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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘SMC’ LUCKNOW
Before: SHRI T.S. KAPOOR
This is an appeal filed by the assessee against the order of ld. CIT(A)-1, Lucknow dated 14.09.2020. The revised grounds of appeal filed by the assessee are reproduced below: “1. The learned CIT (Appeals) - 1, Lucknow (hereinafter referred to as Learned CIT-A erred on facts and in law in passing the order impugned dated 14.09.2020 and by directing the AO - ITO (Exemption), Lucknow to make an ad hoc addition/ disallowance of Rs 5,00,000/- by invoking section 69A read with sec. 115 BBE out of an amount Rs. 25,71,750/- which was amounts representing fully accounted. 2. The Learned CIT A has been completely misled in sustaining an ad hoc disallowance of Rs. 5,00,000/- which was included in the cash sales of molasses waste of 25,71,750/- made to small farmers and kashtkars used for soil enriching sodic preventive manure in their fields and as fuel for firings of brick kilns and was included in the Income Expenditure account and formed part of the income found covered vide the provisions of sec 11 ipso facto. 3. The Learned C!T A has passed the order impugned by making ad hoc disallowance of Rs. 5,00,000/- as per contents of para 5.5 (page 25 of the said Order) by loosely alleging that "A perusal of the details submitted by the Appellant shows that it is not fully substantiated. In
some cases the address is incomplete or details of land holdings are not clear" However there is no such specific point nor any particular information pointed out which was allegedly needed by the CIT(A) to describe the details furnished as ".. .not fully substantiated...". 4. The learned CIT(A) has erred in law and on facts, by being misled to make any addition u7s 69A, let alone an ad hoc addition of Rs 5,00,000/- when there is no rejection of Books of account nor any dispute about Purchase amounts nor of the Sales disclosed nor about the quantity of Molasses waste sold by Appellant and where the Sales is only allowed through State Government /permit, in a short time span being a environmentally harmful and toxic waste, hence has to be disposed off promptly to eliminate risk of Air and Water pollution and to eliminate toxicity in civil habitation) 5. The order impugned of Learned CIT(A) is bad in law on the set of peculiar facts since the same addition of Rs 5,00,000/- in the original assessment order dated 26.12.2019 was based on sec. 68 but the Learned CIT (Appeals) has instead upheld the disallowance to be covered u/s 69A when the Appellant assailed the applicability of sec 68. 6. The Learned CIT(A) erred in law and on peculiar facts found in the present case in making addition u/s 69A of Rs 5,00,000/- which is beyond the vires, intent, purpose and scope of sec. 69A especially when all Sales and Purchases ( including of Rs 5,00,000/-) was already found in the Bank statement and as accounted Sales in books of account duly audited 7. Without Prejudice to the Grounds taken above: the CIT Appeals erred in law and on facts by choosing to ignore that in law, once sec 12A is granted the provisions of section 11 becomes applicable fully and there cannot be any part-by-part or piecemeal applicability and sec. 11 cannot be read to contemplate disallowance of the very Receipts which are covered u/s 11 per se. 8. The learned CIT Appeals erred in law in passing the impugned order dated 14.09.2020 as an arbitrary exercise of discretion being contrary to the intent purpose and scope of sec 68/69A read with sec 11 and 12A which cannot be countenanced on the principles of law, justice, fairplay.”
The ld. AR at the outset invited my attention to the fact that there is a delay in filing the appeal of 301 days which had happened due to a mistake of understanding the process and a bona fide mistake committed without any benefit gained or unfair advantage to the assessee. The delay has occurred due
to inadvertent and wholly misguided mistake on the part of the assessee and its team of advisors. In this respect my attention was invited to detailed petition for condonation of delay and after placing reliance on a couple of decisions it was prayed that delay in filing the appeal may be condoned. In the petition for condonation of delay in filing the appeal, the assessee has submitted as under: 5) Ignorant and naive the Appellant did not / could not however even claim the benefit of Sec 11 in spite of registration u/s 12A and all other matters on record to allow the benefit of sec. 11. 6) After the assessment order dated 26.12.2019 assailed in appeal, the CIT (Appeals) order dated 14.09.2020 upheld the claim of sec. 11 but gave directions to the learned AO to make ad hoc additions of Rs. 500000/-. The directions were carried out by the Learned AO who passed orders u/s 251/143 (3) dated 30.03.2021 communicated by him on 23.07.2021 with DIN : ITBA/GEA/S/91/2021- 22/1034590360(1). 7) The Appellant was under a genuine belief that the it will be this consequential order u/s 251/143(3) passed by the AO (on directions of the CIT - Appeals) that has to be awaited. And in case of appeal period to file appeal will start from the date of communicating this order communicated on 23.07.2021 by learned AO, Exemption Ward. 8) There has been a mistake of understanding the process and a bona fide mistake committed without any benefit gained or unfair advantage to the appellant. An inadvertent and wholly misguided mistake on its part and its team of advisers then is therefore sought to be considered favourably by the Hon'ble Tribunal. 9) This mistake based on ignorance of law more specifically of the rules governing the conduct of the case for the very first time may therefore be condoned. 10) The new set of counsels engaged have explained that this mistake has to be shown and proved before the Hon'ble ITAT condones the delay and allows to admit the appeal. 11 )That without bringing a plethora of judgements and case laws on the issue of ignorance of law and/or mistake of the counsel it may be opportune to just cite inter alia the case of Motilal Padampat Sugar Mills vs. state of U.P. and Others 118 ITR 324 (SC) in the context may kindly be considered. "it must be remembered that there is no presumption that every person knows the law. It is often said that everyone is presumed to
know the law, but that is not a correct statement: there is no such maxim known to the law." And then further by quoting "....in Martindala v. Faulkner(3); "There is no presumption in this country that every person knows the law: it would be contrary to common sense and reason if it were so". Scrutton, also once said: "It is impossible to know all the statutory law, and not very possible to know all the common law." But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans v. Bartlem(l)"___the fact is that there is not and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse, a maxim of very different scope and application." And with regard to the case of Mst Katiji v Add Land Acq, Officer 167 ITR 471 (SC) "1, Ordinarily a litigant does not stand to benefit by lodging an appeal late. 2. 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. 3. "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 pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, 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. 5. 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. 6. It must be grasped that 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". 12) The pleas of Ignorance of law is specifically being pleaded here as shown and a sworn Affidavit in the absence of any technically verifiable proof and in terms of Rule 10 of ITAT Rules, 1963 to show the intention of the Appellant is enclosed for the purposes Exhibit 1.
13) Notwithstanding the facts above, it may kindly also be considered that due to Covid related restrictions for not only affecting the functioning of the Tribunal but also due to difficulty in accessing any professional assistance and guidance and as applied to the public including that to the Appellant may also be considered in condoning this wholly unintentional delay.”
The ld. DR do not have any objection to the application for condonation of delay and finding the reason for delay justified, the delay was condoned and ld. AR was asked to proceed with his arguments. 4. The ld. AR submitted that the ld. CIT(A) has though substantially allowed relief to the assessee against the order passed by the Assessing Officer in the assessment order, but he has upheld an amount of Rs.5.00 lacs which is on adhoc basis as the ld. CIT(A) has not stated as to in which case there were in complete details of land holding. The ld. AR submitted that the assessee is an association of person which had deposited certain amount in the bank account during the demonetization period and which was explained out of corpus donations and sale of molasses. The ld. CIT(A) though admitted about the facts of assessee having sold molasses but partly sustained the addition without any basis which may be deleted. 5. The ld. DR on the other hand relied on orders of authorities below. 6. I have heard the rival parties and have perused the material available on record. I find that the Assessing Officer had made the addition on account of cash deposits in Bank account amounting to Rs.45,70,000/-. The assessee explained to ld. CIT(A) that the cash generated by the assessee was on account of donations and sale of molasses to farmers. The donations to the extent of Rs.9,98,260/- were accepted by the ld. CIT(A) whereas out of sale of Rs.25,71,750/-, the ld. CIT(A) upheld the addition to the extent of Rs.5.00 lacs by holding that a perusal of the details submitted by the appellant shows that it is not fully substantiated and in some cases the addresses is incomplete or the details on land holding are not clear. While sustaining the part addition, the ld. CIT(A)
has not specified any defects in the submission of the assessee and has made general observation which is not sustainable in law. Therefore, the addition sustained by the ld. CIT(A) is deleted and Ground Nos. 1 to 4 are allowed. 7. The ld. AR has not argued Ground No.5 and therefore this ground has not been adjudicated and in view of our findings, Ground No. 5 to 8 have become infructuous and therefore the same are dismissed. 8. In the result, the appeal of the assessee is partly allowed.
(Order pronounced in the open court on 26/04/2022) Sd/- (T.S. Kapoor) Accountant Member Aks/– Dtd. 26/04/2022
Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant Registrar