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Income Tax Appellate Tribunal, ‘A’ BENCH, KOLKATA
Before: Shri Rajpal Yadav, Vice-(KZ) & Dr. Manish Borad
Per Rajpal Yadav, Vice-President (KZ):- The present two appeals are directed by the assessee against the separate orders passed on their respective appeals by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 4th June, 2024 (ITA No. 1507/KOL/2024) in A.Y. 2015-16 and 6th September, 2023 (ITA No. 1508/KOL/2024) in A.Y. 2015-16.
The issues agitated by the assessee in both the cases are identical, therefore, we heard them together and deem it appropriate to dispose of them by this common order.
The Registry has pointed out that is time barred by 249 days. The assessee has filed an application for condonation of delay as well as the affidavit of Ms. Veena Tanwar, daughter of Shri O.P. Tandon, who is working with Akzo Nobel India Limited. The main reason assigned in this application by the assessee is that e-mail ID of Ms. Malvika Saini was provided to the ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund Department while filing the return of income. She has left the company and e-mail account of Ms. Malvika Saini became inoperative since then, therefore, notices could not be served upon the assessee. The appeal was filed before the ld. CIT(Appeals) on 16.01.2018 and she left the job on 31.07.2019. On account of above notice could not be served upon the assessee, it could not know about the status of the appeal filed before the ld. CIT(Appeals). The assessee prayed that the delay in filing the appeal be condoned and it be heard on merit.
On the other hand, ld. D.R. submitted that the assessee has facility of well-trained consultant and if one of the employees has left the job, then it should have updated the e-mail address of another employee. The assessee should have been more vigilant while pursuing its litigation with the Department.
Sub-section 5 of Section 253 contemplates that the Tribunal may admit an appeal or permit filing of memorandum of cross- objections after expiry of relevant period, if it is satisfied that there was a sufficient cause for not presenting it within that period. This expression sufficient cause employed in the section has also been used identically in sub-section 3 of section 249 of Income Tax Act, which provides powers to the ld. Commissioner to condone the delay in filing the appeal before the Commissioner. Similarly, it has been used in section 5 of Indian Limitation Act, 1963. Whenever interpretation and construction of this expression has fallen for ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund consideration before Hon’ble High Court as well as before the Hon’ble Supreme Court, then, Hon’ble Court were unanimous in their conclusion that this expression is to be used liberally. We may make reference to the following observations of the Hon’ble Supreme court from the decision in the case of Collector Land Acquisition Vs. Mst. Katiji & Others, 1987 AIR 1353: 1. Ordinarily a litigant does not stand to benefit by lodging an appeal late.
Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties.
"Every day’s delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner.
When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.
There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk.
It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
Similarly, we would like to make reference to authoritative pronouncement of Hon’ble Supreme Court in the case of N. Balakrishnan Vs. M. Krishnamurthy (supra). It reads as under: “Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life-span for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for 5
ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finis litium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time. A court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words "sufficient cause" under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi lain Vs. Kuntal Kumari [AIR 1969 SC 575] and State of West Bengal Vs. The Administrator, Howrah Municipality [AIR 1972 SC 749]. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the explanation. While condoning delay the Could should not forget the opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation expenses. It would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss”.
We do not deem it necessary to re-cite or recapitulate the proposition laid down in other decisions. It is suffice to say that the Hon’ble Courts are unanimous in their approach to propound that whenever the reasons assigned by an applicant for explaining the condonation of delay,
ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund then such reasons are to be construed with a justice oriented approach.
In the light of above, if we examine the facts and circumstances, then it will reveal that the assessee will not gain anything by making the appeal time barred. It must be on account of some bonafide human lapse that appeal has become time barred. It was not adopted by the assessee as a strategy to litigate with the Department. Therefore, we condone the delay and proceed to decide the appeal on merit.
In both the appeals, the assessee has taken three grounds of appeal and their common grievance in their respective appeals is that ld. CIT(Appeals) has erred in confirming the action of the ld. Assessing Officer vide which benefit of section 10(25(iv) was denied to each assessee. The ld. CIT(Appeals) has confirmed the addition of Rs.59,17,898/- (in the case of ICI India management Staff Gratuity Fund) and Rs.73,74,986/- (in case of ICI India Limited Employees Gratuity Fund).
First we take the facts from the case of ICI India management Staff Gratuity Fund. Brief facts of the case are that the assessee has filed its return of income on 26.07.2017. Its case was selected for scrutiny assessment and a notice under section 143(2) was issued upon the assessee. According to the ld. Assessing Officer, no one has come present on behalf of the assessee. Therefore, he proceeded to frame the assessment order
ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund under section 144 of the Income Tax Act, which empowers him to pass a best judgment according to his understanding. The ld. Assessing Officer has recorded the following finding:- “6.1. Bogus claim of exempt income: On perusal of assessment record, it is found that during the F.Y. 2014-15, the assessee has shown his investment in government or trust securities, Debenture or Bonds, Mutual Funds and in others and earned interest/dividend income which is claimed exemption of Rs.59,17,898/-. On being asked repetitively to offer explanation regarding nature of exemption of his income, the assessee was not able to provide any explanation for the reason known best to him. The assessee failed to file any exemption certificated issued by the Income Tax Department for confirmation to his claim of exempt income. In spite of various opportunities given to the assessee, was unable to submit the exemption certificate of claiming exempt income. Hence, the entire amount of exempt income claim by assessee to the end of Rs.59,17,898/- in his return be treated as normal income and added back to the total income of assessee. Addition Rs.59,17,898/-“.
Dissatisfied with this addition, the assessee filed an appeal on 16.01.2018. This appeal has been decided by the ld. CIT(Appeals) vide its order dated 06.09.2023. The ld. CIT(Appeals) has dismissed the appeal for want of prosecution. It has not adjudicated the appeal on merit.
Before us, the assessee has filed an application under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963, which empowers the Tribunal to permit an assessee to adduce additional evidence. Such application of the assessee is worth to note, which reads as under:-
ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund IN THE MATTER OF: ICI INDIA MANAGEMENT STAFF GRATUITY FUND ASSESSMENT YEAR:2015-16 ITA NO. 1508/KOL/2024 (ASSESSEE’S APPEAL) BENCH: ‘A’ RE: APPLICATION UNDER RULE 18(4) READ WITH RULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 FOR FILING OF ADDITIONAL EVIDENCES Ground No. 1 & 2 These grounds are preferred against the action of the Ld. AO in denying the exemption claimed by appellant under section 10(25)(iv) of the Income-tax Act, 1961 (hereinafter referred to as ‘Act’) amounting to Rs.59,17,898/- in the order under section 144 of the Act and as confirmed by the Ld. CIT(Appeals) for the assessment year 2015-16. In this regard it is pertinent to note that appellant is a Fund created by M/s. Akzo Nobel India Limited (Formerly known as ICI India Limited) (hereinafter referred to as ‘Company’) to provide gratuity to its employees. The said Fund got the approval from the Ld. Commissioner of Income Tax, West Bengal - III, Calcutta in appellant’s earlier name viz. ‘I.C.I. (India) Private Limited Management Staff Gratuity Fund’ with effect from 17-11-1975 vide order dated 24-06-1977. Kindly refer page no. 1 of Paper Book for a copy of the said order. Subsequently, the name of the Fund i.e. appellant has been changed from ‘I.C.I. (India) Private Limited Management Staff Gratuity Fund’ to the current name of appellant i.e. 'ICI India Management Staff Gratuity Fund’ due to the change of name of the company over a period of time. Kindly note that the name of the company was changed from ‘I.C.I. (India) Private Limited’ to ‘Crescent Dyes & Chemicals Limited’ on 17-03-1978, vide certificate of incorporation consequent on change of name dated 17-03-1978 issued by the Assistant Registrar of Companies, West Bengal. Kindly refer page no. 2 of Paper Book for the above certificate. Thereafter, Crescent Dyes & Chemicals Limited’ merged with ‘Indian Explosives Limited’ in 1984. Subsequently, the name of the company was changed from 'Indian Explosives Limited’ to ‘IEL Limited’ on 06-06- 1985 vide certificate of incorporation consequent on change of name dated 12-07-1985 issued by the Assistant Registrar of Companies, West Bengal. Kindly refer page no. 3 of Paper Book for the above certificate. 9
ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund Thereafter, the name of the company was again changed from IEL Limited to ‘ICI India Limited’ on 22-05-1989, vide certificate of incorporation consequent on change of name dated 25-05-1989 issued by the Assistant Registrar of Companies, West Bengal. Kindly refer page no. 4 of Paper Book for the above certificate. In view of the aforesaid approval granted by the Ld. CIT, vide order dated 24-06-1977 the entire income of appellant is exempt from tax under section 10(25)(iv) of the Act, since section 10(25)(iv) of the Act provides that, “any income received by the trustees on behalf of an approved gratuity fund” is exempt from tax. Hence, appellant had claimed its entire income of Rs.59,17,898/- as exempt from tax in the return of income filed on 29-11-2016 for the relevant year i.e. AY 2015-16. However, in the order under section 144 of the Act dated 29.12.2017, the ld. AO has denied the exemption claimed by appellant amounting to Rs.59,17,898/- on the contention that, appellant had not filed exemption certificate and also not filed reply against notice issued to appellant. The Ld. CIT(Appeals) has upheld the said denial of exemption. In this regard it is pertinent to note that the Ld. CIT approved the Fund i.e. appellant vide order dated 24-06-1977 with effect from 17-11-1975 in appellant’s earlier name i.e. ‘I.C.I. (India) Private Limited Management Staff Gratuity Fund’. Subsequently, due to change of name of the company over a period of time, the name of appellant was changed from ‘LC.I. (India) Private Limited Management Staff Gratuity Fund’ to ‘ICI India Management Staff Gratuity Fund'. Your Honours may kindly note that the change of name of appellant, as stated hereinabove, was duly approved by the Ld. CIT. However, the approved ‘Deed of Variation’ and the order of the Ld CIT approving the new name of appellant are somehow misplaced and it could not be traced by appellant even after putting a lot of efforts. In view of the same, appellant could not file the exemption certificate issued in its new name before the Ld. CIT(A). Your Honours may kindly further note that immediately after the change of name of appellant, as stated above, an application was filed with the Income Tax Department to change the name of appellant in the Permanent Account 10
ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund Number (PAN) Card. The Department duly issued the new Permanent Account Number Card in the new name of appellant. Thereafter, appellant started to prepare the books of account and annual financial statements and got the same audited in its new name. Appellant had also prepared the audited accounts for the year under consideration in its new name. Kindly appreciate that the return of income of appellant was also filed in its new name after getting approval from the Ld. CIT. Appellant had also filed return of income for the year under consideration in its new name. In this regard it is pertinent to note that the exemption certificate issued by the Ld. CIT, vide order dated 24-06-1977, in appellant’s earlier name viz. 'I.C.I. (India) Private Limited Management Staff Gratuity Fund’ is equally valid to appellant for the relevant year, since appellant had changed its name from ‘LC.I. (India) Private Limited Management Staff Gratuity Fund’ to ‘ICI India Management Staff Gratuity Fund’, and as such, both the names are pertaining to appellant only. The appellant has also explained the above facts in an affidavit dated 30-07-2024 duly notorised by a notary public. Kindly refer page no. 39 to 41 of paper Book for the said affidavit. Kindly also refer page no.1 to 4 of Paper Book evidencing approval of Registrar of Companies, West Bengal in regard to the change of name of the company from ‘I.C.I. (India) Private Limited’ to ‘ICI India Limited’ over a period of time. Thus, it is submitted that, due to change of name of the company, the name of appellant has been changed from ‘I.C.I. (India) Private Limited Management Staff Gratuity Fund’ to ‘ICI India Management Staff Gratuity Fund’ over a period of time and accordingly, the approval granted by the Ld. CIT vide order dated 24- 06-1977 in appellant’s earlier name is also applicable to appellant in its current name, since both are the same Fund i.e. appellant. Hence, the denial of exemption under section 10(25)(iv) of the Act in the order under section 144 of the Act for the relevant year and its confirmation by the Ld. CIT(Appels) is not justified and hence, the same is not tenable. Keeping in view the importance of the aforesaid documents, appellant company has considered it necessary to file the above new documents (kindly refer page no. 1 to 4 & page no. 39 to 41 of Paper Book) as additional evidences which will go into the root of the matters while deciding the above issue. 11
ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund
In view of the above, we humbly pray to the Hon’ble Members of the Income Tax Appellate Tribunal to kindly accept the additional evidences in appreciation of the facts of the case in order to render justice. Sd/- Anup Sinha (Authorized Representative) Date: 13-09-2024
With the assistance of ld. Representatives, we have gone through the record carefully. A perusal of the impugned order would indicate that ld. Assessing Officer was unable to appreciate the nature of claim made by the asseessee. He has just treated it as bogus because no supporting documents were available. The ld. 1st Appellate Authority further dismissed the appeal for want of prosecution, whereas the case of the assessee is that it is a recognized Gratuity Fund and such recognition was given way back in 1975. Therefore, had these documents were available before the revenue authorities, probably they would have not disallowed the claim of assessee. In other words, the adjudication by the revenue authorities is not on merit, rather on account of non-appearance of the assessee. Considering all these details, we are of the view that ends of justice would meet if we allow this application of the assessee to produce additional evidence and remit these issues to the file of ld. Assessing Officer. The ld. Assessing Officer shall examine the claim of the assessee after providing due opportunity of hearing. In case, physical copy of the exemption certificate is being not made available by the assessee, then ld. Assessing Officer shall call for income tax record and verify
ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund the status of the asseessee in the past on the basis of details given by the asseessee. The ld. Assessing Officer will not simply deny the benefit to the assessee under section 10(25)(iv) in the absence of non-availability of the certificate issued by the CIT(Exemption). He will verify the status in the past and in the subsequent years. He will verify the revenue record on the basis of details of certificate given by the assessee.
With the above observation, this appeal is allowed for statistical purposes.
i.e. the case of ICI India Limited Employees Gratuity Fund. In this case also, the assessee has claimed exemption under section 10(25(iv). Such claim was denied to the assessee in an ex-parte assessment order passed according to the best judgment of the ld. Assessing Officer under section 144 of the Income Tax Act. The appeal to the ld. CIT(Appeals) is also ex-parte. In this year also, the assessee has filed an application for permission to adduce additional evidence. Such application reads as under:- In the matter of : ICI India Limited Employees Gratuity Fund Assessment Year: 2015-16 ITA No. 1507/KOL/2024 (Assessee’s appeal) RE: APPLICATION UNDER RULE 18(4) READ WITH RULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 FOR FILING OF ADDITIONAL EVIDENCES
Ground No. 1 & 2 These grounds are preferred against the action of the Ld. AO in denying the exemption claimed by appellant under section 13
ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund 10(25)(iv) of the Income-tax Act, 1961 (hereinafter referred to as ‘Act’) amounting to Rs.73,74,986/- in the order under section 144 of the Act and as confirmed by the Ld. CIT(Appeals) for the assessment year 2015-16. In this regard it is pertinent to note that appellant is a Fund created by M/s. Akzo Nobel India Limited (Formerly known as ICI India Limited) (hereinafter referred to as ‘Company’) to provide gratuity to its employees. The said Fund got the approval from the Ld. Commissioner of Income Tax, West Bengal - IV, Calcutta long back and latest approval being granted vide order dated 05- 02-1997. Kindly refer page no. 1 of Paper Book for a copy of the said order Kindly note that the name of the company was changed from 'I.C.I. (India) Private Limited’ to ‘Crescent Dyes & Chemicals Limited’ on 17-03-1978, vide certificate of incorporation consequent on change of name dated 17-03-1978 issued by the Assistant Registrar of Companies, West Bengal. Kindly refer page no. 2 of Paper Book for the above certificate Thereafter, Crescent Dyes & Chemicals Limited’ merged with ‘Indian Explosives Limited’ in 1984. Subsequently, the name of the company was changed from ‘Indian Explosives Limited’ to 'IEL Limited’ on 06-06- 1985 vide certificate of incorporation consequent on change of name dated 12-07-1985 issued by the Assistant Registrar of Companies, West Bengal. Kindly refer page no. 3 of Paper Book for the above certificate. Thereafter, the name of the company was again changed from ‘IEL Limited’ to ‘ICI India Limited’ on 22-05-;1989, vide certificate of incorporation consequent on change of name dated 25-05-1989 issued by the Assistant Registrar of Companies, West Bengal. Kindly refer page no. 4 of Paper Book for the above certificate. In view of the aforesaid approval granted by the Ld. CIT, vide order dated 05-02-1997 the entire income of appellant is exempt from tax under section 10(25)(iv) of the Act, since section 10(25)(iv) of the Act provides that, “any income received by the trustees on behalf of an approved gratuity fund” is exempt from tax. Hence, appellant had claimed its entire income of Rs.73,74,986/- as exempt from tax in the return of income filed on 29-11-2016 for the relevant year i.e. AY 2015-16. However, in the order under section 144of the Act dated 29.12.2017, the ld. AO has denied the exemption claimed by 14
ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund appellant amounting to Rs.73,74,986/- on the contention that appellant had not filed exemption certificate and also not filed reply against notice issued to appellant. The ld. CIT(Appeals) has upheld the said denial of exemption.
It is submitted that the above denial of exemption is wholly unjustified considering the fact that the Ld. CIT approved the Fund i.e. appellant long back and latest approval being granted vide order dated 05-02-1997 (kindly refer page no. 1 of Paper Book). In view of the said approval, appellant’s entire income for the relevant year would be exempt from tax under section 10(25(iv) of the Act. In such a situation, the denial of exemption under section 10(25)(iv) of the Act in the order under section 144 of the Act for the relevant year and its confirmation by the Ld. CIT(Appels) is wholly unjustified and accordingly, the same is liable to be quashed in the interests of justice. Keeping in view the importance of the aforesaid documents, appellant company has considered it necessary to file the above new documents (kindly refer page no. 1 to 4 of Paper Book) as additional evidences which will go into the root of the matters while deciding the above issue. In view of the above, we humbly pray to the Hon’ble Members of the Income Tax Appellate Tribunal to kindly accept the additional evidences in appreciation of the facts of the case in order to render justice. Sd/- Anup Sinha (Authorized Representative) Date: 13-09-2024
With the assistance of ld. Representatives, we have gone through all these records. The punishment in the shape of tax liability on denial of exemption under section 10(25)(vi) is disproportionate to the negligence of assessee of not appearing. In a best judgment assessment proceeding. Ld. Assessing Officer ought to have examine the past history as well as the subsequent 15
ITA No. 1507/KOL/2024 (A.Y. 2015-2016) ICI India Limited Employees Gratuity Fund & (A.Y. 2015-2016) ICI India Management Staff Gratuity Fund claims. He has not collected any information from anyone and simply rejected the claim of the assessee, which has been further approved by the ld. CIT(Appeals). To our mind, ends of justice would meet if we set aside both the orders and relegate this issue to the file of ld. Assessing Officer, who will re-adjudicate it on merit. The ld. Assessing Officer shall verify the status of assessee from the Department’s records in the past as well as in subsequent years. He will provide due opportunity of hearing to the assessee for submission of relevant documents and thereafter decide the matter afresh.
In view of the above, this appeal is also allowed for statistical purposes.
In the result, both the appeals are allowed for statistical purposes. Order pronounced in the open Court on 08/10/2024.
Sd/- Sd/- (Manish Borad) (Rajpal Yadav) Accountant Member Vice-President (KZ) Kolkata, the 8th day of October, 2024 Copies to :(1) ICI India Limited Employees Gratuity Fund, Magnum Tower, 9th Floor, Golf Course, Extension Road, Sector-58, Gurgaon-122011, Haryana