JAMNADAS RAMJIBHAI VIKANI,MANAVADAR vs. DCIT, INT.TAX, , RAJKOT

1. The instant four appeals at the instance of the assessee are directed against two sets of orders; two dated 16.07.2003 passed by the Commissioner of Income Tax (Appeals)-IV, Rajkot in & 216/Rjt/2022 & and other two orders dated 27.01.2023 passed by the Commissioner of Income Tax (Appeals)-13, Ahmedabad in ITA Nos. 72 & 73/Rjt/2023 (hereinafter ITA Nos. 215/Rjt/2022 & 3 Ors. (Jamnadas R. Vikani vs. DCIT) - 2- referred to as ‘CIT(A)’), arising out of the orders both dated 25.07.2002 passed by the Learned JCIT, Junagadh Range-1, Junagadh, under Section 271D and 271E of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for the block period from 01.04.1989 to 08.06.1999.

We have heard the rival submissions made by the respective parties and perused the materials available on record. 3. Both the appeals being ITA Nos. 215 & 216/Rjt/2022 are time barred by 6901 days. 4. The appeals have been preferred by the assessee, a non-resident Indian, one of the partners in the partnership firm, namely, M/s. Kuldeep Ginning & Pressing Factory in the capacity of Karta of his Hindu undivided family and currently staying at USA. These appeals are having a chequered history. Initially, a search and seizure action under Section 132 of the Act was conducted at the premises of the appellant on 08.06.1999. Consequent to such search, the jurisdiction of the appellant was transferred to the Deputy Commissioner of Income Tax, Jamnagar and the assessment proceeding whereof was finalized under Section 158BC of the Act on 29.06.2001 for the block period ended on 08.06.1999 determining the undisclosed income of appellant at Rs.71,74,590/- on the alleged violation of the provision of Section 269SS and 269T of the Act by the appellant. Penalty proceedings under Section 271D & 271E of the Act was initiated separately culminating into levy of penalties of Rs.26,97,460/- & Rs.23,45,415/- respectively on 25.07.2002. 5. During the pendency of the assessment proceeding consequent to search, the appellant filed a settlement application before the Hon’ble Income Tax Settlement Commission, Additional Bench, Mumbai on 23.05.2001. It is & 3 Ors. (Jamnadas R. Vikani vs. DCIT) - 3- relevant to mention that in response to show cause notice issued by the JCIT dated 15.01.2002 as to why the penalty of Rs.26,97,460/- would not be levied on the alleged ground of contravening provisions of Section 269SS of the Act, the appellant by and under letter dated 03.03.2002 denied such allegation and further requested the said JCIT to keep such penalty proceeding in abeyance in order to avoid multiple proceedings as the settlement application filed before the Settlement Commission was pending. Such plea, needless to mention, was not found to be acceptable and penalties were imposed. 6. Prior to that being aggrieved by and/or dissatisfied with the order dated 29.06.2001, passed under Section 158BC of the Act, an appeal before the Ld. CIT(A)-IV, Rajkot, was preferred by the appellant on 09.08.2001. Subsequently separate appeals challenging the orders dated 25.07.2002 passed under Section 271D & 271E of the Act were duly filed by the appellant before the Ld. CIT(A)-IV, Rajkot. 7. On the other hand, the Hon’ble Settlement Commission admitted the settlement applications filed by the appellant on 01.04.2003. However, taking into consideration the provision of Section 245F(2) of the Act holding the Settlement Commission having exclusive jurisdiction on every aspect of the case of the appellant, the Ld. CIT(A)-IV, Rajkot on 16.07.2003, dismissed the appeals preferred by the appellant challenging the order passed under Section 158BC of the Act and 271D & 271E of the Act as well on the ground of maintainability itself. At this juncture, the assessee left for USA and started living there with his family. 8. On 28.05.2013, the Hon’ble Settlement Commission, ultimately, rejected the application on the ground of shortfall in payment of interest ITA Nos. 215/Rjt/2022 & 3 Ors. (Jamnadas R. Vikani vs. DCIT) - 4- stating that the proceeding before the Hon’ble Income Tax Settlement Commission had abated under Section 245HA of the Act since 31.07.2007.

Being aggrieved by and/or dissatisfied with the said order dated 28.05.2013 the appellant duly filed Special Civil Application before the Hon’ble Jurisdictional High Court at Gujarat on 15.01.2014, whereupon, partial relief was granted to the appellant on 26.07.2016. Hon’ble High Court was pleased to grant liberty to the appellant to file appeals before the Ld. CIT(A) latest by 31.08.2016 with an observation that the facts of the case were quite complicated and the statutory provisions even more so.

In terms of the liberty granted by the Hon’ble High Court at Gujarat, the appellant on 18.08.2016 duly filed appeal against the order passed under Section 158BC of the Act dated 16.07.2003. During the pendency of the said appeal before the Ld. CIT(A), on 12.02.2021 the appellant further opted for the Vivad se Vishwas Scheme (VSVS) for settling the tax issue in regard to the pending appeal under the said Scheme introduced by and under the Finance Bill, 2020 under Vivad se Vishwas Act, 2020, final order whereof was received on 19.04.2021 under the VSV, 2020 Scheme in Form No.5.

Before us, the appellant filed appeal being for the block period challenging the ex parte order of dismissal by the Ld. CIT(A)-3, Rajkot under Section 271D of the Act to the tune of Rs.26,97,460/- for the alleged contravention of provision of Section 269SS of the Act on the ground that the Settlement Commission was in seisin of the matter and had exclusive jurisdiction on every aspect of the case in terms of Section 245F(2) of the Act. Similarly another appeal being ITA No. 216/Rjt/2022 for A.Y. 2000-01 against the ex parte order of dismissal of by the Ld. CIT(A)-3, Rajkot on the ITA Nos. 215/Rjt/2022 & 3 Ors. (Jamnadas R. Vikani vs. DCIT) - 5- same ground confirming the order imposing penalty under Section 271E of the Act to the tune of Rs.23,45,415/- passed by the Ld. AO alleging contravention of the provision of Section 269T of the Act was filed by the appellant. Both the appeals are barred by limitation for 6091 days.

The appellant, however, on 13.11.2021 filed further two appeals before the Ld. CIT(A)-13 for recalling of the order dated 16.07.2003 levying penalty under Section 271D and 271E of the Act to the tune of Rs.26,97,460/- and Rs.23,45,415/- for contravention of provision of Section 269SS and 269T of the Act, respectively in view of the liberty granted by the Hon’ble Jurisdictional High Court to prefer quantum appeal before the Ld. CIT(A) on the new factual aspect of rejection of settlement application by the Hon’ble Income Tax Settlement Commission as the order of dismissal passed by the Ld. CIT(A) dated 16.07.2003 is only on the sole ground that it is none other than the Settlement Commission exclusively empowered to deal with every aspect of the case in terms of Section 245F(2) of the Act.

On 27.01.2023, both the appeals were rejected by the Ld. CIT(A)-13, Ahmedabad on the ground of lack of jurisdiction to recall the order dated 16.07.2003 passed by his predecessor. Hence, another two appeals before us.

Before, we deal with the merit of the matter, we find that the appeal being and ITA No. 216/Rjt/2022 are time barred by 6901 days. It is an admitted fact that these two appeals have been filed by the appellant challenging the order dated 16.07.2003 passed by the Ld. CIT(A)-4, Rajkot holding that the Settlement Commission had exclusive jurisdiction on every aspect of this case in terms of Section 245F(2) of the Act and the said penalty appeals were, therefore, not maintainable.

It is pertinent to note that these two penalty appeals before us are actually arising out of the quantum appeal order dated 29.06.2001 and the liberty granted by the Hon’ble Jurisdictional High Court was also in respect of dismissal of appeal by the Ld. CIT(A)-4, Rajkot dated 16.07.2003 arising out of the said quantum order dated 29.06.2001 under Section 158BC of the Act. Further that, though these two appeals are against the penalty orders but the status of both these two penalty appeals and the quantum appeal in which liberty was granted by the Hon’ble Jurisdictional High Court on 26.07.2016 remained same as on 16.07.2003 i.e. the date of dismissal order of CIT(A)-4, Rajkot and also on the date of order on 26.07.2016 passed by the Hon’ble Jurisdictional High Court. In that event, the delay in respect to these two penalty appeals filed before us by the appellant, therefore, to be reckoned on and from the date of passing of such order granting liberty to the appellant by the Hon’ble Jurisdictional High Court on 26.07.2016. Further, relevant fact is this that the assessee further opted for benefit provided under the VSV Scheme, 2020 introduced by the Finance Bill, 2020 on 12.02.2021 which stood settled on 19.04.2021. It seems that as the penalty is a consequence of order of quantum, the status, whereof were really been revived as soon as the order of High Court granting liberty to the appellant dated 26.07.2016 was passed. However, the assessee failed to file penalty appeals in due time against the order dated 16.07.2003. The assessee ought to have filed these & 3 Ors. (Jamnadas R. Vikani vs. DCIT) - 7- appeals before us against the order for confirmation of levy of penalty imposed under Section 271D and 271E of the Act immediately after disposal of the application by the Hon’ble Jurisdictional High Court, but the same could not be done in due time. The assessee, however, has filed an application for condonation of delay explaining the inability in preferring these appeals before us with the following submissions:

The appellant, an individual, non resident of India, is currently assessed to tax by the Assistant Commissioner of Income-tax, International Taxation, Rajkot (hereinafter referred to as the "AO"). The appellant is one of the partners in the partnership firm M/s. Kuldeep Ginning& Pressing Factory in the capacity of Karta of his Hindu Undivided Family (hereinafter referred to as the "HUF"). The appellant derives income from interest and agricultural operations. Currently, he is staying at USA.

At the time of hearing of the instant appeal, Learned Counsel appearing for the appellant submitted before us that the appellant along with his wife Smt. Kaushalya J. Vikani permanently shifted to USA in the year 2003. He has further drawn our attention to the affidavit affirmed by the appellant appearing at Page Nos. 115 & 116 of the paper book filed before us. The relevant portion whereof is as follows:

The other explanation that as the appellant is 76 years old, presently residing at New Jersey, USA, left for USA in 2003 not been able to take proper steps in the matter pending since 15 to 20 years and the business is being handled by his employee to whom power of attorney was given in the absence of appellant’s son Shri Kuldeep Jamnadas who also left for USA in 2008 also requires proper consideration. According to the appellant, such attorney is neither conversant with such old matters, nor been able to take proper steps in the proceeding pending before the different judicial forums. In fact, there was, therefore, constant communication gap between the appellant and his constituted attorney in taking proper steps in the matter. Such explanation seems to be genuine considering the evidence/affidavit filed before us by the appellant coupled with the factual aspect of the matter as already narrated hereinabove.

Under these facts and circumstances of the case, particularly, the prolonged Court case, health problem and inefficient constituted attorney, we find ‘sufficient cause’ has been shown by the appellant in being unable to prefer the appeals before us within time. The same is found to be bonafide considering the factual matrix of the matter even though the appeal is filed & 3 Ors. (Jamnadas R. Vikani vs. DCIT) - 20- after delay. Neither, negligence on the part of the appellant is found in preferring the appeals before us. Nor thoroughly negligent in prosecuting his case is reflecting on the facts placed on record supported by sufficient evidence rather we find that in each and every occasion, the appellant pursued the matter before all the forums including the lower authorities, Hon’ble Income Tax Settlement Commission and the Hon’ble Jurisdictional High Court as well. In fact, in our considered opinion, in the case in hand the following should be taken into account in order to adjudicate the issue of condonation of delay: i. A liberal, pragmatic and justice oriented and non-pedantic view is required to be observed while dealing with the application for condonation of delay. ii. The terms ‘sufficient cause’ should be understood in their proper spirit, philosophy and purpose regard being had to the fact that these terms are basically elastic and are to be applied in proper perspective to the obtaining fact-situation. iii. Substantial justice being paramount and pivotal, the technical considerations should not be given undue and uncalled for emphasis. iv. No presumption can be attached to deliberate position of delay but, gross negligence on the part of the either Counsel or litigant is to be taken note which is not found in the case in hand before us. v. Apart from that we have to consider the prejudice theory; the appellant in this particular case would be seriously prejudiced in the event these applications in respect of penalty appeals are not allowed, keeping in view of & 3 Ors. (Jamnadas R. Vikani vs. DCIT) - 21- the particular fact that the assessee was all along and all through vigilant about his case, executed power of attorney and kept constant vigil and it is also required for the courts to be vigilant so that in the ultimate eventuate there is no real failure of justice. vi. The conduct, behavior and attitude of a party in relation to its inaction or negligence are relevant factors to be taken into consideration. It is so as the fundamental principle is that the courts are required to weigh the scale of balance of justice in respect of both parties. However, the entire gamut of the facts are to be carefully scrutinized and the approach should be based on the paradigm of judicial discretion which is founded on objective reasoning and not on individual perception. vii. While considering the aspect of condonation of delay, we are reminded with the Latin maxim ‘Ubi Jus Ibi Remedium’, meaning thereby, where there is a right, there is a remedy. When the law has established a right, there should be a corresponding remedy for its breach. This right to remedy is one of the fundamental rights historically recognized in all legal jurisprudence. This will apply to all regardless of one’s place of origin, belief or way of living. They are based on shared values like dignity, equality, fairness, independence and respect. They are needed to be protected in case of any breach against them would happen and the legal maxim ‘Ubi Jus Ibi Remedium’ comes into play. This maxims states that the person whose right has been infringed has a right to enforce the infringed right through any action before the court. The two ingredients of this particular doctrine being ‘jus’ and ‘remedium’ to be considered in this aspect. ‘Jus’ means legal authority to do or demand something from and ‘remedium’ means rights of action. It simply gives us a meaning that if there is any violation of the legal right, then & 3 Ors. (Jamnadas R. Vikani vs. DCIT) - 22- the law provides a remedy to the affected person. Everyone in the vicinity has the right to have a good legal remedy by the tribunals for the acts which violates one’s fundamental rights or human rights which are granted to him by the constitution or by any law in the vicinity. Here, the appellant before us, has ventilated its grievances initially before the First Appellate Authority but without any result due to the pendency of the application for settlement before the Income Tax Settlement Commission. After rejection of the application by the Settlement Commission the appellant filed appeal before the Hon’ble Jurisdictional High Court and obtained order on 26.07.2016 in favour of the appellant by way of liberty to file the appeal before the appropriate forum against the order passed in the quantum appeal. The said quantum appeal was also settled under the VSV Scheme, 2020. As the penalty is consequential to the order of quantum proceeding, the assessee filed appeals challenging the order of dismissal dated 16.07.2003 passed by the Ld. CIT(A)-4, Rajkot on the ground of pendency of the matter before the Settlement Commission. The assessee, has a right to approach the Court seeking remedy against the said orders and we cannot keep the assessee aside remediless, keeping in view of this fact of having no deliberate or willful violation or malafide intention on the part of the assessee in filing the appeal before us though the same is apparently after a long delay. viii. While going through the entire records of the case, we do not find any fraud or misinterpretation by the assessee by taking recourse to the technicalities of law of limitation.

On this aspect, we are also enlightened by the ratio laid down by the Hon’ble Apex Court in the case of Sardar Amarjit Singh Kalra & Ors. vs. Pramod Gupta & Ors. in Appeal (civil) 1027-1028 of 1992 where this & 3 Ors. (Jamnadas R. Vikani vs. DCIT) - 23- particular maxim of ‘Ubi Jus Ibi Remedium’ has been recognized as fundamental principle of law and held that the duty of the Court is to protect the rights of the people and grant relief to the aggrieved party rather than denying it.

In fact, the ‘sufficient cause’ as it appears in the Act is to be interpreted and understood in its proper spirit as these terms are flexible enough to be applied liberally in the interest of justice even in the case of long delay. Applying the ratio laid done by the Hon’ble Supreme Court and considering the explanation so rendered by the appellant, we find that the appellant has been able to overcome the hurdle of condonation of long delay in preferring the appeals before us. We, therefore, with the aforesaid observations, condone the delay.

However, the impugned orders passed by the Ld. CIT(A) is only on the ground that the Hon’ble Income Tax Settlement Commission has exclusive jurisdiction on every aspect of this case in terms of Section 245F(2) of the Act and in terms of provision of Chapter XI-A. It is an admitted position that the Settlement Commission has already rejected the application filed by the assessee on 28.05.2013 on the ground of shortfall in the payment of interest and stated that proceeding before the said Commission had abated under Section 245HA of the Act since 31.07.2007. The order passed by the Ld. CIT(A) is, therefore, found to have no consequence. The observation made thereof has no meaning at this stage and no order need to be passed. In fact, the cause of action in preferring the appeals against the impugned orders dated 16.07.2003 at this stage does not subsists. Hence, appeals are dismissed as infructuous.

Before the said CIT(A), the appellant challenged the confirmation of penalty under Section 271D r.w.s. 269SS of the Act to the tune of Rs.26,97,460/- and levy of penalty under Section 271E r.w.s. 269T of the Act to the tune of Rs.23,45,415/- both dated 16.07.2003. Initially, when appeals were filed against order dated 25.07.2002 for levy of penalty under Section 271D and 271E of the Act to the tune of Rs.26,97,460/- and Rs.23,45,415/- respectively on 16.07.2003, the Ld. CIT(A)-4, Rajkot dismissed the said two appeals stating the Settlement Commission had exclusive jurisdiction on every aspect of this case in terms of Section 245F(2) of the Act and therefore the appeals were not found to be maintainable. These two appeals filed by the appellant on 13.11.2021 practically were for recalling of confirmation of penalty order passed by the Ld. CIT(A)-IV, Rajkot in view of the rejection of application by the Settlement Commission on 28.05.2013 and disposing of the Special Civil Application by the Hon’ble Gujarat High Court on 26.07.2016 restoring the right of the appellant to file the quantum appeal before the Commissioner stating that the facts of the case was quite complicated and the statutory provisions even more so. In fact, on this premise, the assessee preferred appeal before the Ld. CIT(A)-13, Ahmedabad on 13.11.2021 with the prayer for recalling of the orders passed by the Ld. CIT(A) dated 16.07.2003, whereby and whereunder the appeals were dismissed due to lack & 3 Ors. (Jamnadas R. Vikani vs. DCIT) - 25- of jurisdiction as the Hon’ble Income Tax Settlement Commission was in session of the matter and having exclusive jurisdiction on every aspect of this case in terms of Section 245F(2) of the Act. Therefore, the appeals preferred by the assessee before the Ld. CIT(A)-IV, Rajkot stood dismissed on 16.07.2003 only on maintainability ground and not on merit. Practically, the imposition of penalty under Section 271D & 271E r.w.s. 269SS and 269T to the tune of Rs.26,97,460/- and Rs.23,45,415/- respectively were not adjudicated on merit by any of the Ld. CIT(A). Even in the second round of litigation, the Ld. CIT(A)-13, Ahmedabad on 27.01.2023 dismissed these two appeals filed before it not on merit but found the same as not maintainable for this particular reason that the said Ld. CIT(A)-13, Ahmedabad is not conferred with the jurisdiction of recalling the order passed by his predecessor being CIT(A)-IV, Rajkot dated 16.07.2003. Again whether the issue of imposing penalty under Section 271D & 271E of the Act passed by the Ld. AO on 25.07.2002, is justified or not remained unadjudicated. We, however, cannot shut our eyes saying that the Ld. CIT(A) does not have any power to review the order passed by his predecessor, keeping in view the order passed by Hon’ble Jurisdictional High Court in granting liberty to the appellant to prefer the appeal against the order of appeal in quantum dated 16.07.2003, as the penalty is offshoot of quantum proceeding. Moreso, a litigant cannot remain remediless as because in the first juncture the CIT(A) dismissed the appeal as the Settlement Commission was in seisin of the matter and even in the second round, the Ld. CIT(A) does not have power to recall the order dated 16.07.2003 passed by his predecessor. The avenue to adjudicate the issue of penalty whether justifiable or not cannot be blocked in the way it has been done in this case. The latin maxim ‘Lex Semper Dabit Remedium’ plays the paramount role in the facts and circumstances of the case, meaning thereby, ITA Nos. 215/Rjt/2022 & 3 Ors. (Jamnadas R. Vikani vs. DCIT) - 26- the law will always give a remedy. In fact, every violation of a legal right should give rise to some form of remedy to the aggrieved party. This maxim coupled with the other maxim as we have already discussed in the forgoing paragraph being ‘Ubi Jus Ibi Remedium’, meaning thereby, where there is a right, there is a remedy to be applied herein in its proper perspective. Though, we do not want to make any comment on the approach taken by the Ld. CIT(A) in both the occasions but keeping in view the law of reasonableness and fairness which plays a prime role in rendering substantive justice to the litigant, in this case the appellant before us, we ultimately think it proper to adjudicate the issue by ourselves.

The present penalty proceedings emanate from the order passed by the Ld. AO dated 29.06.2001 under Section 158BC of the Act in respect of the Block Period ended on 08.06.1999. During the course of assessment proceeding, the Ld. AO recorded its finding at para 6 of assessment order that from the rough cash book being Annexure A-16, A-41 & A-75, it was found that the assessee has credited large amount in the name of Patel Cotton Company and the said account is operated as current account but no transaction has been recorded in the regular books of accounts. The said account was also reproduced in the assessment order; the assessee did not produce any evidence or confirmation in support of the said credits in the account. In fact, it is found from the records that the assessee has credited total of Rs.6,10,000/- and payment of Rs 6,05,000/- which was made in piecemeal. The peak credit has been considered as appellant's unexplained cash credit introduced during the block period and addition to the tune of Rs.4,30,000/- was made. Paragraph 10 of the assessment order speaks of credit amount of Rs.11,87,460/- of the assessee and payment of Rs.8.52,415/- in the name of & 3 Ors. (Jamnadas R. Vikani vs. DCIT) - 27- M/s Patel Ginning Co. against which the peak of Rs.3,35,045/- was considered as undisclosed income of the assessee and added to the total income of the appellant.

Similarly, paragraph 12 of the assessment order records that Annexure A-75 and A-40 reflect various credits and debits amounting to Rs.9,00,000/- and Rs.8,88,000/- respectively in the name of Kuldeep Borewell which were neither found in the regular books of accounts. The peak credit of Rs.1,73,800 was added on account of undisclosed income of the assessee.

The total amount of credit of Rs.26,97,460/- was found to be in violation of section 269SS r.ws 271D of the Act and payment of Rs.23,45,415/- as in violation of Section 269T r.w.s 271E of the Act. It is an admitted fact that the Ld. AO taxed the peak of these cash transactions in the hands of the assessee on account of undisclosed sources and therefore, initiation of proceedings under Section 271D and 271E is uncalled for as of the main argument advanced by Ld. AR before us. On the other hand, the Ld. DR relied upon the orders passed by the authorities below in imposing penalty and confirmation made thereof by the Ld. CIT(A).

The provision of Section 271D reads as follows:

We further note that the finding of the Ld.AO to the effect that the peak of receipts recorded in the name of third parties is nothing but appellant's own undisclosed income has already reached finality as soon as the matter got settled under the Vivad Se Vishwas Act, 2020 on 19.04.2021 in respect of the appeal pending before the appellate forum arising out of the same assessment order dated 29.06.2001. Thus, there is no scope for illustration of the mechanism already adopted by the Ld. AO in imposing penalty as we find that the peak of appellant has been held to be the undisclosed income of the appellant and added to the income of the appellant. On this aspect, we have considered the judgment relied upon by the Ld. AR passed by the Jurisdictional High Court in the case of CIT vs. Shyam Corporation, reported in [2013] 7 TMI 772, wherein receipt for which revenue intends to invoke the provision of Section 269SS or 269T of the Act as the case may be for imposing penalty under Section 271D or 271E of the Act as the case may be during the assessment proceeding treated as booking advance and consequently assessed as undisclosed income of the assessee invoking Section 68 of the Act, it has been held by the Hon’ble Court that in that event the same would, thereafter, not bear the character of loan or advances and thus decided against the Revenue. Respectfully relying upon the said ratio laid down by the Hon’ble Court, the initiation of penalty proceeding under Section 271D r.w. s. 269SS of the Act culminating into levy of penalty holding it as loan or deposit is, thus, found to be contradictory in the case in hand. Therefore, the same is bad, void ab initio and liable to be quashed. The identical ratio is also applied for initiation of penalty under Section 271E of & 3 Ors. (Jamnadas R. Vikani vs. DCIT) - 29- the Act culminating into imposition of penalty for alleged violation of provision of Section 269T of the Act. The same is, therefore, held to be bad and void ab initio and, thus, quashed.

Both the appeals filed by the appellant are, therefore, allowed.

In the combined result, & 216/Rjt/2022 are dismissed as infructuous and ITA Nos. 72 & 73/Rjt/2023 are allowed.