SHRI NARANDAR PUGALIA,BENGALURU vs. INCOME TAX OFFICER, WARD- 3(2)(3), BENGALURU

PER A.K. GARODIA, ACCOUNTANT MEMBER : Both these appeals are filed by the two different but connected assessees and these are directed against two separate orders of the ld.CIT(A)-3, both dated 19-06-2019 for assessment years 2014-15.

ITA Nos.1767 & 1768(B)/2019 Page 2 of 13 Both these appeals were heard together and are being disposed of by way of this common order for the sake of convenience. The grounds raised by assessee in ITA No.1767(B)/2019 (AY: 2014-15) are as follows: 1(a) The orders of the authorities below in so far as these are against the appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the appellant’s case. b) The appellant denies himself liable to be assessed on a total income of Rs.14,30,675/- as against a total income of Rs.4,01,220/- returned by the appellant under the facts and circumstances of the case. 2.a) The ld. CIT(A) erred in not condoning the delay of 598 days in filing the appeal and in not adjudicating the matter on merits under the facts and circumstances of the case. b) The ld. CIT(A) erred in holding that the delay in filing the appeal is due to the appellant negligence under the facts and circumstances of the case. c) The ld.CIT(A) failed to appreciate that there was a sufficient cause or delay in filing the appeal under the facts and circumstances of the case. 3. Addition of Rs.10,29,455/- as unexplained cash credit a) The ld.AO erred in disallowing the exemption claimed by the appellant of Rs.10,29,455/- on sale of

ITA Nos.1767 & 1768(B)/2019 Page 3 of 13 shares of M/s Kappac Pharma Ltd., under the facts and circumstances of the case. b) The ld.AO erred in invoking the provisions of section 68 of the Act and thus the addition mad of Rs.10,29,55/- as unexplained cash credits need to be deleted under the facts and circumstances of the case. c) The AO failed to appreciate the fact that the appellant could not have influenced the share prices as the sale took place in a recognized stock exchange on a screen based system where the traders in shares are unknown and thus the addition made is only on suspicion & surmises and needs to be deleted on the facts of the case. d) The AO erred in treating the transactions entered into by the appellant as accommodative in nature without any corroborative evidence which is unacceptable in the eyes of law. e) The AO failed to appreciate the fact that the appellant could not have influenced share prices as the transactions took place in a recognized stock exchange on a screen based system where the traders in shares are unknown and thus the addition made is only on suspicion & surmises and needs to be deleted on the facts and circumstances of the case. 4. a) The action of the AO in treating all the transactions made with M/s Kappac Pharma Ltd., as

ITA Nos.1767 & 1768(B)/2019 Page 4 of 13 sham merely because the company was investigated by Kolkata Investigation Directorate is untenable and unsustainable in the eyes of law. b) The action of the AO in making additions based on the investigation report of Kolkata Investigation Directorate, which was not put forth to the appellant for rebuttal is violative of principles of natural justice and thus the additions made needs to be deleted on the facts and circumstances of the case. c) The AO has not independently applied his mind to the facts of the case and has merely relied upon the general report made by the Kolkata Investigation Directorate which amounts to borrowed satisfaction, which is impermissible in the eyes of the law and therefore, needs to be deleted in the interest of equity and justice. d) The AO erred in treating he share trading transactions as sham by disregarding the submissions made by the appellant under the facts of the case. 5a) The appellant denies himself liable to be levied to interest under sections 234A, 234B and 234C of the Act and further the computation of interest was not provided to the appellant as regard to the rate, period and method of calculation of interest under the facts and circumstances of the case. The appellant expressly urges that the period of levy of interest is

ITA Nos.1767 & 1768(B)/2019 Page 5 of 13 not in accordance with sections 234A,234B and 234C of the Act. b) Without prejudice, the interest levied under sections 234A, 234B and 234C of the Act requires to be waived off under the facts and circumstances of the case. 6. The appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 7. In view of the above and other grounds that may be urged at the time of the hearing of the appeal, the appellant prays that the appeal may be allowed in the interest of justice and equity. The grounds raised by assessee in ITA No.1768(B)/2019 (AY: 2014-15) are as follows: 1(a) The orders of the authorities below in so far as these are against the appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the appellant’s case. b) The appellant denies himself liable to be assessed on a total income of Rs.13,42,948/- as against a total income of Rs.2,97,150/- returned by the appellant under the facts and circumstances of the case. 2.a) The ld. CIT(A) erred in not condoning the delay of 598 days in filing the appeal and in not adjudicating the matter on merits under the facts and circumstances of the case.

ITA Nos.1767 & 1768(B)/2019 Page 6 of 13 b) The ld. CIT(A) erred in holding that the delay in filing the appeal is due to the appellant negligence under the facts and circumstances of the case. c) The ld.CIT(A) failed to appreciate that there was a sufficient cause or delay in filing the appeal under the facts and circumstances of the case. 3. Addition of Rs.10,45,798/- as unexplained cash credit a) The ld.AO erred in disallowing the exemption claimed by the appellant of Rs.10,45,798/- on sale of shares of M/s Kappac Pharma Ltd., under the facts and circumstances of the case. b) The ld.AO erred in invoking the provisions of section 68 of the Act and thus the addition mad of Rs.10,45,798/- as unexplained cash credits need to be deleted under the facts and circumstances of the case. c) The AO failed to appreciate the fact that the appellant could not have influenced the share prices as the sale took place in a recognized stock exchange on a screen based system where the traders in shares are unknown and thus the addition made is only on suspicion & surmises and needs to be deleted on the facts of the case. d) The AO erred in treating the transactions entered into by the appellant as accommodative in nature without any corroborative evidence which is unacceptable in the eyes of law.

ITA Nos.1767 & 1768(B)/2019 Page 7 of 13 e) The AO failed to appreciate the fact that the appellant could not have influenced share prices as the transactions took place in a recognized stock exchange on a screen based system where the traders in shares are unknown and thus the addition made is only on suspicion & surmises and needs to be deleted on the facts and circumstances of the case. 4. a) The action of the AO in treating all the transactions made with M/s Kappac Pharma Ltd., as sham merely because the company was investigated by Kolkata Investigation Directorate is untenable and unsustainable in the eyes of law. b) The action of the AO in making additions based on the investigation report of Kolkata Investigation Directorate, which was not put forth to the appellant for rebuttal is violative of principles of natural justice and thus the additions made needs to be deleted on the facts and circumstances of the case. c) The AO has not independently applied his mind to the facts of the case and has merely relied upon the general report made by the Kolkata Investigation Directorate which amounts to borrowed satisfaction, which is impermissible in the eyes of the law and therefore, needs to be deleted in the interest of equity and justice. d) The AO erred in treating the share trading transactions as sham by disregarding the

ITA Nos.1767 & 1768(B)/2019 Page 8 of 13 submissions made by the appellant under the facts of the case. 5a) The appellant denies himself liable to be levied to interest under sections 234A, 234B and 234C of the Act and further the computation of interest was not provided to the appellant as regard to the rate, period and method of calculation of interest under the facts and circumstances of the case. The appellant expressly urges that the period of levy of interest is not in accordance with sections 234A,234B and 234C of the Act. b) Without prejudice, the interest levied under sections 234A, 234B and 234C of the Act requires to be waived off under the facts and circumstances of the case. 6. The appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 7. In view of the above and other grounds that may be urged at the time of the hearing of the appeal, the appellant prays that the appeal may be allowed in the interest of justice and equity.

ITA Nos.1767 & 1768(B)/2019 Page 9 of 13 this appeal before him. He pointed out that as per his explanation, it was submitted by the assessee before him that the assessee decided initially that to avoid litigation and to have peace of mind and to concentrate on business development, the assessee will make the payment of demand and will not file appeal before the ld.CIT(A) subject to non-initiation of penalty proceedings. He submitted that assesee made the payment of tax on 19-01-2017 which is within the time because assessment order is dated 28-12- 2016. He further submitted that show cause notice was issued by AO on the issue of penalty on 28-12-2016 and reply was filed by assessee before the AO in this regard on 27-01-2017 in which the assessee submitted before the AO that to have mental peace and to concentrate on business, assessee had made payment of entire tax on 19-01-12017 and submitted a copy of the challan also and submitted before the AO that the assessee will not be preferring any appeal before the CIT(A) and requested the AO to drop penalty proceedings. He submitted that copy of this letter is available on pages2 & 3 of the paper book and the payment challan is available on page-4 of the paper book and both are duly received by the Office of the AO on 27-01-2017. Thereafter, he submitted that the assessee did not receive any communication from the AO and the assessee was under the impression that the penalty proceedings will be dropped by the AO and hence, assessee did not file any appeal before the CIT(A). The AO imposed penalty as per its order dated 29-05-2017 and on receipt of this order, assessee preferred to file appeal before CIT (A) against penalty order but did not file any appeal against the assessment order by him before the AO. As per order dated 20-07-2018, ld. CIT(A) dismissed the appeal of the

ITA Nos.1767 & 1768(B)/2019 Page 10 of 13 assessee in penalty proceedings and thereafter, the assessee was advised to file appeal before the CIT(A) against the assessment order also and then the assessee filed appeal before the CIT(A) on 19-09-2018. Under these facts, the delay in filing appeal before the CIT(A) should have been condoned by the CIT (A) and since this was not done by the CIT(A), the assessee is in appeal before the Tribunal with a request that such delay in filing before the CIT(A) should be condoned and the matter should be restored back to the file of CIT (A) for a decision on merit. 3. The ld. DR of the revenue supported the order of the ld.CIT(A). He pointed out that in para-4.5 of his order, ld.CIT(A) has noted various judicial pronouncements as per which, if the assesee is negligent, then it is not expected from the judicial and quasi judicial authorities to enquire into belated and stale claims on the grounds of equity. 4. I have considered the rival submissions. First of all, I re- produce para-4.0 of the order of the ld.CIT(A) because the assessee’s explanation is reproduced by CIT (A) in this Para. “4.0…. 2. I wish to state that, I have received the assessment order with the addition of Rs.10,29,455/- for the year under consideration. I further wish to state that despite the fact that there was a fair chance of admissibility of the claim on appeal, I had decided not to prefer an appeal in order to avoid protracted litigation and to buy peace with the department. 3. It is submit6ed that due to improper assistance and unfavourable business trend going on, I had desired to have peace of mind and concentrate on business development. It was decided by me that the demand raised of Rs.3,51,960/- shall be discharged only to avoid protracted litigation and buy peace with the department subject to non initiation of penal action as there

ITA Nos.1767 & 1768(B)/2019 Page 11 of 13 was neither concealment of income nor furnishing of inaccurate particulars of income. 4. The appeal ought to have been filed on or before 29-01.2017, I wish to state that the delay of 598 days in filing the appeal was only due to bonafide belief that no penal action would be initiated against me. I also wish to state that adverse inference should not be drawn that I had intentionally not filed the appeal in time for the reason that no rational person would intentionally delay in filing the appeal which would put his own interest in jeopardy. 5. I wish to state that I had believed the department who had promised that no penalty would be levied if the taxes were paid in full and if no appeal is filed against the addition made. Accordingly, the taxes were paid and I did not file the appeal before the CIT(A) against the additions. However, the AO levied the penalty which came as a shock to me. Still not disheartened, I had believed that the CIT(A) whose powers are co-terminus with that of the AO will provide relief against the penalty levied because the department had promised so and hence filed appeal only against the penalty order in pursuit of justice but was unsuccessful in the appeal. I could not believe that the department had gone back on its words not to levy penalty and released that the only option available now is to file an appeal against the additions made and hence I am preferring this appeal in pursuit of justice. 6. It is submitted that if the application for condonation for delay in filing the appeal is not allowed, the assessee would be put to great hardship and irreparable injury will be caused to the assessee whereas on the other hand, the revenue is not put to hardship in any manner whatsoever if the delay is condoned. Reliance is placed on the decisions of the Supreme Court in the case of Collector, Land Acquisition & Anr. Reported in 167 ITR 471 and in the case of Concord of India Insurance Co.Ltd., Smt.Nirmala Devi and Others reported in 118 ITR 507. Reliance is also placed on the decision of the Apex Court in the case of CIT Vs West Bengal Infrastructure Development Finance Corporation Ltd. reported in 334 ITR 269. Reliance is further placed on the decision of the Madras High Court in the case of CIT Vs Sanmac Motor Finance Ltd. reported in 2322 ITR 309 wherein the Court while condoning the delay of 1826 days held that … “…Rules of limitation are not mean to destroy the rights of the parties. They are meant to see that the parties do not resort to dilatory tactics, but seek their remedy promptly. The law of limitation is, thus, founded on public policy. The condonation of delay is the discretion of

ITA Nos.1767 & 1768(B)/2019 Page 12 of 13 the Court. Section 5 of the Limitation Act does not say that such discretion can be exercised only if the delay is within certain limit. Length of delay is not the matter, acceptability of the explanation is the only criterion. Sometimes delay of the shortest range may be uncondonable due to want of an acceptable explanation whereas in certain other cases, delay of a very long range can be condoned as he explanation thereof is satisfactory. In every case of delay, there can be some lapse on the part of the litigant concerned. That alone is not enough to turn own his plea and shut the door against him. If the explanation does not smack of malafides or it I not put forth as part of a dilatory strategy, the court must show utmost consideration to the suitor. Reliance is further placed on the following decisions for proposition that the delay in filing the appeal must be condoned. a. CIT Vs ISRA Satellite Centre in ITA NO.532/2008 dated 28.12.2011 jurisdictional High Court. b. M/s Raghavendra Constructions Vs ITO for the assessment Year 2007-08 in ITA NO.425/Bang/2012 dated 14.12.2012 – jurisdictional Bench of the Tribunal. c. Shakuntala Hegde L/R of R K Hegde vs ACIT in ITA NO.2785/Bang/2004 for AY: 1993-94 – jurisdictional Bench of the Tribunal. 7. I pray your honour to take a lenient view under the facts of the case and condone the delay of 598 days in filing the appeal before your honour and adjudicate and hear the matter on merits for substantial cause of advancement of justice. 8.In view of this, I humbly pray your honour to condone the delay of 598 days and admit the appeal for the advancement of substantial cause of justice”.

ITA Nos.1767 & 1768(B)/2019 Page 13 of 13 dismissed by the ld.CIT(A). Thereafter, the assessee chose to file appeal against the assessment order also.

Sd/- (A.K. GARODIA) ACCOUNTANT MEMBER Dated: 8th day of November, 2019. *am Copy of the Order forwarded to: 1.Appellant; 2.Respondent; 3.CIT; 4.CIT(A); 5. DR 6. ITO (TDS) 7.Guard File By Order

Asst. Registrar