NOVA INTERGRATED SYSTEMS LTD,MUMBAI vs. DCIT 1(3)(2), MUMBAI

On the other hand, learned CIT DR opposed the prayer of the learned AR and contended that assessee itself in its return of income has accepted the loss on abandonment of project as capital in nature which was also accepted by AO vide order dated 06/01/2015 passed u/s.143(3). Under these facts and circumstances, there was no reason for filing any appeal against the order of AO. It was also submitted that decision of the Kolkata High Court was not of jurisdictional High Court, therefore cannot be made a sufficient reason for delay in filing appeal. He vehemently argued that such delay should not be condoned and CIT(A) has correctly dismissed the appeal for the delay.

We have considered rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements cited by learned AR and also relied upon the M/s. Nova Integrated Systems Ltd., order passed by the Hon’ble Supreme Court in the case of N. Balakrishnan dated 03/09/2018 wherein Hon’ble Supreme Court observed that rules of limitation are not meant to destroy right of party- ‘sufficient cause’ under Section 5 should receive liberal construction so as to advance justice.

From the record, we found that expenditure on abandonment project debited in P & L account was added back in the computation of income filed alongwith return of income, however, vide note no.4 of the notes forming part of the computation of total income, the assessee had duly furnished the relevant facts vis-à-vis project expenditure written off. Assessee’s return was accepted by the AO vide order dated 06/01/2015 u/s.143(3) of the IT Act. Thereafter, there was a judgment of Hon’ble Kolkata High Court in the case of Binani Cements Ltd., dated 23/03/2015, wherein Hon’ble Court held that expenditure on an abandonment project is revenue in nature and can be claimed as deduction in the year of abandonment of the project. Thus, decision of Hon’ble High Court was a ground even for filing of appeal before the CIT(A). However, there was a delay of 80 days in filing the said appeal as per CIT(A). As per CIT(A), there is no cogent reason for delay in filing the appeal, therefore, he dismissed the appeal on the ground of delay itself. The CIT(A) has not given any verdict on the merit of the assessee’s claim. As per our considered view the decision of Hon’ble High Court on a particular issue was sufficient cause for filing an appeal to claim such expenditure as revenue. Since assessee got aware of this judgment and thereafter filed M/s. Nova Integrated Systems Ltd., an appeal so as to make their claim for allowability of such expenditure, there occasioned a delay of 80 days. Hon’ble Supreme Court in case of Mst. Katiji & Ors [1987] 167 ITR 471 have held that for the substantial cause of justice delay in filing appeal should be condoned and appeal should be heard on merit. Precise observation was 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.

The Hon’ble Supreme Court in the aforesaid case further observed that :- “Ordinarily, a litigant does not stand to benefit by lodging an appeal late. 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. 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. 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. 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. 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.

M/s. Nova Integrated Systems Ltd., 7. Furthermore, the Hon'ble Supreme Court in the case of Vedabai Alia Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil 253 ITR 798 held that the court has to exercise the discretion on the facts of each case keeping in mind that in construing the expression 'sufficient cause', the principle of advancing substantial justice is of prime importance. The court held that the expression "sufficient cause" should receive liberal construction.

Following the judicial pronouncements laid down in the above decisions of Hon’ble Supreme Court vis-à-vis following decisions, delay deserves to be condoned. Accordingly, we restore the matter back to the file of the CIT(A) for deciding on merits. a. Chamanlal Bras Pvt Ltd v. The Punjab State (1961), 12 STC 643 (Punj.) b. Ashok Automobiles (Ranchi) Pvt Ltd, 174 ITR 566,567. c. K.S.P. ShanmugavelNadar, 153 ITR 596 (Mad.) d. BrijIndar Singh v. Kanshi Ram, AIR 1917 PC 156 e. AsiBai v. Gomathi, AIR 1979 Mad 115,116 f. Punjab State Co-operative Milk Producers Federation Ltd v. State of Punjab, (1999) 116 STC 324,326 (Punj.)

Furthermore, as per the provisions of Sub-section 6 of Section 250, order of the Commissioner-Appeals should be in writing and shall state the points for determining the decision there on and the reasons for decision. However, the order passed by CIT(A) cannot be set to be in terms of provisions of Section 250 sub-section 6 of the IT Act.