1987 (12) TMI 74 - AT - Income Tax

Tribunal allows late appeal, denies exemption due to inadequate security for loan, dismisses cross objection

The Tribunal condoned the delay in filing the departmental appeal, considering the unintentional delay and specific circumstances, ultimately admitting ... - Issues:1. Condonation of delay in filing the departmental appeal.2. Rectification of the original assessment order regarding the benefit of exemption under section 11 of the IT Act.Issue 1: Condonation of Delay:The departmental appeal was delayed by 174 days, and a petition for condonation was filed citing transfers of officers and administrative issues. The delay was unintentional, and the appellant sought condonation based on specific circumstances. The Department's representative explained the procedural delays and reliance on Supreme Court guidelines. The assessee's representative opposed, citing negligence and case precedents where delays were not condoned due to lack of sufficient cause. The Tribunal considered the peculiar facts, multiple officer transfers, and diligent actions post-discovery of the appeal order. Relying on the broad guidelines in the case of Katiji, the Tribunal condoned the delay and admitted the appeal.Issue 2: Rectification of Assessment Order:The original assessment order disallowed the benefit of exemption under section 11 of the IT Act to the assessee trust due to a loan given without adequate security to a prohibited person under section 13(3) of the Act. The ITO rejected the assessee's petition for rectification under section 154, stating no mistake was apparent. The AAC, however, accepted the explanation that the loan was repaid with interest and directed rectification to allow the benefit under section 11. The Department argued that personal security is not adequate, referencing a prior Tribunal decision. The Tribunal held that the loan was given without security, leading to loss of exemption under section 11. The ITO's decision was upheld, rejecting the rectification petition. The AAC's decision was reversed, restoring the ITO's order.Cross Objection:The cross objection by the assessee raised issues regarding the departmental appeal's limitation and the correctness of the AAC's decision. The Tribunal found that the matter regarding the limitation of the departmental appeal was addressed in the main appeal and dismissed the cross objection on this ground. As the second ground in the cross objection was not related to any grievance from the AAC's order, it was deemed incompetent. Ultimately, the departmental appeal was allowed, and the assessee's cross objection was dismissed.