AADI REAL ESTATE DEVELOPERS PRIVATE LIMITED ,AHMEDABAD vs. THE ITO, WARD-1(1)(1), AHMEDABAD

The brief facts relating to the case are that the assessee is a Private Limited Company and had filed ‘Nil’ return of income for the impugned assessment year, i.e. AY 2012-13. Subsequently, on information received from DDIT (Inv.), Unit-1 (3), Ahmedabad, by the Assessing Officer that the assessee was a beneficiary of accommodation entry taken through dummy companies run and controlled by one Jignesh Shah, which information was revealed consequent to search action conducted on Jignesh Shah, the case of the assessee was reopened. The Assessing Officer was of the belief that the assessee had taken accommodation entry to the tune of Rs.4,73,20,000/- from dummy concerns managed and controlled by Jignesh Shah. The Assessing Officer was also in possession of information from the AIR that the assessee had purchased immovable property for a consideration of Rs.6.75 crores; therefore, during the reassessment proceedings, the assessee was asked to prove the genuineness of the transactions entered into by it with the alleged dummy companies of Shri Jignesh Shah amounting to Rs.4,73,20,000/- and was also asked to explain the source of investment in the property purchased amounting to Rs.6.75 crores during the year. The proceedings were largely unrepresented by the assessee, except for one reply filed at the fag end of the proceedings on 30.11.2019. The order was subsequently passed on 04.12.2019. The assessee submitted the transactions with the alleged dummy companies of Shri Jignesh Shah to be genuine. The said companies were identified as Amar Textile, Kavita Enterprise, Riddi Siddhi Marketing. As for the purchase of immovable properties amounting to Rs.6.75 crores, the source of same was attributed to money borrowed from the directors, shareholders and investors of the company being (i) Bhavik Parikh Rs.2,88,65,000/-, (ii) Amar Remedies Ltd Rs.3,00,00,000/-, (iii) Chinubhai Virchan Rs.75,00,000/- and (iv) Taraben Chinubhai Rs.75,00,000/- - totaling of all Rs.7,38,65,000/-.

The Assessing Officer considered the reply of the assessee, but treated it as unacceptable noting that the assessee had only submitted the ledger account of the transactions carried out with the alleged dummy companies of Shri Jignesh Shah, without any evidences being filed proving the genuineness of the same. He, therefore, held that the assessee company had failed to prove the basic credentials to satisfy the provisions of Section 68 of the Act. He accordingly held the amount received from the alleged dummy concerns of Shri Jignesh Shah amounting to Rs.4,73,20,000/- as undisclosed income of the assessee.

Further, with respect to the source of purchase of immovable property of Rs.6,75,00,000/-, the Assessing Officer again noted that no evidence proving the genuineness of the loans from which the purchase was sourced, was filed by the assessee. The entire amount of loans taken by the assessee accordingly of Rs.7,38,65,000/-, therefore, was treated as undisclosed credit and added to the income of the assessee in terms of Section 68 of the Act.

Thus, as against ‘Nil” income returned by the assessee/loss returned of (-) Rs.28,260/-, additions of Rs.4,73,20,000/- and Rs.7,38,65,000/- were made to the income of the assessee resulting in the income being assessed to the tune of Rs.12,11,56,740/-.

The matter was carried in appeal before the ld. CIT(A) who in turn confirmed the addition made by the Assessing Officer.

At the outset itself, it was noted that the present appeal was delayed for filing by 485 days. The ld. Counsel for the assessee filed an affidavit before us of the Director of the assessee-company Shri Vishal Mukeshkumar Shah outlining therein the reason leading to the delay in the filing of the present appeal before us by 485 days. The contents of the same are reproduced hereunder:-

That the impugned order of the CIT(A) was passed on 25-05-2022 and was received via email on 26-05-2022 which was operated by our accountant. However, he left the job without informing the management regarding receipt of the said order. We came to know regarding the receipt of such order only on 15-07-2022 and the same was sent to our tax advisor Niranjan Jain & Co. for filing further appeal before the ITAT. Mr. Niranjan Jain is also tax advisor to other member of our group. Therefore, we were under bonafide impression that he will look into the matter and do the needful. Upon verification, it was found that he too did not file the appeal and upon confrontation, he returned the file back to us on or around 06-11-2023.

Referring to the above, the ld. Counsel for the assessee contended before us that there was no laxity attributable to the assessee for the delay. That, in fact, the delay occurred on account of the lapses on the part of the accountant and the professional engaged by the assessee for filing of appeal. He pointed out that the accountant, who was handling all financial matters of the assessee-company, left the job without informing the management regarding the receipt of the order which was received via email on 26.05.2022. That, when the management came to know of the order two months later on 15.07.2022, they immediately sent it to their tax advisor Niranjan Jain & Co. for filing appeal before the ITAT. It was also pointed out that Mr. Niranjan Jain was also a tax advisor to other members of assessee-group. That, therefore, the management of the assessee-company was under the bonafide belief that he would look into the matter and do the needful, but the tax professional returned the file back to them after more than a year on 06.11.2023. That, thereafter, they approached another Chartered Accountant for filing the present appeal who accordingly filed it immediately thereafter on 21.11.2023 resulting in a delay of 485 days in filing the present appeal.

Ld. Counsel for the assessee contended that the delay needed to be condoned since the delay could not be attributed to the assessee, but to the negligence on the part of the professional engaged by it for the said purpose. That the assessee should not be made to suffer for the negligent act of the professionals which he had engaged for carrying out the necessary professional work of filing appeal before the ITAT. That, the assessee bonafidely had believed the professional to carry out their duties once the necessary documents were handed over to them, to take remedial action by filing appeal. That, assessee’s diligence in pursuing the matter by filing appeal to the ITAT is established by the fact that it promptly engaged professionals to take necessary action of filing appeal to the ITAT against order passed by Ld.CIT(A). The negligence of the professional, therefore, cannot be treated as negligence of the assessee and the assessee should not be punished for the negligence of the professional engaged by it. The ld. Counsel for the assessee further contended that, considering the fact that the addition made in its case is many folds the income returned by it i.e. while the assessee had returned ‘Nil” income/loss return, the addition was to the tune of approximately Rs.12 crores, the principles of public policy and equity demanded advancing substantial justice, and therefore the assessee’s appeal should not be dismissed at the threshold itself for mere technicalities but be admitted for hearing.

Ld. DR, on the other hand, countered by saying that the assessee has not filed any evidence to prove the negligence on the part of its professional, and therefore, the explanation of the assessee for the delay cannot be accepted, and therefore he pleaded that the application for condonation of delay in filing the appeal needs to be rejected and the appeal of the assessee be dismissed as non-maintainable.

To this, the ld. Counsel for the assessee countered by stating that all facts leading to the delay have been stated on oath by the Director of the assessee-company. That, no professional would come forward and admit his negligence in any manner. Therefore, the genuineness of the assessee’s explanation cannot be doubted for non-furnishing of any evidence which is virtually impossible for the assessee to produce.

We have heard the contentions of both the parties and we are of the view that it is a fit case for condoning the delay of 485 days in filing of the appeal before us. Undoubtedly, as per the contentions of the ld. Counsel for the assessee, duly supported by the affidavit of the Director of the assessee- company, the delay is attributable to the negligence on the part of the professional engaged by it for filing of appeal. Though the ld. DR has contended that no evidence of the negligence of the professional has been filed by the assessee, we agree with the ld. Counsel for the assessee that the fact that the Director of the assessee-company has stated so on oath suffices.

The Hon’ble Madras High Court in the case of Rarefield Engineers (Pvt.) Ltd., [2023] 156 taxmann.com 643 (Madras) has held that the question of limitation is not based on technical consideration, but is on the principles of public policy and equity, and the substantial justice is paramount consideration and pivotal for deciding the issue of condonation of delay. The Hon’ble High Court in the said judgment referred to the decision of the Hon’ble Apex Court in the case of N. Balakrishnan Vs. M. Krishnamurthy, [1998(7) SCC 123], wherein, the Hon’ble Supreme Court had observed that limitation fixed for approaching the Court is not because on the expiry of such time a bad cause would transform into a good cause. That, rules of limitation are not meant to destroy the rights of parties, but only to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The law of limitation fixes a lifespan for such legal remedy for the redress of the legal injury so suffered. The condonation of delay is a matter of discretion of the Court and Section 5 of the Limitation Act does not say that such discretion can be exercised only if the delay is within a certain limit. Length of delay is no matter, acceptability of the explanation is the only criterion. When there is reasonable ground to think that the delay was occasioned, the same should be condoned. There is no presumption that delay in approaching the court is always deliberate. The words 'sufficient cause" under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice.

The Hon’ble Madras High Court also took note of the decision of the Hon’ble Apex Court in the case of Esha Bhattacharjee Vs. Raghunathpur Nafar Academy [2013] (12) SCC 649, wherein the Hon'ble Supreme Court has culled out the principles applicable to an application for condonation of delay, which is reiterated of what was stated by the Hon’ble Apex Court in the case of N. Balakrishnan Vs. M. Krishnamurthy (supra). Taking note of the above, and also of the fact that no litigant ordinarily stands to benefit by instituting a proceeding beyond time, the Hon’ble Court held that the question of limitation is to be based on the principles of public policy and equity, and the substantial justice is paramount consideration and pivotal. The relevant findings of the Hon’ble Court at paragraph Nos. 6 to 8 of its order are as under:-

We find that the ratio laid down by the Hon’ble High Court in the case of Rarefield Engineers (Pvt.) Ltd. (supra)squarely applies in the facts of the present case. The assessee has adduced sufficient cause before us for the delay. The assessee has suffered with many fold addition to its income having returned loss while the income assessed is approximately Rs.12 crores. We have also noted from the order of the ld. CIT(A) that, though the assessee had filed evidences in support of the grounds raised before it, the ld. CIT(A) summarily rejected them as not sufficient to prove the case of the assessee without affording any further opportunity to the assessee. Therefore, considered from all perspectives as noted above, for advancing substantial justice to the assessee, the delay, we hold, is condoned and the appeal of the assessee is admitted for hearing.

Having held so, we find that the assessee has not been given sufficient opportunity of being heard even by the ld. CIT(A). Before us, ld. Counsel for the assessee has submitted documents which apparently prove the genuineness of all the amounts received by it from the alleged dummy companies of Shri Jignesh Shah, as also the loans taken by it for financing the purchase of the immovable property during the year; on account of both of which addition was made to the income of the assessee. Ld. Counsel for the assessee pleaded that it is in possession of all evidences to prove the genuineness of all of the above, and therefore requested that an opportunity be given to the assessee to prove its case. Taking note of the same, in the interest of justice, we restore the issue back to the Assessing Officer for de novo consideration of all the issues raised in the appeal with the direction to the Assessing Officer to give due opportunity of hearing to the assessee. The assessee is free to furnish all evidences and explanation that it seeks to place reliance in support of its case. Accordingly, the appeal of the assessee is allowed for statistical purposes.

In effect, the appeal of the assessee is allowed for statistical purposes.