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Income Tax Appellate Tribunal, “F”
Before: SHRI C. N. PRASAD, JM & SHRI S. RIFAUR RAHMAN, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI C. N. PRASAD, JM & SHRI S. RIFAUR RAHMAN, AM आयकरअपीलसं./ I.T.A. No. 1564/Mum/2019 (निर्धारणवर्ा / Assessment Year: 2009-10)
DCIT (E) 2(1) J. K. Trust Bombay, 5th floor, Piramal Ground Floor, New Hind बिधम/ House, Narottam Morarjee Chambers, Lalbaug Vs. Marg, Bellard Estate, Parel, Mumbai-400 012 Mumbai-400 001 स्थायीलेखासं./जीआइआरसं./PAN No. AAATT0611L (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : & आयकरअपीलसं./ I.T.A. No. 3084/Mum/2019 (निर्धारणवर्ा / Assessment Year: 2009-10) J. K. Trust Bombay, DCIT (E) 2(1) 5th floor, Piramal Ground Floor, New Hind बिधम/ House, Narottam Morarjee Chambers, Lalbaug Vs. Marg, Bellard Estate, Parel, Mumbai-400 012 Mumbai-400 001 (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri Niranjan प्रत्यथीकीओरसे/Respondentby : Shri Bharti Singh सुनवाईकीतारीख/ : 04.03.2020 Date of Hearing घोषणाकीतारीख / : 15.07.2020 Date of Pronouncement
2 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay आदेश / O R D E R PER S. RIFAUR RAHMAN (ACCOUNTANT MEMBER): The present two Appeals have been filed by the assessee and revenue against the order of Commissioner of Income Tax (Appeals)-5, Mumbai, dated 08.02.2019 for AY 2009-10 respectively. 2. Since the issues raised in both the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed of by this consolidated order.
The brief facts of the case are, the assessee filed its return of income on 23.09.2009 along with income and expenditure account, balance sheet and audit report declaring total income at Rs. Nil. The case was selected for scrutiny under section 143(3) of the Act and the same was completed on 31.12.2011 and the income was assessed at Rs. Nil. The assessment was reopened under section 147 of the Income Tax Act 1961 (in short the act) on the basis of reasons recorded on 30.03.2016 by issue of notice under section 148 of the Act on 31.03.2016 and was duly served on the assessee. In response, the assessee vide letter dated 20.04.2016 submitted that the reopening of the assessment is bad
3 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay in law and requested to provide a copy of the reasons recorded for reopening of the assessment. The assessing officer vide notice under section 142 (1) dated 20.06.2016, supplied reasons for reopening to the assessee. In the reasons, assessing officer observed that the proviso to section 2(15) of the Act was amended in Finance Act 2008 and on perusal of the records, it is observed that assessee is engaged in the activity of upgrading the local indigenous low milk yielding cattle by crossbreeding them with the use of frozen semen of high pedicree exotic bull of the technique of artificial insemination to get resulting better milk yield and will help in improving the socio economic status of the farmers. He further observed that the assessee interest is doing regular activities which are in the nature of business by way of sale of milk and therefore such activity of the assessee trust cannot be treated as charitable in nature. It is further seen that trust is engaged in certain activities, which are commercial in nature and receipt from which are declared in their accounts as income from livestock development centres to the extent of ₹ 35,11,67,791/-. Accordingly, he came to the conclusion that the income has escaped assessment.
4 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay 4. The assessee filed a detailed submission dated 13.07.2016, in which assessee has explained that the nature of activities carried on by the assessee which falls under charitable activities and assessee also registered with the director of income tax (exemption) under section 12A and 80G of the Act. Further assessee brought to the notice of the assessing officer that assessee has never indulged in trading of milk from the farmers and it has involved in development of indigenous cattle for the benefit of the farmers and the assessee has not received any service charges from the farmers but received grants from the respective state governments. After considering the submissions of the assessee, assessing officer has completed the reassessment analysing the amended proviso to section 2 (15) of the Act, by observing that the then assessing officer has not found any opinion on this aspect and there is no discussion in the assessment order passed under section 143(3) of the Act. He also rejected the detailed submissions made by the assessee on reopening of the assessment which was reopened after the expiry of 4 years and there is no mistake on the part of the assessee to disclose fully and truly.
5 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay 5. Aggrieved with the above order, assessee preferred an appeal before Ld CIT(A) and even before Ld CIT(A) assessee has made an elaborate submission on objecting to reopening of the assessment which is made after expiry of 4 years, also there is no mistake on the part of the assessee to disclose all the information fully and truly, the action of the AO is a case of change of opinion and with the submission that the receipts of the assessee are not from commercial activities. After considering the submission of the assessee, Ld CIT(A) dismissed the ground raised by the assessee on reopening of the assessment by relying on various case law of various courts in his order and observed that the assessing officer has issued the notice under section 148 of the Act after following the due process of law and hence no fault can be found with his action. 6. On the other hand, Ld CIT(A) allowed the grounds raised by the assessee on merit by relying on the case of Honourable Gujarat High Court in the case of Sabarmati Ashram Gaushala Trust and decision of the coordinate bench of this Tribunal in assessee’s own case.
6 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay 7. Aggrieved with the above order both assessee as well as revenue is in appeal raising various grounds of appeal. The assessee has filed this appeal objecting the dismissal of their grounds of appeal on reopening of the assessment whereas the revenue is in appeal against the order of the Ld CIT(A) allowing the grounds on merits of the case by treating the receipts of the trust as allowable under section 11 and 12 of the Act. 8. At the time of hearing, Ld. AR submitted that the assessment for this assessment year reopened by relying on the same information and documents which were submitted during the original assessment which was completed on 12.10.2011 under section 143(3) of the Act. No new evidence with the assessing officer in order to initiate reassessment proceedings. He submitted that the main object of the trust is to upgrade the local indigenous milk yielding cattle by cross breeding them with the use of frozen semen of high pedigree exotic bull through technique of artificial insemination, the resulting cross breed cattle will be better milk yielding and helping in proving the socio economic status of the farmer. The assessee is carrying on these projects with the approval of state governments in the 7 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay respective States. He submitted that these activities falls under the category of any other general objects specified under the amended proviso to section 2(15) of the Act. He brought to our notice original assessment order which is placed in page 94 of paper book and he submitted that there is no reference to section 2(15) of the Act in the assessment order, however he brought to our notice that the activities of the trust are discussed in para No. 3 of the assessment order and he brought to our notice page 96 of the paper book in which the 148 notice dated 30.03.2016, which was issued beyond 4 years of passing of original assessment order. He brought to our notice reason for reopening of the assessment which is placed at page no. 102 of paper book in which the assessing officer discusses that the information were taken from the same documents which were submitted in the original assessment and assessing officer’s main reason for forming an opinion to reopening the assessment are procuring and sale of milk. However, he brought to our notice the financial records which was submitted in original assessment that the assessee never indulged in any commercial activities for procurement and sale of milk, the entire receipts of grants is from 8 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay the respective state governments for implementation of the program called “Gopal”. He submitted that the receipts from the state governments are not income but grants. 9. Further, he submitted that the assessing officer discusses the amended proviso to section 2(15) of the Act in the assessment order and reviews the operations based on the reasons given in the reopening of the assessment which was nothing but change of opinion by the assessing officer. He submitted that the reopening of assessment will not survive because of the language used in the reasons for reopening of the assessment itself. He submitted that all the necessary information and documents which was already submitted during the original assessment only was applied to initiate the reassessment proceeding and completed the reassessment proceedings. It clearly indicates that assessing officer has changed his opinion and reviewed the exemptions granted in the original assessment under section 11 of the Act. 10. In the intervening period, he brought to our notice the status of assessment for the assessment year 2010–11 and brought to our notice page 211, which is assessment order under section 143 (3) of the Act for assessment year 2010–11, the 9 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay assessing officer passed the order on 19.12.2012 in which the assessing officer discusses the issue of amended proviso to section 2 (15) of the Act and assessee has submitted its detailed written response and after considering detailed response of the assessee, assessing officer gave a clear finding that the amended proviso to section 2(15) of the Act is not applicable in the case of the assessee. Further, he brought to our notice the status of assessment year 2011–12 and assessment year 2012–13 in which the assessing officer allowed the deduction under section 11 of the Act and he submitted that in the present assessment year, the assessing officer has not followed the principle of consistency.
Ld. AR submitted that the reassessment was completed by AO by using the information which is already in the assessment records of original assessment passed u/s 143(3), it clearly indicates that there is change of opinion. In that proposition, he relied on CIT vrs. Kelvinator India Ltd. 256 ITR 1 (Del). And he also submitted that the reopening was made beyond 4 years without any new tangible material for reopening. For that purpose, he relied on the decision in the case of PCIT vrs. Evelon Synthetics (P) Ltd. (2020) 113 taxman.com 442 (Bom)
10 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay and decision of the Coordinate bench of ITAT in the case of DCIT vrs. M/s Pampac Machines Pvt. Ltd. in ITA No. 3818/M/16. He further submitted that there is no lapse on the part of the assessee with regard to the proviso of section 147 of the Act and for that purpose, he relied on the decision in the case of DCIT vrs. Precilion Holdings Ltd. (2020) 114 taxman 173 (SC) and Nandesari Industries Association vrs. DCIT (2017) 77 taxman 327 (Gujarat HC).
On the other hand, Ld. DR submitted that assessee’s contention was that there is no new material available on record but he submitted that assessing officer has discussed in detail in his order and relied on the case of Giri Lal and company (refer page 11 of CIT(A) order and 75 taxman 11 refer para 8.3.2 of CIT (A) order). He further submitted that there is no change of opinion in the present case, as in the original assessment order the then assessing officer has never formed any opinion on the issue of section 2(15) of the Act. Therefore, there is no change of opinion with respect to completion of this assessment. Further, he supported the findings of the assessing officer and learned CIT
11 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay (A) in their respective order and he distinguished the case laws relied by learned AR. 13. With regard to Department appeal, both the learned AR and learned DR agreed that the issue under consideration is covered by the decision of the coordinate bench in assessee’s own case and also the facts are similar to the case of Sabarmati Ashram which is passed by the Hon’ble Gujarat High Court. 14. Considered the rival submissions and material placed on record, we notice that the reassessment notice was issued by the present assessing officer after the expiry of 4 years and the assessing officer has recorded the reasons for reopening the assessment and also supplied the same to the assessee as per the procedures laid down by the Hon’ble Supreme Court. We do not see any procedural lapse as far as reopening of the assessment adopted by the assessing officer as far as recording of reasons and following the procedures in order to reopen the same. However, in order to reopen the assessment the assessing officer needs to have a cogent material in order to form opinion that the income has escaped assessment. In the given case assessing officer has recorded the reasons and the supplied the same to the 12 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay assessee which is placed on record. From the reasons, recorded we noticed that the reasons for reopening was recorded “as that on perusal of records, it is observed that assessee is engaged in doing regular activities which are in the nature of business by way of sale of milk and therefore such activity of the assessee trust cannot be treated as charitable in nature”. It is further recorded by the assessing officer that it is further seen that trust is engaged in certain activities which are commercial in nature therefore it has resulted in understatement of income accordingly in order to arrive at the real income of the assessee the assessment was reopened by issue of notice under section 148 of the Act. After considering the submissions of the assessee, the assessing officer has not touched upon the main reason for reopening i.e. the key nature of business by way of sale of milk and however, he proceeded to reassess the income based on the amended provision of section 2(15) and section 11 of the Act. To complete the reassessment, he has applied the information and documents which were already available with the assessing officer in the assessment records. By going through the same set of information, the assessing officer disallowed deductions
13 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay claimed by the assessee under section 11 of the Act by treating the activity carried on by the assessee as business activity even though he is aware that the income received by the assessee is from state governments as grants. The activity is carried on by the assessee, he has categorized the activity undertaken by assessee similar to the contract activity. We observed that the main reason for reopening of assessment to reassess income of the assessee from the activities of sale of milk and other activities. Since the assessing officer could not categorize the incomes from sale of milk and other activities, he has analyzed only the other activities which is nothing, but the project called ‘Gopal’. The assessee is carrying on the activities of improving the cow breeds by way of upgrading the indigenous low milk yielding cattle to high yielding cattle is by following technique of artificial insemination. This is the only activities carried on by the assessee which is in line with the object of the trust. Therefore, the assessing officer has revised the exemption allowed to the assessee in the original assessment order. 15. We noticed that the assessing officer in the original assessment has not discussed the exemption granted to the 14 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay assessee under section 11 r.w.s. 2(15) of the Act. There is no discussion even on the amended proviso to section 2(15) in the assessment order even though it is applicable from this assessment year. It is not necessary that assessing officer should bring on the discussion everything in the assessment order, it is presumed that assessing officer has verified and formed an opinion. It is needless to mention that in the subsequent assessment years, the respective assessing officers have accepted the activities carried on by the assessee is not hit by the amended proviso to section 2(15) of the Act and accordingly, they completed the assessments. 16. Therefore, in our considered view, the initiation of the reassessment proceedings with the wrong understanding of the assessing officer that the income of the assessee is out of sale of milk and other activities which are in commercial in nature. Since there is no change in the activities carried on by the assessee and also the assessing officer has accepted the activities carried on by the assessee that it is only improving the quality of the breeds of cow for yielding the milk and assessee is not selling or dealing in milk and revisited the assessment records without
15 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay any new material to reopen the assessment as well as he reopened the assessment after 4 years without bringing on record any mistake on the part of the assessee to disclose fully and truly, all the information to complete the assessment. Ld AO and Ld CIT(A) has applied certain case laws which are distinguishable on facts to the present case. Since the revenue has accepted the activities of the assessee are not hit by the amended proviso to section 2 (15) of the Act in the subsequent assessment years and we presume that the then assessing officer in the original assessment passed under section 143 (3) must have verified and formed an opinion on application of amended proviso to section 2(15) of the Act. Therefore, in our considered view that the reopening of the assessment was made with the wrong understanding of the facts by assessing officer and reviewing the concluded assessment is bad in law. Accordingly, the reassessment proceedings and reassessment order passed by the assessing officer in the assessee’s case is quashed. Accordingly, the grounds arise by the assessee on the reopening of the assessment is accordingly allowed.
16 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay 17. With regard to the revenue appeal, we noticed that the Ld CIT(A) has allowed the grounds raised by the assessee on merits by accepting the submissions of the assessee and cases relied. The decisions submitted before him, are the coordinate bench decisions in assessee’s own case against the order of section 263 of the Act, in which the coordinate bench has relied on the Hon’ble Gujrat High Court decision in the case of Sabarmati Ashram (supra). Since the decision in the Sabarmati Ashram is similar to the facts in the present case, we are inclined to accept the findings of the Ld CIT(A) and for the brevity, the ratio is reproduced below:-
Many activities of genuine charitable purposes which are not in the nature of trade, commerce or business may still generate marketable products. After setting off of the cost, for production of such marketable products from the sale consideration, the activity may leave a surplus. The law does not expect the Trust to dispose of its produce at any consideration less than the market value. If there is any surplus generated at the end of the year, that by itself would not be the sole consideration for judging whether any activity is trade, commerce or business - particularly if generating 'surplus' is wholly incidental to the principal activities of the trust; which is otherwise for general public utility, and therefore, of charitable nature. The Tribunal took into account the objects of the Trust, which are as under:—
17 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay "1. To breed the cattle and endeavour to improve the quality of the cows and oxen in view of the need of good oxen as India is prominent agricultural country and the cow milk as food is both conducive to and requisite for good health and longevity of human life. In order to improve the quality of the cattle, it is very essential to use a high quality bulls. Hence to produce and to get produced the best pedigreed bulls and to castrate the scrub bulls and propagate the work to prepare bullocks by castrating the bulls which do not become good bulls.
To produce and to sell the cow milk and its various preparations so as to popularize the use of cow milk and do all other works for the same.
To hold and cultivate or get cultivated agricultural lands, to keep grazing lands etc necessary or desirable for cattle keeping and breeding or to rehabilitate and assist Rabaris and Bharwads.
To hold and cultivate other land also in order to experiment in the improvement in agriculture and obtain finance support in all the activities of the institution.
To make necessary arrangements for getting informatics and scientific knowledge and to do scientific research with regard to keeping and breeding of the cattle, agriculture, use of milk and its various preparations etc and to establish scientific laboratories, libraries, reading rooms relating to the keeping of the cattle, improvement of agriculture etc and recognize or assist such institutions.
18 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay 6. To establish other allied institutions like leather work etc and to recognize and help them in order to make the cow keeping economically viable successfully.
8. To accept all the trusts and benefactions not inimical to the trust objects conditionally or otherwise.
To open schools and hostels for imparting education in cow keeping and agriculture having regard to the trust objects or to help such schools and hostels and to make suitable arrangements for training workers required for the trust work.
To get the money from time to time as required for the trust work by way of gift, borrow on securities of the trust properties or obtain in any other way as deemed fit by the trustees.
To undertake such other activities from time to time for achieving or helping the trust objects as deemed fit by the trustees".
The Tribunal also noted that the objects were admittedly charitable in nature. The surplus generated was wholly secondary. It was, therefore, that the Tribunal held that the proviso to section 2 (15) of the Act would not apply.
We are wholly in agreement with the view of the Tribunal. The objects of the Trust clearly establish that the same was for 19 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay general public utility and where for charitable purposes. The main objectives of the trust are - to breed the cattle and endeavour to improve the quality of the cows and oxen in view of the need of good oxen as India is prominent agricultural country; to produce and sale the cow milk; to hold and cultivate agricultural lands; to keep grazing lands for cattle keeping and breeding; to rehabilitate and assist Rabaris and Bharwads; to make necessary arrangements for getting informatics and scientific knowledge and to do scientific research with regard to keeping and breeding of the cattle, agriculture, use of milk and its various preparations, etc.; to establish other allied institutions like leather work and to recognize and help them in order to make the cow keeping economically viable; to publish study materials, books, periodicals, monthlies etc., in order to publicize the objects of the trust as also to open schools and hostels for imparting education in cow keeping and agriculture having regard to the trust objects.
AH these were the objects of the general public utility and would squarely fall under section 2 (15) of the Act. Profit making was neither the aim nor object of the Trust. It was not the principal activity. Merely because while carrying out the activities for the purpose of achieving the objects of the Trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business. As clarified by the CBDT in its Circular No. 11/2008 dated 19th December 2008 the proviso aims to attract those activities which are truly in the nature of trade, commerce or business but are carried out under the guise of activities in the nature of public utility'.
20 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay 13. Delhi High Court in case of Institute of Chartered Accountants of India v. DGIT [2012] 347 ITR 99/[20111.202 Taxman 1/13 taxmann.Com 175 considered these very provisions in the context of activities of the Institute of Chartered Accountants holding that the fundamental or dominant function of the Institute was to exercise overall control and regulate the activities of the members/enrolled chartered accountants and merely because the Institute was holding coaching classes which also generate income, the Court held that proviso to Section 2 (.15) of the Act would not be applicable. It thus held and observed as under:—
"Section 2 (15) defines the term "charitable purpose". Therefore, while construing the term "business" for the said section, the object and purpose of the section has to be kept in mind. We do not think that a very broad and extended definition of the term "business" is intended for the purpose of interpreting and applying the first proviso to section 2 (15) of the Act to include any transaction for a fee or money. An activity would be considered "business" if it is undertaken with a profit motive, but in some cases this may not be determinative. Normally, the profit motive test should be satisfied but in a given case activity may be regarded as business even when profit motive cannot be established/proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles, and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business. The test as prescribed in State of Gujarat v. Raipur Manufacturing Co. [1967] 19 STC 1 (SC) and CST v. Sai
21 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay Publication Fund [2002] 258 ITR 70 (SC): [2002] 126 STC 288 (SC) can be applied. The six indicia stipulated in Lord Fisher [1981] STC 238 are also relevant. Each case, therefore, has to be examined on its own facts.
In view of the aforesaid enunciation, the real issue and question is that whether the petitioner-Institute pursues the activity of business, trade or commerce. To our mind, the respondent while dealing with the said question has not applied their mind to the legal principles enunciated above and have taken a rather narrow and myopic view by holding that the petitioner-Institute is holding coaching classes and that this amounts to business."
In the result, we do not find that the Tribunal has committed any error and the Tax Appeal is therefore dismissed.
Therefore, respectfully following the above, ground raised by the revenue is dismissed.
In the result appeal filed by the assessee is allowed and appeal filed by the revenue is dismissed.
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 ITA Nos. 6264 & 6103/Mum/2018 dated 14.5.2020, wherein this 22 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay 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:-
However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 7th January 2020, this order thereon is being pronounced today on 14th day of May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides as follows:
(5) The pronouncement may be in any of the following manners:— (a) The Bench may pronounce the order immediately upon the conclusion of thehearing. (b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date forpronouncement.
(c ) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall notordinarily(emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the noticeboard.
23 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay 8. 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 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 24 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay few more days prior to, and after, the lockdown by observing that “In case the limitationhas expired 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 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.
10.In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system.
25 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon’ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon’ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed “while calculating the 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”. The extraordinary steps taken suomotu by Hon’ble jurisdictional High Court and Hon’ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words “ordinarily”,inthelightoftheaboveanalysisofthelegalposition, theperiodduringwhich lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case.
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 notice board.
Respectfully following the aforesaid judicial precedent, we proceed to pronounce this order beyond a period of 90 days from the date of conclusion of hearing.
26 I.T.A. No. 1564 & 3084/Mum/2019 J. K. Trust Bombay 21 Order pronounced as per Rule 34(5) of ITAT Rules and by placing the pronouncement list in the notice board on 15.07.2020. (C. N. Prasad) (S. Rifaur Rahman) न्याययकसदस्य / Judicial Member लेखासदस्य / Accountant Member मुंबई Mumbai;यदनांकDated : 15.07.2020 Sr.PS. Dhananjay
आदेशकीप्रनिनिनिअग्रेनर्ि/Copy of the Order forwarded to : अपीलाथी/ The Appellant 1. 2. प्रत्यथी/ The Respondent 3. आयकरआयुक्त(अपील) / The CIT(A) आयकरआयुक्त/ CIT- concerned 4. 5. यवभागीयप्रयतयनयि, आयकरअपीलीयअयिकरण, मुंबई/ DR, ITAT, Mumbai 6. गार्डफाईल / Guard File आदेशधिुसधर/ BY ORDER, .उि/सहधयकिंजीकधर (Dy./Asstt.