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Before: Shri Chandra Poojari & Shri Duvvuru RL Reddy
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Chennai) I, Chennai, dated 29.12.2006 relevant to the assessment year 2002-03 passed under section 263 of the Income Tax Act, 1961 [“Act” in short]. Besides raising various grounds in its appeal, by filing petition for condonation of delay, the assessee has pleaded for condoning the delay of 3581 days in filing the appeal before the Tribunal.
Brief facts of the case are that the assessee filed its return of income for the assessment year 2002-03 on 29.09.2003 admitting total income at ₹.26,44,401/- after claiming deduction of ₹.61,70,268/- under section 80HHC of the Act. The return filed by the assessee was accepted under section 143(1) of the Act and intimation was issued on 03.11.2003. The assessee, subsequently, filed a revised return on 18.12.2003 returning NIL income. In the revised return, the assessee has recomputed the income at ₹.33,26,095/-, but claimed the entire amount as exempt under section 10B of the Act. The assessee has stated in the revised return that the company was claiming exemption under section 10B of the Act from the assessment year 1997-98 and was under the erroneous belief that the exemption was available for only five consecutive assessment years and therefore, it did not claim the exemption under section 10B of the Act in respect of current assessment year viz., 2002-03 and accordingly, it has claimed deduction under section 80HHC of the Act in the original return. On realizing that the exemption under section 10B of the Act would be available for 10 consecutive assessment years, the assessee preferred to file the revised return withdrawing the claim of deduction under section 80HHC of the Act, but, claiming the exemption under section 10B of the Act. The assessment under section 143(3) of the Act was completed on 24.03.2005 allowing the assessee’s claim of exemption of entire income under section 10B of the Act. As the assessment completed under section 143(3) of the Act was found to be erroneous and prejudicial to the interest of the Revenue, the ld. CIT initiated proceedings under section 263 of the Act. The ld. CIT passed order under section 263 of the Act by setting aside the assessment and directed the Assessing Officer to recompute the income after withdrawing the deduction under section 10B of the Act. Further, it was directed that the deduction under section 80HHC of the Act claimed by the assessee in its original return filed on 29.09.2003 be considered.
2.1 Upon the directions of the ld. CIT vide his order dated 29.12.2006, the Assessing Officer issued a letter on 22.08.2007 affording an opportunity of hearing to the assessee for making submissions, if any. In response, on 18.09.2007, Shri V. Sakthivel, CA appeared on behalf of the assessee before the Assessing Officer and after that, the assessment under section 143(3) r.w.s. 263 of the Act was completed on 31.12.2007.
3. Against the order passed under section 263 of the Act by the ld. CIT, the assessee is in appeal before the Tribunal with a delay of 3581 days in filing the appeal duly filing condonation petition in support of two affidavits dated 10.12.2016 and 30.03.2017. In the latest affidavit dated 30.03.2017 for by Smt. Usha Mase, the petitioner submits as under: “1. I am the Director of the Petitioner/Appellant company and as such I am competent to swear this affidavit. 2. I state that my husband M. Mase was the Managing Director of the Petitioner/Appellant Company and he expired on 29.01.2006. After his death, the operation of the factory was totally suspended. The staff who were looking after the affairs of the company also left the company and therefore, the company was closed in the year 2006. In this situation, there had been no proper person to attend residual matters connected with the company after its closure.
I further state that I had only elementary education, through which I know reading and writing in Tamil language. I don't possess English knowledge. However it had become a practice to me to put my signature in English. As a member of Mase family, I was made as a Director of the company by my late husband Mr. Mase when the company was initially incorporated under the Companies Act. Though I had been made as Director of the company, I did not have any participation in the administration of the company. After the death of my husband in 2006, there was no proper person with me in Harur to explain any thing about the court matters, tax matters etc., connected with the company My daughter's who were already married, had not shown any interest initially, in the affairs of the Petitioner/Appellant company.
4. I also state that while the fact stood thus, I came to know of the order of the Commissioner of Income Tax, Chennai-1 in C.No.218(24)/CIT-1/263/2005-2016 dated 29.12.2006 passed u/s 263 of the Income Tax Act and also the revised order passed by the Income Tax Officer, Company Ward-I (1), Chennai 600 034 in G1. No./PAN AAACA41042 dated 31.12.2007 only in the month of September 2010 when the department commenced recovery proceedings. Then I contacted my relative Dr.K.V.Kaliappan at Chennai and informed him about the action of the Income Tax officials who commenced recovery proceedings. On the advice and suggestion of my relative Dr.K.V.Kaliappan I submitted applications before the competent authorities for furnishing copies of order of the Commissioner of Income Tax, Chennai-1 and Income Tax Officer, Company Ward -I (1), Chennai - 34. Only on receipt of these orders, I came to know of the authority basing on which the Income Tax Officials commenced recovery proceedings against me. Further I learnt from the above orders, that Mr.5akthivel, FCA, Auditor of Petitioner/Appellant Company appeared before the Commissioner of Income Tax, Chennai-1 in connection with the Revision Proceedings in C.No.218(24)/CIT- 1/263/2005-06 dated 29.12.2006 and before the Income Tax Officer, Company Ward-I (1), Chennai-34 in respect of the order passed in G1No/PAN AAA CA 4104E dated 31.12.2007. 5. In this connection, I further submit that since she did not have any participation in the affairs of the company before the death of my husband Mr. Mase as Managing Director in 2006 as well as after his death. However after the death of my husband Mr. M. Mase, staff employed in the Muthu Mase College of Arts & Science run by Amman Educational Trust (Mr.Pavithra, my daughter as a Trust Member) would convey information about matters pending in Courts. In this context, I myself as a Director of the defunct Petitioner/Appellant company, I used to sign papers relating to court matters whenever brought to my residence in Harur. 6. In this manner I would have signed papers relating to Income tax matters, sent to me by the company's auditor, through the staff of the college of Muthu Mase College of Arts & Science, Harur which is run by my daughter (Living with her husband in U.S.A.) as a Managing Trustee of Amman Educational Trust, without actually knowing the contents in the papers produced to me for my signature. Only after the explanation obtained from my relative Dr.K.V.Kaliappan in September 2010 about the proceedings held before the Commissioner of Income Tax, Chennai- 1 and the Income Tax Officer, Company Ward-I (1) I was advised to file appeal before the Commissioner of Income Tax (Appeals), Chennai against the order of the Income Tax Officer, Company Ward-I (1) in G1 No./ PAN AAA CA 4104E dated 31.12.2007. As the appeal to be filed before the Commissioner of Income Tax (Appeals), Chennai was barred by limitation I was advised to file writ petition in the High Court of Madras for direction in this regard. Accordingly I filed Writ Petition in the Hon'ble High Court of Madras in W.P.No.20181/2010 and the Hon'ble Court was pleased to pass order dated 14.09.2010 giving liberty to file appeal before the Commissioner of Income Tax (Appeals), Chennai. Based on the order of the Hon'ble High Court of Madras in W.P.No.20181/2010 dated 14.09.2010 I filed appeal before the Commissioner of Income Tax (Appeals), Chennai and the appeal was numbered as I.T.A.No.223/2013-2014 and the appeal was dismissed by the Commissioner of Income Tax (Appeals), Chennai in his order dated 24.12.2013.
7. I further state that aggrieved by the order of the Commissioner of Income Tax (Appeals), Chennai, I filed appeal before this Hon'ble Tribunal and the same was numbered as I.T.A.No.568/Mds/2014, however the Hon'ble Tribunal dismissed the appeal holding that the issue raised by the Commissioner of Income Tax in its Order u/s 263 of the Act had attained finality and therefore the lower authorities are justified in following the orders of the Commissioner of Income Tax.
In this connection I submit that appeal against the order of the Commissioner of Income Tax, Chennai-1 in C.NO.218(24)/CIT-1/263/2005-2006 dated 29.12.2006 should have been filed within 60 days of the date on which the order sought to be appealed against is communicated to the assessee. However in view of the above stated circumstances. I could not file appeal before this Hon'ble Tribunal against the order of the Commissioner of Income Tax. However the appeal has been filed against the order of the Commissioner of Income Tax, Chennai-1 in C.No.218(24)/ CIT-1/263/2005-2006 dated 29.12.2006 before this Hon'ble Tribunal with a delay of 3581 days. I do have the chance to succeed in this case if the appeal is heard and disposed of on merit. The delay in filing the appeal is neither willful nor wanton but due the above stated circumstances. Similar issue involved in this case was also decided by this Hon'ble Tribunal in favour of the appellant in respect of assessment Years 2001-02, 2003-04 and 2004- 05 in its common order in I.T.A.Nos.970 to 972/ Mds/2010, dated 22.06.2017. It is therefore prayed that this Hon'ble Tribunal may be pleased to condone the delay of 3581 days in filing the appeal and dispose of the appeal in accordance with-law and on merit of the case and pass such other order or orders that this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the case and render justice.”
By referring to the above submissions in the affidavit filed by Mrs. Usha Mase, one of the Directors of the assessee company and wife of deceased Managing Director of the assessee company Shri M. Mase, the ld. Counsel for the assessee has prayed for condoning the delay of 3581 days in filing the appeal before the Tribunal against the order passed under section 263 of the Act by the ld. CIT.
Per contra, the ld. DR vehemently contended that the Director of the assessee company Smt. Usha Mase filed the above said affidavit by giving various wrong statements to condone the huge delay of 3581 days in filing the appeal before the Tribunal against the order passed under section 263 of the Act by the ld. CIT. Shri V. Sakthivel, FCA, Authorized Representative of the assessee has very much represented the assessee not only before the ld. CIT during the proceedings under section 263 of the Act but also before the Assessing Officer during the course of proceedings under section 143(3) r.w.s. 263 of the Act. Against the first appellate order dated 24.12.2013 upon the assessment order under section 143(3) r.w.s. 263 of the Act dated 31.12.2007, while dismissing the appeal filed by the assessee, the Tribunal vide its order in dated 16.03.2016 has observed that the order of the CIT passed under section 263 of the Act has reached finality as there is no appeal filed by the assessee against that order. Even though there is no sufficient reasonable cause to condone the huge delay in filing the appeal, the appeal filed against the order under section 263 of the Act is not maintainable before the Tribunal once the Tribunal has adjudicated the appeal filed by the assessee against the first appellate order under section 143(3) r.w.s.263 of the Act and pleaded that the appeal should be dismissed as not maintainable.
We have heard both sides, perused the materials available on record and gone through the orders of authorities below. The assessee company has filed two affidavits. In the first affidavit dated 10.12.2016 of Mrs. Usha Mase, Director of the assessee company, at para 2, she has made a statement that after expiry of her husband on 29.01.2006, the factory operation was totally suspended, the staffs who were looking after the tax matters also left the petitioner/appellant and there has been no proper person to administer the day-to-day affairs of the petitioner company. The above statements made in the first affidavit are found to be wrong, because, (i) in response to notice under section 263 of the Act, Shri V. Sakthivel, FCA presented on behalf of the assessee before the ld. CIT and stated the reasons both orally and in writing, objecting to the proposed action under section 263 of the Act to withdraw or reconsider the exemption granted under section 10B of the Act. (ii) During the course of assessment proceedings under section 143(3) r.w.s. 263 of the Act, against the letter issued by the Assessing Officer on 22.08.2007 affording an opportunity of being heard, on 18.09.2007, Shri V. Sakthivel, CA appeared on behalf of the assessee.
(iii) The assessee was very much represented its case in appeals for earlier assessment years before the Tribunal vide its order dated 22.06.2011 as well as 16.03.2016 through its Authorized Representative.
6. These above facts made in the first affidavit are contrary to the second affidavit filed by Smt. Usha Mase, Director of the assessee company dated 30.03.2017, wherein, at para 6, she has admitted to have signed by her the papers relating to income tax matters sent to her by the company’s auditor. When the assessee company’s auditor is very much available to look after income tax matters, and the assessee company was very much represented during the course of 263 proceedings, assessment proceedings under section 143(3) r.w.s. 263 of the Act, appellate proceedings against the order of the ld. CIT(A) for the assessment year 2002-03 as well as appellate proceedings for the assessment years 2001-02, 2003-04 & 2004-05 by filing cross objections against Revenue’s appeals, it is evident that company’s income tax matters were very well looked after by the company’s auditor after the demise of MD Shri M. Mase on 29.01.2006. At para 5 of the second affidavit, which is reproduced hereinabove, Smt. Usha Mase has admitted that staff employed in the college would convey information about matters pending in Courts. From the above statements, it is clear that Smt. Usha Mase, Director of the assessee company was very much aware of matters pertaining to income tax and cases pending in Courts. But, despite knowing the income tax matters pending before the Courts, by representing through its A.R. during the proceedings under section 263 of the Act as well as other proceedings, the assessee company has not filed any valid reasonable cause for the condoning the huge delay of 3581 days in filing appeal against the order passed under section 263 of the Act before the Tribunal. It is nothing but an afterthought to file an appeal against the order under section 263 of the Act when the Tribunal has adjudicated the appeal filed by the assessee against the order of the ld. CIT(A) passed under section 143(3) r.w.s. 263 of the Act, wherein, it was held that the order of the ld. CIT passed under section 263 of the Act reached finality as there was no appeal filed by the assessee against that order by relying on the judgement of Hon’ble Bombay High Court in the case of Hardillia Chemicals Ltd. v. CIT 221 ITR 194 (Bom), in which, it was held that "The Tribunal, in this case, in our opinion, was right in holding that the revisional order, wherein a definite finding is recorded on both the points at issue, having become final on account of the failure of the assessee to pursue the statutory remedies provided in the Act against that order, the assessee cannot be allowed to challenge such concluded findings collaterally in an appeal filed against the fresh order passed by the Income-tax Officer with a view to giving effect to the same." Under the above facts and circumstances, the appeal filed by the assessee, at this juncture, against the order passed under section 263 of the Act stands dismissed.
Admittedly, before filing appeal before the ld. CIT(A), the assessee has not filed any appeal against the order of the ld. CIT. The assessee’s AR Shri V.
Sakthivel, C.A. has very represented assessee’s case before the Assessing Officer to the proceedings in giving effect to the order of the ld. CIT passed under section 263 of the Act dated 29.12.2006. The assessee has not furnished any valid reason for the delay in filing appeal against the order of the ld. CIT before the Tribunal. In this case, the Director of the assessee company Smt. Usha Mase was not aware of the income tax proceedings is not acceptable because the auditor of the assessee company was very much available with the company and represented its case before various proceedings. In the absence of any valid reasonable cause for the huge delay of 3581 days in filing the appeal before the Tribunal against the order of the ld. CIT, the condonation petition filed by the assessee stands dismissed. Accordingly, the appeal filed by the assessee stands dismissed.
In the result, the appeal filed by the assessee is dismissed. Order pronounced on the 23rd August, 2017 at Chennai.