2019 (3) TMI 804 - AT - Income Tax

Tribunal overturns dismissal due to delay, orders fresh adjudication for fair hearing

M/s Shree Vijaylaxmi Trading Corporation Versus ITO Ward-17 (3) (3), Mumbai

M/s Shree Vijaylaxmi Trading Corporation Versus ITO Ward-17 (3) (3), Mumbai - TMI Issues Involved:1. Condonation of delay in filing appeals.2. Additions in quantum assessment under section 68, disallowance under section 40(a)(ia), and adhoc disallowance of sundry creditors.3. Confirmation of penalty under section 271(1)(c) of the Income Tax Act.Issue-wise Detailed Analysis:1. Condonation of Delay in Filing Appeals:The primary issue was the condonation of delay in filing appeals before the Commissioner of Income-tax (Appeals) [CIT(A)]. The appeals were filed after a delay of 247 days for the quantum assessment and 65 days for the penalty order. The assessee argued that the delay was due to severe financial distress, multiple litigations, and the sealing of their administrative office under the SARFAESI Act. The CIT(A) dismissed the appeals by not condoning the delay, resulting in the appeals not being admitted for hearing on merit.The Tribunal noted that the assessee had filed an affidavit explaining the cause of delay, including financial losses, the declaration of their loans as Non-Performing Assets (NPA), and the sealing of their business premises. The Tribunal referred to several judicial precedents emphasizing a liberal approach towards condonation of delay, especially when substantial justice is at stake. Citing the Supreme Court's decision in Collector, Land Acquisition vs. Mst. Katji & Ors, the Tribunal highlighted that 'substantial justice deserves to be preferred' over technical considerations.2. Additions in Quantum Assessment:The assessment was completed under section 144, with additions made under section 68 (Rs. 1.25 Crore), disallowance under section 40(a)(ia) (Rs. 40 Lakhs), and adhoc disallowance of sundry creditors (Rs. 44.45 Lakhs). The Tribunal did not delve into the merits of these additions due to the primary focus on the procedural aspect of condonation of delay. However, the Tribunal acknowledged that the assessee believed they had a strong case on merit and deserved an opportunity to contest the appeal.3. Confirmation of Penalty under Section 271(1)(c):The penalty under section 271(1)(c) was levied ex-parte by the Assessing Officer. The Tribunal noted that the penalty order was passed without the assessee's participation, further complicating their financial and legal predicaments. The Tribunal found the assessee's reasons for delay credible and sufficient, emphasizing that the firm faced 'huge financial crisis' and 'multifarious litigation,' which justified the delay in filing the appeal.Conclusion:The Tribunal concluded that the CIT(A)'s decision to dismiss the appeals by not condoning the delay was not sustainable. The Tribunal set aside the CIT(A)'s order and restored the appeals for fresh adjudication, directing the CIT(A) to provide adequate opportunity for the assessee to present their case. The Tribunal also instructed the assessee to cooperate fully and provide necessary documentation.Order:Both appeals of the assessee were allowed, and the CIT(A) was directed to decide the appeals afresh on merits after granting a fair hearing.Pronouncement:The order was pronounced in the open court on 11/03/2019.