BHAGYALAXMI STEEL ROLLING MILL,MEHSANA V. THE ITO, WARD-1, MEHSANA

ITA 360/AHD/2025

AI Insights

The case involves Bhagyalaxmi Steel Rolling Mill, which appealed against the order of the CIT(A) pertaining to the Assessment Year 2018-19. The appeal was initially delayed due to an oversight by the assessee's accountant, who failed to forward the CIT(A)'s order to their Chartered Accountant in time for filing. The Tribunal found sufficient cause for the delay and admitted the appeal. The main issue in the appeal was the addition of Rs. 5,45,347 to the assessee's income under Section 41(1) of the Income Tax Act, which was contested on the grounds that the liabilities had not ceased to exist, as confirmed by the creditors.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314141 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Other Referred Cases: N. Balakrishnan vs. M. Krishnamurthy, Collector Land Acquisition Vs. Mst. Katiji & Others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVINDRA
• Assessee Lawyers: RUSHIN PATEL
• Keywords: Condonation of delay; Reasonable cause

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE: SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No. 360/Ahd/2025 (Ǔनधा[रण वष[ / Assessment Year : 2018-19) Bhagyalaxmi Steel Rolling Mill C/o Supreme Steel Syndicate, 1 Mal Godown, Mehsana - 384002 बनाम/ Vs. Income Tax Officer Ward-1, Mehsana Öथायी लेखा सं./जीआइआर सं./PAN/GIR No. : AACFB9336N (Appellant) .. (Respondent) अपीलाथȸ ओर से /Appellant by : Shri Rushin Patel, A.R. Ĥ×यथȸ कȧ ओर से/Respondent by : Shri Ravindra, Sr. DR Date of Hearing 06/05/2025 Date of Pronouncement 09/05/2025 (आदेश)/ORDER PER SMT. ANNAPURNA GUPTA, AM: The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), (hereinafter referred to as “CIT(A)”), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi dated 22.02.2024 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) pertaining to Assessment Year (A.Y.) 2018-19. 2. At the outset, we have noted that the appeal of the assessee is delayed for filing by 293 days. An application seeking ITA No. 360/Ahd/2025 [Bhagyalaxmi Steel Rolling Mill vs. ITO] A.Y. 2018-19 - 2 – condonation of delay was filed before us stating that the delay was attributable to the Accountant of the assessee firm to whom the order of the Ld. CIT(A) was handed over to send it to the office of the Chartered Accountant for filing appeal before the ITAT, but due to work overload owing to March ending, the instruction skipped the attention of the Accountant. That only when the penalty notice u/s.270A of the Act dated 29.11.2024 was received by the assessee and was forwarded to his Chartered Accountant for necessary response that his Consultant inquired about the ITAT appeal for the impugned year, which revealed that the order of the Ld. CIT(A) had not been forwarded to the Consultant. And immediately on realization of the mistake necessary action was taken and the appeal filed ultimately on 17th February, 2025, which is within two months from the date the assessee became aware of the lapse of non-filing of the appeal. 3. The contents of the application are reproduced hereunder: “1. The titled Appeal has been filed under section 253 of the Income tax Act, 1961. This application is being filed, praying for condonation of delay of 293 days in filing of appeal against the order of ld. C.I.T.(Appeals), NFAC dated 22.02.2024 for Asst. Year 2018- 19. Said order was received on the same date by the applicant- assessee through email. The appeal ought to have been filed within 60 days of receipt of the order of the ld. CIT(A). 2. On receipt of the said order, Hasmukh Rambhai Patel, one of the partners of the applicant firm instructed their accountant, Mr. Dilipbhai Ranjithhai Rami, to send the same to the office of their Chartered Accountant, CA Virendra C. Shah for filing an appeal before the Hon'ble Income Tax Appellate Tribunal. Unfortunately, the aforesaid instruction skipped attention of the accountant and same could not be forwarded to the office of the Chartered Accountant owing to March ending workload. Thereafter, when the applicant firm ITA No. 360/Ahd/2025 [Bhagyalaxmi Steel Rolling Mill vs. ITO] A.Y. 2018-19 - 3 – received the penalty notice u/s 270A dated 29.11.2024 for A.Y. 2018- 19 (copy attached herewith), the partner of the applicant firm handed over the said notice to the accountant for forwarding the same to the Chartered Accountant for necessary response and also enquired regarding the ITAT appeal for A.Y. 2018-19 to the accountant. On such enquiry, the accountant was reminded of the order of the Id. CIT(A) and realized his mistake that he forgot to forward the aforesaid order to the office of the Chartered Accountant, and hence, immediately on realization of the same, the order along with the other appeal papers were compiled and necessary signatures were obtained and were forwarded to the office of the Chartered Accountant, who in turn forwarded the same to Adv. Rushin Patel at Ahmedabad for filing purpose and ultimately, the appeal could be filed on 17.02.2025. 3. It is also pertinent to note that, the appeal has been filed within the prescribed period of two months from coming to know of the inadvertent lapse of non-filing the appeal. 4. It is because of such circumstances a delay of 293 days has occurred in filing the appeal by the applicant. Affidavit of Mr. Dilipbhai Ranjitbhai Rami affirming the aforesaid facts on oath is attached herewith. The applicant most humbly requests that this delay may kindly be condoned, keeping in mind that there was no mala fide intention in delayed filing of the same and the circumstances under which the delay has occurred may kindly be considered as a reasonable cause and the appeal may kindly be taken up for adjudication in the interest of justice. 5. The applicant relies on the judgement of the Hon'ble Supreme Court in the case of N. Balakrishnan v/s. M. Krishnamurthy (1998) 7 SCC 123 (copy attached herewith), wherein it was held that, in absence of anything showing malafide or deliberate delay as a dilatory tactic, delay should normally be condoned. It further held that, length of delay is no matter, acceptability of the explanation is the only criterion and that there is no presumption that delay in approaching the court is always deliberate. The words \"sufficient cause\" should receive a liberal construction so as to advance substantial justice. 6. The applicant assure the Hon'ble Members of the ITAT that no default of this kind will happen in the future and the applicant may kindly be pardoned for the delayed filing of appeal.” 4. The assessee has duly supported its application with an affidavit of the Accountant confirming on oath that it was his ITA No. 360/Ahd/2025 [Bhagyalaxmi Steel Rolling Mill vs. ITO] A.Y. 2018-19 - 4 – mistake that the CIT(A)’s order was not delivered to the Chartered Accountant for filing appeal to the ITAT in time. 5. The Ld. Counsel for the assessee referred to the reasoning mentioned in the application seeking condonation of delay before us and pleaded that delay of 293 days in filing of the appeal be condoned. 6. Ld. DR vehemently opposed the condonation of delay. 7. Having heard both the parties, we find that the assessee has demonstrated sufficient cause for the delay in filing of the present appeal. The delay has been shown to be attributable to his Accountant who on oath has stated to have failed to deliver the order of the CIT(A) to the Chartered Accountant of the assessee for filing appeal before the ITAT. The Ld.DR has been unable to point out any infirmity in the explanation or demonstrate the same to be false. 8. Courts have been unanimous in holding that the word ‘sufficient cause’ as per section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice and that merely because there is some lapse of the litigant concerned, that alone is not enough to shut the door of justice to him. That as long as the explanation of the assessee does not smack of malafides or it is not put forth as part of a dilatory strategy, the court must show utmost consideration and when there ITA No. 360/Ahd/2025 [Bhagyalaxmi Steel Rolling Mill vs. ITO] A.Y. 2018-19 - 5 – 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 holding so, the courts have considered that ordinarily a litigant does not stand to benefit by lodging an appeal late and by refusing the condonation of delay it can result in a meritorious matter being thrown out at the very threshold, defeating the cause of justice. That when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred. It has also been noted that there is no presumption that delay is occasioned deliberately, or on account of culpable negligence. A litigant doesn’t stand to benefit by resorting to delay. We make a reference in this regard to the decision of Hon’ble Apex Court in the case of Collector Land Acquisition Vs. Mst. Katiji & Others, 1987 AIR 1353. 9. Considering the judicial decisions as above and noting that the assessee had adduced sufficient cause for the delay, we consider it a fit case for condoning the delay and admitting the appeal of the assessee for adjudication. 10. Having said so, we shall now proceed to adjudicate the grounds raised before us which read as under: “1. The ld. CIT(A) has erred in law and on acts of the case, in sustaining addition of alleged cessation of liability of Rs.5,45,347/- u/s 41(1).” ITA No. 360/Ahd/2025 [Bhagyalaxmi Steel Rolling Mill vs. ITO] A.Y. 2018-19 - 6 – 11. As is evident from the perusal of the ground raised by the assessee, the solitary issue before us pertains to addition made to the income of the assessee on account of cessation of liability u/s.41(1) of the Act amounting to Rs.5,45,347/-. 12. Ld. Counsel for the assessee first drew our attention to the facts of the case pointing out that the liability so added back pertained to four creditors noted at page 2 of the assessment order as under: S.No. Name of the Sundry Creditor Amount Outstanding F.Y. since outstanding 1 Subham Traders 85,077/- 2015-16 2 Astha Vinayak Steel 26,430/- 2015-16 3 L. J. Traders 3,89,474/- 2015-16 4 Tarun Steel 44,366/- 2015-16 Total 5,45,347/- 12.1 Thereafter, he pointed out that the present case cannot be a case of cessation of liability since the impugned parties had confirmed the balance outstanding in the books of the assessee, which was noted by the AO also at para 4 of his order as under: “04. On perusal of Balance sheet, it is noted that the assessee has claimed outstanding Sundry creditors of Rs. 1.02.83 930/- The assessee was requested to provide the details of last three years Creditors alongwith confirmations and PAN. However, in respect of below mentioned Sundry creditors, the assessee has merely filed confirmations without PAN as follows: S.No. Name of the Sundry Creditor Amount Outstanding F.Y. since outstanding 1 Subham Traders 85,077/- 2015-16 2 Astha Vinayak Steel 26,430/- 2015-16 3 L. J. Traders 3,89,474/- 2015-16 4 Tarun Steel 44,366/- 2015-16 Total 5,45,347/- ITA No. 360/Ahd/2025 [Bhagyalaxmi Steel Rolling Mill vs. ITO] A.Y. 2018-19 - 7 – 12.2 Ld. Counsel for the assessee contended that the solitary reason for treating the liabilities as having ceased to exist, was that the PAN number of the creditors were not furnished. This fact, he stated, by no stretch of logic could lead to the conclusion that the liabilities ceased to exist. He drew our attention to the findings of the AO in this regard: “The assessee has not provided the details of these outstanding creditors for A.Y. 2014-15. It can be fairly concluded that these creditors are outstanding for more than three years as the assessee has not provided PAN of these persons. The assessee has not made any transactions with these sundry creditors since three years. The burden of proving that the liability did not cease and still subsists lies on the assessee. The assessee has obtained benefit of such trading liability by way of remission or cessation. The assessee has not brought on record whether these creditors are existing by not providing PAN and in which year, the purchases from these persons have been claimed as deductions. Moreover, the assessee has also drained away the third party enquiries by not providing the requisite details of these creditors, in order to confront these creditors. The assessee has neither received any payments against it nor written back in its books of accounts. The assessee has continued these entries in its books of accounts without proving the identity of these creditors and without any intention to receive back the amounts. The liability which is outstanding for a very long period ceases to be in existence either because the creditor is not demanding it or by operation of law it becomes barred by time. No further explanation whatsoever has been filed by the assessee. In view of the above discussion, the amount of Rs. 5,45,347/- is brought to tax by applying the provisions of section 41(1) of the I.T. Act. Penalty proceedings u/s 270A(2)(a) are separately initiated for under reporting of total income.” 13. Ld. DR, however, vehemently supported the order of the Ld. CIT(A). 14. Having heard the contention of both the parties, we find merit in the argument made by the Ld. Counsel for the assessee ITA No. 360/Ahd/2025 [Bhagyalaxmi Steel Rolling Mill vs. ITO] A.Y. 2018-19 - 8 – that there was no case on facts for treating the outstanding balance of sundry creditors amounting to Rs.5,45,347/- as having ceased to exist and added to the income of the assessee in terms of Section 41(1) of the Act. As rightly pointed out by the Ld. Counsel for the assessee, the impugned parties have admittedly confirmed the outstanding balance. The only basis with the Revenue for treating these liabilities to have ceased to exist was the fact that their PAN number was not furnished. The Revenues case rests on the premise that the onus is on the assessee to prove that liabilities exist and by not furnishing PAN of the impugned parties, the assessee has failed to prove whether these parties still exist. 15. As per the Revenues reasoning itself, we find that the assessee had discharged its onus of proving that the balances existed for payment, since admittedly confirmations of the impugned creditors were filed by the assessee and the same have neither been found to be false nor any infirmity pointed out in them. The onus, in fact, now shifted to the Revenue for proving otherwise, that the liabilities ceased to exist. 16. Even otherwise mere non-furnishing of PAN cannot lead to the conclusion that the liabilities have ceased to exist. The non- furnishing of PAN by the assessee firstly does not establish that the said parties have no PAN.PAN may be existing but may not have been furnished for any reason by the assessee. Moreover, PAN is an identity which is given by the department to assessee registered in their data base. Even if we consider no PAN ITA No. 360/Ahd/2025 [Bhagyalaxmi Steel Rolling Mill vs. ITO] A.Y. 2018-19 - 9 – of the creditors, as is the allegation of the Revenue, it can at the most show that these parties do not exist as assessee’s (emphasis supplied by us) with the department. But it definitely is not conclusive proof /evidence of the fact that the entity does not exist at all. 17. In the light of the above, we have no hesitation in holding that the Revenue has no basis at all for making addition of Rs.5,45,347/- to the income of the assessee on account of liabilities ceasing to exist, as per section 41(1) of the Act. The addition therefore made, is directed to be deleted. The grounds raised by the assessee are allowed. 18. In the result, appeal filed by the assessee is allowed. This Order pronounced on 09/05/2025 Sd/- Sd/- (T.R. SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 09/05/2025 S. K. SINHA True Copy आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंͬधत आयकर आयुÈत / Concerned CIT 4. आयकर आयुÈत(अपील) / The CIT(A)- 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड[ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलȣय अͬधकरण, अहमदाबाद / ITAT, Ahmedabad "