COSMOS GARDEN RESORTS PVT. LTD.,JAIPUR vs. DCIT, JAIPUR

PER SHRI KUL BHARAT, JM.

These are two appeals by two different assessees directed against two

different orders of ld. CIT (A)-III, Jaipur both dated 29.09.2016 pertaining to

assessment years 2012-13 and 2009-10 respectively seeking condonation of delay in

filing of the appeal and restoration of the appeal to the file of ld. CIT (A) or decision

on merits.

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scrutiny assessment and the assessments under section 143(3) of the Income Tax

Act, 1961 (hereinafter referred to as the Act) was framed vide order dated

27.03.2015 and 26.03.2015 respectively. While framing the assessment, the AO

made additions on account of Share application money and disallowance on account

of Telephone, Conveyance, Travelling etc. Aggrieved by the orders, the assessees

preferred appeals before ld. CIT (A), who after considering the submissions,

dismissed the appeals on the ground of delay.

written brief. The submissions as made in the written brief are reproduced as under

:- “1. The assesseecompany was incorporated on 13th August, 2009 with the object of undertaking a hospitality project. Accordingly, it purchased a land at Jaisinghpura Road, Bhankrota, Jaipuron 31.08.2009 at a cost of Rs. 207.16 Lakhs. As the project could not be commenced, assessee conducted agricultural activity on the said land and earned income there from. It filed the return declaring NIL (loss of Rs. 5,660/-) income on 30.03.2013.

During the year assessee raised share application money of Rs.500 Lakhsfrom various companies. The shares were allotted during the year itself. In course of assessment proceedings, assessee filed the copy of share application form, confirmation, bank statement and income tax return of these companies to verify its genuineness(PB 2-3).

In between a survey conducted on 29.01.2015 at the business premises of its group companies, i.e., M/s Manu Yatralaya Pvt. Ltd. and M/s TMKI Machine Parts Pvt. Ltd.No incriminating document in respect of the share capital was found in the survey but still to purchase peace of mind, assessee offered Rs. 500 Lakhs for tax with a request that no penalty will be imposed and no notice forimposition of penalty shall be issued. This request was also recorded in the statement of Mr. M.K.Banthia, Director, during the survey proceedings(PB 7- 20 of M/s Manu Yantralaya Pvt. Ltd.).

Accordingly, a revised computation of income was filed in which the share application money was added to the income and self assessment tax was deposited before the completion of assessment proceedings.In the letter filed

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in course of the assessment proceedings (PB 2-3), it is reiterated that the income is offered as admitted in survey to purchase peace of mind with a request that no penalty be imposed and no notice regarding the penalty be issued. The AO completed the assessment as per the revised computation but initiated the penalty proceedingsby giving verbal assurance to drop these penalty proceedings in first hearing itself.

The assessee thereafter filed the reply to penalty notice in dak counter on 20.04.2015(PB 4-6) where the above facts were reiterated. Thereafter, AO again issued notice u/s 271(1)(c) dated 09.09.2015 to complete the penalty proceedings but in course of hearing showed his inability to drop the penalty proceedings. Therefore, assessee filed an appeal to the CIT(A) on 11.09.2015 against the order of the AO passed u/s 143(3) dated 27.03.2015 alongwith an application requesting to condone the delay in filing the appeal(PB 1). The copy of the application is reproduced at page 3 of the Ld. CIT(A) order. Thereafter, the AO imposed the penalty u/s 271(1)(c) vide order dated 30.09.2015.

Before the Ld. CIT(A) it was contended that the income was offered with the condition that no penalty would be levied and while completing the assessment verbal assurance was given but now the AO is imposing the penalty and therefore, the appeal of the assessee be decided on merit as the department has not abided by its assurance.

The Ld. CIT(A) however held that assessee has not fulfilled his promise of surrender made during the survey and the income declared in the return of income filed u/s 139(1) has been declared as total income in the return filed in response to the notice u/s 148. Even when the penalty proceedings were initiated, the appellant should have filed the appeal if he was aggrieved as there is no estoppel against law, she therefore held that there is no reasonable cause for late filing of the appeal. She therefore, rejected the appeal on ground of delay without deciding the merit of the case.

It is submitted that the Ld. CIT(A) has wrongly stated that the assessee has not included the income in the return filed in response to notice u/s 148. Infact, no notice u/s 148 was issued. It is the regular assessment proceedings which were pending before the AO when the survey took place on the group companies on 29.01.2015. Therefore, as per the assurance given, assessee filed the revised computation by including the said amount of Rs. 500 Lakhs and paid tax thereon subject to the condition that the penalty shall not be levied. However, when the AO showed her intention to levy the penalty, the appeal was filed. Thus, there is a reasonable cause for delay in filing the appeal. In these circumstances, the Ld. CIT(A) should have condoned the delay and decided the appeal on merit.

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Reliance in this connection is placed on the following cases:-

Collector, Land Acquisition Vs. Mst. Katiji& Others 167 ITR 471 (SC) The legislature has conferred the power to condone delay by enacting section 5 of the Indian Limitation Act of 1963 in order to enable the Courts to do substantial justice to parties by disposing of matters on ‘merits’. The expression ‘sufficient cause’ employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which subverses the ends of justice that being the life-purpose for the existence of the institution of Courts. It is common knowledge that this Court has been making a justifiably liberal approach in matters instituted in this Court. But the message does not appear to have percolated down to all the other Courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that : (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 out 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 common sense pragmatic manner. (4) When substantial justice and technical considerations are pitted against each other, 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 judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.

Making a justice-oriented approach from this perspective there was sufficient cause for condoning the delay in the institution of the appeal. The fact that it was the ‘State’ which was seeking condonation and not a private party was altogether irrelevant. The doctrine of equality before law demands that all litigants, including the State as a litigant, are accorded the same treatment and the law is administered in an even-handed manner. There is no warrant for according a step motherly treatment when the ‘State’ is the applicant praying for condonation of delay. In fact, experience shows that on account of an impersonal machinery (no one in charge of the matter is directly hit or hurt by judgment sought to be subjected to appeal) and the inherited bureaucratic methodology imbued with the note-making, file pushing and passing-on-the- buck ethos, delay on its part is less difficult to understand though more difficult to approve. In any event, the State which represents the collective cause of the community, does not deserve a litigant non grata status. The Courts, therefore, have to be informed with the spirit and philosophy of the provision in the course of the interpretation of the expression ‘sufficient cause’. So also the same approach has to be evidenced in its application to

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matters at hand with the end in view to do even-handed justice on merits in preference to the approach which scuttles a decision on merits".

EshaBhattacharjee V. Managing Committee of Raghunathpur, Nafar Academy and others2013 (5) CTC 547 The principles involved and the approach needed while considering the application for condonation of delay are broadly culled out as under: i) There should be a liberal, pragmatic, justice-oriented, non- pedantic approach while dealing with an application for condonation of delay, for the courts are not supposed to legalise injustice but are obliged to remove injustice. ii) The terms "sufficient cause" should be understood in their proper spirit, philosophy and purpose regard being had to the fact that these terms are basically elastic and are to be applied in proper perspective to the obtaining fact situation. iii) Substantial justice being paramount and pivotal the technical considerations should not be given undue and uncalled for emphasis. iv) No presumption can be attached to deliberate causation of delay but, gross negligence on the part of the counsel or litigant is to be taken note of. v) Lack of bona fides imputable to a party seeking condonation of delay is a significant and relevant fact. vi) It is to be kept in mind that adherence to strict proof should not affect public justice and cause public mischief because the courts are required to be vigilant so that in the ultimate eventuate there is no real failure of justice. vii) The concept of liberal approach has to encapsule the conception of reasonableness and it cannot be allowed a totally unfettered free play. viii) There is a distinction between inordinate delay and a delay of short duration or few days, for to the former doctrine of prejudice is attracted whereas to the latter it may not be attracted. That apart, the first one warrants strict approach whereas the second calls for a liberal delineation. ix) The conduct, behaviour and attitude of a party relating to its inaction or negligence are relevant factors to be taken into consideration. It is so as the fundamental principle is that the courts are required to weigh the scale of balance of justice in respect of both parties and the said principle cannot be given a total go by in the name of liberal approach. x) If the explanation offered is concocted or the grounds urged in the application are fanciful, the courts should be vigilant not to expose the other side unnecessarily to face such litigation. xi) It is to be borne in mind that no one gets away with fraud, misrepresentation or interpolation by taking recourse to the technicalities of law of limitation.

6 ITA Nos. 1067 & 1068/JP/2016 M/s. Cosmos Garden Resorts P. Ltd. & M/s. Manu Yantralaya Pvt. Ltd. xii) The entire gamut of facts are to be carefully scrutinized and the approach should be based on the paradigm of judicial discretion which is founded on objective reasoning and not on individual perception. xiii) The State or a public body or an entity representing a collective cause should be given some acceptable latitude." S. Nagaraj Vs. State of Karnataka 4 SCC 595: Justice is a virtue which transcends all barriers. Neither the rules of procedure nor technicalities of law can stand in its way. The order of the Court should not be prejudicial to anyone. Rule of stare decisions is adhered to for consistency but it is not as inflexible as Administrative Law as in Public Law. Even the law bends before justice. Entire concept of writ jurisdiction exercised by the higher Courts is founded on equity and fairness. If the Court finds that the order was passed under a mistake and it would not have exercised the jurisdiction but for the erroneous assumption which in fact did not exist and its preparation shall result in miscarriage of justice, then it cannot on any principle be precluded from rectifying the error. Mistake is accepted as valid reason to recall an order Difference lies in the nature of mistake and scope of rectification. Difference lies in the nature of mistaken and scope of rectification, depending on if it is of fact or law. But the root from which the power flows is the anxiety to avoid injustices. It is either statutory or inherent. The latter is available where mistake is of the Court. In Administrative Law, the scope is still wider. Technicalities apart if the Court is satisfied of the injustice then it is its constitutional and legal obligation to set it right by recalling its order.

VedabaiAlias VaijayanatabaiBaburaoPatilvs.ShantaramBaburaoPatil& Ors. (SC) (2002) 253 ITR 0798 In exercising discretion under s. 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. In this case, the approach of the civil Judge is wholly erroneous and his order is unsustainable. It is evident that the discretion under s. 5 of the Limitation Act is exercised by the civil Judge in contravention of the law laid down by this Court, that the expression "sufficient cause" should receive liberal construction. The High Court in exercising its jurisdiction under s. 115 of the CPC, failed to correct the jurisdictional error of the appellate Court. For the aforementioned reasons, the delay of seven days in filing the appeal is condoned and the appeal is restored to the file of the civil Judge and the Civil Judge is directed to decide the appeal on the merits.—State of West Bengal vs. Administrator, Howrah Municipality (1972) 1 SCC 366 and Smt. Sandhya Rani Sarkar vs. Smt. Sudha Rani Debi (1978) 2 SCC 116 applied.

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CIT vs. West Bengal Infrastructure Development Finance Corporation Ltd(SC) (2011) 334 ITR 0269

When huge stakes are involved, the High Court should not dispose of the appeals filed by the Department merely on the ground of delay; High Court can consider imposing costs on the Department for the delay and decide the appeals on merits.

In view of above, the delay in filing the appeal be directed to be condoned and the matter be set aside to the AO/ Ld. CIT(A) as deemed fit to decide the appeal on merit.”

there is no reasonable cause. He strongly supported the orders of the authorities

below.

and gone through the orders of the authorities below. The ld. Counsel for the

assessee has placed reliance on the judgment of the Hon’ble Supreme Court

rendered in the case of Vedabai Alias Vaijayanatabai Baburao Patil vs. Shantaram

Baburao Patil & Ors. (2002) 253 ITR 798 (SC) and also the judgment of Hon’ble

Supreme Court in the case of S. Nagaraj vs. State of Karnataka, 4 SCC 595 (Kar.).

We have also considered the judgment of Hon’ble Supreme Court rendered in the

case of N. Balakrishnan vs. M. Krishnamurthy dated 03.09.1998 and the judgment of

Hon’ble Supreme Court rendered in the case of State of West Bengal vs. The

Administrator, Howrah Municipality, AIR 1972 SC 749 wherein the Hon’ble Supreme

Court has held that -

“ in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala ides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor.”

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Respectfully following the judgments of the Hon’ble Supreme Court, we condone the

delay and restore the appeals to the ld. CIT (A) for decision on merit.

Order pronounced in the open court on 28/02/2017.

Sd/- Sd/- ( dqy Hkkjr) ¼foØe flag ;kno½ (VIKRAM SINGH YADAV) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 28/02/2017. d/ आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

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