doesn’t stand to benefit by resorting to delay. We make a reference in this regard to the decision of Hon’ble Apex Court in the case of Collector Land Acquisition Vs. Mst. Katiji & Others, 1987 AIR 1353.

Considering the judicial decisions as above and noting that the assessee had adduced sufficient cause for the delay, we consider it a fit case for condoning the delay and admitting the appeal of the assessee for adjudication.

Having said so, we shall now proceed to adjudicate the grounds raised before us which read as under:

Ld. Counsel for the assessee first drew our attention to the facts of the case pointing out that the liability so added back pertained to four creditors noted at page 2 of the assessment order as under:

Ld. DR, however, vehemently supported the order of the Ld. CIT(A).

Having heard the contention of both the parties, we find merit in the argument made by the Ld. Counsel for the assessee Steel Rolling Mill vs. ITO] A.Y. 2018-19 - 8 – that there was no case on facts for treating the outstanding balance of sundry creditors amounting to Rs.5,45,347/- as having ceased to exist and added to the income of the assessee in terms of Section 41(1) of the Act. As rightly pointed out by the Ld. Counsel for the assessee, the impugned parties have admittedly confirmed the outstanding balance. The only basis with the Revenue for treating these liabilities to have ceased to exist was the fact that their PAN number was not furnished. The Revenues case rests on the premise that the onus is on the assessee to prove that liabilities exist and by not furnishing PAN of the impugned parties, the assessee has failed to prove whether these parties still exist.

As per the Revenues reasoning itself, we find that the assessee had discharged its onus of proving that the balances existed for payment, since admittedly confirmations of the impugned creditors were filed by the assessee and the same have neither been found to be false nor any infirmity pointed out in them. The onus, in fact, now shifted to the Revenue for proving otherwise, that the liabilities ceased to exist.

Even otherwise mere non-furnishing of PAN cannot lead to the conclusion that the liabilities have ceased to exist. The non- furnishing of PAN by the assessee firstly does not establish that the said parties have no PAN.PAN may be existing but may not have been furnished for any reason by the assessee. Moreover, PAN is an identity which is given by the department to assessee registered in their data base. Even if we consider no PAN Steel Rolling Mill vs. ITO] A.Y. 2018-19 - 9 – of the creditors, as is the allegation of the Revenue, it can at the most show that these parties do not exist as assessee’s (emphasis supplied by us) with the department. But it definitely is not conclusive proof /evidence of the fact that the entity does not exist at all.

In the light of the above, we have no hesitation in holding that the Revenue has no basis at all for making addition of Rs.5,45,347/- to the income of the assessee on account of liabilities ceasing to exist, as per section 41(1) of the Act. The addition therefore made, is directed to be deleted. The grounds raised by the assessee are allowed.

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