ARYA INVESTMENT AND CONSTRUCTION CO.,MUMBAI vs. ITO WD 14(1)(4), MUMBAI

आदेश / O R D E R The assessee is aggrieved by the impugned order dated 10/10/2012 of the ld. First Appellate Authority, Mumbai, confirming penalty of Rs.16,39,871/-,levied u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter the Act). However, it was noticed that there was delay of four days in filing the appeal before this Tribunal. The assessee has filed an application for condonation of delay. The ld. DR, contended that delay many not be condoned as no proper reasoning for the delay has been adduced by the assessee.

2.1. The Hon’ble Apex Court in a celebrated decision in Collector, Land Acquisition vs Mst. Katiji & Ors. 167 ITR 471 opined that when technical consideration and substantial justice are pitted against each other, the courts are expected to further the cause of substantial justice. This is for the reason that an opposing party, in a dispute, cannot have a vested right in injustice being done because of a non- deliberate delay. Therefore, it follows that while considering matters relating to the condonation of delay, judicious and liberal approach is to be adopted. If “sufficient cause” is found to exist, which is bona-fide one, and not due to negligence of the assessee, the delay needs to condoned in such cases. The expression ‘sufficient cause’ is adequately elastic to enable the courts to apply law in a meaningful manner, which sub-serves the end of justice- that being the life purpose of the existence of the institution of the courts. When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred. This means that there should be no malafide or dilatory tactics. Sufficient cause should receive liberal construction to advance substantial justice. The Hon’ble Apex Court in M/s Arya Investment and Construction Co.

Collector, Land Acquisition vs Mst. Katiji & Ors. (167 ITR 471) observed as under:- “3. The legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits. The expression “sufficient cause” employed by the legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the others courts in the hierarchy.”

2.2. Furthermore, the Hon'ble Supreme Court in the case of Vedabai Alia Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil 253 ITR 798 held that the court has to exercise the discretion on the facts of each case keeping in mind that in construing the expression ‘sufficient cause’, the principle of advancing substantial justice is of prime importance. The court held that the expression “sufficient cause” should receive liberal construction. Having made the aforesaid observation and considering the material facts available on record and more

M/s Arya Investment and Construction Co. specifically the reason of delay, as mentioned in the application, the delay is condoned.

3.1. On the other hand, the ld. DR, Shri M. Murli, defended imposition as well as confirmation of penalty on the plea that the assessee has deliberately concealed its income/furnished inaccurate particulars of income and even the quantum addition was affirmed by the Tribunal.

3.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee filed its return on 18/09/2006. In the year under consideration, the assessee, showed Rs.59 lakh as received on sale of land investment and after claiming cost of Rs.15,93,804/- as land cost and Rs.9,435/- as office maintenance attributed Rs.42,96,760/- towards net long term capital gain in its profit & loss accounts. For the impugned assessment year, the assessee

M/s Arya Investment and Construction Co. declared nil income claiming Rs.12,94,648/- as long term capital gain. During assessment proceedings, the assessee was asked to show-cause as to why the resultant receipt from the sale of the plot amounting to Rs.59 lakh should not be held as adventure in the nature of trade and brought to tax. The assessee filed its explanation as has been reproduced in para 2.2 of the penalty order. The ld. Assessing Officer did not agree with the explanation on the ground that the indenture of partnership (page-2, para-3) clearly states that the partnership business shall be in real estate developments, contractors, agriculturist, buying and selling of land and properties of all kind, making investment in movable and immovable properties of any nature or kind and to act as an agent. Considering the totality of facts, it was noticed, by the Assessing Officer, from the working of long term capital gains, that the property was purchased in 1989 for Rs.15,93,804/-, whereas, in the purchase agreement, the said plot of land, the total amount paid was shown as Rs.6,95,000/- (Rs.2,25,000+2,20,000+2,50,000). The other expenses were claimed at Rs.3,33,132/-, therefore, the cost price was taken at Rs.10,28,132/-, instead of Rs.15,93,804/-, thus, this less profit to the tune of Rs.10,28,132/-. Penalty proceedings u/s 271(1)(c) were initiated as the addition of Rs.48,71,870/- was deemed to represent, the income in M/s Arya Investment and Construction Co. respect of inaccurate particulars were furnished/income concealed. The penalty of Rs.16,39,871/- was imposed.

3.3. On appeal, before the ld. Commissioner of Income Tax (Appeals), the partnership deed was considered and since the Tribunal has confirmed that the income of the assessee was liable to be assessed as business income, the appeal of the assessee was dismissed. The assessee is in further appeal before this Tribunal.

3.4. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, the only claim of the assessee before this Tribunal is that since vide order dated 07/12/2011 (ITA No.6965 of 2010), the substantial question has been admitted by the Hon’ble High Court, therefore, in view of the decision from Hon’ble jurisdictional High Court in CIT vs Wander Pvt. Ltd. (2013) 358 ITR 408 (Bom.), the issue of penalty may be sent back to the file of the ld. Assessing Officer. In view of the claim of the assessee, respectfully following, the decision from Hon’ble jurisdictional High Court in CIT vs Wander Pvt. Ltd. (supra), we send this issue to the file of the ld. Assessing Officer with a direction that he shall decide the issue of penalty after receipt of decision from Hon’ble High Court on M/s Arya Investment and Construction Co. quantum proceedings. Thus, the appeal of the assessee is allowed for statistical purposes only.

Finally, the appeal of the assessee is allowed for statistical purposes only.

This order was pronounced in the open in the presence of ld. representatives from both sides at the conclusion of the hearing on 16/03/2016.