NARESH KARLA (HUF),MUMBAI vs. ACIT CIR 4(3), MUMBAI

ORDER PER VIKAS AWASTHY, JM:

These two appeals by the assessee are directed against order of CIT(A)-36, Mumbai dated 24/10/2016, common for the orders passed on quantum addition and penalty levied under section 271(1)(c) of the Income Tax Act 1961 (in short ‘the Act’).

ground of limitation alone. There was delay of 25 days in filing of the appeal, the assessee gave reasons for delay in filing of the appeal. However, CIT(A) rejected the same and dismissed the appeal being barred by limitation. The assessee had also filed an appeal assailing levy of penalty under section 271(1)(c) of the Act. Since the quantum appeal of the assessee was dismissed, the CIT(A) dismissed the penalty appeal as well, however, the same was decided on merits.

4.1 The Hon’ble Supreme Court of India in the case of Ram Nath Sao Alias Ram Nath Sahu & Ors. Vs. Gobardhan Sao & Ors.( (2002) 3 SCC 195) has held that acceptance of explanation furnished should be the rule and refusal, an exception. The relevant extract of the judgment is reproduced herein below:

(A.Y. 2012-13) ITA N0.7654/MUM/2016(A.Y. 2012-13)

"But one thing is clear that the courts should not proceed with the tendency of finding fault with the cause shown and reject the petition by a slipshod order in over-jubilation of disposal drive. Acceptance of explanation furnished should be the rule and refusal, an exception, more so when no negligence or inaction or want of bona fides can be imputed to the defaulting party. On the other hand, while considering the matter the courts should not lose sight of the fact that by not taking steps within the time prescribed a valuable right has accrued to the other party which should not be lightly defeated by condoning delay in a routine-like manner. However, by taking a pedantic and hypertechnical view of the matter the explanation furnished should not be rejected when stakes are high and/or arguable points of facts and law are involved in the case, causing enormous loss and irreparable injury to the party against whom the Us terminates, either by default or inaction and defeating valuable right of such a party to have the decision on merit. While considering the matter, courts have to strike a balance between resultant effect of the order it is going to pass upon the parties either way.” 4.2 The Hon’ble Apex Court in the case of Collector Land Acquisition, vs Mst. Katiji & Ors., 167 ITR 471(SC) held that the explanation furnished by the assessee for seeking condonation should be accepted. The expression “sufficient cause” should be interpreted liberally.

4.3 In view of the well settled law and explanation furnished by the assessee, we are of the view that the CIT(A) has erred in taking pedantic and hyper-technical view in not accepting the explanation furnished by the assessee for condonation of 25 days delay in filing of the appeal. The impugned order is set-aside and the appeal of the assessee is restored to the file of CIT(A) for denovo adjudication on merits. The CIT(A) is directed to grant reasonable opportunity of hearing to the assessee while adjudicating the appeal, in accordance with law.

4.4 Since we have quashed the order of CIT(A) in quantum appeal, the order of CIT(A) confirming levy of penalty under section 271(1)(c) of the Act will not survive. Accordingly, appeal of the assessee assailing levy of (A.Y. 2012-13) ITA N0.7654/MUM/2016(A.Y. 2012-13) penalty under section 271(1)(c) of the Act is also restored back to the file of CIT(A) for fresh adjudication in accordance with law.