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Income Tax Appellate Tribunal, B Bench, Mumbai
Before: Shri R.C. Sharma & Shri Amarjit Singh
O R D E R Per R.C. Sharma, AM These are the appeals filed by two different assessees against the order of the CIT(A)-32, Mumbai for assessment years 2002-03 to 2004-05 in M/s. Movement Impex Trading Co./A C I T - 21(1) the matter of order passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter “the Act”).
In these appeals assessee are aggrieved by the action of the CIT(A) for not condoning the delay in filing the appeals and for not deciding the issue on merits. M/s. Movement Impex Trading Co. was a proprietary concern of Mr. Mahesh Shah up to 30/09/2001. With effect from 1st October 2001, it was converted into a partnership firm and engaged in export of goods mainly to African countries. M/s. Manhattan Exports is also a group concern. It was contention of assessee before the lower authorities that the accounts and tax work was being looked after by his employee Mr.Jitendra R Shah, who remained seriously ill and therefore, could not file the appeal in time. In support of the illness, our attention was also invited to the medical certificate filed before the lower authorities. After long illness Mr. Jitendra R Shah expired and his death certificate also placed on record.
Rival contentions have been heard and record perused. The CIT(A) has dismissed the assessee’s appeal by not condoning the delay in filing the appeals. The CIT(A) has also not decided the issue on merits. In support of sufficient reasons for delay in filing appeal before the CIT(A), the assessees have also filed affidavits which reads as under: - “I, Shri Mahesh Mohanlal Shah, son of Shri Mohanlal Shah, aged about 53 years and presently residing at 1/17, 705-706, Indradarshna, Oshiwara New Link Road, Andheri West, Mumbai - 400 053, do hereby solemnly affirm and declare as under:
1. 1. THAT I am a Partner of M/s. Movement Impex Trading Co. ["the firm”] having its Registered Office at 20, Makharia House, 1st Floor, Shraddhanand Road, Vile Parle (East), Mumbai - 400 057.
2. THAT I started the business of export in the year 1989 under my proprietary concern, M/s. Movement Impex Trading Co. This business was converted into partnership firm from 1st October 2001 by inducting Mr. Milan Shah (my brother), as another partner.
3. THAT the nature of our business is such that, during the material time, I was required to travel to African Countries where substantial part of M/s. Movement Impex Trading Co./A C I T - 21(1) my goods were exported. We deal mainly in export of cotton fabrics where all the goods are sold on clean credit and the credit period extends up to 6 months.
4. THAT the nature of my business also requires me to travel around India to source cotton fabric material and get it processed. The job of processing is done at Ahmedabad, Jetpur, etc. whereas the source of raw material is from Tirupur, Somanur and other places in South India.
THAT I had employed Shri Jitendra R. Shah since inception of my business. He was looking after some office administrative work and handling our accounts, tax, sales tax etc. of my business as well as of all sister concerns and family members numbering about 8 accounts.
THAT in the initial period of my business, there were lots of uncertainties and difficulties and, during that period, Shri Jitendra R. Shah always stood by me in all such difficult times, taking care of our group accounts and also looking after other office administrative work.
Shri Jitendra R. Shah suffered from various ailments due to his bad habits resulting into hyper tension, liver problem, lungs problem, etc. A copy of medical certificate is attached as Annexure - '1’. His problems aggravated around the year 2003 - 2004 and it led to his absenteeism from the job for a substantial period of time. A copy of his Ledger Account and Salary Statement, depicting frequent and prolonged absence is attached as Annexure - "2'.
8. THAT since he was very capable and had, over the years, proved his loyalty and trust towards our family, we supported him and allowed him to come to the office as his health permitted. 9. 'HAT, in the meantime, due to his long absence from work, we had hired a computer operator, who looked after the accounts by posting all the accounting entries in the books of accounts on computer. However, finalization of the accounts and discussion with the consultants of the concerns was always left to Shri Jitendra. As per the need, he also visited the Income Tax Office / Sales Tax Office during our assessment proceedings, etc.
THAT things were smoothly running in our organization and whenever any order or notice of any nature from the Income Tax Department was received or whenever Advance Tax, Self Assessment Tax were to be paid or TDS to be deducted in case of our entire group, which consisted 8 entities, Shri Jitendra R. Shah was the only person who handled the work and co-ordinated with our consultants as well as with the Department and we never faced any problem.
11. THAT it appears that two assessment orders of the firms, for A.Y. 2002 - 2003 and A.Y. 2004 - 2005 and one assessment order of M/s. Manhattan Exports for A.Y. 2004 - 2005 were delivered to the office on or around M/s. Movement Impex Trading Co./A C I T - 21(1) 8/9 December 2006, disallowing the claim u/s. 80HHC of Income - tax Act, 1961.
THAT the above assessment orders were received from Income Tax Department by the office boy, Mr. Rakesh Joshi on 08.12.2006 [late afternoon] (acknowledgement signed by him) and, he handed over the un - opened envelopes to Shri Jitendra R. Shah on the next day. Shri Jitendra R. Shah, being the only person who dealt with such matters, was required to act on such assessment orders by sending the same to our Tax Consultants.
THAT it appears that these envelopes containing orders were thereafter opened by Shri Jitendra and were recovered from a file, which was lying in his drawer. He was to forward these orders to the Consultants for further action.
THAT due to sudden health deterioration of Shri Jitendra R. Shah, he did not come to the office on the very next day i.e. on Monday 11th December 2006 after that Saturday and could resume office only in the last week of June 2007 for finalization of the accounts.
15. THAT he was paid last salary for the month of November, 2006 and thereafter no salary/remuneration was given to him because he did not turn-up till the last week of June 2007 when he resumed office only for finalization of accounts.
THAT similar addition u/s. 80HHC was made by A.O. in the case of the firm, pertaining to A.Y. 2003 - 2004 for which assessment order was received on 27th June 2006. The same was forwarded by Jitendra Shah to our group Consultant, M/s. Majithia Associates, Chartered Accountants, in the month of June 2006 itself for filling appeal and the appeal was filed on 06.07.2006, that is, on time.
THAT appeal against the two assessment orders of the firm and one assessment order of M/s. Manhattan Exports, received on 8th/9th December 2006, were required to filed because the additions were made by the AO on the same grounds 1 u/s 80HHC as made in the Assessment Order for A.Y. 2003 -2004 in case of the Firm. In any case, this very issue was being contested by all exporters and there were varied conflicting decisions on this very aspect, involving multiplicity.
THAT it appears that the two Assessment Orders of the firm that is, for A.Y.2002 - 2003 and 2004 - 2005 and one assessment order of M/s. Manhattan Exports, that is, for A.Y. 2004 - 2005, as mentioned above, remained unnoticed in the drawer of Shri Jitendra R. Shah, unattended and unknown to myself or my brother, Shri Milan M. Shah, because immediately from the next working day, after receiving the order, Shri Jitendra Shah did not attend the office till June 2007 due to bad health.
THAT when Shri Jitendra R. Shah resumed our office for the short period in June 2007, it was only for the purpose of finalizing the M/s. Movement Impex Trading Co./A C I T - 21(1) accounts and coordinating with the Chartered Accountants. Also, as a result of bad health, he was only looking after important work and did not sit in the office for a long time. Also, due to his perennial problem, he somewhat appeared to have lost temporary memory as appeared from his response during the discussion and his interaction with us and our Tax Consultants. He suffered from bad health due to liver, lung infections and hyper tension and all this made him feel feeble and other problems of temporary memory loss as appeared from his work style. He was unmarried and loner.
THAT due to continuous bad health, Shri Jitendra died at age of 59 years in January, 2012, on account of the above perennial problems.
THAT the documents were never forwarded to the assessee and the fact of such an assessment was never known until appeal order in case of Shri Mahesh Mohanlal Shah (Proprietor of Movement Impex Trading Co) was received in respect of AY 2000-2001 and AY 2001-2002 vide order dated 16th March 2012. It was only at the time that while trying to ascertain the status of appeals of these years, the drawer came to be opened on around 23.03.2012 and it was found that three envelopes containing Assessment Orders received by him were recovered from a file, which was lying in his drawer.
THAT even when Shri Jitendra R. Shah was intermittingly coming to the office, already one computer operator was handling the accounts, and, as such, our organization did not find the need to find a substitute for Shri Jitendra R. Shah because atleast the work of finalizing the accounts and attending the Income Tax etc. and coordinating with the Chartered Accountants were carried out by him.
THAT the three orders found in the drawer of Shri Jitendra R. Shah were duly handed over to the Chartered Accountants of the group in the last week of March 2012. On receipt, they advised us to immediately pay the appeal filing fees which was paid through a Challan dated 27th March 2012 and filed the appeal before the Office of CIT (A) on 16.04.2012.
During the above period, we were already contesting the appeal before various authorities for the same issue of section 80HHC, which was a matter of disallowance by the AO in the above three assessment orders as well. As such, there was no reason for us not to file appeal for the above three assessment orders, especially in view of the fact that the very same issue was already contested in all our group cases in appeal. Details of the appeals in our group cases during the above period, which included contesting the addition u/s. 80HHC, are enclosed with this affidavit as Annexure - '3’, this shows that Sec. 80 HHC addition was a live matter in the mind of the group and that it was only due to the inadvertent or forgetfulness or negligence on the part of Shri Jitendra R. Shah that such orders remained to be appealed.
M/s. Movement Impex Trading Co./A C I T - 21(1) 25. THAT Shri Jitendra R. Shah was associated with the group since 1989 when the group started business and he was honest, loyal and a faithful employee and therefore never thought to terminate his service.
I say that during this period, there was no correspondence with the Department for these years, except for formal intimation regarding the tax dues. However, the entire group was following the circular issued by the CBDT, being Circular No. 02 / 2006 and dated 17.01.2006, according to which all assessee having similar situation [appeal pending before CIT (A) on the aspect of disallowance u/s. 80HHC] were given relief by way of clearing the tax dues other the period of five years. As such, there was no occasion in between to get reminder about this honest lapse. I say that all that has been mentioned above is true to the best of my knowledge and belief.”
It was argued by learned AR that assessee started the business of export in the year 1989 under proprietary concern, M/s. Movement Impex Trading Co. This business was converted into partnership firm from 1st October 2001 by inducting Mr. Milan Shah (brother), as another partner. As per learned AR, the nature of business of assessee was such that assessee requires to travel around India to source cotton fabric material and get it processed. The job of processing is done at Ahmedabad, Jetpur, etc. whereas the source of raw material is from Tirupur, Somanur and other places in South India.
5. Learned AR further contended that Mr. Jitendra R Shah was working with the assessee since inception. He was looking after office administrative work and handling accounts, tax, sales tax etc. of business as well as of all sister concerns and family members numbering about 8 accounts. After receipt of order from AO, when the appeal was due to be filed to the CIT(A) Shri Jitendra Shah suffered from various ailments resulting into hyper tension, liver problem, lungs problem, etc. A copy of medical certificate is attached as Annexure - '1’. His problems aggravated around the year 2003 - 2004 and it led to his absenteeism from the job for a substantial period of time.
M/s. Movement Impex Trading Co./A C I T - 21(1)
6. The learned A.R. further contended that exactly similar issue has been decided by the CIT(A) in favour of the assessee vide order dated 16th March, 2012 in the case of group concern Mahesh M. Shah for assessment years 2000-01 and 2001-02. As per learned A.R. no appeal has been preferred by the Department against the order of the CIT(A). A latter was also placed by the learned A.R. in respect of Movement Impex Trading Co. in the matter of 5086 & 5085/Mum/2013 as well as in the case of Manhattan Exports in the matter of ITA No. 5087/Mum/2013.
7. Rival contentions have been heard and record perused. From the record we find that the assessees are basically aggrieved for computation of deduction under Section 80HHC. The assessees were consistently claiming this deduction. However, during the years the assessees did not file the appeal before the CIT(A) within the stipulated period. The CIT(A) therefore, dismissed the appeals on the plea of delay. The CIT(A) was not convinced with the reasons filed for delay. However, he has not dealt with the merits of the disallowance so made by the AO while computing addition under Section 80HHC.
We have also carefully gone through the affidavit filed explaining the reasons for delay. As per the reasons for delay, we observe that delay was basically due to long illness of assessee’s accountant was not looking after his tax matters. The medical certificate so placed on the record clearly establish the long illness of the accountant who suffered from various ailments resulting into Hyper tension, liver problem, lungs problem etc., After long illness, the accountant expired and his death certificate is also placed on record. Considering the reasons so filed for delay, we are satisfied that there was a reasonable cause and in the substantial interest of justice delay is to be condoned.
M/s. Movement Impex Trading Co./A C I T - 21(1)
The Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. MST Katji & Others (167 ITR 471) observed that: “The legislature has conferred the power to condone delay by enacting sec 5 of limitation Act in order to enable the courts to do substantial justice to parties disposing of matter 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 sub serves the ends of justice that being the life purpose of the existence of the institution of court. It is common knowledge that this court has been making 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: (i) Ordinarily, a litigant does not stand to benefit by lodging an appeal late. (ii) 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. (iii) "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 and pragmatic manner. (iv) When substantial justice and technical considerations 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 a non-deliberate delay. (v) 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. (vi) It must be grasped that the 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.”
10. Furthermore, the Hon'ble Supreme Court in the case of N. Bal Krishnan v/s. M. Krishnamurthy - [(1998) 7 SCC 123] observed that:
M/s. Movement Impex Trading Co./A C I T - 21(1)
“The primary function of a court is to adjudicate the dispute between the parties & to advance substantial justice. The time limit fixed for approaching the court in different situations is not because on the expiry of such time a bad cause would transform in to a good cause. Rules of limitation are not meant to destroy the rights of parties. They are meant to see that parties do not resort to dilatory tactics, but seen their remedy promptly. Law of limitation is thus founded on public policy. It is enshrined in the maxim "interest republic up sit finis lithium" (it is for general welfare that a period be put to litigation). Rules of limitation are not meant to destroy the rights of the parties. There is no presumption that delay in approaching the court is always deliberate. In every case of delay, there can be some lapse on the party 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 fides or it is not put forth as per of a dilatory strategy, the court must show utmost consideration to the suitor.”
In the case of Concord of India Insurance Co. Ltd. v. Smt. Nirmala Devi AIR 1979 SC 1666, the 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 said delay can be condoned. Eventually, an overall view in the larger interest of justice has to be taken. None should be deprived of adjudication on merits unless the Court of law or the Tribunal/Appellate Authority finds that the litigant has deliberately and intentionally delayed filing of the appeal that he is careless, negligent and his conduct is lacking in bona fides.
12. Applying the proposition laid down in the above judicial pronouncements and keeping in view the substantial interest of justice we condone the delay in filing the appeals before CIT(A). 13. We also observe that the issue on merit is squarely covered in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of Topman Export. From the record we find that assessment order for all the years in the case of the assessee as well as that of the other group concerns M/s. Movement Impex Trading Co./A C I T - 21(1) were attended by the Accountant, Shri Jitendra R. Shah, who was not well, therefore irregular in attending the work and because of ill health had become forgetful. Ultimately the said account died on 2nd January, 2012. The relevant death certificate is also placed on record. The assessee has also filed medical certificate to the effect that the Accountant was sick, therefore could not attend the work. Since it was the work of the Accountant to look after the tax matter and attending the office of the concerned Chartered Accountant, because of his illness the same could not be done. We found that the Accountant of the assessee has handed over the orders for assessment years 2000-01 and 2001-02 to the concerned Chartered Accountant for further appeals in for all the assessment years in respect of all proprietary concerns and got relief as per the judgement of the Apex Court in the case of Topman Export 342 ITR 49. A copy of the order of the CIT(A) for assessment years 2000-01 & 2001-02 in respect of these years are placed on record. We find that the decision of the Hon'ble Supreme Court was delivered on 08.02.2012, judgment was reported on 26.03.2012 in part 2 of ITR Volume 342 wherein the order of the Hon'ble Bombay High Court relied on by AO in the case of IPCA Laboratory 266 ITR 521, was set aside and Supreme Court has followed the formula laid down in the case of CIT vs. Ravindranathan Nair 295 ITR 228 (SC).
14. In the substantial interest of justice, when the issue is clearly covered by the decision of the Hon'ble Supreme Court and the delay was sufficiently explained by placing on record the medical certificate and death certificate of the concerned accountant looking after the matter, matter required to be restored back to the file of CIT(A) for deciding on merits. As per our considered view the word “sufficient cause” should receive better construction so as to advance substantial justice where no negligence or want of bonafide influence the case of the assessee. Accordingly we condone the delay and restore the matter back to the file of the CIT(A) for M/s. Movement Impex Trading Co./A C I T - 21(1) deciding the issue afresh on merits in terms of the decision of the Hon'ble Supreme Court in the case of Topman Exports (supra).
In the result, the appeals filed by the assessees are allowed in part for statistical purposes.
Order pronounced in the open court on 25th July, 2018.