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Facts
The assessee's case for AY 2020-21 was initially processed under Section 143(1) of the Income Tax Act, resulting in an intimation with adjustments. Subsequently, the case was selected for scrutiny, and a final assessment order was passed under Section 143(3). The assessee initially did not appeal the 143(1) intimation, believing it would be covered by the scrutiny assessment; however, they later filed an appeal against the 143(1) intimation with a 135-day delay, which the CIT(A) rejected as time-barred and not maintainable due to the merger of the 143(1) intimation with the 143(3) order.
Held
The ITAT upheld the CIT(A)'s decision, ruling that an appeal against an intimation under Section 143(1) is not maintainable once a final assessment order under Section 143(3) has been passed, as the 143(1) intimation merges with the 143(3) order and loses independent force. The Tribunal also agreed that the assessee failed to demonstrate 'sufficient cause' for the 135-day delay in filing the appeal. However, the Tribunal granted liberty to the assessee to raise issues arising from the 143(1) intimation in the appeal against the 143(3) assessment order before the CIT(A), if such an appeal exists.
Key Issues
Whether an appeal against an intimation under Section 143(1) is maintainable after a scrutiny assessment under Section 143(3) has been passed; and whether the assessee showed sufficient cause for condoning the delay in filing the appeal.
Sections Cited
Section 143(1) of the Income Tax Act, 1961, Section 143(2) of the Income Tax Act, 1961, Section 143(3) of the Income Tax Act, 1961, Section 144B of the Income Tax Act, 1961, Section 250 of the Income Tax Act, 1961, Section 249(2) of the Income Tax Act, 1961, Section 249(3) of the Income Tax Act, 1961, Section 5 of the Limitation Act, 1963, Section 3 of the Limitation Act, 1963, Order 22 Rule 9 (2) of the Civil Procedure Code
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Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: SHRI G. S. PANNU & MS. MADHUMITA ROY
Appellant by : Dr. Rakesh Gupta, Adv. And Mr. Deepesh Garg, Adv. Respondent by : Shri T. James Singson, CIT-D.R. 27.06.2024 Date of Hearing 18.07.2024 Date of Pronouncement O R D E R PER MS. MADHUMITA ROY – JUDICIAL MEMBER :
The instant appeal filed by the assessee is directed against the order dated 06.12.2023 passed by the Ld. Commissioner of Income Tax (Appeals) – Addl/JCIT(A)-9, Mumbai under Section 250 of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) arising out of the intimation dated 23.12.2021 passed by the ADIT, Centralized Processing
Imperial Auto Industrial Ltd. vs. DCIT Asst.Year :2020-21 - 2 - Centre, Bengaluru under Section 143(1) of the Act for Assessment Year 2020-21.
The appellant’s case was selected for scrutiny under Section 143(3) of the Act by and under notice under Section 143(2) issued on 29.06.2021. The order of intimation under Section 143(1) of the Act was ultimately issued to the appellant on 23.12.2021 inter alia making adjustment of an aggregate amount of Rs.23,23,80,888/-. The assessment was finalized on 21.09.2022 under Section 143(3) r.w.s 144B of the Act; upon assessment of income at Rs.152,67,30,446/- as against the returned income of Rs.127,51,22,620/- and refund was reduced to the tune of Rs.5,84,85,622/-. The solitary addition in the said assessment order was of Rs.1,92,26,836/- for variation in respect of cess disallowance.
The appellant was under bonafide belief that since the assessment proceeding has already been started, all claims and contentions would be examined during the course of assessment proceeding for the impugned year and thus did not pursue the remedy against the impugned intimation under Section 143(1) of the Act dated 23.12.2021 to avoid multiplicity of proceedings. Subsequently, when the assessment order was passed under Section 143(3) r.w.s 144B of the Act dated 21.09.2022, it was found from the computation of assessed income that reduction in refund and aggregate variation became Rs.25,16,07,826/- in assessed income even when the addition in assessment order was only Rs.1,92,26,836/- was due to the impugned order under Section 143(1) of the Act dated 23.12.2021
Imperial Auto Industrial Ltd. vs. DCIT Asst.Year :2020-21 - 3 - where the income was computed under Section 143(1)(a) at Rs.150,75,03,610/- upon making adjustment of Rs.23,23,80,990/- then the assessee found that the correct remedy is to pursue appeal against said order under Section 143(1) of the Act dated 23.12.2021 and appeal was filed before the First Appellate Authority against the said order. However, the said appeal was not admitted by the Learned CIT(A) as the plea of the assessee was not found to be bonafide and after thought too. Moreso, even after considering the relaxation/grace period granted by the Hon’ble Supreme Court in Misc. Application Nos. 29 of 2022 having regard to the Covid-19 pandemic, the appeal before the Learned CIT(A) was barred by limitation by 135 days. Further that, the intimation order under Section 143(1) got merged with the order under Section 143(3) of the Act and thus the said appeal was found not maintainable by the Learned CIT(A). Hence, the instant appeal before us.
Learned CIT(A), as it appears from the order impugned observed the following while rejecting the appeal preferred by the assessee :
“3.4. I have carefully considered the explanation of the appellant in support of its delay in filing of appeal. In the present case, since the appellant is claiming bona fide bellef it is for them to establish that they were entitled to hold such a belief based on interpretation of law as pronounced by any judicial fora. In the case of Interscape vs. Commissioner of Central Excise, Mumbai-1 [2006 (198) ELT 275 (T- Mum)) dated 13/09/2005, it has been held that "Bona fide belief is not blind belief and a belief can be said to be a bonafide belief only when it is formed after all reasonable considerations are taken into account. This statement of the appellant appears to be an afterthought considering the fact that the appellant is one of India's largest
Imperial Auto Industrial Ltd. vs. DCIT Asst.Year :2020-21 - 4 - homogenous manufacturer of the fluid transmission products and automobile parts in India, with its joint ventures with Japanese and Other Foreign countries. Also considering its stature and the battery of consultants and professional advice, the reasons given does not come under reasonable cause as prescribed under the Act. An appeal has to be filed within the stipulated period, prescribed under the Law. Belated appeals can only be condoned, when sufficient reason is shown for delay and the delay of each day is explained Here, the appellant is a company, well aware of Income Tax proceedings, including filing of the appeal against the intimation/assessment order. Further, from the contents of the petition filed by the assessee for condonation of delay, it is seen that the appellant has chosen not to file the appeal against the intimation u/s 143(1) of the Act, because, it can pursue an alternative remedy available of representing its case before the AO on the belief that it can get a favourable order from the AO. Once, the assessment order passed by the AO, went against the appellant, then the appeal was filed against the intimation u/s 143(1) of the Act. which is clearly evident from the facts admitted by the appellant. Therefore, from the above sequence of events, it is very clear that subsequent filing of the appeal against the intimation u/s 143(1) of the Act, is only an afterthought. Thus, there is no merit in the reasons given by ) the appellant in the petition for condonation of delay in filing of the appeal. Be that as it may, coming back to the legal position evolved by the decision of various High Courts, including the Hon'ble Supreme Court in number of cases, where it has been, time and again, held that 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 seek their remedy promptly. within the time bound prescribed under the Act. As regards, the case law relied upon by the assessee, it may be stated that there is no law or mandate in the Act, to condone the delay in each and every case. But, it depends upon all facts of each case and the reasons given for condonation of delay. Therefore, one has to go by the facts of its own case and the reasons given by the petitioner for condonation of delay. The Hon'ble Apex Court in the case of Maji Sinnemma Vs Reddy Sridevi 2021 SSC online SC 1260 dated 16/12/2021, has held as under.
Imperial Auto Industrial Ltd. vs. DCIT Asst.Year :2020-21 - 5 - "Even though limitation may harshly affect the rights of a party, but it has to be applied with all its rigour when prescribed by the statute. The expression sufficient cause cannot be liberally interpreted if negligence in action or lack of bonafide is attributed to the party. If the court starts condoning delay where no sufficient cause is made out by imposing conditions, then that would amount to violation of statutory principle and showing utter disregard to logistics". Recently, the Hon'ble Supreme Court in the case of Ajay Dabra vs Pyare Ram & Ors arising out of SLP (C) No. 15793/2019 dated 31/01/2023 dismissed the delay condonation applications filed under Section 5 of the Limitation Act, 1963, declining to condone a delay of 254 days, because the reasons assigned for the condonation were not sufficient reasons for condonation of the delay. I am further fortified by the decision of the Hon'ble Supreme Court in the case of Balwant Singh (Dead) vs Jagdish Singh & Ors, dated 08/07/2010, where it has held in para 6 that "Law of limitation may harshly affect a particular party but it has to be applied with all its rigour when the statute so prescribed and the courts have no power to extend the period of limitation on equitable grounds". The decision supra also holds that Section 5 of the Limitation Act are to apply para materia, Section 3 of the Limitation Act requires that suits or proceedings instituted after the prescribed period of limitation shall be dismissed. However, in terms of Section 5, the discretion is vested in the Court/Appellate Authority to admit an appeal or an application, after the expiry of the prescribed period of limitation, if the appellant shows sufficient cause for not preferring the application within the prescribed time. The expression sufficient cause' commonly appears in the provisions of Order 22 Rule 9 (2), CPC and Section 5 of the Limitation Act, thus categorically demonstrating that they are to be decided on similar grounds. 3.5. Further, in the present case, the appellant cannot cite Covid-19 pandemic to the reasonable cause which prevented it from filing the appeal in time since the instant appeal has been filed even beyond the relaxation granted by the Hon'ble Supreme Court. From the facts of the case it is clear that the statutory right to appeal which was vested with Imperial Auto Industrial Ltd. vs. DCIT Asst.Year :2020-21 - 6 - the appellant was not exercised within the stipulated time u/s. 249(3) of the Act. Thus, it is clearly a case of lapse and is a direct result of deliberate inaction on the part of the appellant. In view of the above, the delay of 135 days in filling of appeal in this case is not condoned as no "sufficient cause" has been shown under section 249(3) of the Income Tax Act for the appellants failure to file the appeal within prescribed period of limitation u/s 249(2) of the Act r.w.s 5 of the Limitation Act. Since, the delay in filing of appeal has not been condoned, consequently the appeal of the appellant becomes non-est and therefore the same is not admitted. Keeping in view the facts and circumstances and the decision of the Honourable Courts and also the fact that since the appeal of the appellant is not admitted, the grounds of appeal raised by the appellant are not adjudicated on merit and the appeal is Dismissed.
4. Without prejudice to the above, it may be stated that the prominent question that arises from the current factual matrix involved in this appeal is whether the intimation order u/s 143(1) survives when the subsequent order u/s 143(3) of the Act has been passed. In view of the ratio laid down by the Hon'ble Apex Court in the case of Commissioner of Income Tax Vs. Gujarat Electricity Board (2003 ITR (Vol.260) 84) and in view of the other judicial rulings, once the assessment order is passed u/s 143(3) of the Act, the intimation order u/s 143(1) of the Act gets merged/subsumed with the order u/s 143(3) of the Act and therefore after such merger, the intimation order u/s 143(1) does not survive. In the instant çase too, an assessment order u/s 143(3) of the Act has been passed on 21/09/2022. wherein the income as per 143(1) of the Act has been considered, the intimation order u/s 143(1) of the Act dated 23/12/2021 gets merged with the said assessment order and therefore the said intimation order does not survive. Sinice, the present appeal has been preferred against intimation order u/s 143(1) dated 23/12/2021 which does not survive under the statue, the appeal against such order is also not' maintainable and is to be dismissed. In the result, this appeal is dismissed.”
Imperial Auto Industrial Ltd. vs. DCIT Asst.Year :2020-21 - 7 - 5. At the time of hearing of the instant appeal, the Learned Counsel appearing for the assessee submitted before us that a direction may please be given that the grievances arising out of the intimation order under Section 143(1) of the Act on account of various adjustment/disallowances may please be decided on merit in appeal against the order passed under Section 143(3) of the Act by the Learned CIT(A). On the other hand the Learned DR while relying upon the order passed by the Learned CIT(A) submitted before us that the assessee is not been prejudiced by the order of intimation as the same has culminated in the final order of assessment under Section 143(3) of the Act. Once the order under Section 143(3) of the Act is passed the order of intimation lost its force and got merged with the final order of assessment under Section 143(3) of the Act.
We have heard the rival contentions made by the respective parties and perused the materials available on record. After careful consideration of the entire aspect of the matter, we find that when the order under Section 143(3) of the Act is passed by the AO, the order of intimation under Section 143(1) of the Act naturally got merged with the same and the said order independently lost its force. Therefore, the appeal preferred by the assessee against the said intimation order under Section 143(1) of the Act is correctly not found maintainable. If the appeal is not maintainable the same cannot be admitted by the CIT(A). In that view of the matter, the order passed by the Learned CIT(A) is found to be just and proper so as not to warrant interference. However, having regard to Imperial Auto Industrial Ltd. vs. DCIT Asst.Year :2020-21 - 8 - the principle of fair play we would like to grant liberty to the assessee to agitate the issues arising out of the said intimation order under Section 143(1) of the Act before the Learned CIT(A), culminated in the final order of assessment under Section 143(3) of the Act which has been appealed against before the Learned CIT(A), if so advised.
With the aforesaid observations, the appeal preferred by the assessee is dismissed.
However, these observations may not be treated as a precedent.