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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI N.K. BILLAIYA & MS. ASTHA CHANDRA
O R D E R PER ASTHA CHANDRA, JM
The appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-23, New Delhi (“CIT(A)”) dated 27.01.2020 pertaining to Assessment Year (“AY”) 2001-02.
The assessee has raised the following grounds of appeal:-
“1. That on the facts and in the circumstances of the appellant's case, the learned CIT(Appeals) erred in facts & law in not condoning the delay in filing of appeal and dismissing the same being time barred without appreciating the fact that the appellant had sufficient cause for not presenting the appeal within the time prescribed for filing appeal under section 249 of the Income tax Act, 1961. Hence, opportunity of being heard should be given to the appellant for the sake of natural justice.
Without prejudice to Ground of Appeal
No. 1
2. That on the facts and in the circumstances of the appellant's case, the learned CIT(Appeals) erred in facts & law in not appreciating the facts of the case that AO has mechanically rejected rectification application filed against rectification order dated 28.03.2013, wherein addition of Rs 2,11.47,242/- was made by the then Ld. AO on the basis that value of closing WIP not credited to profit and loss account while no corresponding purchases was debited and thus there will be no change in profit even after crediting the closing WIP in profit and loss account.”
3. The facts as culled from the statement of facts filed before the Ld. CIT(A) in Form No. 35 are that the assessee company filed its return for AY 2001-02 on 30.10.2001 declaring income of Rs. 89,760/-. Search and seizure operation under section 132 of the Income Tax Act, 1961 (the “Act”) was carried out on 07.02.2007 on its business premises. Consequently, notice under section 153A of the Act was issued on 15.01.2008 to file the return. In response thereto, the assessee filed return on 28.01.2008 declaring income of Rs. 89,760/-. During the course of assessment proceedings, the assessee furnished details of opening and closing stock including break-up of value of Work-In-Progress (“WIP”) as shown in the balance sheet before the Ld. Assessing Officer (“AO”). The Ld. AO completed the assessment on 30.12.2008 under section 153A of the Act.
3.1 Subsequently, the Ld. AO issued notice under section 154 of the Act on 25.03.2013 to include the value of closing stock of WIP as shown in the balance sheet in the inventory credited to profit and loss account for AY 2001-02. A rectificatory order dated 28.03.2013 was passed including therein addition of Rs. 2,11,47,242/- for inclusion of value of the said closing stock of WIP.
3.2 Aggrieved, the assessee filed rectification application dated 07.05.2013 and 27.09.2013. It was submitted therein that the assessee is engaged in the business of real estate developers and the amount of expenses incurred during the previous year in respect of commercial project RG Complex, Rohini, Sector 8, New Delhi is directly shown as WIP under the head “inventories” amounting to Rs. 2,11,47,242/- in the balance sheet as on 31.03.2001 and submitted the ledger account of the said Complex. It was also submitted that the assessee has neither debited its purchases incurred nor created its closing stock in profit and loss account and that there will be no change in profit in the year even if the same amount is considered in the profit and loss account. A copy of profit and loss account in which purchase and closing stock is considered was furnished showing that there will be no impact on profit. It was also submitted that the assessee has debited aggregate amount of Rs. 51,82,501/- only in its profit and loss account for the year ended on 31.03.2001. Hence, no amount of Rs. 2,11,47,242/- is debited in profit and loss account for the year ended on 31.03.2001 as purchases were directly shown in the balance sheet as on 31.03.2001 under the head “inventories WIP”. Hence, no income has been assessed less by Rs. 2,11,47,242/- on directly debiting expenses of a particular project in balance sheet instead of firstly debiting the same amount of Rs. 2,11,47,242/- in profit and loss account as expenses incurred during the year and showing the same amount of Rs. 2,11,47,242/- by crediting profit and loss account as closing stock.
3.3 However, the Ld. AO summarily rejected the rectification application vide order dated 31.03.2014 under section 154 of the Act stating that it was devoid of merit and that this order dated 31.03.2014 is consequential to rectification order dated 28.03.2013 and therefore, no fresh notice under section 156 of the Act is issued with order dated 31.03.2014.
3.4 Aggrieved, the assessee made an effort to file Form 35 but it was not accepted on the basis that fresh notice of demand under section 156 of the Act was not attached. The assessee filed letters dated 23.04.2014 and 19.04.2018 before the Ld. AO requesting him to issue fresh notice of demand under section 156 of order passed under section 154 of the Act dated 31.03.2014 for AY 2001-02.
3.5 The Ld. AO responded vide letter dated 17.07.2018 stating that since no fresh demand is raised in this case and order dated 31.03.2014 under section 154 of the Act is only consequential by which the original demand has not been changed, hence no fresh notice under section 156 of the Act is required.
3.6 On receipt of Ld. AO’s said letter dated 17.07.2018 the assessee filed From 35 before the Ld. CIT(A) requesting him to accept the appeal condoning the delay in filing Form 35 for the sake of natural justice as the delay is not deliberate and is beyond the control of the assessee.
However, the Ld. CIT(A) declined to condone the inordinate delay discarding the affidavit sworn by the director of the assessee company filed before him without assigning any valid and cogent reasons. The Ld. CIT(A) was of the view that it was incumbent upon the assessee to take notice of demand and file timely appeal. As a sequel, the Ld. CIT(A) dismissed the assessee’s appeal as barred by limitation. This has brought the assessee before the Tribunal.
We have heard the Ld. Representative of the parties. The Ld. AR submitted that despite sincere efforts made by the assessee it could not succeed in obtaining the fresh notice of demand under section 156 of the Act consequent to order passed by the Ld. AO on 31.03.2014 under section 154 of the Act. Soon after receiving the response of the Ld. AO vide his letter dated 17.07.2018, the assessee filed appeal on 20.07.2018 as also application for condonation of delay on 23.01.2020 during the course of appellate proceedings.
The Ld. DR supported the order of the Ld. CIT(A).
We have carefully considered the rival submissions and perused the records. The facts are not in dispute. We are of the view that the assessee is caught in the web of legal and administrative quagmire and complexities. The Ld. AO was adamant that he would not issue fresh demand notice along with order dated 31.03.2014 passed under section 154 of the Act and Form 35 requires notice of demand under section 156 to be attached for filing appeal before the Ld. CIT(A). The assessee was placed in a state of fix. In such a scenario, it cannot be said that the inordinate delay is attributable to 4 the assessee alone. In Vedabai alias Vaijayanta Bai Babu Rao Patil vs. Shanta Ram Baburao Patil & others 253 ITR 798 (SC), the Hon’ble Supreme Court observed that the court should adopt a pragmatic approach. It has to exercise its 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. “Sufficient cause” should receive a liberal construction.
On the facts and in the circumstances of the assessee’s case, in our opinion, it would be expedient and in the interest of justice and fair play to send the matter back to the Ld. CIT(A) with a direction to him to condone the delay and decide the appeal on merits after allowing reasonable opportunity of hearing to the parties. We order accordingly.
In the result, appeal of the assessee is allowed for statistical purposes.