HASMUKH A SHAH (HUF),MUMBAI vs. ITO, WD-19(1)(5), MUMBAI

We note that there is delay of 2075 days in filing the present appeal. The Assessee has filed application seeking for condonation of delay in filing the appeal along with affidavit wherein it has been stated as under:

We have given thoughtful consideration to the relevant statement in the application provided by the Appellant for condonation of delay in filing the appeal. There is no reason to disbelieve the facts as stated in the above application. We note that initially appeal could not be filed on account of medical issues faced by the Karta of the Appellant who was suffering from cancer. While Assessment Year: 2013-14 the Appellant had paid fee on 25/02/2020, the Appellant could not arrange to get the appeal filed on account of COVID-19 pandemic. Subsequently, the karta of the Appellant passed away due on account of medical complications on 21/11/2022. The appeal could only be filed on 23/04/2024 after a delay of 2075 days of receipt of the order. In the case of Collector of Land Acquisition Vs. Mst. Katiji & others AIR 1987 1353 (SC) the Hon’ble Supreme Court has, while dealing with the issue of condonation of delay, emphasized that substantial justice should prevail over technical considerations. Every day’s delay must be explained does not mean that a pedantic approach should be adopted; and that the aforesaid doctrine must be applied in a rational common sense and pragmatic manner, more so, in circumstances where a litigant does not stand to benefit by lodging the appeal late (as is the case in appeal before us). Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold. 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. In the present case the bonafides of the Appellant are not under challenge. Keeping in view of the reasons stated in the application seeking condonation of delay, we condoned the delay of 2075 days in filing the present appeal and proceed to examine the issue on merits.

The relevant facts in brief are that the Appellant filed the return of income on 25/09/2010 declaring income on at Rs.5,50,668/- which was processed u/s. 143(1) of the Act. Subsequently, the reassessment proceeding were initiated in the case of the Appellant on the basis of information received from the investigation wing that the Appellant had booked bogus purchases and had claimed deduction for the same. In the said reassessment proceedings culminated into order dated Assessment Year: 2013-14 29/02/2016 passed under Section 143(3) 147 of the Act whereby an addition of INR 8,38,528/- was made on account of bogus purchases being 12.5% of the alleged bogus purchases of INR.67,08,214/-.

In appeal before the CIT(A), the Appellant contended that the Assessing Officer erred in making addition of 12.5% of bogus purchase without appreciating all related documents/details were furnished during the re-assessment proceedings. The alleged bogus purchases were duly recorded in the books of accounts and were supported by the invoices issued by the vendors and the payments reflected in bank statement. The goods purchased were sold and the sale was also recorded in books of accounts. The Appellant had filed statement showing one to one nexus between the goods purchased and sold. However, the aforeaid submission did not find favour with the Appellant and the appeal was dismissed by the CIT(A) vide order dated 16/05/2018.

The Appellant in now in appeal before us against the above order passed by the CIT(A).

On perusal of the order impugned we find that the Appellant had also made an alternative submission before the CIT(A) which has been reproduced in paragraph 3.2 [at page 6] of the order impugned and reads as under:

On perusal of the above, we find that the gross profits declared in respect of alleged non-genuine purchases were 3.65% whereas as the overall profits declared by the Appellant was 6.17%. However, the CIT(A) has not dealt with the aforesaid alternative plea. In our view, the alternative submissions merit consideration in view of the judgment of the Hon’ble Bombay High Court had, in case of Pr. CIT-17 vs. Mohammad Haji Adam & Co. [2019] 103 taxmann.com 459 (Bom). Keeping in view the overall facts and circumstances of the present case, we direct the Assessing Officer to restrict the addition to difference between the profit margin offered to tax on genuine purchases and the profit margin offered to tax on non-genuine purchases by the Appellant. In terms of the aforesaid, Ground No.1 raised by the Appellant is allowed.