Sri B T Nagaraj Reddy, Bangalore V. Assistant Commissioner of Income Tax, Circle-4(3)(1), Bangalore

ITA 113/BANG/2023

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0483 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 11-10-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 21-02-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRAMANIAN S.
• Keywords: Recovery proceedings; Charitable institution; Bonafide belief; Period of limitation; Retrospective amendment; Reasonable cause; Condonation of delay; Bonafide mistake; TDS
• Section: 139; 143(3); 40(a)(ia); 201(1); 195; 250; 201; 194J; 194A; 13; 22

Judgement Text

ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “B’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No.113/Bang/2023 Assessment Year: 2012-13 B.T. Nagaraj Reddy Sy.No.63/1, No.671 Industrial Estates, Hosur Main Road Bommadsandra, Anekal Taluk Bangalore 560 099 PAN NO : ABXPN1965D Vs. ACIT Circle-2(2)(1) Bangalore APPELLANT RESPONDENT Appellant by : Shri V. Narendra Sharma, A.R. Respondent by : Sri Subramanian S., D.R. Date of Hearing : 12.10.2023 Date of Pronouncement : 27.10.2023 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by assessee is directed against order of CIT(A), Bangalore dated 22.2.2017 for the assessment year 2012-13. The assessee has raised following grounds: 1. The appellate order pass ed by the lear ned C ommissioner of Income-tax [Appeals] , pas sed under Section 250 of the Act dated 22/02/2017, in s o far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circums tances of the Appellant's case, may be quashe d. 2. The appellant denies hims elf liable to be ass ess ed on total incom e of R s. 5,40, 37,938/- determined by the learned as sess ing officer and upheld by the learned C om missioner of Income-tax [Appeals], as against the income returned and reported by the appellant of Rs . 3,45,69,020/-, on the facts and circums tances of the case. 3. The exparte order passed by the learned Commissioner of Income - tax [Appeals], is in grave violation of principles of ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 2 of 29 natural justice, as the appellant was not afforded reasonable opportunity of being heard, consequently the impugned exparte order passed by the learned Commissioner of Income-tax [Appeals] requires to be cancelled in the interest of justice and equity, on the facts and circumstances of the case. 4. The learned Commissioner of Income-tax [Appeals] is not justified in confirming the disallowance made by the learned assessing officer under the provisions of section 40[a][ia] of the Act amounting to Rs. 53,48,300/ -, on the following grounds on the facts and circumstances of the case. [i] The learned authorities failed to appreciate that the payment of interest amount of Rs. 53,48,300/- was made towards the repayment of Vehicle LoA and other loans for purchase of assets which was availed from a Non- Banking Financial Company [NBFC], consequently the payments form part of hire purchase installments which does not require deduction of tax at source under the provisions of section 194A of the Act as in the case of hire purchase what is paid, essentially constitutes part payment towards the price of the goods, on the facts and circumstances of the case. [ii]. Without prejudice the learned authorities failed to appreciate the fact that the provisions of section 40[a][ia] of the Act is not applicable to the facts of the instant case since the recipient/payee NBFC's are all reputed institutions and payments have all been made through proper banking channels, who would have already declared the payments made by the appellant in their respective returns and hence no disallowance is warranted under the provisions of section 40[a][ia] of the Act, on the facts and circumstances of the case. [iii]. The learned authorities below are not justified in law in not appreciating that the de duction of tax is only one mode of recovery of tax and once the tax is recovered by any other mode and the r ecovery of tax on the am ount which has suffered tax in the hands of payee is not permissible since the same will amount to taxing the sam e income twice i.e. once dis allowance of genuine allowable expenditur e in the hands of the payer and once again the amounts being taxed in the hands of the payee under the facts and circumstances of the case. ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 3 of 29 [iv]. Without prejudice, the learned authorities failed to appr eciate that the appellant has not been held as an assessee in default as per the provisions of section 201 of the Act and consequently there cannot be any disallowance under the provisions of section 40[a][ia] of the Act, on the facts and circumstances of the case. 5. The learned Commissioner of Income-tax [Appeals] is not justified in confirming the disallowance made by the learned assessing officer amounting to Rs. 54,98,526/- under the provisions of section 36[1][iii] of the Act, on the facts and circumstances of the case. [i] The learned Commissioner of Income-tax [Appeals] and the lear ned as sessing officer failed to appreciate that the amounts invested by the appellant for purchase of assets are out of surplus capital and reser ves and non-interest bearing funds and consequently there cannot be any disallowance of interest on the loans borrowed which are all for the purpose of business under the provisions of section 36[1][iii] of the Act, on the facts and circumstances of the case. [ii]. The learned authorities below failed to appreciate that the loans taken by the appellant are all for specific pur poses and none of the loans have been diverted for non-busi. nes s purposes and consequently ther e cannot be any disallow ance of interest under the provisions of section 36[1][iii] of the Act, on the facts and circums tances of the case. 6. The learned Commis sioner of Income-tax [Appeals] is not justified in confirming the disallowance made by the learned asses sing officer amounting to Rs. 86,22,392/- under the provisions of section 41[1] of the Act, on the facts and circumstances of the case. [i] The learned authorities below failed to appr eciate the fact that the provisions of section 41[1] of the Act is not applicable to the facts and circumstances of the case. [ii]. The learned authorities below failed to appreciate that the parameters as contemplated for the application of the provisions of section 41 [1] of the Act have not been met and consequently the addition made by the learned assessing officer and confirmed by the learned ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 4 of 29 Commissioner of Income-tax [Appeals], under the provisions of section 41[1] of the Act requires to be deleted, on the facts and circumstances of the case. [iii]. The learned authorities below failed to appreciate that the amounts shown by the appellant as outstanding amounts are payable to the sundry creditors and there is no cessation or remission of the said amounts shown as payable and consequently the provisions of section 41[1] of the Act is not applicable, on the facts and circumstances of the case. 7. Without prejudice, to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies himself liable to be charged to interest under section 234 B of the Incom e Tax Act on the facts and circumstances of the cas e. The appellant contends that the levy of interest under section 234 A Et 234 B of the Act is als o bad in law as the period, rate, quantum and m ethod of calculation adopted by the learned asses sing officer on w hich inter est is levied are not discernible and are wr ong on the facts of the cas e. 8. The appellant craves leave to add, alter, amend, substitute or delete any or all of the grounds of appeal urged above. 9. For the above and other grounds to be urged during the course of hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice. 2. In this case, assessment order has been passed u/s 143(3) of the Income-tax Act,1961 ['the Act' for short] vide order dated 18.3.2015 for the assessment year 2012-13. In the said assessment, total income of the assessee was determined at Rs.5,40,37,938/- as against the returned income of Rs.3,45,69,020/- by the assessee. While making the assessment, the ld. AO has made following additions: a) Addition u/s 40(a)(ia) of the Act - Rs.53,48,300/- b) Addition u/s 36(1)(iii) of the Act - Rs.54,98,526/- c) Addition u/s 41(1) of the Act - Rs.86,22,392/- Total - Rs.1,94,69,218/- ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 5 of 29 Against this addition, assessee went in appeal before ld. CIT(A) who has confirmed the order of the ld. AO. Against this assessee is in appeal before us. 3. It was noticed that the ld. CIT(A)’s order was passed on 22.2.2017 and served on the assessee on 14.3.2017. As per section 253 of the Act, the assessee has to file appeal before this Tribunal within 60 days from the date of receipt of the order i.e. 14.3.2017 of the said order. Thus, the assessee is required to file appeal within 60 days from this date i.e. on or before 13.5.2017. However, the appeal was filed before this Tribunal on 23.2.2023. Thus, there was a delay of 2111 number of days in filing the present appeal before this Tribunal. Out of this delay from 15.3.2020 to 28.2.2022 need not be explained by the assessee as this delay was already condoned by the Hon’ble Supreme Court in Miscellaneous Application No.21 of 2022 in Miscellaneous Application No.665 of 2021 in Suo Moto WP No.(C) No.3 of 2020 in Re: Cognizance of Limitation dated 10.1.2022. Thus, after excluding 715 number of day out of total delay of 2111 days, the balance period of delay was worked out at 1386 number of days, which assessee is required to be explained. 4. The ld. A.R. filed petition from the assessee stating that assessee has approached one Chartered Accountant, who inturn advised to contact M/s. N.S. Business Solutions Pvt. Ltd, who does appellate work in taxation matters. Accordingly, the assessee consulted this Tax Consultancy firm for guiding and preparation of appeal papers to file before this Tribunal. The concerned person viz. Sri M.N. Girish in said tax consultancy firm asked for certain details and documents from the assessee and same were duly provided by the assessee. 4.1 The ld. A.R. for the assessee submitted that after the receipt of the requisite papers from the assessee by the said Tax Consultancy company, the appeal papers were to be ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 6 of 29 prepared by the said Tax Consultancy company. Due to their work pressure, serious family problems (death of father of the directors) and due to diverse reasons the appeal was not prepared within the time specified in the statute. 4.2 He submitted that since the details and documents were all sought by the said Tax Consultancy company furnished by the assessee, the assessee was under a bonafide belief that the filing of appeal will be done by the said consultancy company. He further submitted that due to the work pressure and concentration on his business, the assessee did not follow up as regard to the status of the appeal. 4.3 He submitted that, the assessee received notice for recovery of the outstanding demands issued by the Income-tax department, through post. In the said recovery notice issued by the department the details of the outstanding demands were mentioned and in which the outstanding demand for the impugned assessment year 2012-13 was also mentioned. After the receipt of the said notice of arrears outstanding demand received from the Income-tax department, the assessee consulted the said Tax Consultancy company as regard to the status of the appeal. Then to the shock of the assessee, due to diverse reasons and also as informed by the said Tax Consultancy company due to oversight, serious family problems (death of father of the directors) and work pressure inadvertently the appeal papers were not prepared and filed before the Hon'ble Tribunal. 4.4 He submitted that in the meantime he came to know that M/s. N.S. Business Solutions Private Limited, have misplaced the file and took time to trace the same. After rigorous follow up by the Assessee with the consulting ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 7 of 29 company M/s. N.S. Business Solutions searched and were able to trace the file and handed over the same to Assessee. 4.5 The ld. A.R. submitted that thereafter, the Assessee approached the Chartered Accountant Sri. Girish Hoysala as regard to certain other tax related consultation which he was handling and further brought to his notice as regard to the outstanding notice issued by the department for payment of arrears of demands and also brought to his notice that the appeal against the appellate order has not been filed by the said Tax Consultancy entity and explained the actual facts and circumstances to Sri. Girish Hoysala. The said Chartered Accountant Sri. Girish Hoysala after thoroughly reading the papers advised the Assessee to prefer an appeal before the Income-tax Appellate Tribunal, seeking for condonation of delay in filing the appeal and asked the Assessee to approach the present counsel to prepare the papers for filing appeal before this Tribunal. 4.6 He submitted that the Assessee upon the advise received from the said Chartered Accountant approached the present counsel and briefed him about the issues involved in the present appeal. The present counsel after going through the available papers prepared the appeal papers immediately within a reasonable time. 4.7 He submitted that in view of the above fact, that the Assessee could not file the appeal before this Income Tax Appellate Tribunal, well in time i.e., within 60 days from the date of receipt of order i.e., on or before 13/05/2017 and by the time the Assessee filed this present appeal, there arose a total delay of about 2,111 number of days in filing this present appeal before this Tribunal as per the provisions of the Act. ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 8 of 29 4.8 He further submitted that period for the purpose of limitation need not be considered from 15/03/2020 till 28/02/2022, as per the order of the Hon'ble Supreme Court in Suo Moto Writ Petition [Civil] No.3 of 2020 vide order dated 23/03/2020 has extended the period of limitation from 15/03/2020 till 25/02/2022 the delay need not be considered i.e. about 715 days need not be considered for the purposes of limitation. 4.9 He further submitted that as per the judgement of the Hon'ble Apex Court [supra] the total number of days i.e. about 715 days from 15/03/2020 till 28/02/2022 is to be excluded from the total number of days computed i.e. 2,111 number of days, then the actual delay in filing would be about 1,386 number of days i.e. 2,111 No of days minus 715 No. of days. 4.10 He humbly prayed that this Tribunal takes a lenient and compassionate view and condone the delay of about 1,386 days in filing the present appeal against the order passed by the learned Commissioner of Income-tax [Appeals]- 2, Bengaluru, dated 22/02/2017 for the Assessment Year 2012-13 and hear the same on merits for the advancement of substantial cause of justice. 4.11 Wherefore, in view of the above factual background, the ld. A.R. submitted that the Assessee could not file the appeal before this Tribunal well in time as per the scheme of the Act and there arose of delay of about 1,386 days in filing this present appeal before this Hon'ble Tribunal and the said act of the assessee in not filing the present appeal within time is not deliberate or intentional and the assessee by not filing the appeal in time will not gain any benefit and for the reasons as stated above the assessee could not file the present appeal ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 9 of 29 within the stipulate time which fact requires to be appreciated by this Tribunal. 4.12 He further submitted that if this application for condonation of delay in filing the appeal is not allowed, the assessee would be put to great hardship and irreparable injury and on the other hand no hardship or injury would be caused to the Respondent if this application of condonation of delay is allowed. In this regard, he placed reliance on the decision of the Hon'ble Apex Court in the case of Collector, Land Acquisition Vs. MST. Katiji and Others [1987] 167 ITR 471 and also in the case of Concord of India Insurance Co. Ltd., Vs. Smt. Nirmala Devi and Others 118 ITR 507. Further the Assessee relied on other decisions of the Hon'ble Apex Court in the case of Radha Krishna Rai Vs. Allahabad Bank Et Others [2009] 9 SCC 733; and another decision of the Hon'ble Apex Court in the case of Ram Nath Sao alias Ram Nath Sahu Et Others Vs. Gobardhan Sao Et Others, reported in [2002] 3 SCC 195 and another decision of the Hon'ble Apex Court in the case of CIT Vs. West Bengal Infrastructure Development Finance Corporation Limited [2011] 334 ITR 269 [SC]. 4.13 Wherefore, the ld. A.R. for the assessee once again humbly prayed before this Tribunal to kindly consider the submissions made and considering the submissions the assessee humbly pray before this Tribunal to condone the delay in filing the present appeal of about 1,386 days and hear the same on merits of the matter for the advancement of substantial cause of justice. 4.14 Further, the ld. A.R. for the assessee filed an affidavit from M.N. Girish, S/o N.P. Nagendra, Director, N.S. Business Solutions ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 10 of 29 Pvt. Ltd., aged about 38 years, residing at 75, 3 rd Floor, 5 th Main, Bull Temple Extension, Thyagarajnagar, 3 rd Block, Bangalore 560 038, wherein he has submitted as follows: ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 11 of 29 ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 12 of 29 ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 13 of 29 4.15 Further, ld. A.R. relied on the judgement of Ram Nath Sao V. Gobardhan Sao (2002) 3 SCC 195 wherein the Hon’ble Supreme Court has held as under: “The expression "sufficient cause" within the meaning of Section 5 of the Limitation Act, 1963 or Order 22 Rule 9 CPC or any other similar provision should receive a liberal construction so as to advance substantial justice when no negligence or inaction or want of bona fides is imputable to a party. In a particular case whether explanation furnished would constitute "sufficient cause" or not will be dependent upon facts ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 14 of 29 of that case. There cannot be a straitjacket formula for accepting or rejecting explanation furnished for the delay caused in taking steps. However, courts should not proceed with the tendency of finding fault with the cause shown and reject the petition by a slipshod order in over-jubilation of disposal drive. Acceptance of explanation furnished should be the rule and refusal, an exception, more so when no negligence or inaction or want of bona fides can be imputed to the defaulting party. On the other hand, while considering the matter the courts should not lose sight of the fact that by not taking steps within the time prescribed a valuable right has accrued to the other party which should not be lightly defeated by condoning delay in a routine-like manner. However, by taking a pedantic and hypertechnical view of the matter the explanation furnished should not be rejected when stakes are high and/or arguable points of facts and law are involved in the case, causing enormous loss and irreparable injury to the party against whom the lis terminates, either by default or inaction and defeating valuable right of such a party to have the decision on merit. While considering the matter, courts have to strike a balance between resultant effect of the order it is going to pass upon the parties either way. (Para 12) 4.16 Further, he relied on the judgement in the case of Radha Krishna Rai v. Allahabad Bank and Others (2000) 9 SCC 733, wherein the Hon’ble Supreme Court has held as under: “5. It is a case where the appellant was kept under the impression that the appeal had already been filed. When the appellant tried to contact his advocate Mr. M.M. Verma, to know about the progress of his case, he did not receive any satisfactory information. The appellant found that the progress of the matter was not satisfactory, he engaged another advocate, Mrs. Heera Jain. On enquiry by Mrs. Heera Jain, Advocate it came to her knowledge that no appeal was filed by the appellant before the Division Bench. Then she filed an appeal before the Division Bench with a petition to condone the delay in the circumstances mentioned above. 6. On the facts, we are of the view that though the period of delay is unduly long, the circumstances are also very unusual. The petitioner has been a victim of misrepresentation of facts by his own advocate and was kept under the impression that the appeal is pending before the High Court whereas no appeal was in fact filed by the advocate. It cannot be said that the appellant has not been vigilant in prosecuting the appeal. The cause shown by the petitioner is sufficient to justify condoning the delay in filing the ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 15 of 29 appeal. We accordingly condone the delay and remit the matter to the High Court for disposing of the appeal in accordance with law.” 4.17 Further, the ld. A.R. relied on the judgement in the case of M/s. Raghavendra Constructions v. The Income Tax Officer in ITA No.425/Bang/2012 dated 14.1.2012, therein the Tribunal has held as under: “13. We have considered the rival submissions. At the outset, we observe that the Hon'ble Supreme Court, in the case of Mst. Katiji (supra), has explained the principles that need to be kept in mind while considering an application for condonation of delay. The Hon'ble Apex Court has emphasized that substantial justice should prevail over technical considerations. The Court has also explained that a litigant does not stand to benefit by lodging the appeal late. The Court has also explained that every day's delay must be explained does not mean that a pedantic approach should be taken. The doctrine must be applied in a rational common sense and pragmatic manner. In the case of Shakuntala Hegde, L/R of R.K. Hegdez. ACIT, ITA No.2785/Bang/2004 for the A.Y. 1993-94, the Hon'ble Tribunal condoned the delay of about 1331 days in filing the appeal wherein the plea of delay in filing appeal due to advice given by a new counsel was accepted as sufficient. The Hon'ble ITA No.425/Bang/2012 Karnataka High Court in the case of CIT v. ISRO Satellite Centre, ITA No. 532/2008 dated 28.10.2011 has condoned the delay of five years in filing appeal before them which was explained due to delay in getting legal advice from its legal advisors and getting approval from Department of Science and PMO. In the aforesaid decision, the Hon'ble Court found that the very liability of the assessee was non- existent and therefore condoned the delay in filing appeal. 14. Keeping in mind the aforesaid principles, we shall consider the claim of the assessee in the Assessee before the Hon'ble High Court. The decision of the Hon'ble High Court was rendered on 28.2.2012. The appeal has been filed by the Assessee before the Tribunal on 26.3.2012. Hence, we find that there has been no willful neglect on the part of the Assessee. In such matters the advice of the professional would be the point of time at which the Assessee would begin to explore the option of exhausting all legal remedies. We are also of the view that by condonation of delay there is no loss to the revenue as legitimate taxes payable in accordance with law alone would be collected. We therefore accept the reason given for condonation of delay in filing the appeal. The delay in filing the appeal is accordingly condoned. 15. As far as the merits of the appeal are concerned, we find that the Hon'ble High Court has already accepted the plea of the Assessee that the balcony areas, which were added as forming part of the built of area of the 16 flats which were considered as exceeding the built up area of 1500 ITA No.425/Bang/2012 sq.ft., were common areas and had to be excluded while measuring the built up area. There was covered balcony area in the 16 flats and such covered balcony could ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 16 of 29 be used by two adjoining flats and was common between them. The DVO in measuring the area of these flats divided the ciered balcony area and apportioned them between the two flats. The definition of built up area for the purpose of Sec.80-IB(10) of the Act excludes area which are meant for common use. The fact that it was not common area for all the flats in the building cannot be the basis to apportion the area of covered balcony in measuring the area of the two adjoining flats to which the covered balcony was common. The definition of the built up area in the provisions of sec.80-IB(i) does not speak of common area for all flats in a housing project. Therefore the Assessee should get the benefit of the provisions of Sec.8oIB(io) which are exemption provisions. In view of the above, we hold that the Assessee would be entitled to deduction u/s.80- IB(10) of the Act on the profits of the 16 flats which were excluded by the CIT(A) in the impugned order. We hold accordingly.” 4.18 Further, he relied on the judgement in the case of Collector Land Acquisition v. Mst. Katiji & Ors reported in AIR 1987 SC 1353, wherein the Hon’ble Supreme Court has held as under: "Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908. may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period." 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 bearing 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 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. ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 17 of 29 Making a justice-oriented approach from this perspective, there was sufficient cause for condoning the delay in the institution of the appeal. The fact that it was the 'State' which was seeking condonation and not a private party was altogether irrelevant. The doctrine of equality before law demands that all litigants, including the State as a litigant, are accorded the same treatment and the law is administered in an even handed manner. There is no warrant for according a stepmotherly treatment when the 'State' is the applicant praying for condonation of delay. In fact experience shows that on account of an impersonal machinery (no one in charge of the matter is directly hit or hurt by the judgment sought to be subjected to appeal) and the inher i t ed b ur e au c ra ti c m e thod ol og y i mb ued w i th t he not e - ma ki ng , fil e p us hing , an d passing-on- the-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-non-grata 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. The High Court will now dispose of the appeal on merits after affording reasonable opportunity of hearing to both the sides. Appeal is allowed accordingly. No costs.” 4.19 Further, he also relied on the judgement in the case of M/s. Midas Polymer Compounds Pvt. Ltd. vs. ACIT in ITA No.288/Coch/2017 dated 25.6.2018 regarding condonation of delay. 4.20 Further, he relied on the judgement in the case of CIT Vs. ISRO Satellite Centre (2013), 35 taxmann.com 352 (Karnataka), wherein the Hon’ble Karnataka High court has also condoned the delay. 5. On the other hand, the ld. D.R. submitted that there was inordinate delay of 2111 number of days in filing the appeal before this Tribunal. Even if the delay during the Covid period i.e. 715 days is excluded, there was a delay of 1386 number of days which is very inordinate delay and that was due to very negligent and inaction of assessee in taking the remedial steps against the order of ld. CIT(A) by filing an appeal before this appellate authority. Therefore, he submitted that the delay shall not be condoned and the appeal is to be dismissed in limine without adjudicating the grounds raised by assessee on merits. ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 18 of 29 6. We have heard the rival submissions and perused the materials available on record. In this case the first appellate order has been passed by ld. CIT(A) on 14.3.2017. The time allowed to file appeal u/s 253 of the Act before this Tribunal was up to 13.5.2017 i.e. 60 days from the date of receipt of the order of ld. CIT(A). However, the assessee has filed the appeal before this Tribunal on 23.2.2023. Thus, there was a delay of 2111 number of days in filing the appeal before this Tribunal. The delay during the Covid period was 715 days i.e. from 15.3.2020 to 28.2.2022. The assessee need not explain this delay in view of the order of the Hon’ble Supreme Court in Miscellaneous Application No.21 of 2022 in Miscellaneous Application No.665 of 2021 in Suo Moto WP No.(C) No.3 of 2020 in Re: Cognizance of Limitation dated 10.1.2022. After excluding the 715 days out of 2111 days, the balance period delay was 1386 number of days, which assessee is required to explain. The assessee has explained that this delay was due to failure on the part of the assessee’s consultant Shri M.N. Girish, S/o N.P. Nagendran, Director of N.S. Business Solutions Pvt. Ltd. The assessee along with condonation petition filed by him also filed an affidavit from Shri M.N. Girish explaining the reasons on his part to advise the assessee to file the appeal in time before this Tribunal, which is reproduced in earlier part of this order. Thus, the reason stated by the assessee is due to inadvertent omission from M.N. Girish, Director of N.S. Business Solutions Pvt. Ltd. There was a bonafide mistake on the part of M.N. Girish in taking the suitable action in advising the assessee to file the appeal before this Tribunal. The error is human. We cannot attribute any special importance to this as the assessee has not derived any benefit by filing the appeal belatedly. Therefore, we have to consider whether the assessee has a good and sufficient reason in filing the appeal belatedly before this Tribunal. ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 19 of 29 6.1 The Madras High Court considered an identical issue in the case of Sreenivas Charitable Trust v. Dy. CIT (280 ITR 357) and held that mixing up of papers with other papers are sufficient cause for not filing the appeal in time. The Madras High Court further observed that the expression "sufficient cause" should be interpreted to advance substantial justice. Therefore, advancement of substantial justice is the prime factor while considering the reasons for condoning the delay. 6.2 On merit the issue is in favour of the assessee. But there is a technical defect in the appeal since the appeal was not filed within the period of limitation. The assessee filed an affidavit/petition saying that the appeal was not filed because of the Counsel’s inability to file the appeal. The Revenue has not filed any counter-affidavit to deny the allegation made by the assessee. While considering a similar issue the Apex Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) laid down six principles. For the purpose of convenience, the principles laid down by the Apex Court are reproduced hereunder: (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 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. (2) '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, commonsense and pragmatic manner. (3) When substantial justice and technical consideration are pitted against each other, the 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. (4) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 20 of 29 A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. (5) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so. 6.3 When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of nondeliberate delay. In the case on our hand, the issue on merit regarding allowability of deduction u/s. 40(a)(ia) of the Act was covered in favour of the assessee by the binding Judgment of the various High Courts. Moreover, no counter- affidavit was filed by the Revenue denying the allegation made by the assessee. It is not the case of the Revenue that the appeal was not filed deliberately. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue. As observed by Apex Court, if the application of the assessee for condoning the delay is rejected, it would amount to legalise injustice on technical ground when the Tribunal is capable of removing injustice and to do justice. Therefore, this Tribunal is bound to remove the injustice by condoning the delay on technicalities. If the delay is not condoned, it would amount to legalising an illegal order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto. Under the scheme of Constitution, the Government cannot retain even a single pie of the individual citizen as tax, when it is not authorised by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalise an illegal and unconstitutional order passed by the lower authority. Therefore, in our opinion, by preferring the substantial justice, the delay of 1386 days has to be condoned. 6.4 The next question may arise whether 1386 days was excessive or inordinate. There is no question of any excessive or inordinate ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 21 of 29 when the reason stated by the assessee was a reasonable cause for not filing the appeal. We have to see the cause for the delay. When there was a reasonable cause, the period of delay may not be relevant factor. In fact, the Madras High Court in the case of CIT v. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596) considered the delay of condonation and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Accordingly, the Madras High Court condoned nearly 21 years of delay in filing the appeal. When compared to 21 years, 1386 days cannot be considered to be inordinate or excessive. Furthermore, the Chennai Tribunal by majority opinion in the case of People Education and Economic Development Society (PEEDS) v. ITO (100 ITD 87) (Chennai) (TM) condoned more than six hundred days delay. It is pertinent to mention herein that the view taken by the present author in that case was overruled by the Third Member. 6.5 The Madras High Court in the case of Sreenivas Charitable Trust (supra) held that no hard and fast rule can be laid down in the matter of condonation of delay and the Court should adopt a pragmatic approach and the Court should exercise their discretion on the facts of each case keeping in mind that in construing the expression "sufficient cause" the principle of advancing substantial justice is of prime importance and the expression "sufficient cause" should receive a liberal construction. Therefore, this Judgment of the Madras High Court (supra) clearly says that in order to advance substantial justice which is of prime importance, the expression "sufficient cause" should receive a liberal construction. In this case, the issue on merit regarding granting of deduction u/s. 40(a)(ia) of the Act was covered in favour of the assessee by the Judgments of the various High Courts. Therefore, for the purpose of advancing substantial justice which is of prime importance in the administration of justice, the expression "sufficient cause" should receive a liberal construction. In our opinion, this Judgment of the ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 22 of 29 Hon’ble Madras High Court cited (supra) is also squarely applicable to the facts of this case. A similar view was taken by the Madras High Court in the case of Venkatadri Traders Ltd. v. CIT (2001) 168 CTR (Mad) 81 : (2001) 118 Taxman 622 (Mad). 6.6 The Mumbai Bench of this Tribunal in the case of Bajaj Hindustan Ltd. v. Jt. CIT (AT) (277 ITR 1) has condoned the delay of 180 days when the appeal was filed after the pronouncement of the Judgment of the Apex Court. Furthermore, the Revenue has not filed any counter-affidavit opposing the application of the assessee for condonation of delay. The Apex Court in the case of Mrs. Sandhya Rani Sarkar vs. Smt. Sudha Rani Debi (AIR 1978 SC 537) held that non-filing of affidavit in opposition to an application for condonation of delay may be a sufficient cause for condonation of delay. In this case, the Revenue has not filed any counter-affidavit opposing the application of the assessee, therefore, as held by the Apex Court, there is sufficient cause for condonation of delay. The Supreme Court observed that when the delay was of short duration, a liberal view should be taken. "It does not mean that when the delay was for longer period, the delay should not be condoned even though there was sufficient cause. The Apex Court did not say that longer period of delay should not be condoned. Condonation of delay is the discretion of the Court/Tribunal. Therefore, it would depend upon the facts of each case. In our opinion, when there is sufficient cause for not filing the appeal within the period of limitation, the delay has to be condoned irrespective of the duration/period. In this case, the non- filing of an affidavit by the Revenue for opposing the condonation of delay itself is sufficient for condoning the delay of 1386 days 6.7. In case the delay was not condoned, it would amount to legalise an illegal and unconstitutional order. The power given to the Tribunal is not to legalise an injustice on technical ground but to do substantial justice by removing the injustice. The Parliament ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 23 of 29 conferred power on this Tribunal with the intention that this Tribunal would deliver justice rather than legalise injustice on technicalities. Therefore, when this Tribunal was empowered and capable of removing injustice, in our opinion, the delay of 1386 days has to be condoned and the appeal of the assessee has to be admitted and disposed of on merit. 6.8. In view of the above, we condone the delay of 1386 days in filing the appeal and admit the appeal for adjudication. 6.9 After admitting the appeal, now we proceed to the merits of the issues raised by the assessee. 6.10 First ground of appeal of the assessee is with regard to addition u/s 40(a)(ia) of the Act at Rs.53,48,380/-. 6.11 The assessee has paid interest of Rs.53,48,300/- without deducting TDS u/s 194A of the Act. Hence, the entire amount has been disallowed not allowing any deduction towards the payment of interest. Against this, assessee is in appeal before us. The ld. A.R. submitted that recipients of this interest income has disclosed this income in their return of income and paid necessary taxes on it. Hence, once the payee has paid the tax on the amount received from the assessee, the requirement of disallowance u/s 40(a)(ia) of the Act does not arise. In our opinion, this view of proposition is supported by the judgement of Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages Vs. CIT reported in 293 ITR 226 and also by the judgement of Hon’ble Delhi High Court in the case of CIT Vs. Ansal Landmark Townships Pvt. Ltd. reported in 377 ITR 635 wherein held as follows: “It is seen that the issue in these AYs arises in the context of the disallowance by the Assessing Officer of the payment made by the Respondent Assessee to Ansal Properties and Infrastructure Ltd. ("APIL") which payment, according to the Revenue, ought to have been made only after deducting tax at source under Section 194J of the Act. Before the ITAT, it was urged by the Assessee that in view of the insertion of the second proviso to Section 40(a)(ia) of the Act, the payment made could not have been disallowed. Reliance was placed on the decision of the Agra Bench of ITAT in ITA No. 337/Agra/2013 (Rajiv ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 24 of 29 Kumar Agarwal v. ACIT) in which it was held that the second proviso to Section 40(a)(ia) of the Act is declaratory and curative in nature and should be given retrospective effect from 1 st April 2005. 9. It is seen that the second proviso to Section 40(a)(ia) was inserted by the Finance Act 2012 with effect from 1st April 2013. The effect of the said proviso is to introduce a legal fiction where an Assessee fails to deduct tax in accordance with the provisions of Chapter XVII B. Where such Assessee is deemed not to be an assessee in default in terms of the first proviso to sub- Section (1) of Section 201 of the Act, then, in such event, "it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso." 10. It is pointed out by learned counsel for the Revenue that the first proviso to Section 201(1) of the Act was inserted with effect from 1 st July 2012. The said proviso reads as under: "Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such talc if such resident- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income; - And the person furnishes a certificate to this effect from an accountant in such form as may be prescribed. 11. The first proviso to Section 210(1) of the Act has been inserted to benefit the Assessee. It also states that where a person fails to deduct tax at source on the sum paid to a resident or on the sum credited to the account of a resident such person shall not be deemed to be an assessee in default in respect of such tax if such resident has furnished his return of income under Section 139 of the Act. No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfilment of the conditions as stipulated in the first proviso to Section 201(1). The insertion of the second proviso to Section 40(a)(ia) also requires to be viewed in the same manner. This again is a proviso ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 25 of 29 intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies. 12. Relevant to the case in hand, what is common to both the provisos to Section 40(a)(ia) and Section 210(1) of the Act is that the as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in default. As far as the present case is concerned, it is not disputed by the Revenue that the payee has filed returns and offered the sum received to tax. 13. Turning to the decision of the Agra Bench of ITAT in Rajiv Kumar Agarwal v. ACIT (supra), the Court finds that it has undertaken a thorough analysis of the second proviso to Section 40(a)(ia) of the Act and also sought to explain the rationale behind its insertion. In particular, the Court would like to refer to para 9 of the said order which reads as under: "On a conceptual note, primary justification for such a disallowance is that such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into account in computation of taxable income in the hands of the recipients of the payments. Such a policy motivated deduction restrictions should, therefore, not come into play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivize not deducting tax at source, when such tax deductions are due, but, so far as the regal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses. There are separate penal provisions to that effect. Deincentivizing a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether or not, on a "fair, just and equitable" interpretation of law- as is the guidance from Hon'ble Delhi High Court on interpretation of this legal provision, in our humble understanding, it could not be an "intended .consequence" to disallow the expenditure, due to non deduction of tax at source, even in a situation in which corresponding income is brought to tax in the hands of the recipient. The scheme of Section 40(a)(ia), as we see it, is aimed at ensuring that an expenditure should not be allowed as deduction in the hands of an assessee in a situation in which income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. It is not, in our considered view, a penalty for tax withholding lapse but it is a sort of compensatory deduction restriction for an income going untaxed due to tax withholding lapse. The penalty for tax withholding lapse per se is separately provided for in Section 271 C, and, section 40(a)(ia) does not add to the same. The provisions of Section 40(a)(ia), as they existed prior to insertion of second proviso thereto, went much beyond the obvious intentions of the lawmakers and created undue hardships even in cases in which the assessee's tax ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 26 of 29 withholding lapses did not result in any loss to the exchequer. Now that the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically,\the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an "intended consequence" to punish the assessees for non deduction of tax . at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax. That will be going much beyond the obvious intention of the section. Accordingly, we hold that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004." 14. The Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a) (ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1 st April 2005, merits acceptance. 15. In that view of the matter, the Court is unable to find any legal infirmity in the impugned order of the ITAT in adopting the ratio of the decision of the Agra Bench, ITAT in (Rajiv Kumar Agarwal v. ACIT).” 6.12 Being so, if the assessee is able to satisfy the ld. AO by furnishing a certificate from Chartered Accountant that recipient has paid the tax on this income, the ld. AO shall not disallow this amount u/s 40(a)(ia) of the Act, in view of the second proviso to section 40(a)(ia) of the Act, which reads as follows: “Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the payee referred to in the said proviso.” The said proviso came into effect w.e.f. 1.4.2013. However, it was held in various cases that this proviso is retrospective in nature. For example, this view was taken in the case of Principal CIT Vs. ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 27 of 29 Perfect Circle India Pvt. Ltd. in ITA No.707 of 2016 by the Hon’ble Bombay High Court and in the case of Ansal Landmark Townships Pvt. Ltd. cited (supra). Accordingly, we remit this issue to the file of ld. AO to consider the issue in the light of above directions by giving an opportunity of hearing to the assessee. 6.13 Next ground in this appeal is with regard to addition u/s 36(1)(iii) of the Act at Rs.54,98,526/-. 6.14 The assessee has made investments in agricultural land and other properties. The assessee has incurred interest expenses of Rs.1,40,96,438/- on the loans borrowed from various parties and claimed expenses as deduction thereon. The ld. AO was of the view that the assessee has borrowed loans which were diverted for the purchase of agricultural land which is non-business assets, the proportionate interest expenses which are capital expenditure in nature and not used for business purpose are disallowed at Rs.54,98,526/-. Even before ld. CIT(A), assessee has not given above explanation before us. The assessee has pleaded an opportunity to explain the usage of borrowed funds after considering the documents. Accordingly, we remit this issue to the file of ld. AO for fresh consideration so as to given an opportunity to assessee to explain the usage of borrowed funds. Accordingly, the issue is remitted to the file of ld. AO for fresh consideration by giving an opportunity of hearing to the assessee. 6.15 Next ground of the assessee’s appeal is with regard to addition u/s 41(1) of the Act at Rs.86,22,392/-. 6.16 The assessee has shown sundry creditors amounting to Rs.86,22,392/-, which was outstanding in the books of accounts of the assessee since so many years. Hence, the ld. AO has invoked the provisions of section 41(1) of the Act. The contention of the ld. A.R. is that this amount has not been ceased to exist in the assessment year under consideration and it has been paid in subsequent assessment years and sought an opportunity to place necessary ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 28 of 29 evidences before the ld. AO to prove that in the assessment year under consideration, this liability is still outstanding. 6.17 After hearing both the parties, we are of the opinion that it is appropriate to remit this issue to the file of ld. AO for fresh consideration with the direction to assessee to place necessary evidences to show that this liability has been paid in subsequent assessment year and in the assessment year under consideration it is still outstanding as payable to various parties. Further, in order to apply section 41(1) of the Act, the assessee should have obtained deduction in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. If the assessee not got any deduction in earlier assessment year in respect of the impugned amount, the provisions of section 41(1) of the Act was not applicable. Further, even assuming for the sake of argument that the assessee had got deduction of allowances, even then section 41(1) of the Act was not applicable, if such deduction was not in respect of loss, expenditure or trading liability. Further, any allowances and deduction even allowed in respect of any credit relating to the capital assets, section 41(1) of the Act was not attracted to remission of principal amount of that credit/loan. With this observation, we remit this impugned issue to the file of ld. AO for fresh consideration by giving an opportunity of hearing to the assessee. 7. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 27 th Oct, 2023 Sd/- (Beena Pillai) Judicial Member Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 27 th Oct, 2023. VG/SPS ITA No.113/Bang/2023 Shri B.T. Nagaraj Reddy, Bangalore Page 29 of 29 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(Judicial) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.