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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Tool Centre India P. Ltd. Income Tax Officer, C/o Die Plast P Ltd. Rajendra Ward 9(3)(3) Ganjawala Plot No. 11, Surve Mumbai- No. 61, near mohan bhagat School, naikpada Opp Village Vs. Valiv Vasai (E) Mumbai-400 053 PAN No. AABCT2105P .. Appellant Respondent Assessee by .. Shri Rahul Hakani, AR .. Shri Vishwas Mundhe, DR Revenue by Date of hearing .. 04-05-2017 .. Date of pronouncement 17-05-2017 O R D E R PER MAHAVIR SINGH, JM:
These two appeals by the assessee are arising out of the different orders of CIT(A)-20, Mumbai, in appeal No. CIT(A)-20/9(3)(3)/IT-15 & 16/2012-13 of even date 29-01-2013. The Assessment was framed by ITO Ward 9(3)(3) Mumbai for the A.Y. 2003-04 vide order dated 24-12-2008 u/s 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’). The penalty was levied by the ITO ward No. 9(3)(3), Mumbai u/s 271(1)(c) vide order dated 22.06.2009. for AY 2003-04 appeal by assessee. At the outset, the learned Counsel for the assessee stated that this appeal is time barred by 117 days and for this he has filed condonation petition stating the reasons that the appellate order of CIT(A) dated 21-01-2013 was received on 26-08-2013 and the same was handed over to the Chartered Accountant Firm Gala and Gala, who represented the assessee before AO. The assessee during second week of &1117/Mum/2014 Tool Centre India P. Ltd. AY:03-04 October 2013 enquired from Gala and Gala about status of the appeal and accordingly, Shri Rohit Chheda Chartered Accountant informed the assessee that due to internal dispute among partners, the functioning of the firm had stopped and appeal could not be filed. Accordingly, the papers were handed over to Shri Rohit Chheda, Chartered Accountant in the first week of November 2013 for filing of appeal and he intimated that the time limit for filing of appeal to the Tribunal has expired. Subsequently, the appeal was filed only on 19-02-2014 with the delay of 117 days. It was informed that due to dispute among the firm Shri Rohit Chheda has resigned voluntarily from the Firm with effect from 15- 03-2014 and the relevant copy of resignation letter dated December 14, 2013 was filed before us. The relevant resignation letter state the internal dispute of the firm as under: -
“1. As all of you are well aware, internal disputes of a serious nature have arisen between some partners since the past one and half year and the firm has been consequently engulfed in legal issues.
Even though I personally have good relations with all the partners and none of the partners have any grievances against me, as can even be confirmed from the pleadings of all partners. It is becoming increasingly difficult for me to carry on even with routine work amidst such animosity between partners.
3. Despite my sincere efforts & my best intentions, the prolonged issues between partners and the legal matters are taking their toll on my health. The apparent lack of trust between senior partners has resulted in an atmosphere that Is not conducive to carrying on day to day affairs smoothly.”
Qua this assessee has also filed affidavit. When a query was put to the learned Sr. DR he contested the condonation of delay. We have gone through the &1117/Mum/2014 Tool Centre India P. Ltd. AY:03-04 facts in entirety and are of the view that there is a dispute in the Chartered Accountant Firm due to which the delay occurred. We find the cause reasonable and hence, delay is condoned.
The learned Counsel for the assessee stated that the CIT(A) has adjudicated the issue ex-parte and for this he raised the following ground: -
“1. Violation of Principles of Natural justice:
The learned CIT(A) erred in passing an ex-parte order without giving adequate opportunity to the Appellant to present its case and hence order of CIT(A) may be quashed.”
The learned Counsel for the assessee drew our attention to the claim of the assessee that the issue is covered by the decision of Hon’ble Supreme Court in the case of ACG associated capsules Pvt. Ltd. vs. CIT 2012 343 ITR 89 (SC) wherein it is held that whether the 90% of net labour charges or gross labour charges which has been included in the profit and loss account of the business of the assessee as computed under the head of profit and gains of business or provision is to be deducted under clause (i) of explanation (baa) to section 80HHC of the Act for determining profit of business. According to the learned Counsel only 90% of net labour charges can be reduced in term of clause (bba) to section 80HHC of the Act. We find that CIT(A) has not adjudicated the issue in proper perception and without affording opportunity of being heard to the assessee and order is ex-parte. We set aside the order of CIT(A) and remand the matter back to the file of the AO for fresh adjudication. This appeal of assessee is allowed for statistical purposes.
Coming to AO and confirmed the CIT(A) on the very issue of deduction of 90% of labour chares and bank interest under clause (baa) to section 80 HHC of the Act. Since, we have set aside the quantum appeal, the appeal orders levied by AO and CIT(A)’s order confirming the penalty will not survive. Accordingly, the penalty Page 3 of 4 &1117/Mum/2014 Tool Centre India P. Ltd. AY:03-04 is deleted. However, in case during the course of assessment, the AO comes to the conclusion that there is concealment of income he may initiate the penalty proceedings as per law afresh.
In the result, appeal of assessee in is allowed for statistical purposes and appeal in is allowed. Order pronounced in the open court on 17-05-2017.