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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI G.S. PANNU (VP) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the assessee against the order dated 21.01.2015 passed by the Commissioner of Income Tax (Appeals)-52 (for short ‘the CIT(A), Mumbai, for the assessment year 2004-05, whereby the Ld. CIT(A) has dismissed the appeal filed by the assessee against the penalty order passed u/s 271(1)(c) of the Income Tax Act, 1961 (for short the ‘Act’). Brief facts of the case are that the assessee a notified person under the Special Court (Trial of offences relating to transactions in securities) Act, 1992 did not file the return of income before the due date. Accordingly, the AO issued notice u/s 148 of the Act recording the following reasons:- “Assessee company has not filed the return of income which was due on 30.11.2004. However, based on the assessments completed up to A.Yr. 2003-04 wherein substantial income has been assessed, I have reason to believe that assessee has taxable income during the previous year relevant to A.Yr. 2004- 05. Hence, notice u/s 148 of the I.T. Act is issued today.” Assessment Year: 2004-05
2. In response to the notice u/s 148, the assessee filed return of income declaring the total income of Rs. 8,66,520/-. Further, in response notices u/s 143(2) and 142(1) of the Act, the authorized representative of the assessee attended the proceedings and discussed the case. The AR filed unaudited balance sheet, profit and loss account and books of account in the form of computer print out for verification. Since, the tax computed under provisions of section 115JB was higher than the tax computed under the normal provisions of Act, the total income computed u/s 115JB of the Act was taken as the income of the assessee. The CIT (A) dismissed first appeal filed by the assessee against the assessment order. The assessee challenged the order passed by the Ld. CIT (A) before the ITAT. The ITAT granted certain relief to the assessee and after giving effect to the order of the ITAT, the AO initiated proceedings u/s 271
(1) (c) of the Act and levied penalty of Rs. 29,30,317/- for not filing return within the prescribed period u/s 153(1) as mentioned in the Explanation-3 to section 271 (1) (c) of the Act. 3. The assessee challenged the penalty order before the Ld. CIT (A), the Ld. CIT (A) after hearing the assessee dismissed the appeal filed by the assessee and confirmed the penalty levied u/s 271 (1) (c) of the Act. The assessee is in appeal before the Tribunal against the said order passed by the Ld. CIT (A).
4. The assessee has challenged the impugned order passed by the Ld. CIT
(A) on the following effective grounds:-
1. “The learned Commissioner of Income-tax (Appeals) has erred in law and in facts in passing the order u/s 250 of the Act and confirming the penalty order of the Assessing Officer. Assessment Year: 2004-05
2. The learned Commissioner of Income-tax (Appeals) has erred in law and in facts in passing the order without complying with the principles of natural justice.
The learned Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming the penalty levied u/s 271(1)(c) of the Act amounting to Rs. 29,30,317/-.”
Since, there is a delay of 672 days in filing the present appeal, the assessee has filed an application for condonation of delay. The Ld. counsel for the assessee in the light of the application submitted that the assessee applicant is a notified entity under the provisions of Special Court (trial of offence relating to transactions in securities) Act, 1992 and as per the notification issued by the Special Court all the properties of the applicant are under the control and management of the custodian. The bank account of the assessee was also seized by the CBI, the applicant had to approach the Special Court for issuing direction to the custodian for release of appeal fees, therefore, the delay in the present case is on account of the fact that there was an ordinate delay on the part of the custodian and the banks in releasing the appeal fees. The Ld. counsel further pointed out that such delays have also been caused in the past in several cases and the delay on account of the same causes have been condoned by the Tribunal. The details of which are as under:- 6. As pointed out by the Ld. counsel, the coordinate Benches of the Mumbai Tribunal have condoned the delay in filing the appeals in the similar set of facts in the following cases: i Orion Travels Pvt. Ltd. v. DCIT [ITA No. 1005/Mum.2017] dated 11.09.2017. ii Eminent Holdings Pvt. Ltd. v DCIT [ITA No. 1215/Mum/2017] dated 11.09.2017. Assessment Year: 2004-05 iii Harsh Estate Pvt. Ltd. v. DCIT [ITA No. 1221/Mum/2017] dated 11.09.2017 iv Aatur Holdings Pvt. Ltd. v. DCIT [ITA No. 1223/Mum/2017] dated 11.09.2017. v Fortune Holdings Pvt. Ltd. v. DCIT [ITA No. 939/Mum/2017] dated 11.09.2017. vi Gromore Leasing & Investment Pvt. Ltd. v. DCIT [ITA No. 1219/Mum/2017] dated 27.12.2017 vii Harsh Estate Pvt. Ltd. v. DCIT [ITA No. 3596/Mum/2013] dated 05.05.2015. viii Harsh Estate Pvt. Ltd. v. DCIT [ITA No. 3464/Mum/2013] dated 08.10.2014. ix Rasila Mehta v. DCIT [ITA No. 3890/Mum/2012] dated 20.07.2016. x Growmore Exports Pvt. Ltd. v. DCIT dated 08.02.2016. xi Growmore Exports Pvt. Ltd. v. DCIT [ITA No. 3491-3492/Mum/2014 dated 15.01.2016. xii Growmore Exports Pvt. Ltd. v. DCIT & Ors. [ITA No. 4015- 4019/Mum/2011] dated 20.11.2013. xiii Rina Mehta v. DCIT & Ors. [ITA No. 3047/Mum/2006] dated 11.12.2007”.
The Ld. counsel invited our attention to the chronology of events furnished by the assessee in order to establish that the delay was caused in the process of obtaining appeal filing fees from the custodian. The Ld. counsel further invited out attention to the action taken by the assessee in obtaining the appeal filing fees.
The Ld. Departmental Representative (DR) on the other hand opposed the application filed by the assessee for condonation of delay basically on the ground that the delay is inordinate and the same cannot be condoned. 9. We have perused the material on record including the cases relied upon by the assessee. We notice that the coordinate Bench has condoned the delay of 760 days in the similar set off facts in the case of M/s Velvet Holdings Pvt. Ltd. vs. ACIT delay of 760 days in the case of M/s Eminent Holdings Pvt. Ltd. and Ors. Vs. ACIT ITA No. 1215/Mum/2017 and Assessment Year: 2004-05 delay of 749 days in the case of Fortune Holdings Pvt. Ltd. vs. ACIT ITA No. 939/Mum/2017.
Sub-section 5 of section 253 of the Income Tax Act provides that the Tribunal may admit appeal or permit filing of memorandum of cross- objection of respondent after expiry of relevant period of limitation referred to in sub- section 3 and 4 section 253, if it is satisfied that there was sufficient cause for not presenting it within that period. Expression “sufficient cause” employed in this section has also been used in section 5 of Indian Limitation Act, 1961. This expression has come for consideration before the Hon’ble High Courts as well as before the Hon’ble Supreme Court, and the Hon’ble Courts are unanimous in observing that whenever such issue come for consideration before adjudicating authority, then alleged “sufficient cause” is to be considered with justice oriented approach. We deem it appropriate to make reference to the decision of Hon’ble Supreme Court in the case of Collector Land Acquisition Vs. Mst. Katiji & Others, 1987 AIR 1353. The relevant part of the judgment reads as under: “1. Ordinarily a litigant does not stand to benefit by lodging an appeal late.
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.
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. Assessment Year: 2004-05
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.”
Hence, in the light of the facts of the case and the decision of the coordinate Benches discussed above and in the light of the decision of the Hon’ble Supreme Court, we are of the considered view that the assessee had sufficient reasons for not filing the appeal within the prescribed period. Hence, we condoned the delay of 672 days in filing the present appeal and permitted the Ld. counsel to argue the case of the assessee on merits.
Before us, the Ld. counsel for the assessee submitted that the assessee could not file the return of income within the prescribed time due to various constraints and difficulties. Since, the assessee was a notified person under the Special Court (Trial of offences relating to transactions in securities). Various proceedings have been initiated against the assessee and there was no professional services available as the staff had left due to non-payment of salary. The Ld. counsel for the assessee further submitted that non compliance of the provisions was due to difficulties faced by the assessee and circumstances beyond the control of the assessee. Moreover, the properties of the assessee were under the control of the custodian appointed by the Special Court. The Bank account of the assessee was also seized by the CBI as a consequence thereof the assessee was not able to make payment of due who use to render professional services to them. The assessee had to move various applications before the Special Court for issuing direction to the custodian in connection with withdrawal amounts from the attached accounts of the assessee. So far as the additions are concerned, the ITAT has given partial relief to the assessee and restored the issue of allowability of interest expenditure to the file of CIT (A). Since, the assessee has furnished the reasonable cause for not filing the return under sub section 1 of section 153 within the meaning of Explanation 3 to section 271 (1) of the Act, the Assessment Year: 2004-05 impugned order confirming penalty u/s 271 (1) (c) of the Act is not sustainable in the law. The Ld. counsel accordingly submitted that the order passed by the Ld. CIT (A) may be set aside and the penalty levied may be deleted.
On the other hand, the Ld. Departmental Representative (DR) relying on the order passed by the Ld. CIT (A) submitted that once the case is covered by Explanation-3 to section 271 (1) of the Act, the assessee will be deemed to have concealed the particulars of income unless the assessee establishes that there was a reasonable cause for his failure to furnish the return of income within the specified period. However, in the present case, the Chartered Accountants were appointed by the Special Court, it cannot be said that the assessee was not having support of any professional to look after its affairs. The Ld. DR further pointed out that the office premises of the assessee was auctioned in the year 2004 and the assessee had sufficient time to file return of income voluntarily u/s 139 (1) of the Act. In the light of the aforesaid facts, the Ld. DR submitted that since the order passed by the Ld. CIT (A) is in accordance with law, there is no merit in the contention of the assessee.
We have heard the rival submissions and also perused the material on record in the light of the rival contentions of the parties. Admittedly, the assessee is a notified person under the Special Court (Trial of offences relating to transactions of securities), Act, 1992 and all its assets including bank accounts had been attached and vested under the control of the custodian appointed under the said Act. We further notice that during the appellate proceedings, the assessee made a written submission explaining the delay in filing the return of income. The assessee had to move various miscellaneous applications for appointment of Chartered Accountants for pursing tax related issues, for permission to withdraw money from the bank accounts to meet the expenses for taking necessary steps for sale of commercial and residential Assessment Year: 2004-05 premises belonging to the notified entities. We further notice that the Hon’ble Supreme Court directed the notified person to deposit the keys of commercial premises latest by 18.05.2004 to the custodian so as to unable him to handover to premised to the purchasers. The said order was received by the assessee on 17.05.2004. Since, the assessee had less than 48 hours to vacant the premises, the assessee could not take out the voluminous records in an arranged manner which resulted in misplacement of records. The assessee has placed on record the copies of the orders or extract thereof passed by the Special Court, which establish that during the relevant period, the assessee had to move various applications before the Special Court for withdrawal of money from the attached bank accounts and release/examination of documents, which were in the custody of the custodian appointed. As pointed out by the Ld. counsel, the Directors of the company were arrested and they were not allowed to visit office for some period. Further, the services of employees were not available due to their placement at the disposal of the custodian.
As we notice, the Ld. CIT (A) has confirmed the penalty levied by the AO u/s 271 (1) (c) r.w. Explanation 3 to section 271 (1) for not filing the return within the period prescribed u/s 153A of the Act. Explanation 3 to section 271 (1) of the Act, where an assessee fails to furnish return of its income within the period prescribed in sub section 1 of s.153 in respect of any assessment year commencing or after the 1st day of April 1989 without reasonable cause, or the Commissioner (Appeals) is satisfied that in respect of such assessment years such assessee have taxable income then for the purpose of Clause C of section 271 (1) shall be deemed to have concealed the particulars of its income in respect of such assessment year. However, in the present case, we are satisfied that the assessee had sufficient reason for not filing its return of income as specified in Explanation 3 to section 271 (1) of the Act. We further notice that the assessee had also produced oral as well as documentary evidence before Assessment Year: 2004-05 the Ld. CIT (A) during the appellate proceedings, however the Ld. CIT (A) failed to appreciate the Explanation given by the assessee establishing reasonable cause for not furnishing the return of income pertaining to the assessment year under consideration. Hence, in our considered view, the findings of the Ld. CIT (a) are not based on evidence on record and not in accordance with the settled principles of law. We accordingly allow the appeal of the assessee and set aside the order passed by the Ld. CIT (A).