AJAR AMAR STEELS 1725 10G, 3-A, FOCAL POINT LUDHIANA 141010,PUNJAB V. THE PCIT (CENTRAL) LUDHIANA, PUNJAB

ITA 950/CHANDI/2024

AI Insights

The case involves Ajar Amar Steels, a partnership firm, which appealed against the order of the Commissioner of Income Tax (CIT) under section 263 of the Income Tax Act, 1961. The CIT had deemed the assessment order erroneous as it allowed salary payments to Shri Sorav Jain, a non-working partner, contrary to the terms of the Partnership Deed. The Tribunal, after reviewing the Partnership Deed and the circumstances, concluded that the CIT had misinterpreted the Deed and that the salary payments were in accordance with the law for the other partners who were working partners. The Tribunal also condoned the delay in filing the appeal, attributing it to a bona fide error by the assessee and their tax consultant.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 781438 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 07-09-2024
• Other Referred Cases: Collector Land Acquisition Vs. Mst. Katiji & Others, N. Balakrishnan Vs. M. Krishnamurthy
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Condonation of delay; Revision of order
• Section: 143(3); 263; 40(b)

Judgement Text

"आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘A’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 950/CHD/2024 Ǔनधा[रण वष[ / Assessment Year: 2017-18 Ajar Amar Steels, 1725 10G, 3-A, Focal Point, Ludhiana. Vs The PCIT (Central), Ludhiana. èथायी लेखा सं./PAN NO: AAEFA8866A अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent Assessee by : Shri Sudhir Sehgal, Advocate Revenue by : Shri Vivek Vardhan, Addl. CIT Sr.DR Date of Hearing : 29.07.2025 Date of Pronouncement : 29.09.2025 PHYSICAL HEARING O R D E R PER RAJ PAL YADAV, VP The assessee is in appeal against the order of the ld. Commissioner of Income Tax [in short ‘the CIT’] dated 31.03.2021 passed u/s 263 of the Income Tax Act, 1961 in assessment year 2017-18. 2. The Registry has pointed out that appeal is time barred by 1196 days. The assessee has filed an application for condonation of delay. Printed from counselvise.com ITA No.950/CHD/2024 A.Y.2017-18 2 3. Before adverting to the application of the assessee, we would like to take note of finding of the ld. CIT in paragraph No. 5 of 263 order, which reads as under : “5 In view of the above, the impugned order in the case of the assessee for A.Y. 2017-18is held erroneous in as much as prejudicial to the interest of the revenue on the issue of payment of salary to Shri Sorav Jain. In view of the above, it is held that the salary paid to Shri Sorav Jain is not allowable u/s 40(b) of the Act as twin conditions of Section 40(b) of the Act are not fulfilled/satisfied in his case (he is a non-working partner). However, the salary paid to Shri Ajay Kumar Jain and Shri Archit Jain is in accordance with law the terms and conditions u/s 40(b) of the Act, hence the salary paid to them is held allowable u/s 40(b) of the Act as twin conditions of Section 40(b) of the Act are fulfilled/satisfied in these cases.” 4. We also take note of chronology of different orders which read as under : 1. Order u/s 263 31.03.2021 2. Order under Section 143(3) r.w.s. 263 passed by the ld. Assessing Officer 20.03.2022 3. Order of CIT (Appeals) against the order of AO 20.03.2022 16.02.2024 4. Order of the Hon'ble ITAT Chandigarh Bench against the order of CIT (Appeals) withdrawing appeal 19.09.2024 5. Date of filing appeal against the order u/s 263 07.09.2024 4.1 A conjoint reading of both these facts would reveal that according to the assessee, it was under an impression that when issue regarding payment of salary to the partner will be re-adjudicated by the AO in pursuance of 263 order, then it will challenge it before the appropriate Forum. It has Printed from counselvise.com ITA No.950/CHD/2024 A.Y.2017-18 3 challenged as discernable from the chronological details of the orders extracted supra but during that proceeding, it revealed that in 263 proceeding, ld.CIT itself decided the disallowance of salary payment to Shri Sorav Jain, hence nothing left for the AO for adjudication. He has to executed the order of ld. CIT and only compute the income. When this aspect was faced by the assessee in ITA 399/CHD/2024 challenging the order of CIT (Appeals) against assessment order passed in pursuance of 263 order, then assessee withdrew that appeal and filed the present appeal. Thus, it has availed its remedy under misconception of facts or on failure of understanding of the Tax Consultant of the impugned order passed u/s 263 of the Act. Had it was advised to file an appeal against this order because in the second round, nothing has been left for the AO, then it would have filed the appeal well in advance. There is no deliberate attempt at the end of the assessee. It has prosecuted the Income Tax litigation at every stage. 5. We have perused the application for condonation of delay with the assistance of ld. Representative and also gone Printed from counselvise.com ITA No.950/CHD/2024 A.Y.2017-18 4 through all these facts and circumstances. We are of the view that there was no deliberate attempt at the end of the assessee to make the appeal time barred. It was on account of a bonafide error at the end of the assessee as well as its Tax Consultant in construing the meaning of the impugned order passed u/s 263 of the Act. Therefore, the delay in filing the appeal deserves to be condoned. 5.1 It is pertinent to note that sub-section 5 of Section 253 contemplates that the Tribunal may admit an appeal or permit filing of memorandum of cross- objections after expiry of relevant period, if it is satisfied that there was a sufficient cause for not presenting it within that period. This expression sufficient cause employed in the section has also been used identically in sub-section 3 of section 249 of Income Tax Act, which provides powers to the ld. Commissioner to condone the delay in filing the appeal before the Commissioner. Similarly, it has been used in section 5 of Indian Limitation Act, 1963. Whenever interpretation and construction of this expression has fallen for consideration before Hon’ble High Court as well as before the Hon’ble Supreme Court, then, Hon’ble Court Printed from counselvise.com ITA No.950/CHD/2024 A.Y.2017-18 5 were unanimous in their conclusion that this expression is to be used liberally. We may make reference to the following observations of the Hon’ble Supreme court from the decision in the case of Collector Land Acquisition Vs. Mst. Katiji & Others, 1987 AIR 1353: 1. Ordinarily a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. \"Every day’s delay must be explained\" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to Printed from counselvise.com ITA No.950/CHD/2024 A.Y.2017-18 6 benefit by resorting to delay. In fact, he runs a serious risk. 6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so. 6. Similarly, we would like to make reference to authoritative pronouncement of Hon’ble Supreme Court in the case of N. Balakrishnan Vs. M. Krishnamurthy (1998) 7 SCC 123 dated 03.09.1998. It reads as under: “Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life-span for such legal remedy for the redress of the legal injury so 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. A court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. Printed from counselvise.com ITA No.950/CHD/2024 A.Y.2017-18 7 This Court has held that the words \"sufficient cause\" under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi lain Vs. Kuntal Kumari [AIR 1969 SC 575] and State of West Bengal Vs. The Administrator, Howrah Municipality [AIR 1972 SC 749]. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the explanation. While condoning delay the Could should not forget the opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation expenses. It would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss”. 7. In view of the above, we condone the delay in filing the appeal and proceed to decide it on merit. 8. The brief facts of the case are that a Partnership Firm was formed by way of a Partnership Deed dated 15.11.1995. Thereafter, amendments have been made in this Deed and a new Partnership Deed was executed on 01.04.2016. Copy of this Deed is available at page No. 70 of the Paper Book. In this Deed, there are four partners, namely ; 1. Shri Ajay Kumar Jain S/o Shri Amrit Lal Jain, resident of Ludhiana. Printed from counselvise.com ITA No.950/CHD/2024 A.Y.2017-18 8 2. Shri Rakesh Kumar Jain S/o Shri Amrit Lal Jain, resident of Ludhiana. 3. Shri Sorav Jain S/o Shri Rakesh Jain, resident of Ludhiana 4. Shri Archit Jain S/o Shri Ajay Kumar Jain, resident of Ludhiana 8.1 In clause No.4 of the Deed, the payment of salary to the partners is being provided. We deem it appropriate to take note of this clause also, which reads as under : 4. That the party of first, second and fourth part shall be working partners actively engaged in the conduct of the business and shall be paid remuneration as under : (a) Ajay Kumar Jain 70000/- per month (b) Sorav Jain 70000/- per month (c) Archit Jain 40000/- per month 8.2 The ld. CIT was of the view that at Sr.No. 2, Shri Rakesh Kumar Jain has been mentioned in the title of the Deed whereas in clause No.4, it has been provided that partners at Sr.No. 1, 2 and 4 will be working partners who will be entitled for salary. However, salary has been given to Shri Sorav Jain, who is not entitled. Accordingly, ld. CIT termed the assessment order as erroneous. 8. We have duly considered the rival contentions and gone through the record carefully. In our opinion, ld. CIT has misconstrued the Partnership Deed. There was a minor Printed from counselvise.com ITA No.950/CHD/2024 A.Y.2017-18 9 typographical error but salary has been mentioned specifically against the name of the partner who will be entitled for that and if this minor ambiguity is being appreciated, then view ought to be taken in favour of the assessee i.e. in the manner in which assessee has given benefit of this Deed in its accounts. It is not an item which has really caused any prejudice to the interests of Revenue. The AO has appreciated this Deed and accepted its interpretation according to the way assessee has interpreted it. The ld. CIT has committed an error by branding the assessment order as erroneous in such a minor issue. Therefore, we allow the appeal of the assessee and quash the impugned order passed u/s 263 of the Income Tax Act. 9. In the result, appeal of the assessee is allowed. Order pronounced on 29.09.2025. Sd/- Sd/- (KRINWANT SAHAY) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” Printed from counselvise.com ITA No.950/CHD/2024 A.Y.2017-18 10 आदेश कì ÿितिलिप अúेिषत/ Copy of the order forwarded to : 1. अपीलाथê/ The Appellant 2. ÿÂयथê/ The Respondent 3. आयकर आयुĉ/ CIT 4. िवभागीय ÿितिनिध, आयकर अपीलीय आिधकरण, चÁडीगढ़/ DR, ITAT, CHANDIGARH 5. गाडª फाईल/ Guard File सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com "