RELIANCE INDUSTRIES LTD,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX LARGE TAXPAYER UNIT, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI B.R.Baskaran, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA no.5073/Mum/2017 (Assessment Year :2005-06) Reliance Industries Ltd. Maker Chambers, IV, 3rd Floor, 222,Nariman Point, ……………. Appellant Mumbai-400021 PAN-AAACR5055K v/s

DCIT, Large Taxpayer Unit, 29th Floor, Centre No.1, ……………. Respondent World Trade Centre, Cuffe Parade, Mumbai-400005 Assessee by : Shri Arvind Sonde Revenue by : Shri Jacinta Zimik Vashai-CIT-DR

Date of Hearing-05.04.2018 Date of Order-02.05.2018 O R D E R PER: SANDEEP GOSAIN, JUDICIAL MEMBER.

The present appeal has been filed by the assessee against the order of the Ld. CIT(A)-1, Mumbai, dated 15/05/2017 and pertains to AY 2005-06, wherein, the CIT(A) has dismissed the appeal filed by the assessee on the ground that the same was filed beyond the prescribed period of limitation and thus the delay in filing the appeal was not condoned. The grounds of appeal read as under:-

ITA no.5073/Mum./2017 Reliance Industries Limited 1. The Learned Principal Commissioner of Income Tax (Appeals)-1 (hereinafter referred to as "Pr. CIT(A)") erred in law and on facts in refusing to condone the delay in filing the appeal before him within the time limit stipulated under Section 249(2) and thereby in dismissing the appeal in limine without going into the merits of the case. 2. The Pr. CIT(A) erred in not appreciating the 'sufficient cause' demonstrated to him for condonation delay in filing in appeal under Section 249(3) in correct perspective The Appellant submits that it was prevented by sufficient cause and on the facts of the case, the Pr. CIT(A) ought to have condoned the delay in filing appeal. 3. The Pr. CIT(A) erred in law and on facts in sustaining the action of the Assessing Officer of levying interest u/s 234B of the Act in respect of disallowance confirmed by the Hon'ble ITAT to the total income of the appellant, in view of the retrospective amendment made by the Finance Act 2011 with effect from 01/04/2005 in section 11 5JB of the Act, by deleting clause (iv) to Explanation 1 of sub-section (2) to section 11 5JB of the Act.. 4. Your Appellant reserves the right to add, amend, alter or vary all or any of the above grounds of appeal as they or their representatives may think fit.”

ITA no.5073/Mum./2017 Reliance Industries Limited the same was filed before the Ld. CIT(A) after a delay of one year and six months. After considering the case of both the parties had dismissed the appeal on the ground of limitation as the ld. CIT(A) was not convinced that assessee was having a „sufficient cause‟ for not filing the appeal within the prescribed period.

“4. During the course of appellate proceeding, appellant made submissions which are summarized as under - I. Appellant submitted that it had filed its return of income on 28.10.2005 declaring the income at Rs 1323,20,78,513 under the normal provisions of the Income Tax Act, 1961. (Act) and book profit at Rs 5715,11,93,129 as per section 115JB of the Act. While computing income under normal provisions of the Act, no deduction was claimed u/s 80HHC based on the sun-set provisions contained in

ITA no.5073/Mum./2017 Reliance Industries Limited section 80HHC (TB) of the Act. However, since no corresponding amendment [similar to section 80HHC (IB)] was made In section 115JBof the Act, the Appellant, while computing hook profit, claimed 100% deduction of export profits u/s 80HHC of the Act, without applying the provisions contained in section 80HHC (IB). II. Appellant further submitted that assessment proceeding u/s 143(3) of the Act had been completed vide order dated 22.02.2008 assessing the income at Rs. 2561,21,49.200 under the normal provisions of the Act and book profit at Rs 9072,25,39,190. The additions made to the book profit u/s 1153B of the Act inter alia includes the disallowance of deduction with respect to profit eligible for deduction u/s 80HHC of the Act. Being aggrieved, the Appellant. filed an appeal before Hon'ble Commissioner of Income Tax (Appeal) [CIT(A)j. The Hon'ble CIT(A) disposed off the appeal vide his order dated 31.10.2008 confirming the disallowance of deduction of profit eligible for deduction u/s 80HHC the Act, while computing book profit u/s 115JB of the Act. The disallowance of deduction was confirmed in the light of the provisions of clause (iv) of Explanation to 115JB read with section 80HHC (IS) of the Act. Against the order of Hon'ble CIT(A), the Appellant filed an appeal before the Hon'ble ITAT, iii. Appellant contended that the Appellants appeal against the order of Hon’ble CIT(A) has been dismissed by the Hon’ble ITAT vide order dated 13.09.2013. The ITAT held that in view of the amendment made In section 115JB by the Finance Act 2011 with retrospective effect from 01.04.2005, the clauses (iv) to (vi) of Explanation to section 115JB of the Act has been omitted and consequently the provisions of section 115JB have been brought at par with the provisions of section 80 HHC (IB) of the Act. Accordingly, the ITAT confirmed the action of the AO in not allowing the deduction of profit eligible for deduction u/s 80HHC of the Act, while computing book profit u/s 115JB of the Act. The Appellant did not prefer any further appeal to the High Court. The order giving effect to the Hon'ble ITAT's order has been passed by the AO vide his order dated 30.12.2014 (received on 12.01.2015), wherein he levied interest u/s 234B of the Act on the tax amount on the hook profit computed as a result of the disallowance of deduction of profit eligible for deduction u/s 80HHC the Act. The Appellant did not contest the same before the appellate authority. iv. Appellant further contended that subsequently, an appeal of the Appellant arising out of decision of the CIT(A) in passing the rectification order for AY 2005-06 [in pursuance of application filed by the AO in order to give effect to the amendment made by the Finance Act 2009 with retrospective effect from 01.04.2001 brought into section 115JB of the Act subsequent to the date of the order of the learned CIT(A)] has been decided by the Hon'ble ITAT vide its order dated 03.06.2016 (received on 12.07.2016). The said ITAT appeal involved the issue of addition-of provision for doubtful debt while computing the book profit as per section 11536 of the Act in view of the aforesaid retrospective amendment. During the course of the 4

ITA no.5073/Mum./2017 Reliance Industries Limited proceedings before the Hon'ble ITAT an additional ground was filed w.r.t levy of interest u/s 234B on the additions confirmed in view of retrospective amendment made by the Finance Act 2011 with effect from 01/04/2005 in section 115JB of the Act by deleting clause to Explanation 1 of sub-section (2) to section 115JB of the Act. The said Appeal has been partly dismissed by the Hon'ble ITAT confirming the addition of provision for doubtful debt while computing the book profit u/s 1151B of the Act. However, in the said order the Hon'ble ITAT gave a categorical finding that no interest u/s 234B of the Act shall be levied on the additional tax due to the addition to book profit in respect of 'provision for doubtful debt' as a consequent to a retrospective amendment to the Act. However, the said ITAT order was silent on non-levy of interest u/s 234B in respect of addition to book profit on account of disallowance of deduction of profit eligible for deduction u/s 80HHC of the Act, as a consequent to a retrospective amendment to the Act. V. It was submitted that after receiving the aforesaid ITAT order dated 03.06.2016 (received on 12.07.2016), the Appellant realized that on the identical sets of facts, while giving effect to the ITAT order dated 30.12.2014 the AO ought to have not levied the interest u/s 234B of the Act on account of retrospective amendment made in the law (i.e. on the tax liability arising due to the disallowance of deduction of profit eligible for deduction u/s 80HHC of the Act, while computing book profit u/s 115JB of the Act). On realizing the same, the Appellant immediately filed an appeal before CIT(A) against the action of the AO in levying the interest u/s 2345 of the Act. From the above narrated facts, CIT(A) would appreciate that the Appellant's appeal is delayed since appellant was under a bona fide belief that the learned ITAT would give a general direction/ruling with respect to non- levy of interest u/s 234B as a consequent to a retrospective amendment in the Act and the same would not be restricted to issue specific (i.e. only w.r,t. provision for doubtful debt). The Appellant immediately filed an appeal on receipt of the FIAT order dated 03.06.2016 for AY 2005-06 wherein it was held that interest u/s 234B is not leviable on additional tax payable due to retrospective amendment. In view of the above facts, the Appellant submitted that the delay in filing the appeal before CIT(A) is due to 'sufficient cause" within the meaning of section 249(3) of the Act. VI. In this regard, appellant also submitted that the expression "sufficient cause or reasons" as provided in the sub-section (3) of section 249 of the Act is used in identical position in the Limitation Act 1963, and in Civil Procedure Code. Such expression has also been used in other sections of the Income Tax Act such as section 253, 259, 260A, etc. Based on, the authoritative pronouncement from Hon'ble Apex Court in the case of Collector of land acquisition vs Mst. Katiji & Othrs [167 ITR 471 SC] , it is an admitted position that the words "sufficient cause" appearing in sub-section (3) of section 249 of the Act should receive a liberal construction so as to advance substantial justice. The Apex court opined that when technical consideration and substantial justice are pitted against each other, 5

ITA no.5073/Mum./2017 Reliance Industries Limited the courts are expected to further the cause of substantial justice, This is because an opposing party, in a dispute, cannot have a vested right in injustice being done because of a non-deliberate delay. Therefore, it submitted that while considering matters relating to the condonation of delay, judicious and liberal approach is to be adopted. it is further submitted that in every case of delay where there has been some lapse on the part of the litigant concerned, this alone is not enough to turn down the plea and to shut the door against him. If "sufficient cause" is found to exist, which is bona-fide, one, and not due to negligence of the assessee, the delay needs to condoned in such cases. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the explanation. Further, it has been held by the courts that the length of delay is immaterial. It is the acceptability of the explanation by the assessee and that is the only criteria for condoning the delay. Thus it is submitted that the expression 'sufficient cause' is adequately elastic to enable the courts to apply law in a meaningful manner, which sub-serves the end of justice. 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. Thur., the term 'sufficient cause' should receive liberal construction to advance substantial justice. In support of the above contention the appellant relied on plethora of judgments. In light of the above, appellant submitted that the delay in filing the appeal may be condoned and case may be decided on merit.” 5. Ld AR also relied upon the judgements in support of his contentions and also submitted that even otherwise the assessee has a very good case on merits. The assessee had raised the grounds on merits before Ld. CIT(A) to the effect that the interest levied by the AO u/s 234B of the Act is liable to be deleted on account of retrospective amendment in the Act. In this respect, Ld. AR relied upon the various judgements passed by the Hon‟ble Supreme Court, Hon‟ble High Courts as well as Hon‟ble ITAT in order to support his case on merits.

ITA no.5073/Mum./2017 Reliance Industries Limited 6. On the other hand, ld. DR relied upon the order passed by Ld. CIT(A).

4.1. I have considered the facts and circumstances of the case, gone through the assessment. order of the A.0 and the submissions of the appellant and also discussed the case with the AR of the appellant. The contentions and submissions of the appellant are being discussed and decided here in under: i. Appellant submitted that Hon'ble FAT vide its order dated 3.6.2016 have decided the issue of levy of interest u/s 234B with reference to the provision for doubtful debts but the order is silent on non-levy of interest U/S 234B in respect of 80HHC. Accordingly this appeal was filed against the order of the AO which has been claimed to be the sufficient cause for condonation of delay. In this regard it is noted that the appellant had raised an additional ground before Hon`ble ITAT (vide paragraph 15 of ITAT order dated 3.6.2016) with regard to chargeability of interest u/s 234B on addition relating to "provision for doubtful debts" which was decided by Hon’ble FIAT. No such ground was raised by the

ITA no.5073/Mum./2017 Reliance Industries Limited appellant for levy of interest U/S 234B with reference to 80HHC. Even on an earlier occasion during the course of proceedings before Hon’ble ITAT (vide order dated 13.09.2013) no such ground was raised. Thus the appellant has not availed two opportunities available to it for agitating this issue which shows gross negligence on its part. Appellant is a corporate house assisted by qualified professionals and hence it was duty bound to adhere to the time limits prescribed by the statute. ii. Appellant further submitted that it was under a bonafide belief that ITAT could give a general direction with reference to non--levy of interest U/5 2345 and same would not be restricted to the specific issue of provision for doubtful debt. This contention of the appellant is not acceptable since before Hon'ble ITAT (order dated 3.6.2016), the only ground raised by the appellant was relating to the provision for doubtful debts and hence there was no occasion for Hon'ble ITAT to deliberate on the issue of non-levy of interest u/S 234B with reference to section 80HHC. Thus the reason that appellant had bonat7de belief expecting any such direction is completely misfounded. iii. Under these circumstances, I am not satisfied that the appellant had sufficient cause for not presenting his appeal within a Period of 30 days permitted u/s.249(2). For this, I am supported by the judgement of Hon'ble Supreme Court in the case or Rankak & Others vs Reva Coal Fields Ltd [AIR 1962 (SC) 361}, where the Hon'ble Apex Court have held that the party has to show reason for delay on the last date of limitation and thereafter for each day since condonation is not a matter of right Further in the case of Ornet Properties vs. ITO [312 ITR 193] and CIT vs. Reliance Capital Ltd [322 ITR 252], it was held by Hon'ble Bombay High Court: that inordinate delay in

ITA no.5073/Mum./2017 Reliance Industries Limited filing appeal are not condoned since dormant claims cannot he given new life. The Hon'ble High Court further clarified that those who sleep over their rights for a prolonged period cannot claim equity iii justice. Also in the case of Airlines Rotabies Ltd. 54 taxnmann.com 28 Hon'ble Bombay High Court held that if the explanation is found to be concocted or demonstrates thorough negligence in prosecuting the cause, then, it. would be a legitimate exercise of discretion not to condone the delay. On similar facts the Hon'ble Ii Al, Mumbai in the case of Prashant Project Ltd Vs DCIT 37 taxmann.com 137 have observed that adopting a liberal view in condoning delay is one of the guiding principles in the realm of belated appeals, but liberal approach cannot be equated with a license to file appeals at will-disregarding the time-limits fixed by the Statutes. The Hon’ble court further held that a corporate- assessee, filing returns of income of lac5 Of Rupees and assisted by highly qualified professionals couldn't take. umbrella of ignorance of the provisions of law. Also in the case of Dr. G..G.Diiir Vs DCIT 41 taxmann.com88, Hon’ble Allahabad High Court hove held that where delay in filing of appeal was due to negligence of assessee, application for condonation of delay was to be rejected. Also, in the case of Venkatesh Paper ST Boards vs, DCIT [98 ITD 200], the Hon’ble Chennai FIAT have held that for condonation of delay u/s,249(3), the appellant should have sufficient cause and has to prove that there has been diligence on its part and was not guilty of negligence whatsoever and further the cause for delay in filing appeal which by due care and attention could have been avoided cannot be sufficient case within the meaning of these provisions. Hon'ble IIAT after considering the decision of Hon’ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katji (19 and seven) 167 1TR 471 observed: "While deciding the prayer for condonation of delay, the Court

ITA no.5073/Mum./2017 Reliance Industries Limited cannot ignore or give a go-by to the basic principle that the burden to prove the existence of sufficient cause Is always on the assessee and there is no presumption that the delay occasioned ,in the filing of the appeal, is always bona fide and the condonation of delay is not the matter of course. The law of limitation is prescribed by the Income-tax Act under the provisions of section 249(3) of the Act which envisages that there should have been a sufficient cause for not presenting the appeal within that period as prescribed, where the applicant has failed to show sufficient cause for condonation of delay, the application for condonation of delay is liable to be rejected" Similar observation were made by Hon’ble ITAT Chennai Bench in the case of DCIT vs Jaya Publication [309 ITR (AT)245] Further, the Hon’ble Punjab and Haryana High Court in the case of CIT v. Ram Mohan Kabra [2002] 257 ITR 773 held that it is a settled principle of law that the provisions relating to specified period of limitation must be applied with their rigour and effective consequences. Iv. In view of We facts and legal position as discussed above, I am satisfied that there was no "sufficient cause" as provided under section 249(3) for filing appeal beyond the prescribed time limit and hence the delay in filing appeal is not condoned. Consequently the appeal is not admitted.”

ITA no.5073/Mum./2017 Reliance Industries Limited should be to the satisfaction of the Court. The expression “sufficient cause or reasons” as provided in sub-section (5) of section 253 of the Act is used in identical position in the Limitation Act 1963, and in CPC. Such expression has also been used in other sections of the Income Tax Act such as section 273, 274, etc. Keeping in mind, the authoritative pronouncement from Hon‟ble Apex Court, it is admitted position that the words “sufficient cause” appearing in sub-section (5) of section 253 of the Act should receive a liberal construction so as to advance substantial justice. It must be remembered that in every case of delay, there can be some lapses on the part of the litigant concern. That alone is not enough to turn down the plea and to shut the doors against him, unless and until, it makes a mala-fide or a dilatory statutory, the court must show utmost consideration to such litigant. Further the length of delay is immaterial, it is the acceptability of the explanation and that is the only criteria for condoning the delay.

ITA no.5073/Mum./2017 Reliance Industries Limited where delay has occurred for “bona fide reasons” on the part of the assessee or the Revenue in filing the appeals. In matters concerning the filing of appeals, in exercise of the statutory right, a refusal to condoned the delay can result in a meritorious matter being thrown out at the threshold, which may lead to miscarriage of justice. 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.

ITA no.5073/Mum./2017 Reliance Industries Limited institution of the courts. When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred. This means that there should be no malafide or dilatory tactics. Sufficient cause should receive liberal construction to advance substantial justice. The Hon‟ble Apex Court in Collector, Land Acquisition vs Mst. Katiji & Ors. (167 ITR 471) observed as under:-

“3. The legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de 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 subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the others courts in the hierarchy.”

ITA no.5073/Mum./2017 Reliance Industries Limited that the expression “sufficient cause” should receive liberal construction.

“Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life-span for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finis litium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time. A court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words "sufficient cause" under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi lain Vs. Kuntal Kumari [AIR 1969 SC 575] and State of West Bengal Vs. The Administrator, Howrah Municipality [AIR 1972 SC 749]. It must be remembered that in every case of delay there can be some lapse on the part 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 part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the explanation. While condoning delay the Could should not forget the opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation 14

ITA no.5073/Mum./2017 Reliance Industries Limited expenses. It would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss.” 13. In another case, the Hon‟ble Madhya Pradesh High court in Mahaveer Prasad Jain vs CIT (1988) 172 ITR 331 (MP) held that applicant cannot be made to suffer for the negligence of his counsel by following the decision from Hon‟ble Apex Court in Rafiq vs Munsilal (AIR 1981 (SC) 1400). Identically, in Y.P. Trivedi vs JCIT (2014) 059 (II) ITC 0450, it was held that the assessee should not suffer and a bona-fide mistake has to be condoned.

ITA no.5073/Mum./2017 Reliance Industries Limited considered to be consequential in nature. Therefore, we are of the view that there is merit in the contentions of the assessee that the delay was for sufficient reason. Therefore, the delay on the part of the assessee in filing appeal before Ld. CIT(A) deserves to be condoned. Accordingly, we condone the said delay and the appeal is remanded back to the file of Ld. CIT(A) to decide the appeal filed by the assessee on merits. It is needless here to mention that before passing the order of assessment, Ld. CIT(A) shall provide sufficient opportunity of hearing to the assesse. Before parting, we may make it clear that our decision to restore the matter back to the file of Ld. CIT(A) shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the Ld. CIT(A) independently in accordance with law. Resultantly, these grounds of the assessee are allowed for statistical purposes.

ITA no.5073/Mum./2017 Reliance Industries Limited In the net result, appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the Open Court on 02.05.2018

Sd/- Sd/- B.R. BASKARAN SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 02.05.2018

Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file.

By Order Shekhar Private Secretary (Dy./Asstt.Registrar) ITAT, Mumbai