ORGANZA INVESTMENT & TRADING P. LTD, NEW DELHI V. ITO WD 3(2)(4), MUMBAI

ITA 1250/MUM/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2645 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 24-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA
• Assessee Lawyers: RAHUL RINGE
• Keywords: Unexplained investment; Condonation of delay
• Section: 271(1)(c); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI P M JAGTAP, ACCOUNTANT MEMBER AND SHRI R S PADVEKAR, JUDICIAL MEMBER ITA NOS 1249 AND 1250/MUM/2009 (ASSESSMENT YEAR: 2005-06) ORGANZA INVESTMENT & TRADING PVT LTD, CORPORATE OFFICE, P-10, LGF, GREEN PARK EXTENSION, NEW DELHI -110016 PAN: AAACO 0692 D VS ITO -3(2)(4), AAYAKAR BHAVAN, 6 TH FLOOR, M K ROAD, MUMBAI -400 020 APPELLANT RESPONDENT ASSESSEE BY: MR RAHUL RINGE REVENUE BY: MR VIRENDRA OJHA ORDER PER P M JAGTAP, ACCOUNTANT MEMBER THESE TWO APPEALS ARE PREFERRED BY THE ASSESSEE AG AINST TWO SEPARATE ORDERS BOTH DATED 20.1.2009 PASSED BY THE LEARNED CIT (A)- III MUMBAI WHEREBY HE DISMISSED THE APPEALS FILED BY THE ASSESSEE AFTER E XPIRY OF THE PRESCRIBED TIME IN LIMINE DECLINING TO CONDONE THE DELAY IN FILING THE SAME. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES AND SECURIT IES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION IE AY 2005-06 WAS FILED BY IT ON 21.9.2006 DECLARING A TOTAL INCOME OF NIL. THE SAID RETURN WAS DULY ACCOMPAN IED BY AUDITED STATEMENT OF ACCOUNTS AS WELL AS THE REPORT OF THE AUDITORS. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THERE WAS NO COMPLIANCE ON THE PART OF THE ASSESSEE TO THE NOTICES ISSUED BY THE ASSESSING OFFICER. THE ASSESSING OFF ICER, THEREFORE, WAS LEFT WITH NO OPTION BUT TO COMPLETE THE ASSESSMENT IN THE CASE O F THE ASSESSEE EX-PARTE U/S 144 TO THE BEST OF HIS JUDGMENT ON THE BASIS OF MATERIA L AVAILABLE ON RECORD. IN THE ASSESSMENT SO COMPLETED VIDE AN ORDER DATED 15.11.2 007, THE TOTAL INCOME OF THE ASSESSEE WAS COMPUTED BY THE ASSESSING OFFICER AT R S 1,07,62,931/- AFTER MAKING ADDITIONS AT RS 51,00,000/- AND RS 56,62,000/- ON A CCOUNT OF UNEXPLAINED ADVANCE ITA 1249 AND 1250/M/2009 ORGANZA INVESTMENT & TRADING PVT LTD 2 PAID BY THE ASSESSEE TO M/S SRISHTI GROWTH FUND PVT LTD AND UNEXPLAINED INVESTMENTS ALLEGEDLY MADE BY IT DURING THE YEAR UN DER CONSIDERATION RESPECTIVELY. HE ALSO IMPOSED A PENALTY OF RS 39,38,085/- U/S 271 (1)(C) IN RESPECT OF THE SAID ADDITIONS TREATING THE SAME AS CONCEALED INCOME OF THE ASSESSEE BY AN ORDER DATED 29.5.2008 PASSED EX-PARTE . AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R U/S 144, AN APPEAL WAS FILED BY THE ASSESSEE BEFORE THE LEARNED CIT (A) ON 22.9.2008 AS AGAINST THE DUE DATE OF 1.1.2008 RESULTING IN A DEL AY OF ABOUT EIGHT MONTHS. SIMILARLY, THERE WAS A DELAY OF ABOUT FOUR MONTHS I N FILING THE APPEAL BY THE ASSESSEE BEFORE THE LEARNED CIT (A) AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER IMPOSING PENALTY U/S 271(1)(C). 3. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E THE LEARNED CIT (A), APPLICATIONS WERE MOVED BY THE ASSESSEE SEEKING CON DONATION OF THE AFORESAID DELAY IN FILING ITS APPEALS ON THE FOLLOWING GROUNDS : (I) IT HAD 2 DIRECTORS BOTH SETTLED IN DELHI AND TH E MAIN DIRECTOR MR AJAY NATHANI WAS LOOKING AFTER THE AFFAIRS OF THE COMPAN Y EXPIRED ON 4 TH MARCH 2007. (II) THE REMAINING DIRECTOR HAD NO KNOWLEDGE OF THE STATUTORY MATTERS BEFORE THE LEARNED CIT (A), IT WAS ALSO SUBMITTED O N BEHALF OF THE ASSESSEE IN THIS CONTEXT THAT ALTHOUGH ITS REGISTERED OFFICE HAD BEE N SITUATED IN MUMBAI, THERE WAS NO ESTABLISHMENT IN EXISTENCE IN MUMBAI AND ITS AFFAIR S WERE BEING CONTROLLED FROM DELHI. IT WAS ALSO SUBMITTED THAT AFTER THE DEATH OF MAIN DIRECTOR MR AJAY NATHANI, THE OTHER DIRECTOR COULD NOT TAKE CARE OF THE AFFAIRS O F THE COMPANY PROPERLY LEADING TO THE DELAY IN FILING THE APPEALS. A REQUEST, THEREF ORE, WAS MADE TO THE LEARNED CIT (A) TO CONDONE THE SAID DELAY. 4. THE LEARNED CIT (A) DID NOT FIND MERIT IN THE SU BMISSIONS MADE ON BEHALF OF THE ASSESSEE-COMPANY IN SUPPORT OF ITS APPLICATION FOR CONDONATION OF DELAY IN FILING THE APPEALS AND REJECTING THE SAID APPLICATIONS, HE DISMISSED THE APPEALS OF THE ITA 1249 AND 1250/M/2009 ORGANZA INVESTMENT & TRADING PVT LTD 3 ASSESSEE IN LIMINE HOLDING THE SAME TO BE BARRED BY LIMITATION FOR THE FOLLOWING REASONS GIVEN IN THE IMPUGNED ORDERS :- I HAVE PERUSED THE FACTS OF THE CASE. IT IS NECES SARY TO POINT OUT HERE THAT ALONG WITH THE APPEAL UNDER CONSIDERATION, ANOTHER APPEAL WAS ALSO RECEIVED FROM THE SAME APPELLANT IN SIMILAR FASHION AND ON T HE SAME DATE AGAINST ORDER IMPOSING PENALTY U/S 271(1)(C) FOR THE ASSESSMENT Y EAR UNDER CONSIDERATION. THAT ORDER WAS PASSED ON 29 TH MAY 2008 AND WAS SERVED ON THE APPELLANT ON 28 TH JUNE 2008. IN THAT APPEAL, THE QUANTUM OF PENALTY IS RS 39,38,085/-. IT IS EVIDENT THAT AFTER RECEIPT OF THAT PENALTY ORDER APPELLANT COMPANY HAS GOT ACTIVATED AND HAS FILED BOTH THE APPEALS. A CORPOR ATE ENTITY IS DISTINCT FROM INDIVIDUAL SHAREHOLDERS OR INDIVIDUAL DIRECTORS. T HE REASONS TAKEN UP IN THE CONDONATION APPLICATION ARE THAT ONE OF THE DIRECTO RS HAD EXPIRED. THE EXPIRY OF ONE DIRECTOR, IF THERE ARE ONLY TWO DIRECTORS IS TO FOLLOW WITH APPOINTMENT OF ANOTHER DIRECTOR. THEREFORE, THE LOGICAL CONCLUSIO N TAKEN BY APPELLANT COMPANY THAT THE SECOND DIRECTOR WAS UNAWARE OF THE STATUTORY MATTERS IS OF NO SIGNIFICANCE. IN A CORPORATE ENTITY THE RESPONS IBILITY IS UPON THE BOARD OF DIRECTORS AND NOT UPON THE SINGLE DIRECTOR. IT CAN NOT BE SAID THAT THE BOARD WAS NOT IN EXISTENCE OR THE BOARD WAS UNAWARE OF TH E SITUATION. THE ORDER OF ASSESSMENT UNDER APPEAL WAS DULY SERVED UPON THE CO MPANY. APPARENTLY, COMPANY WAS SITTING QUIET ON THIS ORDER TILL THEY W ERE AWAKENED BY THE SUBSEQUENT PENALTY IMPOSED BY THE DEPARTMENT. TO M Y MIND IN THE INSTANT FACTS, THERE IS ABSOLUTE ABSENCE OF SUFFICIENT CAUS E PREVENTING COMPANY FROM FILING OF APPEAL. THEREFORE, REQUEST FOR CONDONATI ON OF DELAY CANNOT BE ACCEPTED AND IS REJECTED. AGGRIEVED BY THE ORDERS OF THE LEARNED CIT (A), THE ASSESSEE HAS PREFERRED THESE APPEALS BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIALS ON RECORD. THE LEARNED COUNSEL FOR THE A SSESSEE HAS REITERATED BEFORE US THE SUBMISSIONS MADE BEFORE THE LEARNED CIT (A) IN SUPPORT OF ASSESSEES CASE THAT THERE BEING A SUFFICIENT CAUSE FOR DELAY IN FILING ITS APPALS BY THE ASSESSEE-COMPANY BEFORE THE LEARNED CIT (A), THE SAID DELAY SHOULD H AVE BEEN CONDONED BY HIM. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, RELIED ON THE IMPUGNED ORDERS OF THE LEARNED CIT (A) ON THIS ISSUE. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT AS PER THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE- COMPANY BEFORE THE LEARNED CIT (A), IT HAD NO ESTAB LISHMENT IN MUMBAI DURING THE ITA 1249 AND 1250/M/2009 ORGANZA INVESTMENT & TRADING PVT LTD 4 RELEVANT PERIOD. MOREOVER, THE MAIN DIRECTOR OF TH E ASSESSEE-COMPANY SHRI AJAY NATHANI WHO WAS LOOKING AFTER ITS AFFAIRS HAD EXPIR ED ON 4.3.2007. THE REMAINING DIRECTOR HAD NO KNOWLEDGE ABOUT THE PENDING MATTERS OF THE ASSESSEE-COMPANY INCLUDING THE REQUIREMENT OF FILING OF APPEALS, WHI CH WAS STATED TO BE A FACTOR WHICH LEAD TO DELAY IN FILING OF APPEALS BEFORE THE LEARN ED CIT (A). THE LEARNED CIT (A), HOWEVER, DID NOT ACCEPT THE REASONS GIVEN ON BEHALF OF THE ASSESSEE-COMPANY FOR THE DELAY IN FILING THE APPEALS TO BE SUFFICIENT CAUSE AND REJECTED THE REQUEST OF THE ASSESSEE FOR THE CONDONATION OF THE SAID DELAY FOR THE REASONS GIVEN IN HIS IMPUGNED ORDERS, WHICH, IN OUR OPINION, ARE MORE OF HYPOTHET ICAL NATURE. A PERUSAL OF THE RELEVANT PORTION OF HIS IMPUGNED ORDERS SHOWS THAT THE FACTUAL POSITION PUT FORTH ON BEHALF OF THE ASSESSEE-COMPANY WHILE EXPLAINING THE DELAY WHILE FILING THE APPEALS HAS NOT BEEN DISPUTED BY THE LEARNED CIT (A). ON T HE OTHER HAND, A PERUSAL OF THE ORDERS OF THE ASSESSING OFFICER CLEARLY SHOWS THAT NOTICES SENT BY HIM COULD NOT BE SERVED AT THE MUMBAI ADDRESS OF THE ASSESSEE-COMPAN Y AND EVEN THE EFFORTS MADE BY HIM TO SERVE THE SAID NOTICES AT THE RESIDENTIAL ADDRESS OF THE DIRECTORS OF THE ASSESSEE-COMPANY WERE NOT FRUCTIFIED. THESE FACTS, CLEARLY BORNE OUT FROM THE ORDERS OF THE ASSESSING OFFICER SUPPORT THE STAND OF THE A SSESSEE THAT IT HAD NO ESTABLISHMENT IN MUMBAI DURING THE RELEVANT PERIOD AND ITS AFFAIRS WERE BEING MANAGED BY THE DIRECTORS FROM DELHI, WHICH RESULTED IN DELAY IN FILING THE APPEALS BEFORE THE LEARNED CIT (A). 7. AS PER THE PROVISIONS OF SECTION 249(3), THE LEA RNED CIT (A) IS GIVEN A DISCRETION TO ADMIT AN APPEAL FILED BEFORE HIM EVEN AFTER EXPIRY OF THE PRESCRIBED PERIOD IF THE ASSESSEE HAS A SUFFICIENT CAUSE FOR NOT REPRESENTING THE SAME WITHIN THAT PERIOD. IN THE CASE OF COLLECTOR LAND ACQUISI TION VS M/S KATAJI 167 ITR 471, HONBLE SUPREME COURT HAS OBSERVED THAT THE EXPRESS ION SUFFICIENT CAUSE IMPLIED BY LEGISLATURE IS ADEQUATELY ELASTIC TO ENABLE THE COURT TO APPLY THE LAW IN MEANINGFUL MANNER WHICH SUB-SERVES THE ENDS OF JUSTICE. IN TH E CASE OF RAMANATH SAHU AND OTHERS VS GOVARDHANDAS SAHU AND OTHERS, THE HONBLE SUPREME COURT HAS REITERATED THIS POSITION BY OBSERVING THAT THE EXPRESSION SUF FICIENT CAUSE WITHIN THE MEANING OF SECTION 5 OF LIMITATION ACT SHOULD RECEIVE LIBER AL CONSTRUCTION SO AS TO ADVANCE SUBSTANTIAL JUSTICE WHEN NO NEGLIGENCE OR INACTION OR WANT OF BONA FIDE IS IMPUTABLE ITA 1249 AND 1250/M/2009 ORGANZA INVESTMENT & TRADING PVT LTD 5 TO THE PARTY. IN THE PRESENT CASE, THERE IS NOTHIN G ON RECORD TO SHOW THAT ANY NEGLIGENCE OR INACTION WAS IMPUTABLE TO THE ASSESSE E IN FILING THE APPEALS BELATEDLY BEFORE THE LEARNED CIT (A). ON THE OTHER HAND, THE DELAY IN FILING THE SAID APPEALS WAS EXPLAINED BY THE ASSESSEE BY ADVANCING THE REAS ONS WHICH, IN OUR OPINION, CERTAINLY CONSTITUTED SUFFICIENT CAUSE FOR NOT REPR ESENTING THE APPEALS WITHIN THE PRESCRIBED PERIOD. AS SUCH, CONSIDERING ALL THE FA CTS OF THE PRESENT CASE AND KEEPING IN VIEW THE LEGISLATIVE SPIRIT PROPOUNDED BY THE HO NBLE SUPREME COURT IN THE AFORESAID JUDGMENTS, WE ARE OF THE CONSIDERED OPINI ON THAT THERE WAS A SUFFICIENT CAUSE FOR THE DELAY IN FILING ITS APPEALS BY THE AS SESSEE-COMPANY BEFORE THE LEARNED CIT (A) AND IT WAS FIT CASE FOR EXERCISING THE DISC RETION TO CONDONE THE SAID DELAY. IN THAT VIEW OF THE MATTER, WE REMAND THESE MATTERS TO THE LEARNED CIT (A) WITH A DIRECTION TO CONDONE THE DELAY IN FILING ITS APPEAL S BY THE ASSESSEE COMPANY BEFORE HIM AND TO DISPOSE OFF THE SAID APPEALS OF THE ASSE SSEE ON MERITS. 8. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE T REATED AS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 22ND DAY OF DECEMBER 2009. SD/- (R S PADVEKAR) JUDICIAL MEMBER SD/- (P M JAGTAP) ACCOUNTANT MEMBER MUMBAI, DATE: 22ND DECEMBER 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) III, MUMBAI 4) THE CIT-3, MUMBAI. 5) THE D.R. C BENCH, ITAT, MUMBAI BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI ITA 1249 AND 1250/M/2009 ORGANZA INVESTMENT & TRADING PVT LTD 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 18.12.09 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 21.12.09 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER