M/S EMMAI PHARMA LTD,MUMBAI vs. THE ACIT CIR 4(1) INV, MUMBAI

The appeal numbered as is barred by limitation by 3 years and 76 days. The assessee has filed a petition with the prayer to the bench to condone the delay in filing the appeal. The Ld Counsel appearing for the assessee submitted that the assessee preferred appeal before the Ld CIT(A) challenging the order passed by the AO u/s 143(3) of the Act. The Ld CIT(A) partially confirmed the addition and restored one issue relating to share application money to the file of the AO. The Ld Counsel submitted that the assessee was advised that a fresh assessment order would be passed and it can file appeal thereafter only in respect of all the additions. In the set aside proceedings, the AO decided the issue relating to share application money against the assessee and the Ld CIT(A) also confirmed the same. Hence the assessee filed appeal challenging all the additions confirmed by Ld CIT(A) in both of his orders by filing a single appeal before the Tribunal. The assessee was under bona fide belief that the course of action adopted by it was correct. However, when the bench pointed out that the assessee should have filed appeal challenging the first order passed by Ld CIT(A), the assessee realised its mistake and accordingly filed another appeal with delay as pointed out by the Tribunal.

The Ld A.R submitted that the assessee was not keeping the matter idle, but was pursuing the assessment order continuously. Since the assessee was wrongly advised and since the assessee also entertained bonafide belief, the appeal was not filed against the first order of Ld CIT(A). He submitted that acting on the wrong advice of the counsel is a reasonable cause and accordingly prayed that the delay may be condoned. He further submitted that the technicalities should not come in the way of justice as held by Hon’ble Supreme Court in the case of Collector, Land

On the contrary, the Ld D.R submitted that the assessee has not shown sufficient cause for the delay in filing the appeal and accordingly opposed the petition filed by the assessee.

We have heard the parties on this preliminary issue and perused the record. We notice that the assessee was aggrieved by the three types of additions made in the original assessment order. In the appeal preferred before the Ld CIT(A), the first appellate authority confirmed two additions and restored one matter to the file of the AO. In the set aside proceedings, the AO again confirmed the addition pertaining to the third issue also and the ld CIT(A) also confirmed the same. After the receipt of second order of Ld CIT(A), the assessee filed appeal before the Tribunal challenging all the three additions. According to the assessee, it has acted in a bonafide manner on the advice given by its earlier counsel. Subsequently, it appears that the assessee realised the mistake when the Tribunal was hearing the appeal filed by the assessee and accordingly filed another appeal challenging the two additions confirmed by Ld CIT(A) in his first order.

Thus, we notice that the assessee was not properly advised in this matter and we also notice that the assessee was acting in a bonafide manner as per the advice given it. The Hon’ble Madras High Court has held in the case of Sreenivasa Charitable Trust Vs. Deputy CIT (280 ITR 357) has held that no hard and fast rule can be laid down in the matter of condonation of delay and the courts should adopt a pragmatic approach

The Hon’ble Supreme Court has observed in the case of Collector, Land Acquisition Vs. MST. Katiji and Others (supra) that “when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay”.

The co-ordinate Chennai bench of Tribunal has held in the case of Chank Mohammed Abubeker P Ltd Vs. DCIT (ITA 1628/M/2010 dated 16.12.2010) held that the alternative avenues being pursued by the assessee constitutes sufficient cause for condoning the delay.

In the instant case, we notice that the assessee has been wrongly advised that it can file only one appeal covering all the disputed matters. It is not a case, where the assessee has kept silent after the receipt of the first order of the Ld CIT(A). Since one of the matters was restored to the file of the assessing officer, the assessee can be said to have pursued the matter before the AO, thereafter before the Ld CIT(A) and Tribunal. It is pertinent to note that the assessee has filed appeal before the ITAT challenging all the three issues, which in fact vindicates the explanations given by the assessee that it was advised to file appeal before the Tribunal covering all the issues, after the receipt of result of set aside proceedings. Later, when the assessee realised its mistake while pursuing the appeal before the Tribunal, it took steps to file another appeal along with the 5 1808/Mum/2006 petition for condoning the delay. Under these set of facts and in the interest of promoting cause of justice, we are of the view that the delay in filing this appeal should be condoned. In our view, the said action will promote the cause of justice. Accordingly, we condone the delay and admit the appeal for hearing.

The issues urged in both the appeals are given below:- (a) Rejection of claim of set off of bank interest earned on oversubscribed share application money against share issue expenses. (b) Addition of Rs.31,962/- disclosed in the asset side of Balance sheet. (c) Addition of share application money of Rs.11,65,000/-.

We heard the parties on the above said issues and perused the record. The first issue relates to rejection of claim of bank interest earned on the share application money kept in the bank account. The assessee had issued shares to public. The said issue was oversubscribed. As per the terms and conditions relating to public issue, the share application money had to be kept in a separate bank account, which earned interest income. The assessee claimed set off of the same against the share issue expenses, which was rejected by both the tax authorities. We noticed that the claim of the assessee is allowable as per the following decisions: a) J M Shares and Stock Brokers Ltd V/s DCIT (2004) 83 TTJ (Mum) 1052; and b) Aarti Industries Ltd V/s DCIT (2005) 95 TTJ (Ahd) 14 Consistent with the view taken on the above cited decision of the Tribunal, we set aside the order of ld. CIT(A) and direct the AO to allow the claim of the assessee.

The next issue relates to addition of Rs.11.65,000/-, being share application money received from a person named as Shri Rakesh Jain. The ld. AR submitted that the assessee has furnished the details of share application and also the PAN of the above said applicant along with address before the tax authorities. He further submitted that the assessee, being a Public Limited Company, has received the share application money from various persons. Hence, as per the decision rendered by Hon’ble Supreme Court in the case of Lovely Export Ltd, wherein it was held that it is open to the department to move against the share applicants in accordance with law, the impugned disallowance is liable to be deleted. The ld. AR also placed reliance on the order rendered by the Hon’ble Delhi High Court in the case of CIT Vs. Oasis Hospitalities Pvt. Ltd. (2011) 333 ITR 119.

Since the assessee has furnished all the details relating to the share applicant Shri Rakesh Jain and also his PAN, we are of the view that the ld. CIT(A) was not justified in confirming the addition of share application money received by the assessee. It is further noticed that the assessee has received the share application money through public issue.