ITO WARD 3 (2), THANE vs. M/S PLUS SUPPLIERS , THANE

The brief facts of the case are, assessee filed the return of income, declaring total income of Rs 1,09,882/- on 17.9.2009 and the same was processed u/s 143(1) of the Act. The assessee is a firm, engaged in the business of supplying various items on tender basis. Based on the information received by the AO from the Sales Tax Department, the assessment for 2009-10 was re- opened and AO after recording necessary reasons/satisfaction, he issued notice u/s148 of the Act and served upon the assessee. The re-assessment order u/s 143(3) r.w.s. 147 of the Act. was finalized on 15/1/2014 by assessing the total income of Rs 11,10,992/-, after making the disallowances of Rs 9,93,815/-, on account of bogus purchases. The AO also initiated the penalty proceeding u/s 271(1)(c) of the Act and levied the penalty.

Aggrieved by the above order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of the parties, allowed the appeal filed by the assessee.

We have heard counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that the identical ground raised in the present appeal has already been decided by the Coordinate Bench of ITAT in for AY 2009-10 in the case of ITO vrs. M/s Devji J. Patel, which is reproduced below:-

We have carefully heard rival submissions and perused relevant material on record. From the perusal of case records, it emerges that the assessee was assessed u/s 143(3) r.w.s. 147 wherein it was saddled with estimated additions of Rs.14.15 Lacs being peak of purchases made from 3 suspicious entities. The primary reason to make the addition was the fact that notices issued u/s 133(6) did not elicit satisfactory response and the assessee failed to substantiate the purchase transactions. The assessee also failed to produce any of the suppliers to confirm the transaction. Consequently, penalty proceedings were initiated in quantum assessment order and the assessee was saddled with impugned penalty u/s 271(1)(c) for Rs.4.57 Lacs vide penalty order dated 29/09/2015. Upon further appeal, Ld. CIT(A) deleted the penalty by noting that there was adhoc disallowance and concealment of income or furnishing of inaccurate particulars has not been established by Ld. AO. Aggrieved, the revenue is under further appeal before us.

Since the preliminary objection raised by the assessee question the very maintainability of revenue’s appeal, we take up the same at the threshold. Undoubtedly, the quantum of penalty under dispute is Rs.4.57 Lacs and the same is certainly below the threshold limit of Rs.50 Lacs as provided in latest low tax effect Circular No.17/2019 dated 08/08/2019 issued by Central Board of Direct Taxes [CBDT].

The Ld. DR has pleaded that penalty should be construed to be covered by exception clause 10(e) since the same was levied on account of quantum additions which was based upon receipt of information from an external agency i.e. Sales Tax Department. We have considered the said submissions. It is settled legal position that quantum proceedings and penalty proceedings are M/s Plus Suppliers independent and distinct proceedings and confirmation of additions may not be the sole ground for confirming the penalty. Extending the same logic, unless specific exception is provided in the circular with respect to penalty also, it could not be construed that the penalty was to be treated at par with quantum additions. The clause 10(e) specifically apply only to additions which are based on information received from external sources. The levy of penalty, by no stretch of imagination, could be construed as addition as envisaged by clause 10(e). Therefore, the submissions made by Ld. DR could not be honoured and we decline to accept the same.

It is pertinent to mention here that this order is pronounced after a period of 90 days from the date of conclusion of the hearing. In this regard, we place reliance on the decision of co- ordinate bench of this Tribunal in the case of JSW Ltd in & 6103/Mum/2018 dated 14.5.2020, wherein this issue has been addressed in detail allowing time to pronounce the order beyond 90 days from the date of conclusion of hearing by excluding the days for which the lockdown announced by the Government was in force. The relevant observations of this tribunal in the said binding precedent are as under:-

Quite clearly, “ordinarily” the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression “ordinarily” has been used in the said rule itself. This rule was inserted as a result of directions of Hon’ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that “We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and M/s Plus Suppliers followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment”. In the ruled so framed, as a result of these directions, the expression “ordinarily” has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any “extraordinary” circumstances.

Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon’ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon’ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that “In case the limitationhasexpired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Hon’ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall M/s Plus Suppliers continue further till 15th June 2020”. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus “should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure…”. The term ‘force majeure’ has been defined in Black’s Law Dictionary, as ‘an event or effect that can be neither anticipated nor controlled’ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an “ordinary”period.

To sum up, the appeal of the assessee is allowed, and appeal of the Assessing Officer is dismissed. Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the noticeboard.