KING PRAWNS LTD,MUMBAI vs. DCIT 9(2), MUMBAI

We shall first take up the appeal filed by the assessee against the order passed by Ld CIT(A) in quantum assessment proceeding. The Ld CIT(A) had dismissed the appeal of the assessee in limine, as the same has been filed belatedly before him. Accordingly, the Ld CIT(A) did not adjudicate the grounds urged on merits. The assessee is aggrieved by the decision of Ld CIT(A) in refusing to condone the delay and consequently dismissing the appeal of the assessee in limine.

The original assessment for the year under consideration was completed on 26.12.2006 determining total income of the assessee at NIL after setting off of brought forward losses. The present assessment was reopened by the 2 King Prawns Limited assessing officer u/s 147 of the Act in order to assess the income arising on the settlement of bank loan under One time settlement scheme, u/s 41(1) of the Act. The AO completed the assessment, vide its order dated 13.12.2011, by assessing entire interest portion of loan, treating the same as waived by the bank. The AO assessed interest amount of Rs.168.42 lakhs as income of the assessee. The assessee did not prefer appeal against the same.

Subsequently, the assessee filed appeal before Ld CIT(A) on 18-09-2013, which resulted in a delay of 577 days. The assessee submitted before Ld CIT(A) that it did not file appeal as per the advice given by the Chartered Accountant. Subsequently the AO also levied penalty u/s 271(1)(c) of the Act and the same was also confirmed by Ld CIT(A). At this stage, the assessee sought advice of other consultants, who advised the assessee to challenge the addition made in the assessment order. Hence the assessee filed appeal before Ld CIT(A) with a delay of 577 days. The Ld CIT(A), however, took the view that the assessee has taken a conscious decision, as per the advice of its consultants, not to file appeal against the assessment order. The Ld CIT(A) also took support of the decisions rendered by Tribunal in the case of S.S. Builders vs. ITO (2010)(TIOL 714). He also took the view that the condonation of delay is not a matter of right. The Ld CIT(A) has also taken the view that the issue under reference has already attained finality, since he has decided the penalty appeal, vide his order dated 15-02-2013. Further placing reliance on various case laws, the Ld CIT(A) refused to condone the delay and accordingly dismissed the appeal in limine, without admitting the same.

The Ld A.R submitted that the assessee did not file appeal against the reassessment order as per the advice given its Chartered Accountant. He submitted that wrong advice given by the professional is a sufficient ground for condoning the delay. In this regard, he took support of the decision rendered by Hon’ble Bombay High Court in the case of Vijay Vishin Meghani vs. DCIT (Income tax Appeal No.493 of 2015 dated 19-09-2017), wherein delay of 2984 days was condoned. The Hon’ble Bombay High Court has followed the 3 King Prawns Limited decision rendered by Hon’ble Supreme Court in the case of M/s Concord of India Insurance co. Ltd vs. Smt. Nirmala Devi and others (AIR 1979 SC 1666), wherein it was held that a legal advice tendered by a professional and the litigant acting upon it one way or the other could be a sufficient cause to seek condonation of delay and coupled with the other circumstances and factors for applying liberal principles and then the said delay can be condoned. The Ld A.R also furnished a copy of letter dated 04-05-2018 furnished by Shri Virendra Dalal of M/s V.B. Dalal & Co., Chartered Accountants, wherein the C.A has submitted that he had advised the assessee not to file appeal against the assessment order, since the brought forward losses would neutralize the demand. Accordingly, the Ld A.R submitted that the assessee has acted upon the advice given by his Chartered Accountant in not filing the appeal before Ld CIT(A) and the same constitutes sufficient cause. Accordingly, he submitted that the Ld CIT(A) should have condoned the delay in filing the appeal.

The Ld D.R, on the contrary, submitted that the assessee is duty bound to explain the delay and the appellate authorities should exercise the discretion to condone the delay in a judicial manner. The Ld D.R placed his reliance on various case laws, where the delay has not been condoned. He submitted that the assessee has taken a conscious decision not to file appeal and it has filed appeal before Ld CIT(A) only after the order passed by Ld CIT(A) confirming the penalty levied by the AO. Accordingly, the Ld D.R contended that there was no sufficient cause in filing the appeal before Ld CIT(A) belatedly and accordingly submitted that the Ld CIT(A) has rightly refused to condone the delay.

We have heard rival contentions and perused the record. There is no dispute with regard to the fact that the assessee is having brought forward losses and hence the assessee was advised by the C.A not to file appeal, as the tax effect would be neutral. Accordingly, in the explanations furnished before Ld CIT(A), the assessee stated that it did not file appeal on the advice of C.A. Subsequently, when the AO passed the penalty order and further when the 4 King Prawns Limited penalty was confirmed by Ld CIT(A), the assessee obtained advice from another consultant, who advised the assessee to prefer appeal against the reassessment order also. Thus, it is seen that the assessee did not file appeal initially only on the advice given by the C.A. Before us, the assessee has also filed a letter obtained from the C.A, who has also confirmed that he has advised so, as the tax effect would be neutral due to brought forward losses.

In the case of M/s Concord of India Insurance co. Ltd vs. Smt. Nirmala Devi and others (AIR 1979 SC 1666), the Hon’ble Supreme Court has held that a legal advice tendered by a professional and the litigant acting upon it one way or the other could be a sufficient cause to seek condonation of delay and coupled with the other circumstances and factors for applying liberal principles and then the said delay can be condoned. In the instant case, the C.A has also given reason to support his advice, i.e., the assessee was having brought forward losses and hence the tax effect would be neutral. Hence the principle laid down by Hon’ble Supreme Court, in our view, would apply to the present case. The principle laid down by Hon’ble Supreme Court has been followed by the jurisdictional Hon’ble Bombay High Court in the case of Vijay Vishin Meghani (supra), wherein the delay of 2984 days of delay was condoned.

Accordingly, we are of the view that there was sufficient cause for the assessee in filing the appeal belatedly before Ld CIT(A). Accordingly, we condone the said delay. Since the Ld CIT(A) has not adjudicated the grounds urged on merits, we feel it proper to restore the appeal to his file for adjudicating the issues contested on merits. Accordingly, we set aside the order passed by Ld CIT(A), condone the delay in filing appeal before him and restore all the issues urged on merits to his file for adjudicating them, after affording adequate opportunity of being heard to the assessee.

We shall now take up the appeal filed by the assessee challenging the order passed by Ld CIT(A) confirming the penalty levied by AO u/s 271(1)(c) of 5 King Prawns Limited the Act. Since the quantum appeal has been restored to the file of the AO, the Ld A.R prayed that the issues urged in penalty appeal may also be restored to the file of Ld CIT(A) for adjudicating them afresh after disposal of the quantum appeal. We find merit in the submissions of Ld A.R., as the decision taken by Ld CIT(A) in quantum appeal may have effect on the penalty appeal. Accordingly, we set aside the order passed by Ld CIT(A) in the penalty appeal and restore the same to his file for adjudicating it afresh after disposal of quantum appeal.

In the result, both the appeals of the assessee are treated as allowed for statistical purposes. Order has been pronounced in the Court on 24.10.2018.