PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 vs. VERSATILE POLYTECH PVT. LTD.

ITA 371/2022 & 526/2022

Page 1 of 19 pages

$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI %

Judgment reserved on: 24.11.2023

Judgment pronounced on: 12.12.2023 + ITA 371/2022 & CM APPL. 42496/2022

PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2

..... Appellant

Through: Ms Hemlata, Jr. Standing Counsel for

Mr Sanjay Kumar, Sr. Standing

Counsel.

versus

VERSATILE POLYTECH PVT. LTD.

..... Respondent

Through: Mr Gaurav Jain and Mr Shubham,

Advs.

+ ITA 526/2022 & CM APPL. 53804/2022

PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2

..... Appellant

Through: Ms Hemlata, Jr. Standing Counsel for

Mr Sanjay Kumar, Sr. Standing

Counsel.

versus

VERSATILE POLYTECH PVT. LTD.

..... Respondent

Through: Mr Gaurav Jain and Mr Shubham,

Advs.

CORAM:

HON'BLE MR. JUSTICE RAJIV SHAKDHER

HON'BLE MR. JUSTICE GIRISH KATHPALIA

[Physical Hearing/Hybrid Hearing (as per request)] Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 2 of 19 pages

GIRISH KATHPALIA, J.: CM APPL. 42496/2022 in ITA 371/2022 CM APPL. 53804/2022 in ITA 526/2022

ITA 371/2022 & 526/2022

Page 3 of 19 pages

(respondent herein) pertaining to the Assessment Years 2009-10 and 2014- 15 were dismissed. The appeal registered as ITA 371/2022 was instituted on 27.05.2022, while the other appeal registered as ITA 526/2022 was instituted on 20.05.2022 in the Registry of this court, as per filing logs.

Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 4 of 19 pages

Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 5 of 19 pages

7.1 As stipulated in Section 260A(1) of the Act, from every order passed by the Income Tax Appellate Tribunal, an appeal shall lie to the High Court if the High Court is satisfied that it involves a substantial question of law. The provision under Section 260A(2) of the Act mandates that the revenue or the assessee, aggrieved by any order passed by the Tribunal may file an appeal to the High Court within 120 days from the date on which the order appealed against is received by the aggrieved party. By way of Finance Act, 2010, brought into effect from 01.10.1998, sub-section (2A) was inserted in Section 260A of the Act and the same lays down that the High Court may admit an appeal after expiry of 120 days, if it is satisfied that there was sufficient cause for not filing the appeal within time. As held in plethora of judicial pronouncements dealing with the provision under Section 5 Limitation Act, the expression “sufficient cause” must be construed liberally in favour of the defaulting applicant so that the dispute could be decided as far as possible on merits and not on defaults. It has also been held in various precedents that in cases involving governmental bodies the court must keep in mind that owing to the impersonal State machinery, delays and defaults on the part of government must be accepted with latitude to a certain extent.

7.2 At the same time, law on the expression “sufficient cause” while dealing with limitation questions evolved also to the extent that the concepts of liberal interpretation and substantial justice cannot be over stretched to render the law of limitation otiose, especially where the court finds absolutely no justification for the delay in question. While looking for “sufficient cause” as an explanation of delay, the court must bear in mind that expiration of limitation period for filing an appeal gives rise to a Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 6 of 19 pages

substantive right in favour of the successful litigant to treat the subject order or decree as final and binding between the parties.

7.3 The condonation of delay being the discretionary power, the exercise of discretion must be guided by sufficiency of cause and degree of acceptability of the explanation irrespective of the length of delay, in the sense that for want of sufficient cause or an acceptable explanation, delay of shortest period may not be condoned while if the explanation is satisfactory and acceptable, long delay of years can be condoned. The court must keep in mind the distinction between an “explanation” and an “excuse”. An explanation is designed to give someone all of the facts and lay out the cause for something, and it helps to clarify the circumstances of a particular event, allowing the person to point out that something which has happened is not his fault. Between “explanation” and “excuse”, there is a distinction which, though fine, is real. An “excuse” is often offered by a person to deny responsibility and consequences when under attack and it is sort of a defensive action. Calling something as just an “excuse” would imply that the explanation proffered is believed not to be true.

7.4 In the case of Finolux Auto Pvt. Ltd. vs Finolex Cables Ltd., 136 (2007) DLT 585 (DB), a Division Bench of this court held thus: “6. In this regard, we may refer to a decision of the Supreme Court in P.K. Ramachandran vs State of Kerala, IV(1997) CLT 95 (SC). In the said decision, the Supreme Court has held that unless and until a reasonable or satisfactory explanation is given, the inordinate delay should not be condoned. In para 6 of the judgment, the Supreme Court has laid down in the following manner: “Law of Limitation may harshly affect a particular party Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 7 of 19 pages

but it has to be applied with all its rigour when the statute so prescribes and the Courts have no power to extend the period of limitation on equitable grounds. The discretion exercised by the High Court was, thus, neither proper nor judicious. The order condoning the delay cannot be sustained. This appeal, therefore, succeeds and the impugned order is set aside. Consequently, the application for condonation of delay filed in the High Court would stand rejected and the Miscellaneous First Appeal shall stand dismissed as barred by time. No costs.”

(emphasis is ours)

7.5 In the case of Pundlik Jalam Patil (dead) by LRs vs Executive Engineer Jalgaon Medium Project, (2008) 17 SCC 448, while dealing with the issue of condonation of delays on the part of the governmental bodies in filing the appeals, the Supreme Court held thus: “31. It is true when the State and its instrumentalities are the applicants seeking condonation of delay they may be entitled to certain amount of latitude but the law of limitation is same for citizen and for Governmental authorities. Limitation Act does not provide for a different period to the government in filing appeals or applications as such. It would be a different matter where the Government makes out a case where public interest was shown to have suffered owing to acts of fraud or collusion on the part of its officers or agents and where the officers were clearly at cross purposes with it. In a given case if any such facts are pleaded or proved they cannot be excluded from consideration and those factors may go into the judicial verdict. In the present case, no such facts are pleaded and proved though a feeble attempt by the learned counsel for the respondent was made to suggest collusion and fraud but without any basis. We cannot entertain the submission made across the Bar without there being any proper foundation in the pleadings”. (emphasis is ours)

7.6 The concepts of “liberal approach” and “reasonableness” in the exercise of discretion by the courts in condoning delay were again considered by the Hon'ble Supreme Court in the case of Balwant Singh(dead) vs Jagdish Singh & Others, (2010) 8 SCC 685, holding thus: Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 8 of 19 pages

“25. We may state that even if the term “sufficient cause” has to receive liberal construction, it must squarely fall within the concept of reasonable time and proper conduct of the party concerned. The purpose of introducing liberal construction is normally to introduce the concept of “reasonableness” as it is understood in its general connotation.

…. 35. The expression “sufficient cause” implies the presence of legal and adequate reasons. The word “sufficient” means adequate enough, as much as may be necessary to answer the purpose intended. It embraces no more than that which provides a plentitude which, when done, suffices to accomplish the purpose intended in the light of existing circumstances and when viewed from the reasonable standard of practical and cautious men. ….. 36. ….The party shows that besides acting bonafide, it had taken all possible steps within its power and control and had approached the court without any unnecessary delay. The test is whether or not a cause is sufficient to see whether it would have been avoided by the party by the exercise of due care and attention.” (emphasis is ours) 7.7 In the case of Union of India vs C.L. Jain Woollen Mills Pvt. Ltd., 131 (2006) DLT 360, one of the arguments of the applicant Union of India seeking condonation of delay in filing the appeal was that the power to Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 9 of 19 pages

condone delay has been conferred to do substantial justice and the court should adopt a liberal approach and the delay resulting from official procedures should normally be condoned. This court rejected the argument, placing reliance on the judgment in the case of P.K. Ramachandran (supra) and observed that although the provisions under Section 5 Limitation Act have to receive liberal construction, but the court cannot ignore the fact that where an appeal gets barred by time, a definite right accrues to the opposite party and such right should not be taken away in a routine manner without disclosure of good and a sufficient cause for condonation of delay.

7.8 As regards the delays in appeals filed by the government departments on account of impersonal official machinery, this court dealt with the issue in the case of Union of India vs Wishwa Mittar Bajaj & Sons, 141 (2007) DLT 179 and held thus: “41. It is well settled that administrative delays which are urged by the respondents have to be properly and adequately explained. Negligence or indifference on the part of the authority or its officers in pursuing a matter cannot be condoned simply because the applicant is a State or government undertaking. The law of limitation remains the same and certainly there cannot be two laws, one governing the State and the other governing individuals. Cryptic and routine explanations for condonation of delay cannot be accepted as adequate explanation or sufficient cause for condonation of delay. (Re: DDA vs Ramesh Kumar) This Court in several judgments has noted the manner in which matters are proceeded with utmost casualness on the part of the State and its officials. In this behalf, in a decision rendered on 2nd December, 1988 reported as UOI vs Mangat, noticing the judgments of the Apex Court where delay was condoned observed thus: “4. ...The Supreme Court was thus concerned with isolated cases of said aberrations. What we are facing in this Court is a spate of delayed appeals without any proper Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 10 of 19 pages

and convincing explanation or even an attempt in doing so. It is a common experience of Benches of this Court that the condonation applications are in a cyclostyled form and only the dates and days are filled in hand. The stay applications are also mechanically drafted and are in one standard cyclostyled form. Usually, the appeals are filed with defects. After the Registry points out the defects, the defects are not removed for months together. We do not think that the Supreme Court judgments can be usefully availed of by the Union of India in the colossal situation of negligence and delays as we find in this Court. In fact, it appears that the liberal approach of the higher courts and the understanding of the difficulties of the Government departments shown by the courts have not been appreciated in its proper perspective by the Government departments. Nobody in the Government Department feels any responsibility or takes any responsibility for the delay caused in the movement of files. There is no conscious and systematic efforts to keep the deadline of limitation in view and to speed up the disposal at various stages. If a serious effort is made in the Government Departments to fix the responsibility on the persons causing delay the present sorry state of affairs can be rectified substantially within short time. Occasionally, important questions of law or principles of compensation or heavy financial stakes are involved in land acquisition matters. The agencies of the Government involved in the acquisition, unfortunately, seems to be completely oblivious of these considerations. In some cases there is great urgency of acquisition of land for urgent developmental projects. They are likely to be frustrated by the habitual negligence of Government departments. 5. The practical problem in the day to day cases is how to reconcile the two principles laid down by the Supreme Court, namely - (i) the doctrine of equality before law demands that all litigants including the State as litigant should be accorded the same treatment and the law is administered in an even-handed manner, and (ii) it would perhaps be unfair and unrealistic to put Government and private parties on the same footing in all respects in such matters. The Supreme Court in the judgments referred to above had observed that the State should not be given step-motherly treatment. If all the petitions of condonation of delay filed in the large number of cases are to be Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 11 of 19 pages

accepted, as requested by the Government Advocate, a citizen would naturally complain that the State is being given a „son-in-law‟ treatment. In State of M.P. & Ors vs Vishnu Prasad Sharma & Ors. AIR 1996 SC 1593 at page 1598 the three Judges Bench of the Supreme Court observed: “In interpreting these provisions the court must keep in view on the one hand the public interest which compels such acquisition and on the other the interest of the person who is being deprived of his land without his consent.” The Supreme Court further held: “the provisions of the statute must be strictly construed as it deprives a person of his land without his consent.” A golden rule for reconciliation of these conflicting considerations would be to use the discretion with common sense. Extreme positions of either not condoning the delay howsoever negligible it may be or to condone the delay howsoever large and unjustifiable it may be should be avoided. The discretion has to be exercised on the basis of the facts of each case with common sense and public interest in view.” (emphasis is ours)

7.9 Recently, in the case of The State of Madhya Pradesh vs Bherulal, (2020) 10 SCC 654, the Hon’ble Supreme Court observed thus : “3. No doubt, some leeway is given for the Government inefficiencies but the sad part is that the authorities keep on relying on judicial pronouncements for a period of time when technology had not advanced and a greater leeway was given to the Government (Collector, Land Acquisition, Anantnag & Anr vs. Mst. Katiji & Ors. (1987) 2 SCC 107). This position is more than elucidated by the judgment of this Court in Office of the Chief Post Master General & Ors. v. Living Media India Ltd. & Anr. (2012) 3 SCC 563 where the Court observed as under: “27) It is not in dispute that the person(s) concerned were well aware or conversant with the issues involved including the prescribed period of limitation for taking up the matter by way of filing a special leave petition in this Court. They cannot claim that they have a separate period of limitation when the Department was possessed with competent persons familiar with court proceedings. In the absence of plausible and acceptable explanation, we are posing a question why the delay is to be condoned mechanically merely because the Government or a Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 12 of 19 pages

wing of the Government is a party before us. 28) Though we are conscious of the fact that in a matter of condonation of delay when there was no gross negligence or deliberate inaction or lack of bonafide, a liberal concession has to be adopted to advance substantial justice, we are of the view that in the facts and circumstances, the Department cannot take advantage of various earlier decisions. The claim on account of impersonal machinery and inherited bureaucratic methodology of making several notes cannot be accepted in view of the modern technologies being used and available. The law of limitation undoubtedly binds everybody including the Government. 29) In our view, it is the right time to inform all the government bodies, their agencies and instrumentalities that unless they have reasonable and acceptable explanation for the delay and there was bonafide effort, there is no need to accept the usual explanation that the file was kept pending for several months/years due to considerable degree of procedural red- tape in the process. The government departments are under a special obligation to ensure that they perform their duties with diligence and commitment. Condonation of delay is an exception and should not be used as an anticipated benefit for government departments. The law shelters everyone under the same light and should not be swirled for the benefit of a few”. (emphasis is ours)

7.10 Most recently on 23.08.2023 this court in the case of Principal Commissioner of Income Tax-4 vs National Fertilizers Ltd, 2023:DHC:6017-DB recapitulated the legal position as discussed above, observing that despite anguish expressed by courts at all levels through various judicial pronouncements, no change in the work attitude of the officials of some of the government departments has taken place. It was further held that the legislature under Section 260A of the Act has already granted comparatively much longer period of 120 days to the aggrieved Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 13 of 19 pages

party to file an appeal, which in itself is a factor calling for a rather stricter scrutiny of the factual matrix set up by the delayed appellant in order to explain the delay in filing the appeal.

ITA 371/2022 & 526/2022

Page 14 of 19 pages

revenue to extend covert advantage to the assessee by filing the appeals with inordinate delay and that too, without any application seeking condonation of the delay. Be it the former or the latter, we find no reason in the present case to extend any further latitude to the appellant/revenue at the cost of frustration of the assessee, who certainly had reasons to believe across this period of three years that the revenue had accepted the decision of the Tribunal.

10.1 As mentioned above, even according to the appellant/revenue, the copy of the impugned common order was received in the office of PCIT (Central-2) on 11.04.2019; that being so, limitation period to file these appeals was to expire on 09.08.2019, but for reasons best known to the revenue and not disclosed before this court, scrutiny of the impugned common order was done only on 06.08.2019. And thereafter, just a day before expiry of limitation period, a draft was sent to the Standing Counsel on 08.08.2019. Even thereafter, the draft appeal was received back by the revenue after an unexplained hiatus of two months on 03.10.2019.

10.2 Further, according to the appellant/revenue, after signatures the memo Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 15 of 19 pages

of appeal was sent to the Standing Counsel on 14.10.2019 for being filed in court. It has not been disclosed as to when the said earlier appeals were filed, though it has been stated by appellant/revenue that the said appeals were withdrawn on 12.02.2021 with liberty to file fresh appeals. As reflected from order dated 12.02.2021, when counsel for the appellant/revenue sought permission to withdraw those appeals with liberty to file afresh, learned counsel for the respondent/assessee strongly objected to grant of liberty, but the coordinate bench was pleased to allow liberty to file the appeals afresh on account of technical defects in those appeals. Despite having withdrawn those appeals in such circumstances on 12.02.2021, the appellant/revenue filed the present appeals after a delay of more than one year on 27.05.2022.

10.3 Coming to the explanation of time spent between 12.02.2021 (when earlier appeals were withdrawn) and 27.05.2022 (when the present appeals were filed), the explanation rendered on behalf of the appellant/revenue is that after withdrawal of the earlier appeals, it is only on 06.01.2022 that legal opinion of the Standing Counsel was sought. There is not even a whiff of explanation as to why it took almost one year for the appellant/revenue to seek legal opinion from Standing Counsel, that too when earlier the appeals had already been filed but had to be withdrawn merely on account of technical defect.

10.4 Further, after obtaining the legal opinion on 10.01.2022, it took further two months for the CIT to scrutinize the impugned common order on 09.03.2022 so as to direct the Standing Counsel to prepare draft appeal. The Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 16 of 19 pages

said draft appeal also took another period of 02 months for being placed before the concerned officer of the revenue for signatures and the same was filed on 27.05.2022. There is not even a whisper, explaining the delays on these stages as well, especially in the light of the previous stages enumerated above.

10.5 Evidently, in the name of submitting through affidavits the sufficient cause to explain delay in filing the appeals, the appellant/revenue has presented merely a chronology of dates and stages, that too with prolonged vacuum periods. The same cannot be treated as an explanation of delay, much less setting up of circumstances which were beyond the control of the appellant/revenue, thereby precluding it from filing the appeals in time.

ITA 371/2022 & 526/2022

Page 17 of 19 pages

Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified

ITA 371/2022 & 526/2022

Page 18 of 19 pages

ITA 371/2022 & 526/2022

Page 19 of 19 pages

the view taken by the apex court on such issues in the case of Bherulal (supra). But sadly, there appears no change. We still would prefer to remain hopeful that some serious soul searching would be done by the revenue by way of a meticulous enquiry to rule out if in such cases the defaults were tailored to extend a covert help to the rival side, and to ascertain the fault lines.

ITA 371/2022 & ITA 526/2022

(GIRISH KATHPALIA) JUDGE

(RAJIV SHAKDHER) JUDGE

DECMBER 12, 2023/RY Digitally Signed By:VAISHALI CHAUHAN Signing Date:12.12.2023 18:37:57 Signature Not Verified