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Income Tax Appellate Tribunal, BENCH ‘B’, CHENNAI
Before: SHRI SANJAY ARORA & SHRI G. PAVAN KUMAR
आदेश /O R D E R
Per Sanjay Arora, AM:
This is an Appeal by the Assessee agitating the Order by the Commissioner of Income Tax (Appeals), Salem [‘CIT(A)’ for short] dated 26.07.2016, dismissing the assessee’s appeal contesting it’s assessment under section 143(3) of Income Tax Act, 1961 (‘the Act’ hereinafter) dated 26.11.2012 for assessment year (AY) 2010-11.
2 (AY 2010-11) Deventhira Spinners (P.) Ltd. v. Asst. CIT 2. The ld. CIT(A), we observe at the outset, has not decided the issue raised before him on merits, finding the appeal as not maintainable in-as-much as there has been an unexplained delay of 173 days in filing the said appeal. The issue therefore arising in the instant appeal is whether the first appellate authority ought to have, in the facts and circumstances of the case, condoned the delay in preferring the appeal before him by the assessee, having been filed on 18.06.2013, while the limitation period expired on 28.12.2012.
Explaining the reason for the delay, it was submitted by the ld. counsel, Shri S.Sridhar, Advocate, that the issue arising in appeal before the ld. CIT(A) was the rate of depreciation to be allowed on the civil construction of the Windmill, which had been allowed at a lower rate, even as the assessee claims the rate applicable to the Windmill on the basis that the same (civil construction) forms an integral part thereof. The matter in fact is clearly covered by the decision by the Tribunal in Velathal Spinning Mills Pvt. Ltd. (in & 2083/Mds/2010 dated 30.06.2011/copy on record). The matter also arising in the case of the said assessee for another, subsequent year (AY 2008-09), recourse to section 154 of the Act was made and, on its rejection, before the first appellate authority, who also confirmed the said rejection. The matter was taken to the tribunal, which also agreed with the Revenue, dismissing the appeal before it vide its order dated 02.05.2013 (in ITA No. 212/Mds/2013 at pages 24-27). The said assessee being also represented by him (i.e., Shri S. Sridhar), it was considered reasonable to await the said order by the tribunal in-as-much as in case of a favourable order, a similar application u/s. 154 would also be moved before the Assessing Officer (A.O.), for which time was available up to 31/3/2017. However, the tribunal deciding otherwise, an appeal against the quantum assessment in the instant case was preferred before the ld. CIT(A) immediately thereafter, on 18.06.2013. In-as- much as the issue involved in the present appeal is the same, the assessee entertained a bona fide belief that it would be saved of the tedium of filing an 3 I.T.A No.2442/2016 (AY 2010-11) Deventhira Spinners (P.) Ltd. v. Asst. CIT appeal (against the quantum assessment), and shall move, likewise, a rectification application u/s. 154. The ld. DR would contest, stating that the same does not constitute a reasonable ground for a bona fide belief, which could, if at all, be so in the case of Velathal Spinning Mills Pvt. Ltd. (supra).
We have heard the parties, and perused the material on record. We find no basis for a belief in the instant case. The application u/s. 154 was made only in the case of Velathal Spinning Mills Pvt. Ltd. (supra), and not the assessee. In fact, recourse to section 154, where so, could be taken only in that case in-as-much as the constituents as well as their cost and, thus, the written down value (WDV) of the relevant block of the assets (comprising the Windmill) had been determined for earlier years, i.e., AYs 2005-06 & 2006-07. As such, it was only in that case that the assessee-appellant could, and in our view not incorrectly, adopt such a plea; no appeal against the quantum assessment for AY 2008-09 having been preferred in time in that case as well. In fact, as it transpires, the adopted course was not considered sustainable in law right up to the tribunal even in that case. No such alternative course had been, or even possibly could be, taken in the present case, i.e., even if action u/s. 154 had been upheld in the case of Velathal Spinning Mills Pvt. Ltd. (supra). The only course for the assessee, if it intended to derive benefit out of the favourable decision in the case of Velathal Spinning Mills Pvt. Ltd. (supra), was to keep the issue alive by contesting the assessment in appeal, and which it finally did, albeit belatedly, leading to the instant proceedings. Why, if that be so, rectification proceedings could be adopted in every case where the same issue has been decided in any one case. It is only in case of a decision by the Hon’ble jurisdictional High Court or the Apex Court, deciding a question of law, that an assessment or order inconsistent therewith could be said as legally infirm, liable for rectification. The plea of bona fide belief is, therefore, mis-conceived.
4 (AY 2010-11) Deventhira Spinners (P.) Ltd. v. Asst. CIT So, however, in our considered view, the assessee deserves to succeed. The reason is that the assessee, as is apparent, has all along proceeded on the advice of it’s counsel, who is the same as in the case of Velathal Spinning Mills Pvt. Ltd. (supra), having represented it both before first appellate authority as well as the tribunal, as in the instant case. Appellate proceedings being only a continuation of the original proceedings, the same were outstanding at the stage of the first appellate authority in the case of Velathal Spinning Mills Pvt. Ltd. (surpa) (for AY 2008-09) at the time the assessment in the instant case was made in November, 2012 (PB pgs. 18-23). Could, therefore, the assessee be penalized for having adopted bona fide the course suggested by it’s counsel? This is particularly so as there is an order by the tribunal deciding the issue at hand in its’ favour, so that the Revenue authorities were ordinarily, i.e., unless there is a contrary decision by either the tribunal or a superior forum, or distinguishing facts, or a difference in law, bound by it. Why, the issue is principally factual, i.e., whether the infrastructure fee; civil construction; electrical installation, form part of the cost of the Windmill or constitute separate, identifiable assets. And which the tribunal had decided in the case of Velathal Spinning Mills Pvt. Ltd. (supra) following the functional test, holding the same as forming an integral part of the Windmill, so that their cost would form part of it’s cost and, therefore, subject to the same rate of depreciation. In our view, therefore, the assessee is eligible for it’s appeal being heard and considered on merits. In so deciding, we are guided by the ratio of the decisions by the Apex Court in Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 (SC) and Concord of India Insurance Co. Ltd v. Nirmala Devi [1979] 118 ITR 507 (SC). In the former, a celebrated decision, the Apex Court clarified a liberal approach to be valid, i.e., in principle, while considering an application for condonation of delay, adopting a justice oriented approach, as a litigant does not stand to benefit by resorting to delay, and between substantial justice and technical considerations, it is the cause of the former that is to be preferred. Of course, the 5 (AY 2010-11) Deventhira Spinners (P.) Ltd. v. Asst. CIT delay is to be non-deliberate, and it is for this reason that we have referred to the decision in the case of Concord of India Insurance Co. Ltd. (supra). In that case, the Apex Court opined that ordinarily no prejudice should be caused to a litigant for the wrong advice of its’ counsel. Of course, it must not be a device to cover an ulterior purpose or some limitation in and around the case, so that care must be taken to see that there is no taint of mala fides or ruse or an element of recklessness. If the legal advice is honestly and actually sought and given, it must be treated as a sufficient cause when an application u/s. 5 of the Limitation Act, 1963 is being considered. We have found the surrounding facts and circumstances as indicating it as a case of an advice, though mistaken, rendered and followed. There is nothing to suggest any ulterior motive. What else, one may ask, prevented the assessee from filing the appeal in time? The ld. CIT(A) has, in not condoning the delay, relied on the decisions in the case of Madhu Daha v. Dy. CIT [2009] 317 ITR 458 (Mad) and CIT v. Ram Mohan Kabra [2002] 257 ITR 773 (P&H). The proposition that the appellant must show sufficient cause for the delay is well-settled. What is sufficient cause is a matter of fact, even as clarified in Ram Mohan Kabra (supra), and which we have found as so considering the facts and circumstances of the case in light of the legal position in the matter. What we have, in substance, stated is that regard must be made for a view, though mistaken, given in honesty, and followed, considering it from the stand-point of an ordinary person who is dependent on the legal advice of his counsel in such matters. The very fact that such a course was followed in the case of Velathal Spinning Mills Pvt. Ltd. (for AY 2008-09), shows it to be a case of an opinion, actually given, and followed, so that it cannot be regarded as a ruse. A perusal of the both the decisions relied upon show that the petitioner had not been able to satisfactorily explain the delay. Reliance on the same would thus not be of much assistance to the Revenue’s case.
We, accordingly, accepting the assessee’s plea, vacate the finding of absence of sufficient and reasonable cause for delayed filing of appeal before the 6 (AY 2010-11) Deventhira Spinners (P.) Ltd. v. Asst. CIT first appellate authority and, condoning it, set aside the matter to his file for a consideration on merits. We may clarify that we may not be construed as having issued any finding on the merits of the case, and our observations herein represent only a prima facie view, made while considering the case from the stand point of substantial justice as well as the reasonability of the assessee’s case. We decide accordingly.
In the result, the assessee’s appeal is allowed.