TaxTMI 
TaxTMI 
2023 (6) TMI 1023
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....of the Act, and that only subsequently, when the consequential assessment order under section 143(3) of the Act was passed, assessing the income of the assessee multiple times to that returned by the assessee, that the assessee was alarmed and had consulted another counsel, who when asked about the status of the appeal against the order passed under section 263 of the Act, was appraised by the assessee of the fact that no appeal was filed. That it was then that the assessee was advised by the later counsel to file appeal against the order passed u/s 263 of the Act, since he had good case. That therefore, on the advice of the later counsel, the present appeal was filed belatedly. An affidavit of the assessee stating the above facts on oath was also filed before us. 3. The ld. counsel for the assessee contended that there being sufficient cause for the delay in filing appeal, in the interest of justice, the delay needed to be condoned. He relied on various case laws in this regard. We will deal with these case laws while adjudicating the issue. 4. The ld.DR vehemently opposed the application for condonation of delay filed by the assessee stating that there was inordinate delay ....
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....suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finislitium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time." Having so dealt with the purpose of law of limitation, the Hon'ble Court in the said decision also held that condonation of delay is a matter of discretion of the Court, which is to be exercised on the basis of acceptability of the explanation for the delay, with the length of delay being of no consequence; that what would be a prime point for consideration of the delay, was whether there was....
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....ession "sufficient cause" for section 5 of Limitation Act was to be applied in a manner to sub-serve the ends of justice and therefore a justifiable liberal approach had to be adopted on principle. The Hon'ble Court has given reasons for adopting a liberal approach stating that : * ordinarily a litigant does not stand to benefit by lodging an appeal late, * and by refusing to condone delay, a meritorious matter will be thrown out at the very threshold and cause of justice defeated, * as opposed to that if delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties; * that when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, because either side cannot claim to have vested right in injustice being done because of nondeliberate delay * that there was no presumption that delay was occasioned deliberately, and in fact a litigant does not stand to benefit by resorting to delay; * that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it....
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....e-buck ethos, delay on its part is less difficult to understand though more difficult to approve. In any event, the State which represents the collective cause of the community, does not deserve a litigant-nongrata status. The Courts therefore have to be informed with the spirit and philosophy of the provision in the course of the interpretation of the expression "sufficient cause". So also the same approach has to be evidenced in its application to matters at hand with the end in view to do even handed justice on mertis in preference to the approach which scuttles a decision on merits. Turning to the facts of the matter giving rise to the present appeal, we are satisfied that sufficient cause exists for the delay. The order of the High Court dismissing the appeal before it as time barred, is therefore. set aside. Delay is condoned. And the matter is remitted to the High Court." 8. In the case of Maniben Devraj Shab Vs. Municipal Corporation of Brihan Mumbai, (2012) 5 SCC 157, Hon'ble Apex Court emphasised that liberal and justice oriented approach is required to be adopted while condoning the delays, but at the same time, the Hon'ble Court took note of rights acquired by the su....
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.... by not being diligent. The reason for explaining the delay, it was held had to be plausible and reasonable so as to enable the court to exercise its discretion. The relevant finding of the Hon'ble Court in this regard at para-11 of its order is as under: '5. It is a settled position that an application for condonation of delay has to be liberally construed, as held by the Apex Court in various cases (see Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 (SC). However, this liberal construction of the sufficient cause while condoning delay has to be counter balanced by ensuring that the law of limitation which provides for definite consequence on the rights of the parties does not become ineffective. The rule of limitation is provided for general welfare of the society so as to put a period beyond which a party cannot agitate an issue in litigation. The rationale for the same is that once a litigation is decided, the dispute must repose. This is particularly so, if the party aggrieved by the order does not agitate the issue before the appellate forum within the time provided. The opposite party can then proceed on the basis that the dispute is settled and a....
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....s can be imputed to the appellant, a liberal construction of the provisions has to be made in order to advance substantial justice. Seekers of justice must come with clean hands. In the instant case, the assessee justified the delay only with reference to the affidavit of its director. In the said affidavit it was stated that the Commissioner (Appeal) 's order was misplaced and forgotten. It was found while sorting out the unwanted papers and thereafter steps were taken for the preparation of the appeal and consequently the delay was caused. That clearly showed that the delay was due to the negligence and inaction on the part of the assessee. The assessee could have very well avoided the delay by the exercise of due care and attention. There existed no sufficient and good reason for the delay of 310 days. Therefore, reasonings adduced by the Accountant Member were to be concurred with. [Para 8]" 11. What can be culled out from the above is that the in matters of condonation of delay the principles to be applied rest on the basic premise that : * Rule of limitation is to provide certainty to litigations and thus avoid consequential anarchy due to unending pe....
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....n the filing of the appeal. In the affidavit, the assessee has reasonably demonstrated length of period of delays or 284 days pointing out of the fact that on the date of receipt of order under challenge before us of the ld.Pr.CIT under section 263 of the Act on being 6.3.2019, the date by which the appeal was filed before the ITAT being on or before 5.5.2019; that consequential assessment order under section 143(3) was passed on 30.12.2019 after which he approached the second counsel who advised him to file appeal against the order under section 263 and in regard to which he filed an appeal on 12.2.2020 resulting delay of 284 days. 14. Above facts, relating to the chronology of events have not been controverted by the ld.DR before us. Therefore, it can be safely read from the same that the assessee promptly pursued the legal action which was advised by the second legal counsel on receipt of consequential order under section 143(3)/263 and filed appeal against the order passed by the ld.Pr.CIT under section 263. What has to be seen now is whether, this explanation of the assessee for the delay was bona fide, reasonable and did not exhibit any negligence or laxity in pursuing ....
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....g, 153 ITR 131 iv) Avtar Vs. CIT, 133 ITR 338 Also there is no benefit accruing to the assessee by not filing appeal in the first instance itself but on the contrary the assessee has been inflicted with serious consequences of huge demand raised on him on account of the consequential assessment framed which there was a possibility of avoiding if appeal were filed against the order passed u/s 263 of the Act. Therefore noting that there is no negligence or laxity attributable to the assessee for the delay in filing appeal, and to subserve the ends of justice we find that it is a fit case for condoning the delay of 283 days in the present appeal. The impugned delay in filing the present appeal is accordingly condoned. 15. We shall now proceed to deal with the appeal before us. 16. As transpires from order of the ld.Pr.CIT the assessee was deriving income from dealing in water purifier, water RO and water treatment plant under the name and style of proprietorship concern viz. "M/s. Unitech Water Solutions". For the impugned year i.e. Asst.Year 2014-15, the assessee had filed return of income declaring income at Rs. 17,01,720/-. The assessee's case was selected for ....
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.... (d) justification for claiming prior period expenses totaling Rs. 1,63,511/-." 17. The ld.PCIT further noted that the AO had not called for any details regarding the source and nature of addition to the capital of the proprietary of Rs. 12,08,080/- or the unsecured loans of Rs. 11,78,000/- from Hiralal R. Shah. He also noted that the issue of disallowance under section 40A(3) of the Act for payments made in cash also not been examined by the AO. His findings in this regard at para-7 of his order are as under: "7. The A.O. has not called for any details regarding the source or nature of addition to capital of Rs. 12,08,080/- or the unsecured loan of Rs. 11,78,000/- from Mr.Hiral R. Shah. Even the confirmation has not been called for. The issue of disallowance u/s 40A(3) out of payments in cash exceeding Rs. 20,000/- has also not been examined." 18. Thus, finding that the AO had completed assessment without conducting necessary inquiries as warranted by the facts of the case, he held the assessment order to be erroneous and prejudicial to the interest of the Revenue, and accordingly he set aside the order passed by the AO under section 143(3) of the Act to the fil....
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....CIT - ITA 377/Ahd/2020; * Dharmin Thakkar vs. ITO - ITA 1378/Ahd/2019 * Kumar vs. PCIT -187 iTD 454 (Del.); * Spotlight Vaniya Ltd. PCIT - ITA 353/Kol/2020; * Dharmin N. Thakkar vs. ITO - ITA 1378/Ahd/2019 * Shri Narendra kumar R. Patel vs. DCIT - ITA 981/Ahd/2019; * CBDT's Instruction No.7/2014 dated 26.09.14; * CBDT's Instruction No.20/2015 dated 29.12.15; * CBDT's Instruction No.5/2016 dated 14.07.16; In view of the above, CIT was not justified in invoking jurisdiction u/s 263 of the Act in respect of issues other than "commission expenses": 21. We are not in agreement with this contention of the ld. counsel for the assessee. The facts and documents on record before us and placed in PB by the ld. counsel for the assessee comprising of 170 pages itself demolishes the very premise and basis of the assessee's arguments for setting aside the ld.Pr.CIT order that it was a case of limited scrutiny. On page No.4 to 6 is placed screen-shot of the reasons for scrutiny selection in the present case, which categorically mentions "Type of Scrutiny : COMPLETE" and "Reasons for scrutiny selection":....
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....Guj) • Hari Iron Trading Co. v. CIT [2003] 263 ITR 437 (P&H) • CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom) • CIT vs. Vikas Polymers - 341 ITR 537 (Del) • CIT vs Honda Siel Power Products - 333 ITR 547 @ 557-558 (Del) It is settled law that if two views are possible as regards a particular issue and AO adopts either of two such views, then CIT cannot invoke jurisdiction u/s 263. Mere fact that different view could have been taken doesn't justify proceedings u/s 263. Reliance is placed on the followings: * Malabar Industrial Co. Ltd. vs. CIT - 243 ITR 83 (SC); * Kwality Steel Suppliers vs. CIT - 395 ITR 1 (SC); * CIT vs. Mehsana District Co-op. Milk Producers Union Ltd. - 263 ITR 645 (Guj) * CIT vs. D. P. Karia-266 ITR 113 (Guj); * CIT vs. Arvind Jewellers - 259 ITR 502 (Guj); * Sir Dorabji Tata Trust vs. DCIT(E) - (2021) 188 ITD 38 (Mum); Torrent Pharmaceutical, vs DCIT -(2021) 173 ITD 130 (Ahd); 23. The contention of the ld. counsel for the assessee that the issues were examined threadbare at the original assessment stage was made out from Annexu....
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....ted that the purpose of paying commission to the said persons and the nature of services rendered by these parties was not inquired into by the AO. His show cause notice, noting the above facts are produced hereinunder at para-3.2. "3.2) The case records show that you have debited the following commission expenses amounting to Rs. 22,40,340/- to P&L account for the year under consideration. Name Amt. (Rs. ) Kamlesh S.Desai 66,750/- Naba Daka 7,00,000/- RajeshPatidar 1,55,000/- Rakesh Panchal 46,100/- Samarth D.Shah (HUF) 1,28,400/- Radha S.Shah 48,000/- Tushar Gohil 7 1,00,000/- Menakshi Tushar Gohil 2,50,070/- Mureshbhai Juthani 6,56,577/- Manish Rama 80,000/- Total 22,40,340/- From the above chart, it is seen that you have paid Rs. 7,00,000/-to Shri Naba Daka. However, the PAN of Shri Naba Daka (BJWPD9099M) mentioned in the confirmation is found invalid. The PAN is also not mentioned in the confirmation ledger of Radha S.Shah. Similarly, in the confirmation of Tushar Gohil who has been paid commission of Rs. 1,00,000/- and salary of Rs. 1,41^200/j, the PAN mentioned on ledger a/c is found in....
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....s no inquiry conducted by the AO at all, and therefore, the ld.Pr.CIT was right in holding that the assessment order was erroneous causing prejudice to the Revenue. The assessee's arguments therefore that the issues were examined during the assessment proceedings is dismissed. Also since we have found the AO to have not conducted any inquiry on the issues for which complete scrutiny was directed in the present case, there cannot be any question of any view formed by the AO on the issues and hence the argument advanced on behalf of the assessee that where two views were possible, revisionary proceedings are unjustified, needs to be rejected. 27. Next contention of the ld. counsel for the assessee before us that there is no finding of error by the ld.Pr.CIT in the assessment framed by the AO and twin conditions viz. assessment order is erroneous and prejudicial to the interest of the Revenue not being satisfied, the exercise of revisionary jurisdiction under section 263 was not in accordance with law. His submissions in brief in this regard are as under: "It is settled law that if two views are possible as regards a particular issue and AO adopts either of two such views,....
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.... addition is called for in respect of issue raised by CIT in view of contentions forming part of Annexure -"B". * Thus, even on merits, there is no error in the order passed by AO in the case of the assessee for the year under consideration. 32. The same were reiterated during the course of oral arguments made before us. This contention of the ld. counsel for the assessee also merits no consideration. On merits, the case of the ld. counsel for the assessee is merely with respect to the issue of commission expenses. With respect to the other issues relating to disproportionately large expenses claimed by the assessee, noted by the ld.Pr.CIT to have not been examined by the AO relate to the case being selected for low net profit. No submissions on merits are there by the assessee on this count. Therefore, vis-à-vis the issue of disproportionately large expenses claimed by the assessee, the assessee surely has no case on merits, since it has not even been examined by the AO during assessment proceedings, and even before the ld.Pr.CIT the assessee failed to give any reasonable explanation for justifying the increase in expenses. 33. As for the commission expenses,....
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....quiry as he deems necessary, pass such order thereon as the circumstances of the case justify, [including,- (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]. Explanation 1.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- .... ..... ..... .... Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in ....
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.... substantive provisions and are inserted to clear up any ambiguity in the section. They only clarify an existing law. Normally Explanations do not enlarge the scope of the section but only explain the scope. Explanation 2 to section 263, clearly provides additional support to the dominant object of section 263, specifically pointing out situations where assessment orders will be deemed to be erroneous. The main provision of the section and its import has not been altered by the explanation. Therefore where section 263 itself has been invoked and the reason for finding the assessment order erroneous clearly pointed out to the assessee during revisionary proceedings to the effect that adequate inquiries were not conducted by the AO on the issue in question, Explanation 2 to section 263 (a) also being to the same effect of assessment orders being deemed to be erroneous on account of lack of adequate inquiry, we see no reason why pointedly the Explanation also needs to be brought to the notice of the assessee while applying it to the case. 36 Once the ld.Pr.CIT brings to the notice of the assessee the reason why he finds the assessment order to be erroneous, ....
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....ion framed before it whether Explanation to section 263 of the Act can be said to be validly invoked without first confronting it to the assessee. In the case before Hon'ble High Court in the decision relied upon by the Ld.AR, the Revenue had proposed the following questions as substantial question of law before the Hon'ble High Court: "(a) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is correct in holding that the PCIT was not empowered and entitled to revise assessment order u/s. 263 of the Act r/w Explanation 2 thereto by ignoring that the order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue in as much as the Assessing Officer has passed the assessment order without making inquires/verification in the light of the unsecured loans of Rs. 2.49 Crores received from M/s. Georgette Tradecom Pvt. Ltd (GTPL) and M/s. PurbaAgro Food Pvt. Ltd (PAFPL)? (b) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is correct in cancelling the impugned order u/s. 263 of the I.T. Act and allowing all the grounds of the Assessee?" 40. The ....
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....t a precedent is an authority only for what it actually decides and a decision on a question that has not been argued cannot be treated as a precedent. Judgments must be read as a whole and observations in judgements should be considered in the context in which they are made and in the light of the questions that were before the court. The Hon'ble apex court has held so in the case of CIT vs Sun Engineering Works Pvt. Ltd.198 ITR 297 (SC). In the case of Padma Sundra Rao v State of TN 255 ITR 147(SC) the Hon'ble Apex Court had laid down that a ratio laid down by the Court have to be read in the context of the entire facts leading to the said ratio. 44. In view of our elaborate discussion as above, we hold that the assessee cannot derive any benefit from the judgment of Hon'ble High Court in the case of Shreeji Prints P. Ld. (supra), to the effect that non-mentioning of Explanation 2 to section 263 in the show cause notice will render entire revisionary order as non-est in the eyes of law. This contention raised by the ld. counsel for the assessee, is therefore, rejected." 27. In view of the above, we do not find any merit in the contention of the ld. counsel for t....
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.... but clearly, the assessee failed to do so. Therefore, his order restoring the case to the file of the AO for denovo assessment is in accordance with law, and we do not find any infirmity in the same. 37. In view of the above, all the contentions raised by the ld. counsel for the assessee, as above, are dismissed by the assessee, and the order passed by the ld.Pr.CIT is upheld. Appeal of the assessee is accordingly dismissed. 38. In the result, the appeal of the assessee is dismissed. Order pronounced in the Court on 26th May, 2023 at Ahmedabad. ============= Document 1 1. The order passed by the learned Commissioner of Income-tax under section 263 of the Act for the Assessment Year 2014-15 was received by me on 06.03.2019 and therefore, appeal before Your Honors was required to be filed on or before 05.05.2019. However, appeal came to be filed on 12.02.2020 and thus, there is a delay of 284 days in filing the appeal before Your Honors. The reasons for the said delay are: a) CARY SHINOL EDABAD CUJARAT NO. 63 INDIA Order passed by Ld. CIT under section 263 of the Act was received by me on 06.03.2019. However, at that poin....
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....above. Hence, it is prayed to Your Honors that there is good and sufficient reason to condone the delay and therefore the delay in filing the appeal may kindly be condoned and the appeal may kindly be decided on merits. Document 2 Date 02.04.2016 04.04.2016 Particulars The assessee, vide letter dated 02.04.2016, made following submissions before the AO: Main business of assessee is of water R.O. Plant which is fully dependent on commission payment. In preceding years (i.e. FY 2012-13), commission expenses of Rs.10,34,440/- were incurred on sales of Rs.3,45,81,155/- which comes to 2.99%. ➤ In current year (i.e. FY 2013-14), commission expenses of Rs.22,40,340/- were incurred on sales of Rs.5,98,96,092/- which comes to 3.74%. ➤ Sales had increased by Rs.2,53,14,937/- whereas commission payment has increased by 0.75% only. The assessee, vide letter dated 04.04.2016, furnished following documentary evidences before AO: ➤ Tax Audit Report & ITR (Pgs.9-44 of P/B) ➤ Kotak Mahindra Bank's ledger (Pgs.47-108 of P/B) Ledger of commission expenses (Pgs.45-16 of P/B) ➤ Confirmations & TDS cert....