The Prudential Co-Operative Urban Bank Limited, Secunderabad V. Dy. Commissioner of Income Tax , Circle-2(3), Hyderabad

ITA 101/Hyd/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6189 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2005-2006
• Appeal Filed On: 10-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y.V.S.T. SAI
• Keywords: Condonation of delay; Liquidation
• Section: 147; 148; 154; 143(3); 40(a)(ia); 143(1); 13

Judgement Text

आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”, HYDERABAD BEFORE SHRI RAMA KANTA PANDA, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER आ.अपी.सं / ITA No. 101/Hyd/2018 (निर्धारण वर्ा / Assessment Year: 2005-06) The Prudential Co-operative Urban Bank Limited, Secunderabad [PAN : AABCT7077J] Vs. Dy.Commissioner of Income Tax, Circle-2(3), Hyderabad अपीलधर्थी / Appellant प्रत्‍यर्थी / Respondent निर्धाररती‍द्वधरध / Assessee by: Shri A.V.Raghuram, AR रधजस्‍व‍द्वधरध / Revenue by: Shri Y.V.S.T.Sai, CIT-DR स ु िवधई‍की‍तधरीख/Date of hearing: 20/07/2022 घोर्णध की‍तधरीख/Pronouncement on: 17/08/2022 आदेश / ORDER PER K. NARASIMHA CHARY, JM: Aggrieved by the order dated 14/08/2013, passed by the Learned Commissioner of Income Tax (Appeals)-III, Hyderabad (“Ld. CIT(A)”) in the case of Prudential Co-operative Urban Bank Ltd., (“the assessee”) for the assessment year 2005-06, assessee filed this appeal. ITA No. 101/Hyd/2018 Page 2 of 15 2. Brief facts of the case are that the assessee is engaged in banking business. They have filed their return of income for the assessment year 2005-06 on 28/10/2005 declaring a loss of Rs. 9,06,34,836/-. Originally it was processed under section 143(1) of the Income Tax Act, 1961 (for short “the Act”). Subsequently the case was reopened with the issuance of notice under section 148 of the Act to the official liquidator as the assessee was in liquidation. Assessment under section 143(3) read with section 147 of the Act was complete by order dated 29/12/2008 determining the income of the assessee at Rs. 10,48,16,318/-. Subsequently a notice under section 148 of the Act was issued on 27/03/2012 and order under section 143(3) of the Act was passed on 08/03/2013 disallowing a sum of Rs. 22,18,70,175/-. 3. Assessee, being aggrieved by such an order dated 08/03/2013 preferred an appeal before the Ld. CIT(A) and the Ld. CIT(A) by order dated 14/08/2013 held that the disallowance of interest was incorrect and therefore, while partly allowing the appeal directed the learned Assessing Officer to calculate the interest paid till 03/12/2001 and allow the same because till such date the assessee had a valid banking license, and interest for the period thereafter has to be disallowed under section 40(a)(ia) of the Act . 4. Aggrieved by the order dated 14/08/2013, assessee preferred this appeal before us with a delay of 1529 days. In the appeal assessee challenged the action of the Ld. CIT(A) in remanding the matter to the file of the learned Assessing Officer to verify as to whether any interest was provided after cancellation of the banking license, in spite of the submissions made to the effect that not just cancellation of the banking ITA No. 101/Hyd/2018 Page 3 of 15 license, but the society came under liquidation by the date and no interest was provided after the date of liquidation in accordance with the provisions of law. By way of additional grounds assessee challenged the initiation of proceedings under section 147 when the earlier order was passed and the entire material was before him and there was no fresh material obtained by the learned Assessing Officer for issuing the notice. 5. Insofar as the delay is concerned, in the affidavit filed in support of the prayer to condone the delay, it is stated that the order dated 14/08/2013 passed by the Ld. CIT(A) was received on 05/09/2013 and the appeal should have been filed on or before 03/11/2013. Reason for the delay of 1529 days, according to the assessee is that the consequent order dated 14/02/2014 passed by the learned Assessing Officer was received by the assessee on 14/03/2014 along with another order dated 17/02/2014 wherein the tax was stated to be nil, and therefore, it was understood by the assessee that no further action need be taken. Assessee, however, subsequently noticed that in the order dated 17/02/2014, there was no reference to the earlier order, but received a letter dated 18/3/2017 directing the official liquidator to pay the outstanding demands. Then the assessee being non-conversant with the Income Tax proceedings wrote a letter on 17/03/2017 to the learned Assessing Officer requesting to clarify how there is a demand for the assessment year 2005-06 when as per the order dated 17/02/2014 the demand was nil. Assessee received the letter dated 15/03/2017 on 14/07/2017 and thereafter the official liquidator appeared before the learned Assessing Officer on 7/11/2017 and came to know that in view of the order dated 14/3/2014, there arose some demand and then only the assessee had taken the matter to the legal consultant ITA No. 101/Hyd/2018 Page 4 of 15 for advice after consulting the Commissioner of Co-operative Societies. On the advice of the legal consultant, appeal was prepared and filed, but with a delay of 1529 days. Assessee, therefore, attributes the reason for delay in filing of the appeal to the order dated 10/03/2017 rectifying the consequential order dated 17/02/2014, under section 154 of the Act and rising demand of Rs. 6,26,60,765/-. 6. It is the submission on behalf of the assessee that because in the order dated 17/2/2014 the tax was stated to be nil, the assessee was under the mistaken impression that nothing need be done but it is only on receiving the letter dated 18/3/2017, the assessee started making enquiries and addressed a letter to the learned Assessing Officer as to how the demand had arisen, since no such thing was to be found in the order dated 17/2/2014. According to the Ld. AR the letter dated 15/3/2017 said to have been received by the assessee on 14/7/2017 was not to be found in the records of the assessee and therefore, by appearing before the learned Assessing Officer on 7/11/2017 the assessee came to know about the letter dated 15/3/2017 and the learned Assessing Officer passing the order dated 14/3/2014 which resulted in demand. He placed reliance on the decisions reported in the case of Collector, Land Acquisition vs. MST. Katiji & others (1987) 167 ITR 471 (SC) and Surya General Traders vs. CTO 1997 (4) ALD 439 for the principle that ordinarily a litigant does not stand to benefit by lodging an appeal late and that when substantial Justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. 7. Per contra, Ld. DR submitted that the reasons mentioned by the assessee for the condonation of delay in filing this appeal are totally ITA No. 101/Hyd/2018 Page 5 of 15 irrelevant, because in the appeal the assessee challenged the action of the Ld. CIT(A) in remanding the matter to the file of the learned Assessing Officer, for which the assessee need not wait till the consequential orders were passed. If really the assessee is aggrieved of the consequential orders, the assessee could have as well challenged the consequential orders in the appeal. Ld. DR submitted that the stand taken by the assessee is inconsistent because the consequential order is relevant to challenge the action of the Ld. CIT(A) in remitting the issue back to the file of the learned Assessing Officer, and if the assessee is aggrieved by the rectification order dated 10/3/2017, the assessee could have challenged the rectification order itself. Assessee is showing the cause of action for challenging the order dated 14/8/2013, as the rectification order dated 10/3/2017, which is inconsistent. Ld. DR placed reliance on the decision of the Hon’ble Apex Court in the cases of Balwant Singh (dead) v. Jagdish Singh and others [2010] 8 S.C.R. 597, Esha Bhattacharjee vs Managing Committee of Raghunathpur Nafar Academy (2013) 12 SCC 649 and the Hon’ble High Court of Bombay in the case of Vama Apparels (India) (P.) Ltd. vs. ACIT (2019) 102 taxmann.com 398 (Bombay) in support of his contention that the law of limitation is a substantive law and has definite consequences on the right and obligation of a party to arise and it would be unreasonable to take away the right on the mere asking of the party, particularly when the delay is directly a result of negligence, default or inaction of that party. 8. We have gone through the record in the light of the submissions made on either side. The assessee filed the original return of income on 28/10/2005 declaring a loss of Rs. 9,06,34,836/-, the same was processed ITA No. 101/Hyd/2018 Page 6 of 15 under section 143(1) of the Act. Subsequently, the learned Assessing Officer noticed that the Reserve Bank of India cancelled the banking permission to the assessee with effect from 4/12/2004, issued a notice dated 7/1/2008 under section 148 of the Act questioning the allowability of the NPA provision to the tune of Rs. 19,52,52,762/- which was debited to the P&L Account stating that it could be inadmissible. And after hearing the assessee by order dated 29/12/2008 an order under section 143(3) read with section 147 of the Act was passed by disallowing the NPA provision and also the contingent provision. Assessee challenged the same before the Ld. CIT(A) unsuccessfully and therefore carried the matter to the Tribunal, which allowed the appeal crashing the reopening, and therefore the Revenue is in appeal before the Hon’ble High Court. 9. Subsequently, a notice under section 148 of the Act was issued on 27/3/2012 to the official liquidator proposing to disallow interest on deposits under section 40(a)(ia) of the Act, order under section 143(3) read with section 147 of the Act was passed on 8/3/2013 disallowing a sum of Rs. 22,18,70,175/-. Assessee’s appeal before the Ld. CIT(A) against the order dated 8/3/2013 was allowed in part by the Ld. CIT(A) by order dated 14/8/2013 holding that the entire interest cannot be disallowed as the assessee was having RBI license till 4/12/2014, and therefore, on this premise, the Ld. CIT(A) directed the learned Assessing Officer to disallow interest paid post 4/12/2004. This order is under appeal before us now. 10. Subsequently, learned Assessing Officer passed two orders, namely, on 14/2/2014 giving effect to the order of the Ld. CIT(A) and on 17/2/2014 giving effect to the order of the ITAT and arriving at the loss of Rs. 9,06,34,863/-. Learned Assessing Officer, however, rectified the order ITA No. 101/Hyd/2018 Page 7 of 15 dated 17/2/2014 under section 154 of the Act on 10/3/2017 giving rise to a demand of Rs. 6,26,60,765/-. Learned Assessing Officer said to have addressed a letter dated 15/3/2017 in respect of the demand for the assessment year 2004-05 and 2005-06, which according to the record of the learned Assessing Officer was served on the assessee on 14/7/2017, but according to the assessee there is no such letter. The official liquidator appeared before the learned Assessing Officer in connection with the notices for the assessment years 2014-15 and 2015-16 on 7/11/2017 and then only came to know about the pending demands for the assessment years 2004-05 and 2005-06 and the notice dated 15/3/2017. Assessee says that then they sought the legal advice and filed the appeal against the order dated 14/8/2013 passed by the Ld. CIT(A) with a delay of 1529 days. 11. It is not the case of the assessee that they did not receive the order dated 14/8/2013 passed by the Ld. CIT(A) which is now under challenge in the appeal. The grievance of the assessee as could be seen from the grounds and also the additional grounds of appeal is relating to the reopening of the assessment by issuing the notice dated 27/3/2012 under section 148 of the Act to the official liquidator proposing to disallow the interest on deposits under section 40(a)(ia) of the Act and also the action of the Ld. CIT(A) in remitting the issue to the file of the learned Assessing Officer to allow the interest up to the date of cancellation of the license by the RBI, on 4/12/2004 and to disallow the interest paid to the subsequent period. 12. A plain reading of the grounds and the additional grounds raised in this appeal clearly shows that the assessee’s grievance relate to the reopening of the assessment with the issuance of notice under section 148 ITA No. 101/Hyd/2018 Page 8 of 15 of the Act on 27/3/2012 and the orders of the Ld. CIT(A) in disallowing the interest paid subsequent to 4/12/2014. Insofar as this grievance is concerned, the assessee is clear as to the state of affairs by 14/8/2013 itself. The assessee need not wait till the consequential orders are passed. Whether or not the demand is stated to be nil in the consequential order dated 17/2/2014, it has nothing to do with the impugned order passed directing the learned Assessing Officer to disallow the interest paid subsequent to 4/12/2014. The disallowance in the impugned order is very clear and loud. Merely because a subsequent point of time the learned Assessing Officer passed an order dated 14/2/2014, it does not mean that the assessee has a good case. 13. It is pertinent to note that by the date of this consequential order dated 14/2/2014 itself the due date for filing the appeal was lapsed, because the impugned order dated 14/8/2013 was served on the assessee on 5/9/2013 and the due date for filing the appeal was by 4/11/2013. Even if we believe that the orders dated 14/2/2014 and 17/2/2014 received by the assessee on 14/3/2014 were capable of misleading the assessee, still the assessee cannot harp on that point because the impugned order was clear in its import that the interest for a period subsequent to 4/12/2004 was clearly directed to be disallowed by the Ld. CIT(A) on 14/8/2013 to challenge which, the appeal time was only available till 5/9/2013. Assessee cannot have the benefit of any confusion that is likely to arise subsequent to this 5/9/2013, because the cause of action for the grievance of the assessee is the order dated 14/8/2013 and, as a matter of fact, is not at all the order dated 10/3/2017 rectifying the order dated 17/2/2014 under section 154 of the Act. ITA No. 101/Hyd/2018 Page 9 of 15 14. Whether or not the order dated 10/3/2017 and the letter dated 15/3/2017 were served on the assessee are totally irrelevant insofar as the time to file this appeal is concerned. Such a time to file the appeal against the order dated 14/8/2013 was barred by limitation from 4/11/2013 itself. The assessee cannot be allowed to agitate that with the fond hope that the learned Assessing Officer will commit a mistake in passing 2 orders one on 14/2/2014 and the other on 17/2/2014 where under the demand will be nil, the assessee are allowed the appeal to be barred by limitation by 4/11/2013, but only thought of preferring an appeal in case any of these orders passed on 14/2/2014 and 17/2/2014 are rectified. It militates against the logic and ordinary human conduct and common course of business. It is not known how the assessee can take advantage of the events that took place subsequent to the original time to prefer appeal was barred by limitation on 4/11/2013 itself. It is only an afterthought to agitate such illogically, attempting to take subsequent events to aid. Assessee had forgotten one basic thing before citing the orders dated 14/2/2014, 17/2/2014 and 10/3/2017 as a reason for the mistaken impression not to prefer the appeal, that the original limitation to file the appeal against the impugned order expired long before these orders. The facts pleaded by the assessee to justify the delay in filing the appeal are wholly irrelevant and illogical. It is nothing but a drowning man trying to catch a straw. Law of limitation does not permit such unacceptable conduct on the part of the parties. 15. At this juncture, it is just and necessary to refer to the observations of the Hon'ble Apex Court on this aspect. In Esha Bhattacharjee vs Mg.Commit.Of Raghunathpur Nafar (2013) 12 SCC ITA No. 101/Hyd/2018 Page 10 of 15 649, the Hon'ble Apex court, after the review of the entire case law on this aspect including the view taken in the cases of Collector, Land Acquisition, Anantnag Vs. Katiji, 167 ITR 471, Balwant Singh (dead) Vs. Jagdish Singh and others [2010] 8 S.C.R. 597 and a catena of cases, held that,- 12. A reference to the principle stated in Balwant Singh (dead) v. Jagdish Singh and others[15] would be quite fruitful. In the said case the Court referred to the pronouncements in Union of India v. Ram Charan[16], P.K. Ramachandran v. State of Kerala[17] and Katari Suryanarayana v. Koppisetti Subba Rao[18] and stated thus:- “25. We may state that even if the term “sufficient cause” has to receive liberal construction, it must squarely fall within the concept of reasonable time and proper conduct of the party concerned. The purpose of introducing liberal construction normally is to introduce the concept of “reasonableness” as it is understood in its general connotation. 26. The law of limitation is a substantive law and has definite consequences on the right and obligation of a party to arise. These principles should be adhered to and applied appropriately depending on the facts and circumstances of a given case. Once a valuable right has accrued in favour of one party as a result of the failure of the other party to explain the delay by showing sufficient cause and its own conduct, it will be unreasonable to take away that right on the mere asking of the applicant, particularly when the delay is directly a result of negligence, default or inaction of that party. Justice must be done to both parties equally. Then alone the ends of justice can be achieved. If a party has been thoroughly negligent in implementing its rights and remedies, it will be equally unfair to deprive the other party of a valuable right that has accrued to it in law as a result of his acting vigilantly.” 13. Recently in Maniben Devraj Shah v. Municipal Corporation of Brihan Mumbai[19], the learned Judges referred to the pronouncement in Vedabai v. Shantaram Baburao Patil[20] wherein it has been opined that a distinction must be made between a case where the delay is inordinate and a case where the delay is of few days and whereas in the former case the consideration of prejudice to the other side will be a relevant factor, in the latter case no such consideration arises. Thereafter, the two-Judge Bench ruled thus: - ITA No. 101/Hyd/2018 Page 11 of 15 “23. What needs to be emphasized is that even though a liberal and justice-oriented approach is required to be adopted in the exercise of power under Section 5 of the Limitation Act and other similar statutes, the courts can neither become oblivious of the fact that the successful litigant has acquired certain rights on the basis of the judgment under challenge and a lot of time is consumed at various stages of litigation apart from the cost. 24. What colour the expression “sufficient cause” would get in the factual matrix of a given case would largely depend on bona fide nature of the explanation. If the court finds that there has been no negligence on the part of the applicant and the cause shown for the delay does not lack bona fides, then it may condone the delay. If, on the other hand, the explanation given by the applicant is found to be concocted or he is thoroughly negligent in prosecuting his cause, then it would be a legitimate exercise of discretion not to condone the delay.” Eventually, the Bench upon perusal of the application for condonation of delay and the affidavit on record came to hold that certain necessary facts were conspicuously silent and, accordingly, reversed the decision of the High Court which had condoned the delay of more than seven years.” 14. In B. Madhuri Goud v. B. Damodar Reddy[21], the Court referring to earlier decisions reversed the decision of the learned single Judge who had condoned delay of 1236 days as the explanation given in the application for condonation of delay was absolutely fanciful. 15. From the aforesaid authorities the principles that can broadly be culled out are: There should be a liberal, pragmatic, justice-oriented, non- pedantic approach while dealing with an application for condonation of delay, for the courts are not supposed to legalise injustice but are obliged to remove injustice. The terms “sufficient cause” should be understood in their proper spirit, philosophy and purpose regard being had to the fact that these terms are basically elastic and are to be applied in proper perspective to the obtaining fact- situation. Substantial justice being paramount and pivotal the technical considerations should not be given undue and uncalled for emphasis. No presumption can be attached to deliberate causation of delay but, gross negligence on the part of the counsel or litigant is to be taken note of. ITA No. 101/Hyd/2018 Page 12 of 15 Lack of bona fides imputable to a party seeking condonation of delay is a significant and relevant fact. It is to be kept in mind that adherence to strict proof should not affect public justice and cause public mischief because the courts are required to be vigilant so that in the ultimate eventuate there is no real failure of justice. The concept of liberal approach has to encapsule the conception of reasonableness and it cannot be allowed a totally unfettered free play. There is a distinction between inordinate delay and a delay of short duration or few days, for to the former doctrine of prejudice is attracted whereas to the latter it may not be attracted. That apart, the first one warrants strict approach whereas the second calls for a liberal delineation. The conduct, behaviour and attitude of a party relating to its inaction or negligence are relevant factors to be taken into consideration. It is so as the fundamental principle is that the courts are required to weigh the scale of balance of justice in respect of both parties and the said principle cannot be given a total go by in the name of liberal approach. If the explanation offered is concocted or the grounds urged in the application are fanciful, the courts should be vigilant not to expose the other side unnecessarily to face such a litigation. It is to be borne in mind that no one gets away with fraud, misrepresentation or interpolation by taking recourse to the technicalities of law of limitation. The entire gamut of facts are to be carefully scrutinized and the approach should be based on the paradigm of judicial discretion which is founded on objective reasoning and not on individual perception. The State or a public body or an entity representing a collective cause should be given some acceptable latitude. 16. To the aforesaid principles we may add some more guidelines taking note of the present day scenario. They are: - An application for condonation of delay should be drafted with careful concern and not in a half hazard manner harbouring the notion that the courts are required to condone delay on the bedrock of the principle that adjudication of a lis on merits is seminal to justice dispensation system. ITA No. 101/Hyd/2018 Page 13 of 15 An application for condonation of delay should not be dealt with in a routine manner on the base of individual philosophy which is basically subjective. Though no precise formula can be laid down regard being had to the concept of judicial discretion, yet a conscious effort for achieving consistency and collegiality of the adjudicatory system should be made as that is the ultimate institutional motto. The increasing tendency to perceive delay as a non- serious matter and, hence, lackadaisical propensity can be exhibited in a non- challant manner requires to be curbed, of course, within legal parameters. ... ... ... ... ... ... ......It should have kept itself alive to the following passage from N. Balakrishnan (supra): - “The law of limitation fixes a lifespan for such legal remedy for the redress of the legal injury so suffered. Time is precious and wasted time would never revisit. During the efflux of time, newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a lifespan must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. The law of limitation is thus founded on public policy. It is enshrined in the maxim interest reipublicae up sit finis litium (it is for the general welfare that a period be put to litigation). Rules of limitation are not meant to destroy the rights 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.” We have painfully re-stated the same. 16. In view of the facts and law discussed above, we are of the considered opinion that there is no sufficient cause made out by the assessee to condone the delay and the reasons stated for the delay are not at all relevant insofar as this appeal challenging the order dated 14/8/2013 is concerned. We, therefore, decline to condone the delay and ITA No. 101/Hyd/2018 Page 14 of 15 consequently the appeal stands dismissed. Since the delay is not condoned, discussion on merit does not arise. 17. In the result, appeal of the assessee is dismissed. Order pronounced in the open court on this the 17 th day of August, 2022 Sd/- Sd/- (RAMA KANTA PANDA) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 17/08/2022 TNMM ITA No. 101/Hyd/2018 Page 15 of 15 Copy forwarded to: 1. The Prudential Co-operative Urban Bank Limited, C/o. K.Vasantkumar, A.V.Raghu Ram & P.Vinod, Advocates, 610, Babukhan Estate, Basheerbagh, Hyderabad. 2. Dy.Commissioner of Income Tax, Circle-2(3), Hyderabad. 3. CIT(Appeals)-III, Hyderabad. 4. CIT-II, Hyderabad. 5. DR, ITAT, Hyderabad. 6. GUARD FILE TRUE COPY ASSISTANT REGISTRAR ITAT, HYDERABAD