MFAR CONSTRUCTIONS PRIVATE LIMITED ,BANGALORE vs. DCIT, CIRCLE-4(1)(1), BANGALORE

PER KESHAV DUBEY, JUDICIAL MEMBER:

a) Confirmation letters and confirmed copy of ledger accounts of the supplier b) Email ID and copy of the Ledger accounts of the parties c) Copy of ITR and acknowledgement as well as GST Return of the suppliers d) Copies of Invoices & other documentary evidence in support of transactions 3.1 The assessee company submitted all the relevant documents which were maintained by the assessee in the normal course of business along with the sample invoices. However the assessee could not submit the copy of the ITR and acknowledgments, GST Returns & Balance confirmations from third parties. The AO on 09- 12-2022 issued a show cause notice proposing addition of income by disallowing purchases on account of absence of documentary evidences amounting to Rs.7,77,47,055/- and disallowance of payments made u/s 194J of Rs. 3,78,82,321/-. In response to the said show cause notice, the assessee company had filed detailed Mfar Constructions Private Limited, Bengaluru Page 4 of 17 reply and objections to the proposed addition on 15-12-2022 and also submitted once again all the documents/details as under- a) Copies of All Bills, Vouchers b) Copies of Ledger Accounts c) Copies of Bank Statements marking payments to parties d) Details of PAN & GSTIN e) Details of TDS deducted made on all the payments which attracts TDS f) Details of Suppliers like Name, PAN, GST, Address, Email g) Complete Purchase Registers h) All Suppliers Ledger Accounts i) Details of Balance confirmation received from third parties (whichever received) & Emails Sent for requesting Balance Confirmations, Ledgers, ITR Copies and GST Returns 3.2 The assessee was not able to submit ITR copies of suppliers, GST Returns of the suppliers and third-party confirmations since these documents were not in the possession of the assessee. Further, these documents were required to be provided by third parties and some of the suppliers were not having continuing relationship with the assessee. Many of the suppliers had even refused/did not co-operate to provide such documents by stating that the ITR/GSTR documents are their confidential documents and cannot be disclosed to a third party. Further, the assessee had also been provided personal hearing through video conferencing. During the personal hearing, the assessee had submitted additional information as under for consideration and objected for proposed additions- Mfar Constructions Private Limited, Bengaluru Page 5 of 17 a) GSTR2A Report downloaded from GST Department Portal b) GSTR2B Report downloaded from GST Department Portal c) GSTR3B Returns filed 3.3 Further, the assessee submitted that GSTR 2A Report and GSTR 2B Reports are generated from the GST Department based on the suppliers return filing in GSTR-1, (i.e., All the entries reported in GSTR-2A & GSTR-2B were uploaded by the suppliers and the service providers) and accordingly claimed that these transactions were Genuine. The GSTR-2A Report and GSTR-2B reports are third party evidence and the same can be verified with the GST Department. The AO, however, concluded the Scrutiny assessment by making addition of income of Rs.49,32,553/- by disallowing the claim of the excess purchases of following suppliers:-

3.4 Further, while passing the assessment order under section 143(3) of the Act, the AO also reduced the refund of Rs.12,41,424/-.

“4. Held: In view of facts and circumstances of the case, the appellant failed to remove the deficiency issued in the appeal filed. Sufficient opportunities were also afforded to the appellant through notices as mentioned above. As the appellant failed to remove the deficiency, the appeal filed by the appellant cannot be admitted in view of the provisions of Section 249(1) of Income Tax Act, 1961 and the same is not maintainable. For statistical purposes, the appeal is treated as dismissed.

5. Again, aggrieved by the order of ld. CIT(A)/NFAC dated 20/07/2023, the assessee has filed the present appeal before this Tribunal with a delay of 571 days as noted by the Registry.

7.1 In the present case, there is no dispute that the order of ld. CIT(A)/NFAC was communicated to the assessee on 20.7.2023 i.e. on the date of the order. It is also undisputed fact that the assessee also after the service of the order of ld. CIT(A)/NFAC, checked the income tax portal wherein it was found that the first appellate proceedings for assessment year 2021-22 was still pending. The reason for filing the appeal belatedly before us was mainly due to the fact that assessee on an honest and Bonafide belief that the appeal filed against the assessment order is still pending and the ld. CIT(A)/NFAC order dated 20.7.2023 was pertaining to the intimation u/s 143(1) of the Act for the same year. We are of the considered opinion that this honest and Bonafide belief of the assessee also manifest from the fact that in reply to the penalty notice u/s 270A of the Act, the assessee had also requested to keep the penalty proceedings in abeyance on the belief that the appeal filed against the assessment order is still pending with ld. CIT(A)/NFAC. Therefore, we are of the considered opinion that it cannot be said that assessee is very callous in its approach in filing the appeal before us. It is perceived that the explanation offered in the condonation application as well as in affidavit is plausible and sufficient cause being shown by the assessee which prevented them from filing the appeal within the specified period u/s 253 of the Act. Further, 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 for injustice being done because of non-deliberate delay. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue. Therefore, we are bound to remove the injustice by condoning the delay on technicality. If the delay is not condoned, it would amount to legalizing an illegal Mfar Constructions Private Limited, Bengaluru Page 15 of 17 order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto. Under the scheme of Constitution, the Government cannot retain even a single pie of the individual citizen as tax, when it is not authorized by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalize an illegal and unconstitutional order passed by the lower authority.

7.2 Further, in the case of People Education & Economic Development Society Vs/ ITO reported in 100 ITD 87 (TM) (Chen), wherein held that “when substantial justice and technical consultation 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 non-deliberate delay”.

7.3 The next question may arise whether delay was excessive or inordinate. There is no question of any excessive or inordinate when the reason stated by the assessee was a sufficient cause for not filing the appeal. We have to see the cause for the delay. When there was a sufficient cause, the period of delay may not be relevant factor. In fact, the Madras High Court in the case of CIT vs. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596) considered the condonation of delay and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Accordingly, the Madras High Court condoned nearly 21 years of delay in filing the appeal. When compared to 21 years, 583 days cannot be considered to be inordinate or excessive. Furthermore, the Chennai Tribunal by majority opinion in the case of People Education and Economic Development Society (PEEDS) v. ITO (100 ITD 87) (Chennai) (TM) condoned more than six hundred days delay. Therefore, in our opinion, by preferring the substantial justice, the Mfar Constructions Private Limited, Bengaluru Page 16 of 17 delay of 583 days has to be condoned and accordingly we condone the delay and admit the appeal for adjudication.