COMMERCIAL HOUSE PVT. LTD.,,KOLKATA vs. ITO, WARD - 6(1), KOLKATA

2. The appeal was presented before the Tribunal on 26.03.2024 against the order of ld. CIT(Appeals) dated 06.01.2023. It shows that the appeal is time barred, but somehow Registry has not raised objection. However, the assessee has filed an application for condonation of delay alongwith affidavit of Shri Lalit Kumar Bagri, son of Manik Chand Bagri. The affidavit of the Director reads as under:-

The ld. Counsel for the assessee submitted that basically this order was not served upon the assessee through e-mail nor it was served physically. It might have been uploaded on the Portal, which the assessee could not lay its hand in time. It could only come to know when penalty notice under section 270A was served upon it.

We have duly considered the rival contentions and gone through the record carefully. 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 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.

When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.

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 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 7 (A.Y. 2017-2018) Commercial House Pvt. Limited 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”.

In the light of above, if we examine the facts and circumstances of assessee’s case, then, it would reveal that basically it is not ascertainable, whether impugned order was physically served upon the assessee or not? It is pertinent to note that if it was not physically served, then, it should be served on the e-mail of the assessee. The details to that effect are also not available. In our opinion, the assessee would not gain anything by making its appeal time barred. Therefore, we are of the view that there might be some bonafide lapse at the end of the assessee in not filing the appeal well in time. Therefore, we condone the delay and proceed to decide the appeal on merit.

(A.Y. 2017-2018) Commercial House Pvt. Limited 9. The substantial grievance of the assessee is that ld. CIT(Appeals) has erred in confirming the addition of Rs.13,33,668/-. The finding of the ld. Assessing Officer is not very specific. Therefore, for the appreciation of facts, we take note of the finding of ld. CIT(Appeals), which reads as under:- “6. In this appeal, there and only two substantive grounds, which are as under:

In the result, the appeal is dismissed”.

The ld. Counsel for the assessee while impugning the order of ld. CIT(Appeals) contended that he has placed on record a statement giving comparative details of the expenditure debited to 9 (A.Y. 2017-2018) Commercial House Pvt. Limited Profit & Loss Account and suo motu disallowance made by the assessee at page no. 53 of the paper book. In his first-fold of contention, he submitted that the assessee has positive interest income of Rs.3,50,487/-, therefore, nothing can be disallowed out of interest expenditure. For buttressing his contention, he relied upon the decision of the Hon’ble Gujrat High Court in the case of Principal Commissioner of Income Tax -vs.- Nirma Credit & Capital Pvt. Limited reported in [2017] 85 taxmann.com 72 (Guj.). He further submitted that the assessee itself has disallowed Rs.3,10,847/-. The break-up of this amount has also been tabulated in the table placed at page no. 53 of the paper book. In view of the above, he submitted that no further disallowance deserves to be made.

The ld. D.R., on the other hand, submitted that disallowance has to be worked out as per Rule 8D. If no interest is to be disallowed, then also under sub-clause (3), the administrative expenses are required to be worked out for disallowance.

We have duly considered the rival contentions and gone through the record carefully. A perusal of the record would indicate that assessee’s average investment has been worked out by the ld. Assessing Officer at Rs.13,21,80,634/-. He has worked out a disallowance at 1% of this average investment and made a calculation of Rs.13,21,806/-. The ld. Assessing Officer has not made disallowance out of interest expenses. Therefore, we are of the view that from the total disallowance of Rs.13,21,806/-, credit of Rs.3,10,847/- be granted to the assessee and the rest of the (A.Y. 2017-2018) Commercial House Pvt. Limited disallowance deserves to be confirmed. No disallowance is to be made out of interest expense because the assessee has a surplus interest income. The Hon’ble Gujrat High Court in the case of Nirma Credit & Capital Private Limited has observed that interest expenditure is to be worked out net, in other words if the assessee has an interest income as well as expenditure, then net amount is to be worked out for considering the disallowance. If the net amount is a positive interest income, then, no disallowance out of interest expenditure is to be made. But in the present case, disallowance is to be u/s. 14A Rule 8D(iii) i.e. out of administrative expenses. The ld. Assessing Officer has worked out it at Rs.13,21,806/-. This amount deserves to be reduced by the amount, assessee has itself disallowed i.e. (Rs.13,21,806/- minus Rs.3,10,847/-) Rs.10,10,959/-. The above addition is confirmed.

In view of the above, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 11/09/2024.