Vinayak Care Solutation (P) Ltd., Mumbai V. The OTO Ward 3(2), Bhopal

ITA 137/Ind/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4440 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 14-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K G GOYAL
• Assessee Lawyers: P D NAGAR ARS
• Keywords: Opportunity of being heard; Question of law; Reasonable cause; Condonation of delay; Set aside
• Section: 143(3); 191; 44AB; 13

Judgement Text

[ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.137/IND/2019 ASSESSMENT YEAR: 2011-12 VINAYAK CARE SOLUTIONS PVT. LTD. 115, ATLANTA ESTATE GOREGAON, MULUND LINK ROAD, GOREGAON (E), MUMBAI / VS. ITO - 3 ( 2 ) BHOPAL ( APPELLANT ) ( REVENUE ) P.A. NO. AABCV8500G APPELLANT BY S/ SHRI SUMIT NEMA & P.D. NAGAR ARS REVENUE BY SHRI K.G. GOYAL, DR DATE OF HEARING: 10.02.2020 DATE OF PRONOUNCEMENT: 20.02.2020 / O R D E R PER KUL BHARAT, J.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER O F THE CIT(A)-2, BHOPAL DATED 08.02.2016 FOR THE ASSESSME NT YEAR 2011-12. [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 2 2. THIS APPEAL IS TIME BARRED BY 2 YEARS, 10 MONTHS AND 17 DAYS. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THO UGH THE APPELLATE ORDER WAS PASSED BY THE LD. COMMISSIONER OF INCOME TAX, (APPEALS)-II, ON 08.02.2016 YET THE ADVOC ATE AT BHOPAL DID NOT TAKE PROPER CARE REGARDING FILING OF 2 ND APPEAL BEFORE THE HON'BLE TRIBUNAL AND AVOIDED THE SAME ON ONE GROUND OR THE OTHER BY GIVEN FALSE ASSURANCES REGARDING FILING OF WRIT PETITION AGAINST THE APPELLATE ORDER. THERE BEING REASONABLE AND SUFFICIENT CASE, THE APPEAL WA S SUBMITTED LATE WITH A SEPARATE PRAYER TO ADMIT THE APPEAL BY CONDONING THE DELAY ON THE PART OF THE COUNSEL. I N SUPPORT OF THE SAME ASSESSEE HAS ALSO FILED AFFIDAVIT WHEREIN IT HAS ALSO BEEN SUBMITTED THAT SUCH DELAY WAS OCCURRED ON ACCOUNT OF EXTREME FAILURE ON THE PART OF ITS COUNSEL DUE TO GROSS NEGLIGENCE AS WELL IMPROPER HAND LING OF APPELLATE MATTERS. LD. COUNSEL SUBMITTED THAT FOR TH E GROSS NEGLIGENCE OF THE AR OF THE ASSESSEE, APPEAL COU LD NOT [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 3 BE FILED IN TIME. LD. COUNSEL SUBMITTED THAT A LENIEN T VIEW MAY BE ADOPTED. LD. COUNSEL PLACE RELIANCE ON VARIOUS C ASE LAWS AS UNDER:- S.N O PARTICULARS (CITATIONS) 01 ) VEDABI ALIAS VIJAYANTBAI PATEL VS. SHANTARAM PATEL (2002) 253 ITR 798 SC) - , 02) MAHAVIR PRASAD JAIN VS. CIT (1988) 172 ITR 331 (MP) 03) M/S. MIHANI NETWORK VS. CCCE (2014) 23 ITJ 621 (MP) 04) M/S. JETU STEELS VS. DCIT (2012) 19 ITJ 616 (MP) 05) HAWKINS COOKERS LTD VS. STATE OF MP (WP NO.15783, 15787 & 15788) JUDGMENT DT. 04.11.2019 (MP) 06) SUJATA VERMA VS. ITO (2012) 20 IT} 5 (INDORE BENCH) 07) NARAYAN BALMUKUND DUBEY VS. CIT (2016) 28 ITJ 348 (INDORE BENCH) 08) M/S. EMSONS ORGANICS LTD VS. DCIT (APPEAL NO.1088 TO 10 92/CHD/2 0 18) [CHANDIGARH BENCH) 09) M/S. BHAGWATI COLONIZERS PVT. LTD, MANSA (APPEAL NO.169/AMR/2015) [AMRITSAR BENCH] 3. ON THE OTHER HAND, LD. SR. DR OPPOSED THE SUBMISS IONS OF THE ASSESSEE AND SUBMITTED THAT THE DELAY SHOULD NO T BE CONDONED AS UNDER THE LIMITATION ACT, EACH DAYS DELA Y HAS TO BE EXPLAINED. LEARNED SR. DR FOR THE ASSESSEE ALSO R ELIED [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 4 ON THE DECISION OF HON'BLE SUPREME COURT PASSED IN C ASE OF CIT VS. HAPUR PILKHUWA DEVELOPMENT AUTHORITY (SLP NO.26127/2018) ON 27.8.2018. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL AVAILABLE ON RECORD. WE FIND THAT AFTER RECEIVING THE APPELLATE ORDER, THE ADVOCATE AT BHOPAL DID NOT TAKE PROPE R CARE REGARDING FILING OF 2 ND APPEAL BEFORE THE TRIBUNAL AND AVOIDED THE SAME BY GIVEN FALSE ASSURANCES REGARDING FIL ING OF WRIT PETITION AGAINST THE APPELLATE ORDER. IN SUPPOR T OF THE SAME THE ASSESSEE HAS ALSO FILED AFFIDAVIT. THEREFORE , THE APPEAL WAS SUBMITTED LATE WITH A SEPARATE APPLICATION FOR CONDONATION OF DELAY WITH PRAYER TO ADMIT THE APPE AL BY CONDONING THE DELAY AS THE ADVOCATES DID NOT ATTEND THE HEARING ON ANY DATE THOUGH THE ASSURED FROM TIME TO TIM E WHICH RESULTED INTO THE PRESENT DELAY. SO FAR AS THE JUDGMENT OF HON'BLE SUPREME COURT PASSED IN CASE OF C IT VS. HAPUR PILKHUWA DEVELOPMENT AUTHORITY (SLP [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 5 NO.26127/2018) ON 27.8.2018 AS RELIED BY THE LD. DR IS CONCERNED, THE FACTS ARE DISTINGUISHABLE BECAUSE THE HON'BLE SUPREME COURT DID NOT CONDONE THE DELAY OF THE APPEAL OF THE REVENUE DUE TO MISLEADING STATEMENT GIVEN BEFORE THE HONBLE COURT. IN THE PRESENT CASE, THE CONTENTION OF THE ASSESSEE IS THAT THE DELAY OCCURRED DUE TO NEGLIGENCE OF THE ADVOCATE. HON'BLE SUPREME COURT IN THE CASE OF VEDABI ALIAS VIJAYANTBAI PATIL VS. SHANTARAM PATIL (2002) 253 ITR 798(SC) HELD AS UNDER: IN EXERCISING DISCRETION UNDER SECTION 5 OF THE LIM ITATION ACT THE COURTS SHOULD ADOPT A PRAGMATIC APPROACH. A DIS TINCTION MUST BE MADE BETWEEN A CASE WHERE THE DELAY IS INOR DINATE AND A CASE WHERE THE DELAY IS OF A FEW DAYS. WHEREA S IN THE FORMER CASE THE CONSIDERATION OF PREJUDICE TO THE O THER SIDE WILL BE A RELEVANT FACTOR SO THE CASE CALLS FOR A M ORE CAUTIOUS APPROACH BUT IN THE LATTER CASE NO SUCH CONSIDERATI ON MAY ARISE AND SUCH A CASE DESERVES A LIBE- RAL APPROACH . NO HARD AND FAST RULE CAN BE LAID DOWN IN THIS REGARD. THE COURT HAS TO EXERCISE THE DISCRETION ON THE FACTS OF EACH CASE K EEPING IN MIND THAT IN CONSTRUING THE EXPRESSION 'SUFFICIENT CAUSE', THE PRINCIPLE OF ADVANCING SUBSTANTIAL JUSTICE IS OF PR IME IMPORTANCE. IN OUR VIEW IN THIS CASE, THE APPROACH OF THE LEARNED CIVIL JUDGE IS WHOLLY ERRONEOUS AND HIS ORD ER IS UNSUSTAINABLE. IT IS EVIDENT THAT THE DISCRETION UN DER SECTION 5 OF THE LIMITATION ACT IS EXERCISED BY THE CIVIL JUD GE IN CONTRAVENTION OF THE LAW LAID DOWN BY THIS COURT, T HAT THE [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 6 EXPRESSION 'SUFFICIENT CAUSE' SHOULD RECEIVE LIBERA L CONSTRUCTION, IN A CATENA OF DECISIONS (SEE STATE OF WEST BENGAL V. ADMINISTRATOR, HOWRAH MUNICIPALITY, AIR 1972 SC 749 ; [1972] 1 SCC 366 AND SMT. SANDHYA RANI SARKAR V. SMT. SUDHA RANI DEBI, AIR 1978 SC 537 ; [1978] 2 SCC 116). THE HIGH COURT IN EXERCISING ITS JURISDICTION UNDER SECTION 115 OF TH E CIVIL PROCEDURE CODE, FAILED TO CORRECT THE JURISDICTIONS ERROR OF THE APPELLATE COURT. FOR THE AFOREMENTIONED REASONS, WE SET ASIDE THE IM PUGNED ORDER OF THE HIGH COURT AS WELL AS THAT OF THE CIVI L JUDGE AMALNER (THE APPELLATE COURT) CONDONE THE DELAY OF SEVEN DAYS IN FILING THE APPEAL, RESTORE THE APPEAL TO THE FIL E OF THE CIVIL JUDGE AND DIRECT THE LEARNED CIVIL JUDGE, AMALNER, TO DECIDE THE APPEAL ON THE MERITS. 5. FURTHER, THE HON'BLE M.P. HIGH COURT IN THE CASE OF MAHAVEER PRASAD JAIN VS. CIT (1988) 172 ITR 331(MP) HEL D AS UNDER: 3. HAVING HEARD LEARNED COUNSEL FOR THE PARTIES, WE HAVE COME TO THE CONCLUSION THAT THE APPLICATION DESERVES TO BE ALLOWED. THE APPLICANT HAD ENGAGED A COUNSEL AND WAS, THEREF ORE, JUSTIFIED IN PRESUMING THAT COUNSEL WOULD ATTEND TO THE CASE. THE APPLICANT CANNOT BE MADE TO SUFFER FOR THE NEGL IGENCE OF COUNSEL. WE MAY USEFULLY REFER TO THE FOLLOWING OBS ERVATIONS OF THE SUPREME COURT IN RAFIQ V. MUNSHILAL , AIR 1981 SC 1400, 1401 : 'THE DISTURBING FEATURE OF THE CASE IS THAT UNDER O UR PRESENT ADVERSARY LEGAL SYSTEM, WHERE THE PARTIES GENERALLY APPEAR THROUGH THEIR ADVOCATES, THE OBLIGATION OF THE PART IES IS TO SELECT HIS ADVOCATE, BRIEF HIM, PAY THE FEES DEMANDED BY H IM AND THEN TRUST THE LEARNED ADVOCATE TO DO THE REST OF T HE THINGS. THE [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 7 PARTY MAY BE A VILLAGER OR MAY BELONG TO A RURAL AR EA AND MAY HAVE NO KNOWLEDGE OF THE COURT'S PROCEDURE. AFTER E NGAGING A LAWYER, THE PARTY MAY REMAIN SUPREMELY CONFIDENT TH AT THE LAWYER WILL LOOK AFTER HIS INTEREST. AT THE TIME OF THE HEARING OF THE APPEAL, THE PERSONAL APPEARANCE OF THE PARTY IS NOT ONLY NOT REQUIRED BUT HARDLY USEFUL. THEREFORE, THE PARTY HA VING DONE EVERYTHING IN HIS POWER TO EFFECTIVELY PARTICIPATE IN THE PROCEEDINGS CAN REST ASSURED THAT HE HAS NEITHER TO GO TO THE HIGH COURT TO INQUIRE AS TO WHAT IS HAPPENING IN TH E HIGH COURT WITH REGARD TO HIS APPEAL NOR IS HE TO ACT AS A WAT CHDOG OF THE ADVOCATE THAT THE LATTER APPEARS IN THE MATTER WHEN IT IS LISTED. IT IS NO PART OF HIS JOB. MR. A.K. SANGHI STATED TH AT A PRACTICE HAS GROWN UP IN THE HIGH COURT OF ALLAHABAD AMONGST THE LAWYERS THAT THEY REMAIN ABSENT WHEN THEY DO NOT LIKE A PAR TICULAR BENCH. MAY BE WE DO NOT KNOW, HE IS BETTER INFORMED IN THIS MATTER. IGNORANCE IN THIS BEHALF IS OUR BLISS. EVEN IF WE DO NOT PUT OUR SEAL OF IMPRIMATUR ON THE ALLEGED PRACTICE BY DISMISSING THIS MATTER, WHICH MAY DISCOURAGE SUCH A TENDENCY, WOULD IT NOT BRING JUSTICE DELIVERY SYSTEM INTO DISREPUTE ? WHAT IS THE FAULT OF THE PARTY WHO, HAVING DONE EVERYTHING IN H IS POWER AND EXPECTED OF HIM, HAS TO SUFFER BECAUSE OF THE DEFAU LT OF HIS ADVOCATE? IF WE REJECT THIS APPEAL, AS MR. A. K. SA NGHI INVITED US TO DO, THE ONLY ONE WHO WOULD SUFFER WOULD NOT B E THE LAWYER WHO DID NOT APPEAR BUT THE PARTY WHOSE INTER EST HE REPRESENTED. THE PROBLEM THAT AGITATES US IS WHETHE R IT IS PROPER THAT THE PARTY SHOULD SUFFER FOR THE INACTION, DELI BERATE OMISSION OR MISDEMEANOUR OF HIS AGENT. THE ANSWER OBVIOUSLY IS IN THE NEGATIVE. MAY BE THAT THE LEARNED ADVOCATE ABSENTED HIMSELF DELIBERATELY OR INTENTIONALLY. WE HAVE NO MATERIAL FOR ASCERTAINING THAT ASPECT OF THE MATTER. WE SAY NOTH ING MORE ON THAT ASPECT OF THE MATTER. HOWEVER, WE CANNOT BE A PARTY TO AN INNOCENT PARTY SUFFERING INJUSTICE MERELY BECAUSE H IS CHOSEN ADVOCATE DEFAULTED. THEREFORE, WE ALLOW THIS APPEAL , SET ASIDE THE ORDER OF THE HIGH COURT, BOTH DISMISSING THE AP PEAL AND REFUSING TO RECALL THAT ORDER. WE DIRECT THAT THE A PPEAL BE RESTORED TO ITS ORIGINAL NUMBER IN THE HIGH COURT A ND BE DISPOSED OF ACCORDING TO LAW.' [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 8 4. FOLLOWING THE AFORESAID DECISION, THIS APPLICATI ON IS ALLOWED. MISCELLANEOUS PETITION NO. 191 OF 1981 IS RESTORED. AS THE PETITION CAN NOW BE DISPOSED OF ONLY BY THE CENTRAL ADMINISTRATIVE TRIBUNAL, THE REGISTRY IS DIRECTED T O ARRANGE TO SEND THE RECORD OF THE CASE TO THE TRIBUNAL. NO ORD ER AS TO COSTS. 6. FURTHER, THE HON'BLE M.P. HIGH COURT IN THE CASE OF M/S. JETU STEELS VS. DCIT (2012) 19 ITJ 616 (MP) HELD AS UNDER: 8. HAVING CONSIDERED THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE PARTIES, WE ARE OF THE VIEW THAT THE SUBSTANTIAL QUESTION OF LAW REQUIRES TO BE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. WE FIND THAT IN THE APPLICATION SEEKING CONDONATION OF DELA Y, THE APPELLANT ASSESSEE HAD CLEARLY STATED THAT THE BUSI NESS OF THE APPELLANT A PROPRIETORSHIP FIRM WAS BEING RU N IN THE NAME AND STYLE OF A PARTNERSHIP FIRM VIZ. M/S. JETU SEELS HAVING TWO PARTNER DILIP BIRANI AND ANIL BIRA NI. THE SAID FIRM WAS DISSOLVED W.E.F. 28.11.2008. IT H AS BEEN FURTHER STATED THAT THE ORDER OF CIT(A) WAS SE RVED ON THE APPELLANT ON 22.01.2010. HOWEVER, THE SAME WAS MISPLACED BECAUSE OF VOLUMINOUS PAPER WORK INVOLVED PERTAINING TO PARTNERSHIP PERIOD OWNING TO DISSOLUTION OF THE FIRM AND IT COULD NOT BE HANDED OVER TO THE COUNSEL FOR FILING THE APPEAL ON ACCOUNT OF STRAIN OF THE DISSOLUTION OF THE FIRM, JOINT FAMILY SEPARA TION AND CONSTANT HEAVY LOSSES. IN SUPPORT OF REASONS STATE D IN THE APPLICATIONS, AN AFFIDAVIT OF DILIP BIRANI, PRO PRIETOR OF APPELLANT FIRM AND AFFIDAVIT OF R.S. PASARI, MAN AGER OF THE FIRM WERE FILE. THE SAID AVERMENTS WERE NOT CONTROVERTER BY THE RESPONDENT BY FILING ANY COUNTE R AFFIDAVIT. HOWEVER, THE TRIBUNAL VIDE ITS ORDER DAT ED 16.12.2011 DISMISSED THE APPEAL BY HOLDING THAT THE [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 9 APPELLANT HAD FAILED TO SHOW ANY REASONABLE CAUSE F OR CONDONATION OF DELAY. 9. ONGOING THROUGH THE ORDER OF THE TRIBUNAL, IT IS CLEAR THAT THE TRIBUNAL HAS NOT GONE INTO THE REASONS STA TED BY THE APPELLANT AND HAS DISMISSED THE APPLICATION IN A SLIPSHOD MANNER. ON DUE CONSIDERATION OF THE SAID REASONS, WE ARE OF THE VIEW THAT THE REASONS ASSIGN ED IN THE APPLICATION SEEKING CONDONATION OF DELAY ARE SUFFICIENT REASONS AND ARE FORMING A REASONABLE CAU SE FOR CONDONATION OF DELAY. 10. IN THE CIRCUMSTANCES, WE HOLD THAT THE TRIBUNAL HAS ERRED IN RECORDING THE FINDING THAT THE ASSESSEE HA S UTTERLY FAILED TO SHOW ANY REASONABLE CAUSE FOR CONDONATION OF DELAY. ON THE OTHER HAND, AS OBSERVE D, THE ASSESSEE HAD SUFFICIENTLY EXPLAINED THE DELAY I N FILING THE APPEAL BEFORE THE TRIBUNAL AND HAD MADE OUT A CASE FOR CONDONATION OF DELAY IN FILING THE APPEA L. AS A RESULT, WE ANSWER THE QUESTION IN FAVOUR OF THE ASSESSEE AND CONDONED THE DELAY. 7. FURTHER, THE HON'BLE M.P. HIGH COURT IN THE CASE OF HAWKINS COOKERS LTD VS. STATE OF MP (WP NO.15783, 15 787 & 15788) JUDGMENT DT. 04.11.2019 (MP) HELD AS UNDER: 8. EXAMINING THE LEGAL POSITION RELATING TO CONDON ATION OF DELAY UNDER SECTION 5 OF THE ACT OF 1963, IT MAY BE OBSERVED THAT THE SUPREME COURT IN ORIENTAL AROMA CHEMICAL INDUST RIES LTD. V. GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION AND ANOT HER, (2010) 5 SCC 459 LAYING DOWN THE BROAD PRINCIPLES FOR ADJU DICATING THE [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 10 ISSUE OF CONDONATION OF DELAY, IN PARAS 14 AND 15 OBSERVED AS UNDER:- '14. WE HAVE CONSIDERED THE RESPECTIVE SUBMISSIONS. THE LAW OF LIMITATION IS FOUNDED ON PUBLIC POLICY. THE LEGISLA TURE DOES NOT PRESCRIBE LIMITATION WITH THE OBJECT OF DESTROYING THE RIGHTS OF THE PARTIES BUT TO ENSURE THAT THEY DO NOT RESORT TO DI LATORY TACTICS AND SEEK REMEDY WITHOUT DELAY. THE IDEA IS THAT EVE RY LEGAL REMEDY MUST BE KEPT ALIVE FOR A PERIOD FIXED BY THE LEGISLATURE. TO PUT IT DIFFERENTLY, THE LAW OF LIMITATION PRESCRIBE S A PERIOD WITHIN WHICH LEGAL REMEDY CAN BE AVAILED FOR REDRESS OF TH E LEGAL INJ URY. AT THE SAME TIME, THE COURTS ARE BESTOWED WITH THE POWER TO CONDONE THE DELAY, IF SUFFICIENT CAUSE IS SHOWN FOR NOT AVAILING THE REMEDY WITHIN THE STIPULATED TIME. 15. THE EXPRESSION 'SUFFICIENT CAUSE' EMPLOYED IN S ECTION 5 OF THE INDIAN LIMITATION ACT, 1963 AND SIMILAR OTHER STATU TES IS ELASTIC ENOUGH TO ENABLE THE COURTS TO APPLY THE LAW IN A M EANINGFUL MANNER WHICH SUB SERVES THE ENDS OF JUSTICE. ALTHOU GH, NO HARD AND FAST RULE CAN BE LAID DOWN IN DEALING WITH THE APPLICATIONS FOR CONDONATION OF DELAY, THIS COURT HAS JUSTIFIABL Y ADVOCATED ADOPTION OF A LIBERAL APPROACH IN CONDONING THE DEL AY OF SHORT DURATION AND A STRICTER APPROACH WHERE THE DELAY IS INORDINATE- COLLECTOR (L.A.) V. KATIJI (1987) 2 SCC 107, N. BAL AKRISHNAN V. M. KRISHNAMURTHY (1998) 7 SCC 123 AND VEDABAI V. SHANT ARAM BABURAO PATIL (2001) 9 SEC 106.' 9. THE MEANING TO BE ASSIGNED TO THE EXPRESSION 'SU FFICIENT CAUSE' OCCURRING IN SECTION 5 OF THE 1963 ACT SHOUL D BE SUCH SO AS TO DO SUBSTANTIAL JUSTICE BETWEEN THE PARTIES. T HE EXISTENCE OF SUFFICIENT CAUSE DEPENDS UPON FACTS OF EACH CASE AN D NO HARD AND FAST RULE CAN BE APPLIED IN DECIDING SUCH CASES . 10. THE SUPREME COURT IN ORIENTAL AROMA CHEMICAL INDUST RIES LTD. (SUPRA) AND R.B. RAMLINGAM V. R.B. BHAVANESWAR I, (2009) 2 SCC 689 NOTICED THAT THE COURTS SHOULD ADOPT LIBERA L APPROACH WHERE DELAY IS OF SHORT PERIOD WHEREAS THE PROOF RE QUIRED SHOULD BE STRICT WHERE THE DELAY IS INORDINATE. FURTHER, I T WAS ALSO OBSERVED THAT JUDGMENTS DEALING WITH THE CONDONATIO N OF DELAY MAY NOT LAY DOWN ANY STANDARD OR OBJECTIVE TEST BUT IS PURELY AN INDIVIDUALISTIC TEST. THE COURT IS REQUIRED TO EXAM INE WHILE ADJUDICATING THE MATTER RELATING TO CONDONATION OF DELAY ON [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 11 EXERCISING JUDICIAL DISCRETION ON INDIVIDUAL FACTS INVOLVED THEREIN. THERE DOES NOT EXIST ANY EXHAUSTIVE LIST CONSTITUTI NG SUFFICIENT CAUSE. THE PETITIONER IS REQUIRED TO ESTABLISH THAT IN SPITE OF ACTING WITH DUE CARE AND CAUTION, THE DELAY HAD OCC URRED DUE TO CIRCUMSTANCES BEYOND HIS CONTROL AND WAS INEVITABLE . 11. WE FIND THAT THE EXPLANATION FURNISHED BY THE PETIT IONER, AS NOTICED HEREINBEFORE, BEING PLAUSIBLE, LEADS TO THE CONCLUSION THAT THERE WAS SUFFICIENT CAUSE FOR DELAY IN FILING THE REFERENCE APPLICATION. ONCE THAT WAS SO, THE APPLICATION FOR CONDONATION OF DELAY OUGHT TO HAVE BEEN ALLOWED. 12. IN VIEW OF THE ABOVE, THE IMPUGNED ORDER DATED 10.0 5.2019 (ANNEXURE P/4) IS SET ASIDE. THE DELAY OF FOUR MONTHS IN FILING REFERENCE APPLICATION IS CONDONED BY HOLDING THAT T HERE WAS SUFFICIENT CAUSE FOR CONDONATION OF DELAY. AS A RES ULT, THE WRIT PETITION IS ALLOWED AND THE MATTER IS REMITTED TO T HE BOARD/RESPONDENT NO.2 TO RE-DECIDE THE REFERENCE AP PLICATION IN ACCORDANCE WITH LAW. 8. THUS, ON CONSIDERATION OF ABOVE FACTS AND CIRCUMSTANC ES IN THE LIGHT OF AFORESAID CASE LAWS, WE ARE OF THE VIEW THAT DELAY DESERVES TO BE CONDONED AS FOR THE MISTAKE OF ADVOCATE, THE JUSTICE SHOULD NOT BE DEPRIVED OF. ACCORDINGLY, WE CONDONE THE DELAY SUBJECT OF COST O F RS.10,000/- TO BE DEPOSITED IN THE ACCOUNT OF CENTRAL GOVERNMENT. [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 12 9. NOW, WE TAKE UP THE MATTER. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.THAT THE LEARNED COMMISSIONER OF INCOME TAX(A) E RRED IN LAW IN NOT AFFORDING REASONABLE OPPORTUNITY OF BEING HE ARD WHILE ADJUDICATING THE APPEAL IN AN EXPARTE MANNER. HE OU GHT TO HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE VIZ. CLOSURE OF BHOPAL OFFICE AND PENDENCY OF APPLICATION FOR TR ANSFER OF CASE RECORDS TO MUMBAI BEING REASONABLE AND SUFFICIENT C AUSE FOR NONATTENDANCE. THERE WAS NO REASON TO AVOID THE HEA RING WHEN HUGE DEMAND WAS CREATED. THE APPELLATE ORDER SO PAS SED WITHOUT CONSIDERING THE FACT THAT BUSINESS WAS CLOS ED DUE TO LOSSES AND AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT WERE PLACED ON RECORD ALONG WITH CERTAIN DETAILS IS , UNJUSTIFIED, IMPROPER, BAD IN LAW AND DESERVES TO BE QUASHED. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE CONSIDERED THAT IN WRITTEN SUBMISSIONS EXPLAIN ING THE REASONS FOR FALL IN GROSS PROFIT AND INCREASE IN DI RECT EXPENSES BESIDES INCREASED COST OF MATERIAL WHICH RESULTED I NTO REDUCTION OF GROSS PROFIT TO 33.18%. JUST BECAUSE IN A.Y. 200 9-10 & 2010- 11, THE GROSS PROFIT WAS 37.96% AND 41.98%, THE APP LICATION OF GP RATE OF 41 % IN THE YEAR UNDER APPEAL IGNORING T HE AUDITED ACCOUNTS ALONG WITH TAX AUDIT REPORT U/S. 44AB OF T HE ACT AND EXPLANATIONS GIVEN WAS UNJUSTIFIED AND BAD IN LAW. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE CONSIDERED THAT RELEVANT RECORDS SUCH AS PURCH ASE BILLS, STOCK REGISTERS SHOWING QUANTITATIVE DETAILS, BILLS AND VOUCHERS ETC. COULD NOT BE PRODUCED BECAUSE THEY WERE SHIFTE D TO MUMBAI DUE TO CLOSURE OF OFFICE AT BHOPAL. THERE BEING NO PROPER [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 13 COMMUNICATION FROM THE COUNSEL OF THE APPELLANT, SU CH RECORDS COULD NOT BE PRODUCED. IN FACT BECAUSE OF CLOSURE OF BUSINESS, THE STOCK WERE DISPOSED OF BY ALLOWING HIGHER DISCOUNT AND COMMISSION WHICH RESULTED IN REDUCTION OF GROSS PROFIT RATE HENCE APPLICATION OF GP RATE OF 41 % AND ITS CONFIRMATION BY REJECTING THE BOOK RES ULTS IS UNJUSTIFIED AND BAD IN LAW. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) FURTHER ERRED IN LAW IN CONFIRMING THE ADHOC DISALLOWANCE OF VARI OUS EXPENSES EQUAL TO 10% UNDER EACH HEAD IGNORING NORM AL INCREMENT IN SALARY TO STAFF, PETROL, CONVEYANCE AN D TRAVELLING EXPENSES ETC. SUCH EXPENSES WERE MAINLY RELATED TO MARKETING TEAM OF THE COMPANY WHO EFFECTED TOTAL TURNOVER OVE R RS. 468.76 LACS HENCE ANNUAL INCREMENT TO THEM WAS INEV ITABLE. DISALLOWANCE ON ADHOC BASIS WITHOUT APPRECIATING TH E NATURE OF BUSINESS AND INCREASE IN INDEX COST IS UNJUSTIFIED AND BAD IN LAW. 5. THE APPELLANT FURTHER CRAVES LEAVE TO ADD, ALTER , AND/OR TO AMEND THE AFORESAID GROUNDS OF APPEAL AS WHEN NECES SARY 10. FACTS GIVING RISE TO THE MATTER ARE THAT THE ASSESS EE COMPANY WAS ENGAGED IN MARKETING & TRADING OF DRUGS AND MEDICINES AT SHAHPURA, BHOPAL. THE REGISTERED OFFICE OF THE COMPANY INITIALLY AT IN THE STATE OF M.P. AND THE SAME WAS LATER ON SHIFTED TO MUMBAI IN 2005. AS THE REGISTERED OFFICE OF THE COMPANY IS LOCATED AT MUMBAI NOT [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 14 ONLY THE DIRECTORS ARE ALSO RESIDING IN MUMBAI BUT THE ENTIRE ESTABLISHMENT AND ALL THE DOCUMENTS & ACCOUNTS WERE ALSO BEING MAINTAINED IN MUMBAI. RETURN OF INCOME WAS FILED DECLARING THE SAME AT RS.4,07,450/-. HOWEVER, THE PAN ALLOTTED TO THE COMPANY WAS NOT TRANSFERRED HENCE T HE ASSESSMENT PROCEEDINGS WERE TAKEN UP BY THE ITO, BHOP AL. REQUEST WAS MADE FOR TRANSFER THE CASE RECORDS TO MUMBAI BUT DUE TO TECHNICAL REASONS I.E. WITHOUT PRIOR TRANSF ER OF PAN AND PROPER COMPLIANCE COULD NOT BE MADE BEFORE THE ASSESSING OFFICER RESULTING IN TO PASSING OF ASSESSME NT ORDER BY THE ITO, BHOPAL. THE LOCAL COUNSEL AT BHOPAL D ID NOT PROPERLY ATTEND THE HEARINGS AND SUBMITTED PARTIAL DETAILS THOUGH ASSURED TO THE ASSESSEE. DUE TO INCOMPL ETE INFORMATION THE INCOME TAX OFFICER PASSED THE ORDER U /S 143(3) OF THE ACT DETERMINING TOTAL INCOME AT RS.50,97,350/- BY MAKING FOLLOWING ADDITIONS ;_ A) GROSS PROFIT ON TOTAL TURNOVER OF RS.468.76 LACS WAS [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 15 DETERMINED AT RS.192.19 LACS I.E. 41% AS AGAINST 33.18% DISCLOSED BY THE APPELLANT THEREBY ADDITION OFRS.36,65,070/- WAS MADE. B) BY REJECTING THE BOOKS OF ACCOUNTS, ESTABLISHMENT EXPENSES TO THE EXTENT OF 10% WERE DISALLOWED ON ADHOC BASIS AT RS.1 0,07,830/-. 11. BEING AGGRIEVED, THE ASSESSEE P REFERRED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS)-II, BHOPAL. THE ASSESSEE COMPANY FORWARDED THE NOTICES RECEIVED FROM T HE COMMISSIONER OF INCOME TAX (APPEALS)-II TO ITS ADVOC ATE BUT HE DID NOT ATTEND THE HEARINGS ON ANY DATE THOUGH ASSURED FROM TIME TO TIME. THE COMMISSIONER OF INCOM E TAX (A) DISMISSED THE APPEAL ON ALL THE GROUNDS BASED O N STATEMENT OF FACTS NARRATED IN THE ASSESSMENT ORDER. 12. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME TAX(A) ERRED IN NOT [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 16 AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD WHILE ADJUDICATING THE APPEAL IN AN EX-PARTE MANNER. LD. CIT(A) DID NOT CONSIDER THE FACTS AND CIRCUMSTANCES OF THE CAS E VIZ. CLOSURE OF BHOPAL OFFICE AND PENDENCY OF APPLICATI ON FOR TRANSFER OF CASE RECORDS TO MUMBAI BEING REASONABLE AND SUFFICIENT CAUSE FOR NONATTENDANCE. THERE WAS NO REASON TO AVOID THE HEARING WHEN HUGE DEMAND WAS CREATED. THE APPELLATE ORDER SO PASSED WITHOUT CONSIDERING THE FACT THAT BUSINESS WAS CLOSED DUE TO LOSSES AND AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT WERE PLACED ON RECORD ALONG WITH CERTAIN DETAILS IS, UNJUSTIFIED, IMPROPER, BAD IN LAW AND DESERVES TO BE QUASHED. LD. COMMISSIONER OF INCOME TAX (A) DID NOT CONSIDER THAT IN WRITTEN SUBMISSIONS EXPLAINING THE REASONS FOR FALL IN GROSS PROFIT AND INCREASE IN DIREC T EXPENSES BESIDES INCREASED COST OF MATERIAL WHICH RESULTED INTO REDUCTION OF GROSS PROFIT TO 33.18%. FURTHER, [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 17 LD. COMMISSIONER OF INCOME TAX (A) DID NOT CONSIDER THAT RELEVANT RECORDS SUCH AS PURCHASE BILLS, STOCK REGISTE RS SHOWING QUANTITATIVE DETAILS, BILLS AND VOUCHERS ETC. C OULD NOT BE PRODUCED BECAUSE THEY WERE SHIFTED TO MUMBAI DUE TO CLOSURE OF OFFICE AT BHOPAL. THERE BEING NO PR OPER COMMUNICATION FROM THE COUNSEL OF THE ASSESSEE, SUCH RECORDS COULD NOT BE PRODUCED. IN FACT BECAUSE OF CL OSURE OF BUSINESS, THE STOCK WERE DISPOSED OF BY ALLOWING HIGHER DISCOUNT AND COMMISSION WHICH RESULTED IN REDUCTION OF GROSS PROFIT RATE HENCE APPLICATION OF GP RATE OF 41 % AND ITS CONFIRMATION BY REJECTING THE BOOK RESULTS IS UNJUSTIFIED. ALSO THE LEARNED COMMISSIONER OF INCOME TAX (A) DID NOT APPRECIATE THE FACTS IN CONFIRMING THE AD HOC DISALLOWANCE OF VARIOUS EXPENSES EQUAL TO 10% UNDER EACH HEAD IGNORING NORMAL INCREMENT IN SALARY TO STAFF, PETROL, CONVEYANCE AND TRAVELLING EXPENSES ETC. SUCH EXPENSES WERE MAINLY RELATED TO MARKETING TEAM OF THE [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 18 COMPANY WHO EFFECTED TOTAL TURNOVER OVER RS. 468.76 L ACS HENCE ANNUAL INCREMENT TO THEM WAS INEVITABLE. DISALLOWANCE ON ADHOC BASIS WITHOUT APPRECIATING THE NATURE OF BUSINESS AND INCREASE IN INDEX COST IS UNJUSTIFIED. 13. ON THE OTHER HAND, LD. SR. DR RELIED ON THE ORDE RS OF THE AUTHORITIES BELOW. 14. WE HAVE CONSIDERING THE FACTS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LEARNED COMMISSIONER OF INCOME TAX(A) DID NOT AFFORD REASONABL E OPPORTUNITY AND PASS THE ORDER IN AN EX-PARTE MANNER. LD. CIT(A) DID NOT CONSIDER THE FACTS AND CIRCUMSTANCE S OF THE CASE VIZ. CLOSURE OF BHOPAL OFFICE AND PENDENCY OF APPLICATION FOR TRANSFER OF CASE RECORDS TO MUMBAI BEIN G REASONABLE AND SUFFICIENT CAUSE FOR NONATTENDANCE. LD. CIT(A) DID NOT CONSIDER THE FACT THAT BUSINESS WAS CLO SED [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 19 DUE TO LOSSES AND AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT WERE PLACED ON RECORD ALONG WITH CERTAIN DETAILS AND RELEVANT RECORDS SUCH AS PURCHASE BILLS, STOCK REGISTERS SHOWING QUANTITATIVE DETAILS, BILLS AND VOUCHE RS ETC. COULD NOT BE PRODUCED BECAUSE THEY WERE SHIFTED TO MUMBAI DUE TO CLOSURE OF OFFICE AT BHOPAL AS THERE BEI NG NO PROPER COMMUNICATION FROM THE COUNSEL OF THE ASSESSEE, SUCH RECORDS COULD NOT BE PRODUCED. IN VIE W OF THESE FACTS AND IN THE INTEREST OF JUSTICE, THE PRESE NT MATTER DESERVES TO BE RECONSIDERED AT THE LEVEL OF TH E LD. CIT(A) WHO WILL AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THE ASSESSEE IS ALSO DIRECTED TO COOPERATE WITH THE LD. CIT(A) BY FILING THE RELEVANT EVIDENCES AND WRITTEN SUBMISSIONS IN SUPPORT OF THE CLAIM. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND THE GROUNDS RAISED IN THE ASSESSEES APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES ONLY. [ITA NO.137/IND/2019] [VINAYAK CARE SOLUTIONS PVT. LTD. ] 20 15. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 20 .02. 2020. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIAL MEMBER INDORE; DATED : 20/02/2020 PATEL/PS COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR, INDORE