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Facts
The assessee's return of income for AY 2015-16 was assessed, with additions made by the AO for delayed deposit of employee's provident fund, MVAT collected but not paid on time, and notional interest on an interest-free advance. The assessee appealed to the CIT(A), which dismissed the appeal due to a delay of 790 days. The assessee then appealed to the ITAT.
Held
The Tribunal held that the CIT(A) was unjustified in not condoning the delay, as the delay was caused by the pending rectification application before the AO concerning the MVAT addition. The Tribunal condoned the delay and restored the appeal to the CIT(A) for adjudication on merits. For ITA No. 80/Mum/2024, the penalty was directed to be deleted as the quantum additions were set aside.
Key Issues
1. Whether the CIT(A) was justified in dismissing the appeal for delay without considering the pending rectification application. 2. Whether the additions made by the AO for delayed PF deposit, MVAT payment, and notional interest are sustainable. 3. Whether the penalty levied is valid when the quantum additions are set aside.
Sections Cited
Sec. 143(3), Sec. 154, Sec. 250, Sec. 143(2), Sec. 36(1)(va), Sec. 2(24)(x), Sec. 43B, Sec. 139(1), Sec. 119, Sec. 271(1)(c)
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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI AMARJIT SINGH & SHRI RAHUL CHAUDHARY,
P a g e | 1 ITA Nos.79 & 80/Mum/2024 Indaco Jeans Pvt. Ltd. Vs. ITO-6(3)(2)
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI
BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER & SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER,
ITA Nos.79 & 80/Mum/2024 (A.Y. 2015-16)
Indaco Jeans Private Vs. ITO-6(3)(2) Limited, 510 Eco Star Room No. 503, 5th Floor, Vishweshwar Nagar Road, Aayakar Bhavan Goregaon East, M.K. Road, Maharashtra – 400063 Maharashtra – 400020 �थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAKCS7348N Appellant .. Respondent
Appellant by : Ashwin Chhag Respondent by : H.M. Bhatt
Date of Hearing 16.05.2024 Date of Pronouncement 05.07.2024 आदेश / O R D E R Per Amarjit Singh (AM):
Both these appeals filed by the assessee are pertained to assessment years 2015-16 and these appeals are adjudicated together by this common order.
ITA No. 79/Mum/2024 “1. Ld. CIT(A) is erred to dismiss the appeal petition stating it as belated and that the appellant did not have "sufficient cause" for delay in filing the appeal which is without appreciating the fact brought to his notice that the appellant has invoked alternative remedy by way of filing the petition u/s 154 of the Act which has remained undisposed even today in view of which only order appealable u/s.250 of the Act happens to be order u/s 143(3) of the Act without prejudice to this decision of the SC in the Checkmate Services P. Ltd (2022) 448 ITR 518 (SC) came only on 12.10.2022 is very much applicable to the case in hands and so as to determine the correct levy of the tax.
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Ld. CIT(A) has failed to appreciate that the Id AO has not appreciated the facts and the law before confirming the addition and hence, the case may be referred back to the Id AO with the direction.
Appellant craves to add, alter, amend or withdraw any of the grounds of appeal raised here above.”
Fact in brief is that return of income declaring total loss of Rs.16,43,673/- was filed on 30.09.2015. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 27.07.2016. The assessee company is engaged in the business of manufacturing and job work in textiles garments. Assessment u/s 143(3) of the Act was finalised on 26.12.2017 determining the total income of the assessee at Rs.78,27,210/-. The AO noticed that auditor in the audit report has reported the contribution from the employees towards provident fund which have been deposited in the provident fund accounts of the employees after the due date. The relevant part of the information referred in the order of AO is as under: Sr. No. Amount (Rs.) Due date of payment Actual date of payment 1. 1,01,114 15.05.2014 08.08.2014 2. 92,799 15.06.2014 08.08.2014 3. 92,494 15.07.2014 08.08.2014 4. 84,346 15.08.2014 08.04.2014 5. 87,788 15.09.2014 06.09.2014 6. 1,56,658 15.10.2014 05.11.2014 7. 1,49,346 15.11.2014 13.11.2014 8. 1,47,708 15.12.2014 22.12.2014 9. 1,49,087 15.01.2014 08.01.2015 10. 1,51,775 15.03.2014 13.02.2015 11. 1,53,515 15.03.2014 17.03.2015 12. 1,50,507 15.04.2014 06.04.2015 Total 15,17,137
The assessing officer stated that assessee has not deposited the aforesaid amount of Rs.15,17,137/- in the provident fund account of the employees within the due date mentioned in the explanation to Sec. 36(1)(va) of the Act. Therefore, as per provisions of Sec. 2(24)(x) r.w.s 36(1)(va) of the Act of Rs.15,17,137/- was treated as income of the assessee company and added to the total income of the assessee.
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Further during the course of assessment the assessing officer noticed that as reported in the audit report the assessee has collected MVAT amounting to Rs.95,07,085/- from its customer and not paid in the government account before the due date for filing its return of income. The AO further noticed that assesse had not added the same back to its total income as per Sec. 43B of the Act. On query the assessee explained that MVAT payable as on 31.03.2015 was Rs.95,07,085/- out of this which it has paid Rs.18,89,340/- till date of filing the return of income and the remaining amount was paid before 31.03.2016. Therefore, the assessing officer has added a sum of Rs.76,17,745/- [95,07,085 - 18,89,340] on account of MAT payable u/s 43B of the Act to the total income of the assessee.
During the course of assessment the AO has also noticed that assessee has given advance of Rs.28,00,000/- to Mr. Prasad M. Parekar, but no interest was charged on the aforesaid advance given by the assessee. On query the assessee explained that the interest free advance was actually related to a running account of Mr. Prasad K. Pabrekar who was the father of the director of the assessee company of Manasi Pabrekar and the said amount was used in the business of the assessee company. However, AO has not agreed with the submission of the assessee and stated that assessee has not furnished any documentary evidences in support of its claim, therefore, estimated notional interest at 12% on the said amount was treated as deemed income of the assessee. Accordingly, interest amount of Rs.3,36,000/- was added to the total income of the assessee.
The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the same without condoning the delay of 790 days in filing the appeal before the ld. CIT(A).
P a g e | 4 ITA Nos.79 & 80/Mum/2024 Indaco Jeans Pvt. Ltd. Vs. ITO-6(3)(2)
During the course of appellate proceedings before us the ld. Counsel vehemently contended that ld. CIT(A) is unjustified in not condoning the delay in filing the appeal without disproving the facts and evidences furnished by the assessee that caused delay in filing the appeal. The ld. Counsel submitted that it was categorically brought to the notice of ld. CIT(A) that assessing officer had erroneously made addition u/s 43B of the Act without considering the facts that date of filing of return of income was extended and the assessee has made the payment of MVAT before the extended due date of filing return of income. Further the ld. Counsel submitted that assessee has preferred alternative remedy and filed application u/s 154 of the Act to rectify the mistake occurred in the assessment order from the side of the assessing officer. The ld. Counsel submitted that assesse has filed the rectification application u/s 154 of the Act on 07.04.2020 within the limitation period of 4 years, however, till the date of filing the appeal the assessing officer has not disposed off the rectification application filed by the assessee. Inspite of follow up made before the assessing officer to dispose the rectification application, the assessing officer has not taken any action.
On the other hand, the ld. D.R supported the order of lower authorities.
Heard both the sides and perused the material on record. The assessment order u/s 143(3) of the Act was completed in the case of the assessee on 26.12.2017. During the course of assessment the assessing officer has made addition of Rs. 15,17,137/- u/s 2(24)(x) r.w.s 36(1)(va), addition of Rs.76,17,745/- on account of MVAT expenses and also added notional interest of Rs.3,36,000/- on the advance amount of Rs.28,00,000/- as discussed supra in this order. After perusal of the
P a g e | 5 ITA Nos.79 & 80/Mum/2024 Indaco Jeans Pvt. Ltd. Vs. ITO-6(3)(2)
material on record it is noticed that assessee has filed its return of income on 30.09.2015 u/s 139(1) of the Act. The assessing officer has disallowed the amount of Rs.76,17,745/- relating to MVAT payment u/s 43B of the Act that the same was paid beyond the due date of filing the return of income. However, it is undisputed fact that due date for filing return of income was extended from 30.09.2015 to 31.10.2015 u/s 119 of the Act vide CBDT Instruction No. 225/207/205/ITA-11 dated 01.10.2015. However, the assessing officer has not rectified the mistake occurred in the assessment order by not considering the extended due date of filing return of income. After considering the aforesaid fact we find that ld. CIT(A) has dismissed the appeal of the assessee without disproving the claim of the assessee that delay in filing the appeal happened because of not disposing the rectification application filed by the assessee before the assessing officer to correct the apparent mistake from record of not considering the actual due date of filing return of income before disallowing the payment of MVAT under the provision of Sec. 43B of the Act. The above facts and relevant supporting material placed in the paper book demonstrate that there was reasonable cause for delay in filing the impugned appeal before the ld. CIT(A) because of undisposed rectification application pending before the assessing officer. Considering the above facts and circumstances we find that decision of ld. CIT(A) in not condoning the delay in filing the appeal is not justified, therefore, we condone the delay of 790 days in filing the appeal before the CIT(A) because of non-disposal of rectification application filed by the assessee before the assessing officer within the time limit as prescribed u/s 154(8) of the Act as discussed supra in this order.
We have also perused the rectification application filed by the assessee before the assessing officer placed at page no. 23 to 25 of the
P a g e | 6 ITA Nos.79 & 80/Mum/2024 Indaco Jeans Pvt. Ltd. Vs. ITO-6(3)(2)
paper book wherein the assessee has mentioned all the 3 issues on which the following addtions were made by the assessing officer:
(i) Income u/s.2(24X) r.w.s.36(1) (va) of Rs.15,17,137/- (ii) MVAT u/s.43B of Rs. 76,17,745/-. (iii) Notional Interest Income of Rs.3,36,000/-.
Further we have also perused the decision of Hon’ble High Court of Bombay in the case of Mr. Balmukund Vs. DCIT vide ITA No. 217 of 2001 wherein Hon’ble jurisdictional High Court of Bombay on the issue of Collection of Right Taxes as observed as under:
“31. Having said so, we must observe that the Apex Court and the various High Courts have ruled that the authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If any assessee, under a mistake, misconceptions or on not being properly instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected (see S.R. Kosti v CIT (Guj) (2005) 276 ITR 165, C.P.A. Yoosuf v. I.T.O. (1970) 77 ITR 237, CIT v. Bharat General Reinsurance Co. Ltd, (1971) 81 ITR 303, CIT vs. Archana R. Dhanwate (1982) 136 ITR 355 (Bom).
If particular levy is not permitted under the Act, tax cannot be levied applying the doctrine of estoppel. (See Dy. Commissioner of Sales Tax vs. Sreeni Printers (1987) 67 SCC 279.”
Further on the issue of delay in filing the appeal. The decision of Hon’ble Supreme Court in the case of Vedabai @ Vaijayanatabai Baburao Patil vs Shantaram Baburao Patil Appeal 4494 of 2001is reproduced as under:
“In exercising discretion under Section 5 of the Limitation Act the Courts should adopt a pragmatic approach. A distinction must be made between a case where the delay is inordinate and a case where the delay is of a few days. Whereas in the former case the consideration of prejudice to the other side will be a relevant factor so the case calls for a more cautious approach but in the latter case no such consideration may arise and such a case deserves a liberal approach. No hard and fast rule can be laid down in this regard. 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. In our view in this case, the approach of the learned Additional District Judge is wholly erroneous and his order is unsustainable. It is evident that the discretion under Section 5 of the Limitation Act is exercised by the Additional District Judge in contravention of the law laid
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down by this Court, that the expression ’sufficient cause’ should receive liberal construction, in catena of decisions (see State of West Bengal v. The Administrator, Howrah Municipality & Others, [1972] 1 SCC 366 and Smt. Sandhya Rani Sarkar v. Smt Sudha Rani Debt & Others, [1978] 2 SCC 116). The High Court in exercising its jurisdiction under Section 115 C.P.C. failed to correct the jurisdictional error of the Appellate Court. For the aforementioned reasons, we set aside the impugned order of the High Court as well as also of the Additional District Judge, Amalner (the Appellate Court), condone the delay of seven days in filing the appeal, restore the appeal to the file of the Additional District Judge and direct the learned Additional District Judge, Amalner to decide the appeal on merits.”
After considering the above facts and findings as discussed supra, we restore this case to the file of the ld. CIT(A) for adjudicating on merit on all the three issues on which the assessing officer has made addition as per order passed u/s 143(3) of the Act on 26.12.2017. Needless to say that due opportunity of hearing be provided to the assessee and the assessee is also directed to make compliance before the ld. CIT(A) without any failure. 10. The appeal of the assessee is allowed for statistical purposes.
ITA No. 80/Mum/2024
Vide penalty order passed u/s 271(1)(c) of the Act on 27.06.2018 the assessing officer has levied penalty of Rs.28,22,678/- on the aforesaid additions of Rs.91,34,882/- made in the assessment order in respect of the following additions:
Income u/s.2(24X) r.w.s.36(1) (va) of Rs.15,17,137/- (i) (i) MVAT u/s.43B of Rs. 76,17,745/-. (ii) Notional Interest Income of Rs.3,36,000/-. 12. Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee.
Since, we have adjudicated the quantum appeal of the assessee vide ITA No. 79/Mum/2024 as above in this order and the quantum additions made by the assessee has been set aside to the file of the ld.
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CIT(A) for deciding on merit as discussed supra in this order. The penalty levied u/s 271(1)(c) of the Act has no basis since quantum addition on the basis of which the impugned penalty was levied had been set aside to the file of the ld. CIT(A) as discussed above, therefore, we direct the assessing officer to delete impugned penalty. Accordingly, this ground of appeal of the assessee is allowed.
In the result, the appeal of the assessee vide ITA No.79/Mum/2024 is allowed for statistical purposes and vide ITA No. 80/Mum/2024 is allowed.
Order pronounced in the open court on 05.07.2024
Sd/- Sd/- (Rahul Chaudhary) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 05.07.2024 Rohit: PS आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent. 2. आयकर आयु� / CIT 3. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण DR, ITAT, 4. Mumbai गाड� फाईल / Guard file. 5. स�ािपत �ित //True Copy// आदेशानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण/ ITAT, Bench, Mumbai.