SRI.INDUDHAR,DAVANGERE vs. INCOME TAX OFFICER, DAVANGERE

Per Shri Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the order dt.29.09.2016 of

Commissioner of Income Tax (Appeals), Davangere for the Assessment Year

2009-10.

2 ITA No.2281/Bang/2016

3 ITA No.2281/Bang/2016

adjudication.

appeal. The assessee filed the appeal before the CIT (Appeals) after a delay of

1460 days. A petition for condonation was filed before the CIT (Appeals).

However the CIT (Appeals) declined to condone the delay.

has submitted that this is a case of wrong advise and the assessee filed the

appeal against the assessment order after the penalty under Section 271(1)(c)

of the Income Tax Act, 1961 (in short 'the Act') was levied. The learned

Authorised Representative has submitted that the assessee accepted the

addition / disallowance on the condition that no penalty would be levied as the

4 ITA No.2281/Bang/2016 assessee did not want his business effected due to involvement of multiple

litigation. Thus the assessee did not challenge the assessment order however

subsequently the Assessing Officer levied the penalty under Section 271(1)(c)

of the Act. It was advised to the assessee that the assessment order should

also be challenged along with the penalty order by filing the appeal. Thus only

when the penalty under Section 271(1)(c) of the Act was levied by the Assessing

Officer, the assessee was advised to file the appeal. Therefore there is a delay

which is neither intentional nor deliberate. The learned Authorised

Representative has further submitted that the assessee had a good case on

merit and the CIT (Appeals) has deleted the penalty under Section 271(1)(c) of

the Act. Therefore there was no deliberate attempt on the part of the assessee

to delay the proceedings but it was a bona fide belief that no penalty would be

levied under Section 271(1)(c) of the Act the assessee did not challenge the

assessment order. But when the Assessing Officer has levied the penalty, the

assessee had decided to file the appeal. The learned Authorised

Representative has filed the order dt.30.6.2016 of CIT (Appeals) deleting the

penalty levied under Section 271(1)(c) of the Act. Thus the learned Authorised

Representative has contended that when the assessee had a good case on

merit, then the delay in filing the appeal need to be condoned. He has stressed

5 ITA No.2281/Bang/2016 that a liberal view and approach has to be taken while condoning the delay and

the matter should be decided on merit instead of technicality. In support of his

contention, he has relied upon the decision of Hon'ble Supreme Court in the

case of CIT Vs. Bijoy Kumar Almal 215 ITR 22 (SC).

submitted that it is a case of gross negligence on the part of the assessee and

no explanation has been given by the assessee for not filing the appeal for such

an inordinate delay of 1,468 days. The assessee cannot claim a reason for not

filing the appeal that the assessee accepted the addition on the belief that the

Assessing Officer would not levy the penalty under Section 271(1)(c) of the Act.

Thus the learned Departmental Representative has contended that it cannot be

a reason that the Assessing Officer cannot levy the penalty under Section

271(1)(c) of the assessee for delay in filing the appeal. In support of his

contention, he has relied upon the decision of Hon'ble Madras High Court in the

case of Mrs. P S Rajeswari Vs. ACIT 373 ITR 464 as well as in the case of

Inderchand D. Kochar Vs. ACIT 388 ITR 500.

record. It is the case of the assessee that since the assessee accepted the

proposed addition made by the Assessing Officer with the belief that no penalty

6 ITA No.2281/Bang/2016 under Section 271(1)(c) of the Act will be levied by the A.O. Therefore the

assessee decided not to challenge the assessment order. However, when the

Assessing Officer levied the penalty under Section 271(1)(c) of the Act, the

assessee challenged its decision and then filed the appeal. This change of

decision based on the order passed by the Assessing Officer under Section

271(1)( c ) cannot be a reasonable explanation for such inordinate delay of

1468 days in filing the appeal. It is a clear case that the assessee decided not to

file the appeal against the assessment order till the penalty under Section

271(1)(c) of the Act was passed Thus the assessee never wanted to challenge

the assessment order and therefore there is no reason/cause which has

prevented the assessee from filing the appeal before the CIT (Appeals). The

only explanation of the assessee is that the assessee consented to the addition

made in the assessment order with the condition that the Assessing Officer

would not levy any penalty however such a condition cannot be imposed on the

assessment authorities and therefore it cannot be taken as a reasonable cause

for not filing the appeal before the CIT (Appeals). The Hon'ble Madras High

Court in the case of M/s. P.S. Rajeswari Vs. ACIT (supra) while dealing with

the issue of condonation of delay has held in paras 41 to 43 as under :

7 ITA No.2281/Bang/2016 “ 41. In the present case, the inordinate delay of approximately more than 1100 days calls for a strict approach and the principles or guidelines given by the Supreme Court in the above- said decision on the conduct that cannot be favourably considered are clearly attracted to the facts of the present case. The further guidelines issued in paragraph 16 of the above-said decision are breached by the appellants and we extract below the same as such. "16. To the aforesaid principles we may add some more guidelines taking note of the present day scenario. They are: - (a) An application for condonation of delay should be drafted with careful concern and not in a half hazard manner harbouring the notion that the courts are required to condone delay on the bedrock of the principle that adjudication of a lis on merits is seminal to justice dispensation system. (b) An application for condonation of delay should not be dealt with in a routine manner on the base of individual philosophy which is basically subjective. (c) Though no precise formula can be laid down regard being had to the concept of judicial discretion, yet a conscious effort for achieving consistency and collegiality of the adjudicatory system should be made as that is the ultimate institutional motto. (d) The increasing tendency to perceive delay as a non- serious matter and, hence, lackadaisical propensity can be exhibited in a non-challant manner requires to be curbed, of course, within legal parameters." 42. In the present case, we find that the appellants have been lackadaisical in their approach and in a nonchalant manner they have tried to seek condonation of delay. The Supreme Court in the decision referred supra has deprecated such practice of showing leniency in condoning the delay. The parameters laid down by the Supreme Court when not to condone delay get squarely attracted to the facts of the present case and we find no reason to condone the delay and the Tribunal was correct in dismissing the appeal on that score. The plea of illness, payment of tax at some point of time, adjustment of payment before the Sub-Court, Kancheepuram are all matters on merit. That stage has not come. In any event, we are not inclined to go into such issue, as we are now concerned only with the plea of condonation of delay of approximately more than 1100 days in filing the appeal before the Tribunal in each one of the case. 43. A faint plea has been made by the learned counsel appearing for the appellants that attachment orders have not been served on the appellants and therefore, there is a breach of law and the said issue has not been raised and considered by the Tribunal. The appellants can agitate this issue before an appropriate forum, if legally permissible. At present, we are only concerned with the issue of condonation of delay and this Court, after detailed consideration, finds that the appellants have not shown sufficient cause for condoning the delay. The parameters laid down by the Supreme Court in the above-said decision when not to condone delay gets attracted to the facts of the present case. Therefore, we are not inclined to interfere with the order of the Tribunal.”

8 ITA No.2281/Bang/2016 In the case on hand, the approach of the assessee was casual and unprudent as

the assessee initially decided not to challenge the assessment order and after

lapse of a consideration period of around 4 years, the assessee filed the appeal

before the CIT (Appeals). There is no reason or circumstances which were

beyond the control of the assessee prevented the assessee from filing the

appeal. The Hon'ble Madras High Court again in the case Ingerchand D. Kochar

Vs. ACIT (supra) has observed in paras 13 to 19 as under :

“ 13. Due diligence and caution, are the essential requirements. Due diligence cannot be measured by any absolute standard and it depends on relative facts of a particular case. Due diligence is a measure of prudence by the litigant, who is expected to be reasonable and prudent, under the particular circumstances. 14. As tabulated in paragraph 10, only one appellant viz. Mr. Inderchand D. Kochar, has filed the Miscellaneous petition, dated 19.12.2012, under Section 154 of the Income Tax Act, 1961, before the Commissioner of Income Tax Act, who had disposed of the appeal in I.T.A. No. 210 of 2010. All other Miscellaneous petitions have been filed before the Deputy Commissioner of Income Tax, who is not the competent authority to entertain any application under Section 154 of the Income Tax Act, 1961. When Miscellaneous petitions have been filed, in a wrong forum, it is our considered view that it is the duty of the appellant to pursue the same and seek for adjudication, by the competent authority. 15. Absolutely, there are no materials to indicate, as to what steps the appellants had taken between the date of filing of the miscellaneous petitions, i.e. 18.07.2012 or 19.07.2012, and the date on which the supporting affidavits for condonation, have been filed, except, sending a reminder on 28.05.2014. The appellants have not stated the date, as to when, the change of brief was given and also the date as to when opinion was given by the learned counsel to prefer appeals, before the Tribunal. No details are given in the affidavit filed by the assessees, as to why, they have not, prosecuted the applications filed under Section 154 of the Income Tax Act, 1961, for nearly two years. 16. In the supporting affidavit to the petitions filed for condoning the delay of 962 days, in filing the appeals, before the Tribunal, the assessees have not given the dates, as to when they had handed over the papers to the erstwhile Chartered Accountants for action. The statement of the assessees that due to misunderstanding with the erstwhile Chartered Accountant, the appellants were constrained to appoint a counsel, in the month of June 2014, and on review of all the Income Tax matters, the fact of non-filing of appeals against the appellate orders, was noticed and thus, the appeals were filed on 11.07.2014 before the Commissioner of Income

9 ITA No.2281/Bang/2016 Tax (Appeals), is not supported with any material document. Mere averments, do not stand the test of proof. 17. Though, Mr. S. Sridhar, learned counsel for the assessees/appellants submitted that it is the duty of the office of the Commissioner of Income Tax (Appeals) to have sent the notices for hearing of the rectification petitions, filed by the appellants/assessees and thus the assessees were waiting, for a considerable period, and thus attributed the cause for delay, this court is not inclined to accept the same, for the reason that as observed earlier that rectification petitions have been filed before an incompetent appellate authority. Even taking for granted that they were filed in the office of the Deputy Commissioner of Income Tax, we are of the considered view that it is for the appellants/assessees to have processed the same. Blaming an authority is always easy. Conduct of the appellants substantiates lethargy and lack of bonafides. On the facts and circumstances of the case, we are also of the considered view, that the appellants, have not pursued the remedy, promptly, with diligence and due care, when they filed such applications. Inaction, is apparent on the face of record. In the light of the above, it cannot be contended that the appellants were wrongly pursuing a remedy, with diligence, care and caution and hence the delay in filing the appeals before the Tribunal should be condoned. 18. Further in H. Dohil Constructions Co. (P.) Ltd. v. Nahar Exports Ltd. [2015] 1 SCC 680, the Hon'ble Supreme Court, after considering the Hon'ble Division Bench judgment of this Court in Tamilnadu Mercantile Bank Ltd. v. Appellate Authority [1990] 1 LLN 457 and decision of the Supreme Court in Esha Bhattacharjee v. Raghunathpur Nafar Academy [2013] 12 SCC 649 at paragraph Nos.23 and 24, held as follows: '23. We may also usefully refer to the recent decision of this Court in Esha Bhattacharjee [Esha Bhattacharjee v. Raghunathpur Nafar Academy, reported in (2013) 12 SCC 649], where several principles were culled out to be kept in Principles (iv), (v), (viii), (ix) and (x) of para 21 can be usefully referred to, which read as under: (SCCpp.658-59) "21.4 (iv) No presumption can be attached to deliberate causation of delay but, gross negligence on the part of the counsel or litigant is to be taken note of. 21.5. (v) Lack of bona fides imputable to a party seeking condonation of delay is a significant and relevant fact. 21.8. (viii) There is a distinction between inordinate delay and a delay of short duration or few days, for to the former doctrine of prejudice is attracted whereas to the latter it may not be attracted. That apart, the first one warrants strict approach whereas the second calls for a liberal delineation. 21.9 (ix) The conduct, behaviour and attitude of a party relating to its inaction or negligence are relevant factors to be taken into consideration. It is so as the fundamental principle is that the courts are required to weight the scale of balance of justice in respect of both parties and the said principle cannot be given a total go- by in the name of liberal approach.

10 ITA No.2281/Bang/2016 21.10. (x) If the explanation offered is concocted or the grounds urged in the application are fanciful, the courts should be vigilant not to expose the other side unnecessarily to face such a litigation. 24. When we apply those principles to the case on hand, it has to be stated that the failure of the Respondents in not showing due diligence in filing of the appeals and the enormous time taken in the refiling can only be construed, in the absence of any valid explanation, as gross negligence and lacks in bonafides as displayed on the part of the Respondents. Further, when the Respondents have not come forward with proper details as regards the date when the papers were returned for refiling, the non-furnishing of satisfactory reasons for not refiling of papers in time and the failure to pay the Court fee at the time of the filing of appeal papers on 06.09.2007, the reasons which prevented the Respondents from not paying the Court fee along with the appeal papers and the failure to furnish the details as to who was their counsel who was previously entrusted with the filing of the appeals cumulatively considered, disclose that there was total lack of bonafides in its approach. It also requires to be stated that in the case on hand, not refiling the appeal papers within the time prescribed and by allowing the delay to the extent of nearly 1727 days, definitely calls for a stringent scrutiny and cannot be accepted as having been explained without proper reasons. As has been laid down by this Court, Courts are required to weigh the scale of balance of justice in respect of both parties and the same principle cannot be given a go-by under the guise of liberal approach even if it pertains to refiling. The filing of an application for condoning the delay of 1727 days in the matter of refiling without disclosing reasons, much less satisfactory reasons only results in the Respondents not deserving any indulgence by the Court in the matter of condonation of delay. The Respondents had filed the suit for specific performance and when the trial Court found that the claim for specific performance based on the agreement was correct but exercised its discretion not to grant the relief for specific performance but grant only a payment of damages and the Respondents were really keen to get the decree for specific performance by filing the appeals, they should have shown utmost diligence and come forward with justifiable reasons when an enormous delay of five years was involved in getting its appeals registered." 23. It is also worthwhile to extract paragraph Nos. 14 to 17 of the judgment in Tamilnadu Mercantile Bank's case. "14. We are unable to agree with the reasoning of the learned Judge that no litigant ordinarily stands to benefit by instituting a proceeding beyond time. It is common knowledge that by delaying a matter, evidence relating to the matter in dispute may disappear and very often the party concerned may think that preserving the relevant records would be unnecessary in view of the fact that there was no further proceeding. If a litigant chooses to approach the Court long after the time prescribed under the relevant provisions of the law, he cannot say that no prejudice would be caused to the other side by the delay being condoned. The other side would have in all probability destroyed the records

11 ITA No.2281/Bang/2016 thinking that the records would not be relevant as there was no further proceeding in the matter. Hence to view a matter of condonation of delay with a presupposition that no prejudice will be caused by the condonation of delay to the respondent in that application will be fallacious. In our view, each case has to be decided on the facts and circumstances of the case. Length of the delay is a relevant matter to be taken into account while considering whether the delay should be condoned or not. It is not open to any litigant to fix his own period of limitation for instituting proceedings for which law has prescribed period of limitation. 17. . . . . . Once it is held that a party has lost his right to have the matter considered on merits because of his own inaction for a long time, it cannot be presumed to be non-deliberate delay, and in such circumstances of the case, he cannot be heard to plead that substantial justice deserved to be preferred as against technical considerations. We are of the view that the question of limitation is not merely a technical consideration. Rules of limitation are based on principles of sound public policy and principles of equity. It is a litigant liable to have a Damocles' sword hanging over his head indefinitely for a period to be determined at the whims and fancies of the opponent?' 19. In the light of our discussion, and principles of law laid down by the Hon'ble Supreme Court in H. Dohil Constructions Co. (P.) Ltd. (supra), we are not inclined to entertain the appeals. Substantial question of law raised by the appellants, is answered against the appellants/assessees and in favour of the respondent.” In view of the above facts and circumstances of the case, when the assessee

was not prevented by any circumstances or reasons which were beyond the

control of the assessee to file the appeal then the reason explained by the

assessee for such an inordinate delay cannot be considered as prudent or bona

fide or reasonable cause for not filing the appeal. The decision in the appeal

against the penalty order will not change the character of the reasons explained

by the assessee. Accordingly, no interference is called for in the impugned

order of the CIT (Appeals) for not condoning the delay. Since the appeal of the

12 ITA No.2281/Bang/2016 assessee was dismissed by the CIT (Appeals) on the ground of limitation

therefore other grounds of the assessee's appeal becomes infructuous.

Order pronounced in the open court on 22.03.2017. Sd/- (VIJAY PAL RAO) JUDICIAL MEMBER Bangalore, Dt. 22.03.2017.

*Reddy gp

Copy to : 1. Appellant 2. Respondent 3. C.I.T. 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard File.

Assistant Registrar Income Tax Appellate Tribunal Bangalore.