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Income Tax Appellate Tribunal, ‘’ A’’ BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED & SHRI SIDDHARTHA NAUTIYAL
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal hasbeen filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-10, Ahmedabad, dated 16/12/2015 arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2012-2013.
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The assessee has raised the following grounds of appeal: 1. That the ld.CIT(A) has erred in law and facts by not quashing the order passed by the ld.AO wherein loss has been disallowed by him and therefore the ld.AO should be directed to accept the returned income and allow the loss, in full. 2. That the learned CIT(A) has erred in law and facts by treating the loss Rs.1,40,69,748/- as speculative loss, in commodity trading business and therefore the ld. Assessing Officer is to be directed to allow the said loss as business loss and its set off is to be given against other income, while computing the total income. 3. That your appellant craves to leave to add, alter or amend any grounds at the time of hearing.
The assessee vide letter dated 12 June 2022 has also filed the additional ground of appeal which is reproduced as under: That the notice issued under section143(2) of the Act by the Income Tax Officer, Ahmedabad is without jurisdiction as it is violation of instruction issued by the Hon’ble CBDT under section 119 of the Act and therefore the notice issued under section 143(2) of the Act, is bad in law, illegal and without jurisdiction and therefore the order passed by the learned AO is required to be quashed.
The learned AR for the assessee, at the outset, submitted that the additional ground raised by the assessee vide letter dated 12-06-2022 goes to the root of the matter and all the facts related to the additional ground are available on the record. Therefore, the same needs to be admitted in view of the judgment of the Hon’ble Supreme Court in the case of NTPC Ltd. reported in 229 ITR 383 where it was held as under: Under section 254, the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the department have a right to file an appeal/cross objections before the Tribunal. There is no reason why the. Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) takes too narrow a view of the powers of the Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings there is no reason why such a question should
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not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. In the instant case, therefore, the Tribunal had jurisdiction to examine a question of law which arose from the facts as found by the lower authorities and having a bearing on the tax liability of the assessee.
On the other hand the learned DR did not raise any objection on the admission of the additional ground of appeal raised by the assessee.
Heard the rival contentions of the parties and perused the materials available on record. The additional ground raised by the assessee is legal in nature and therefore the same can be raised at any stage in pursuance to the judgment of the Hon’ble Supreme Court in the case of NTPC Ltd (supra). Hence, we admit the additional ground of appeal raised by the assessee and proceed to adjudicate the same.
At the outset, the learned AR appearing on behalf of the assessee submitted that there was the delay in filing the appeal before the ITAT for 1442 days. The learned AR has explained the delay for the reason that there was change of the chartered accountant on account of difference of opinion in the dispute involved in the impugned appeal. Thus, upon the resolution of the dispute among the chartered accountants, the appeal was filed with the delay of 1442 days. According to the learned AR, the delay has occurred as the assessee could get the correct advice from the tax consultant which constitute sufficient cause and thus the assessee was prevented from filing the appeal within the prescribed time. Therefore, the appeal should be admitted for adjudication on merit. The learned AR in support of his contention has also filed the affidavit of the assessee which is available on record.
On the other hand, the learned DR submitted that there is inordinate delay in filing the appeal by the assessee and reasons given by the assessee for the delay have not been supported by the documentary evidence. Accordingly, the learned DR opposed to condone the delay occurred in filing the appeal by the assessee.
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We have heard the rival contentions of both the parties and perused the materials available on record. Under the provisions of the Act, there is a time limit specified under the respective section of the Act for filing the appeal against the finding of the specified authority. However, the provisions of the Act also provides relaxation to the parties, if failed to file the appeal within the stipulated time, if there was the sufficient cause which prevented the assessee/party in doing so. It is the trite law that the Hon’ble Courts time and again in the series of cases have held that the expression "sufficient cause" should be interpreted to advance substantial justice. Therefore, advancement of substantial justice is the prime factor while considering the reasons for condoning the delay. In this regard we note that the Hon’ble Madras High Court in the case of Sreenivas Charitable Trust v. Dy. CIT reported in 280 ITR 357 has held that :
“3. The Supreme Court in Vedabai v. Shantaram Baburao Patil [2002] 253 ITR 798held as under "In exercising discretion under section 5 of the Limitation Act the Courts should adopt a pragmatic approach. A distinction must be made between a case where the delay is inordinate and a case where the delay is of a few days. Whereas in the former case the consideration of prejudice to the other side will be a relevant factor so the case calls for a more cautious approach but in the latter case no such consideration may arise and such a case deserves a liberal approach. No hard and fast rule can be laid down in this regard. The Court has to exercise the discretion on the facts of each case keeping in mind that in construing the expression ‘sufficient cause’, the principle of advancing substantial justice is of prime importance." (p. 799)
The Calcutta High Court in CIT v. Orissa Concrete & Allied Industries Ltd. [2003] 264 ITR 186 held as under : ". . .what is really indicated in the various decisions cited and in section 5 of the Limitation Act itself, is that a litigant would be required to explain why the appeal and/or application could not be filed within the period prescribed by limitation and explain the delay for such period for the purpose of linking up the circumstances which had caused the delay during the period of limitation and thereafter." (p. 192)
Recently, the Allahabad High Court in Ganga Sahai Ram Swarup v. ITAT [2004] 271 ITR 512 has taken the view that liberal view ought to have been taken by the authority as the delay was only of a very short period and the appellant was not going to gain anything from it.
Applying the ratio laid down by the Apex Court as well as various High Courts, we find, it is stated in the petition filed by the assessee for condonation of delay that the order copy was misplaced and thereafter it was found and sent to counsel for preparing the appeal and then, the appeal was prepared and filed before the Tribunal and in that process, the delay of 38 days occurred. As held by the Apex Court, no hard and fast rule can be laid down in the matter of
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condonation of delay and the Courts should adopt a pragmatic approach and the Courts should exercise their discretion on the facts of each case keeping in mind that in construing the expression "sufficient cause" the principle of advancing substantial justice is of prime importance and the expression "sufficient cause" should receive a liberal construction. We are, therefore, of the opinion that the Appellate Tribunal ought to have condoned the delay in filing the appeal, considering the reasons given by the assessee for the delay.”
9.1 It is also important to note that Hon’ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) laid down certain principles for considering the condonation petition for filing the appeal which are reproduced hereunder: (1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late (2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. (3) 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner. (4) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. (5) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. (6) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
9.2 From the above judgment of the Hon’ble Apex Court, we note that the substantial justice deserves to be preferred rather than deciding the matter on the basis of technical defect.
9.3 We also note that there is no allegation from the Revenue that the appeal was not filed within the time deliberately. The Revenue has not filed any counter- affidavit to deny the submission made by the assessee. Therefore, we are inclined to prefer substantial justice rather than technicality in deciding the issue.
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9.4 The next controversy arises whether the delay of 1442 days was excessive or inordinate. There is no question of any excessive or inordinate when there was reasonable cause which prevented the assessee in filing the appeal. As such we need to consider the cause for the delay and not the length of the delay. Accordingly in our considered view when there was a reasonable cause, the period of delay may not be relevant factor. We find support from the judgment of the Hon’ble Madras High Court in the case of CIT v. K.S.P. Shanmugavel Nadai and Ors reported in 153 ITR 596 wherein it was held as under : “Since in this case the assessee had been prosecuting other remedies, the time taken by those proceedings should naturally be taken while determining the question whether the assessee had sufficient cause for not presenting the appeal in time. Therefore, the revenue was not right in submitting that the appeal filed under section 17 was an appeal against the original order of assessment under the Act, which was passed about 20 years ago, as it was evident that the appeal was against an order of rejection of relief by the assessing authority. Thus, though the Tribunal's view that there was no question of limitation in such cases, was not correct yet the AAC was right in condoning the delay and entertaining the appeal.”
9.5 From the above, we note that the Hon’ble Madras High Court in the above case was pleased to condone delay for 20 years approximately by holding that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. The delay in the instant case is just of 1442 number of days which cannot be considered to be inordinate or excessive in comparison to the delay of 7330 days approximately.
9.6 In view of the above we are of the opinion that when there is sufficient cause for not filing the appeal within the period of limitation, the delay has to be condoned irrespective of the duration/period of the delay. In this case, the non-filing of an affidavit by the Revenue for opposing the condonation of delay itself is sufficient for condoning the delay of 1442 number of days. Thus, we condone the delay of 1442 days in filing the appeal and proceed to hear the appeal on merit for the adjudication.
The assessee in the 1st and additional ground of appeal has challenged the validity of the assessment framed under section 143(3) of the Act.
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The facts in brief in the present case are that the assessee is an individual, based in Metro city being Ahmedabad as evident from the assessment order and filed the return of income declaring total income at ₹ 53,53,630.00. Thereafter, the case of the assessee was selected under scrutiny and notice under section 143(2) of the Act was issued by the ITO Ward 2(1) of the Income Tax Department Ahmedabad whereas the assessment was framed by the DCIT Circle-1(2) of the Income Tax Department vide order dated 29 December 2014.
It was contended by the learned AR that the jurisdiction was vested with the DCIT Circle 1(2) of the Income Tax Department whereas the notice has been issued by the ITO Ward 2(1) of the Income Tax Department. Thus, as per the learned AR, there was no valid jurisdiction with the Department for framing the assessment under section 143(3) of the Act.
12.1 The learned AR also contended that there was no order in writing under the provisions of section 127 of the Act to transfer the file from the ITO ward 2(1) to the DCIT Cirle-2(1) of the Income Tax Department for framing the assessment.
12.2 It was also pointed out by the learned AR that even the defect in the notice issued under section 143(2) of the Act cannot be cured under the provisions of section 292BB of the Act.
The learned AR further submitted that there is nothing under the provisions of the Act with respect to the PAN based jurisdiction. As such, the jurisdiction based on PAN is the internal arrangement of the Department having no legal sanctity.
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The learned AR in support of his contention has relied on the order of the Tribunals as detailed below:
Anderson Printing House Pvt Ltd vs. ACIT in ITA No.339/Kol/2021 for A.Y. 2016-17 . 2. M/s. Balaji Enterprise Vs. ACIT in ITA No.354/Gau/2018 for A.Y. 2011-12. 3. Krishnendu Chowdhury vs Income-tax Officer (2017) 55 ITR 52 (Kolkata-Trib)
On the other hand, the learned DR contended that the notice under section 143(2) of the Act was issued by the ITO which was subsequently transferred to the DCIT who was under the same range. Therefore there was no requirement for making any reference to the provisions of under section 127 of the Act. The learned DR also contended that the assessee cannot question the jurisdiction of the assessing officer after the expiry of the time specified under section 124(3) of the Act. The learned DR vehemently supported the order of the authorities below.
We have heard all the rival contentions of both the parties and perused the materials available on record. The facts of the case have already been elaborated in the preceding paragraph which are not in dispute. Admittedly, the notice has been issued by the ITO Ward 2(1) whereas the jurisdiction over the assessee was vested with the DCIT Circle 1(2) of the Income Tax Department as per the Board’s INSTRUCTION NO. 1/2011 [F. NO. 187/12/2010-IT(A-I)], DATED 31-1-2011, the relevant extract is reproduced as under: INSTRUCTION NO. 1/2011 [F. NO. 187/12/2010-IT(A-I)], SECTION 119 OF THE INCOME-TAX ACT, 1961 - INCOMETAX AUTHORITIES - INSTRUCTIONS TO SUBORDINATE AUTHORITIES INSTRUCTION NO. 1/2011 [F. NO. 187/12/2010- IT(A-I)], DATED 31-1-2011 References have been received by the Board from a large number of taxpayers, especially from mofussil areas, that the existing monetary limits for assigning cases to ITOs and DCs/ACs is causing hardship to the taxpayers, as it results in transfer of their cases to a DC/AC who is located in a different station, which increases their cost of compliance. The Board had considered the matter and is of the opinion that the existing limits need to be revised to remove the abovementioned hardship. An increase in the monetary limits is also considered desirable in view of the increase in the scale of trade and industry since 2001, when the present income limits were introduced. It has therefore been decided to increase the monetary limits as under: Income Declared (Mofussil areas) Income Declared (Metro cities) ITOs ACs/DCs ITOs DCs/ACs Corporate returns Upto Rs. 20 lacs Above Rs. 20 lacs Upto Rs. 30 lacs Above Rs. 30 lacs Non-corporate returns Upto Rs. 15 lacs Above Rs. 15 lacs Upto Rs. 20 lacs Above Rs. 20 lacs Metro charges for the purpose of above instructions
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shall be Ahmedabad, Bangalore, Chennai, Delhi, Kolkata,Hyderabad, Mumbai and Pune. The above instructions are issued in supersession of the earlier instructions and shall be applicable with effect from 1-4-2011.
16.1 There is no dispute to the fact that above instruction was issued by the Board in terms of the power granted under the statute in pursuance to the provisions of section 119 of the Act. Thus, there cannot be any question with respect to the validity of impugned instruction which is binding on all the income tax authorities. 15.2 Admittedly the assessee has declared income over and above the sum of ₹30 lakhs and therefore the jurisdiction over the assessee is vested with the DCIT who was authorised to issue the notice under section 143(2) of the Act.
16.2 With respect to the provisions of section 124(3) of the Act and PAN based jurisdiction, we find that the ITAT Kolkata in the of M/s Balaji Enterprise Vs. ACIT in ITA No. 354/Gau/2018 vide order dated 13-11-2020 has held as under: 9. Coming to the contention of the Ld. CIT, DR that since the assessee did not question the territorial jurisdiction of the ITO, Ward-1, Shillong after he received the statutory notice from him and, therefore, the assessee is estopped/shut out from doing so as stipulated by sub- section 3 of section 124 of the Act. In this regard, it is noted that sub-section (3) of section 124 of the Act will come into play only when the question arises as to as to whether an AO has jurisdiction to assess any person u/s. 124 of the Act and the AO derives his powers from the direction or order issued by CBDT and/or authorities under sub-section (1) or (2) of sec. 120 of the Act respectively. It is true that when a question of jurisdiction arises in the event an AO assumes jurisdiction u/s. 124 of the Act by virtue of the jurisdiction vested by direction or order issued by CBDT and/or other authorities under sub-section (1) or (2) of sec. 120 of the Act respectively, then assessee is estopped from raising an objection to the jurisdiction, after the time period prescribed under sub-section (3) of sec. 124 of the Act lapses. This however is not the fact of the appellant's case. Admittedly the AO at Gauhati had enjoyed jurisdiction u/s. 124 of the Act since its place of business was at Ulubari at Gauhati and the Shillong Assessing Officer did not enjoy jurisdiction u/s 124 or u/s 127 of the Act. Therefore, in our opinion as far as in the appellant's case is concerned, the provision of section 124(3) does not come into play since the Shillong Assessing Officer never had jurisdiction u/s 124 of the Act. In my considered opinion section 124(3) of the Act does not in any way help the Department to justify the action of AO at Shillong in issuing notice under section 143(2) to the assessee, which is an action done by him without jurisdiction. So the challenge raised by the Ld, Sr. DR against the legal issue raised by assessee fails. Therefore, I do not find any merit in the contention of the Ld. CIT, DR on this score. Admittedly, the ITO, Shillong had no territorial jurisdiction over the assessee since the assessee's principle placed of business was situated at Ulubari, Guwahati, therefore, sub-section 3 of section 124 of the Act will not come into play. 10. Coming to the contention of Sr DR that ITO Shillong had PAN jurisdiction of the assessee I note that there is no such jurisdiction vested in AO as per the Act called PAN jurisdiction. This may be an internal arrangement made by the Department which has no statutory recognition, so the contention cannot be accepted. Therefore, when the statute specifically recognizes territorial jurisdiction, pecuniary jurisdiction, classes of assessee's ( viz company,
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etc) and has not recognized PAN jurisdiction, question of addressing this legal issue on PAN jurisdiction does not arise.
16.3 We also note that the certificate honourable Chhattisgarh High Court in similar facts and circumstances has decided the issue in favour of the assessee in the case of CIT versus Sony thus winless Ltd reported in 330 ITR 491 wherein it was held as under: 13. In the matter of Smt. Nayana P. Dedhia's case (supra), the Andhra Pradesh Court held that these guidelines issued by the Board in exercise of powers in terms of section 119 of the Act relaxing the rigours of law are binding on all the officers responsible for implementation of the Act and, therefore, bound to follow and observe any such orders, instructions and directions of the Board. 14. Direction by issuing instructions to the officers for the process of selection of cases for scrutiny of returns for a particular financial year and allowing time of three months for completion of the same can, by no stretch of imagination, be considered that it overrides or detracts from the provisions of the Act. It only directs that the above exercise should be completed within three months of the date of filing of return by the assessee, which amounts to relaxation to the assessee that the return filed by him can be scrutinized by the Assessing Officer within three months of filing of the return. 15. So far as contention of the Revenue that Instruction No. 9/2004 dated September 20, 2004, is not applicable in the present case is concerned in view of the specific stipulation in the circular that "for returns filed during the current financial year 2004-05, the selection of cases for scrutiny will have to be completed within three months of the date of filing the returns" and considering that in the present case, the return has admittedly, been filed by the assessee on October 29, 2004, i.e., during the current financial year 2004-05, we find no substance in the above contention. 16. For the aforesaid reasons, we decide the substantial question of law in favour of the assessee and against the Revenue. Accordingly, the appeal is dismissed.
16.4 In view of the above, we hold that the notice under section 143(2) of the Act has not been issued by the AO having valid jurisdiction over the assessee and therefore the assessment framed by the DCIT circle 1(2) of the Income Tax Department is void-ab-initio. Accordingly, we quash the assessment framed under section 143(3) of the Act. Hence the ground No. 1 and additional ground of appeal of the assessee is allowed.
16.5 As we have decided the technical issue in favour of the assessee, we refrain ourselves from giving our finding on the issue raised by the assessee on merit. As
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such the issue raised by the assessee on merit becomes infructuous. Thus we dismiss the same.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the Court on 16/09/2022 at Ahmedabad.
Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 16/09/2022 Manish