Shri Pankaj Hiralal Marothi, Ahmedabad V. The ITO, WARD-5(3)(4), Ahmedabad

ITA 164/AHD/2022

AI Insights

The case involves Shri Pankaj Harilal Marothi, who appealed against the penalty imposed by the Income Tax Officer under Section 271(1)(c) for the assessment year 2010-11. The penalty was based on an addition of Rs. 4.44 lakhs due to excess stock found during a survey. The assessee contended that the stock belonged to other firms and was mistakenly included under his firm's records. The Commissioner of Income Tax (Appeals) dismissed the appeal due to a 5-day delay in filing, which the Tribunal later condoned. The Tribunal found that the assessee had not concealed any income and set aside the penalty.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125719 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 01-05-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 11-05-2022
• Other Referred Cases: Collector, Land Acquisition v. Mst. Katiji, N. Balakrishnan v. M. Krishnamurthy, S.S.M. Ahmed Hussain v. ITO, Kiran Laxmikant Joshi v. ITO, Rameshbhai V. Prajapati v. DCIT, Kashmir Road Lines v. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause; Condonation of delay
• Section: 271(1)(c); 154; 2; 69B; 64; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER& SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . No .1 64 /A h d / 20 22 ( A s se ss m e nt Y e a r : 20 10- 1 1 ) Sh r i Pa nk a j H ira la l M ar o th i 61, N u t an C lo th M a rk e t, Ou tsi d e R a i pu r C a t e , R a ip ur , Ah me da bad - 3 80 00 2 V s. I nc o m e Ta x O f fic er Wa r d - 5( 3) ( 4 ) , A h m e da ba d [ P AN N o. A C YP M 5 82 9P ] (Appellant) .. (Respondent) Appellant by : Shri Sanjay R. Shah, A.R. Respondent by: Shri M. Anand Kumar, Sr. D.R. D a t e of H ea r i ng 02.05.2023 D a t e of P r o no u n ce me nt 26.05.2023 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-5, (in short “Ld. CIT(A)”) Ahmedabad, in Appeal No. CIT(A)-5/ITO Wd.5(3)(4)/161/2015-16 vide order dated 19.09.2016 passed for Assessment Year 2010-11. 2. The assessee has taken the following grounds of appeals:- “1. The learned C.I.T(Appeals) erred in law and on facts in not condoning the delay of only 5 days in filing appeal before him by the Appellant. It is submitted that there was reasonable cause on the part of the Appellant in filing the appeal before the learned C.I.T(Appeals) late by 5 days and the same should have been condoned. It is submitted that it be so held now and the order passed by the learned C.I.T.(Appeals) rejecting the appeal in limine be quashed in this regard. ITA No. 164/Ahd/2022 Shri Pankaj HarilalMarothivs. ITO Asst.Year –2010-11 - 2 - 2. The learned C.I.T.(Appeals) grossly erred in law and on facts in not admitting the appeal and not adjudicating the appeal on the merits of the case and erred in confirming levy of penalty of Rs. 1,19,200/- imposed by learned Assessing Officer u/s.271(1)(c) of the Act. It is submitted that in the facts and circumstances of the case, the penalty of Rs. 1,19,200/- be deleted. Your appellant prays for leave to add, alter and/or amend any of the grounds before the hearing of the appeal.” 3. Before going into the merits of the case, we observe that the present appeal is time barred by 1976 days. In the application for condonation of delay, the assessee submitted that for A.Y. 2010-11, an addition of Rs. 4.44 lakhs was made on account of excess stock under Section 69B of the Act. The assessee did not prefer appeal before CIT(Appeals) against the aforesaid order. Subsequently, penalty order under Section 271(1)(c) of the Act was passed, against which the assessee filed appeal before CIT(Appeals). However, CIT(Appeals) dismissed the appeal of the assessee on the ground that there was a delay of 5 days in filing of appeal before CIT(Appeals). The said order was passed on 19.09.2016. Subsequently, the Department launched prosecution case against the assessee on 14.05.2018 by filing a criminal case against the assessee and the Hon’ble Additional Chief Metropolitan Magistrate, Ahmedabad passed an order on the assessee under Section 279(1) of the Income Tax Act, on 19.02.2018. The fact of Department having launched prosecution against the assessee came to the notice of the assessee only on the month of May / June 2021 on receipt of order of Hon’ble Additional Chief Metropolitan Magistrate, Ahmedabad. The assessee was advised by his consultant to file compounding application, which was filed ITA No. 164/Ahd/2022 Shri Pankaj HarilalMarothivs. ITO Asst.Year –2010-11 - 3 - before Principal CCIT on 03.12.2021. However, the Principal CCIT rejected the compounding application vide order dated 12.01.2022. It was owing to the aforesaid circumstances that there was a delay of 1976 days in filing of the present appeal before ITAT. The Ld. Counsel for the assessee submitted that in view of the facts mentioned above, it is a fit case for condonation of delay in filing of the present appeal, since there was no mala fide intention on part of the assessee in delay in filing of the present appeal. In response, the Ld. Departmental Representative vehemently opposed the assessee’s application for condonation of delay in filing of the present appeal. 3.1 The Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji 1987 taxmann.com 1072, analyzed the provisions of law qua limitation Act and held that the expression 'sufficient cause' employed by the legislature in the Limitation Act is adequately elastic to enable the Courts to apply the law in a meaningful manner which sub-serves the ends of justice-that being the life purpose for the existence of the institution of Courts. It was further observed that a liberal approach is requires to be adopted on principle as ordinarily a litigant does not stand to benefit by lodging an appeal late. Further refusing to condonedelay 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 hearing the parties. The Apex Court further held that 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. It must be grasped that judiciary is respected ITA No. 164/Ahd/2022 Shri Pankaj HarilalMarothivs. ITO Asst.Year –2010-11 - 4 - 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. 3.2 The Supreme Court in N. Balakrishnan v. M. Krishnamurthy 2008 (228) ELT 162, while condoning the delay of 883 days in filing an application for setting aside the ex parte decree held "That the purpose of Limitation Act was not to destroy the rights. It is founded on public policy fixing a life span for the legal remedy for the general welfare. The primary function of a Court is to adjudicate disputes between the parties and to advance substantial justice. The time limit fixed for approaching the Court in different situations is not because on the expiry of such time a bad cause would transform into a good cause. The object of providing legal remedy is to repair the damage caused by reason of legal injury. If the explanation given does not smack mala fides or is not shown to have been put forth as a part of a dilatory strategy, the Court must show utmost consideration to the suitor." 3.3 In the case of S.S.M. Ahmed Hussain v. ITO [2017] 85 taxmann.com 351 (Madras), the assessee filed an appeal before the Commissioner (Appeals) along with an application for condonation of delay of 175 days. The assessee claimed that delay occurred since he was waiting outcome of penalty order. The Commissioner (Appeals) however refused to condone the delay. The ITAT as later (as also confirmed by the High Court) held that that the reason stated by the assessee in these cases is that he was waiting for the outcome of the penalty proceedings. Therefore, one has to consider, whether reasonable prudent person would do so. The inference of such delay has to be drawn on the basis of circumstances available on record and conduct of the assessee. After considering the surrounding circumstances and applying the test of human probabilities, one has to reasonably conclude that the plea of the ITA No. 164/Ahd/2022 Shri Pankaj HarilalMarothivs. ITO Asst.Year –2010-11 - 5 - assessee is genuine. The explanation offered by the assessee for the delay cannot be rejected as false or devoid of merits. Therefore, this short delay of 175 days is condoned. 3.4 In the case of Kiran Laxmikant Joshi v. ITO [2004] 3 SOT 822 (AHD.), the facts were that the assessee moved an application under section 154, which was disposed of by the Assessing Officer. The appeal against the said order was filed before the Commissioner (Appeals) with a delay of more than 6 months. The assessee explained that the delay was on account of earthquake and ill health of his wife coupled with change of his address due to certain family dispute. The Commissioner (Appeals), however, rejected the explanation of the assessee on the ground that the reasons were very general in nature and did not explain specifically as to why the delay had occurred.On second appeal, ITAT held the Courts and the quasi-judicial bodies are empowered to condone the delay if a litigant satisfies the court that there were sufficient reasons for availing the remedy after expiry of the limitation. Such reasoning should be to the satisfaction of the Court. In the instant case, on account of earthquake and ill health of his wife, the assessee had been facing many problems, simultaneously. According to him, order under section 154 was served upon him at the old address. That communication had also consumed time. Therefore, the assessee could not gain anything by filing the appeal late. There was no mala fide imputable to the assessee. The delay in filing the appeal was the result of ill health coupled with the change of his address thrice in a short span. In every case of delay there can be some lapse of the litigant concerned. That alone is not enough to turn down the plea and to shut the doors against him. If the explanation does not smack of mala fide or it is not put-forth as a part of ITA No. 164/Ahd/2022 Shri Pankaj HarilalMarothivs. ITO Asst.Year –2010-11 - 6 - dilatory strategy, the Courts must show utmost consideration to such litigant. At the most for the inaction or a little negligence, the assessee could be burdened with the cost. But his right of hearing of the appeal on merit ought not to be shut. Therefore, the delay in filing the appeal before the Commissioner (Appeals) was condoned and the matter restored to the first appellate authority to decide the appeal on merit. 3.5 In the case of Rameshbhai V. Prajapati v. DCIT [2021] 127 taxmann.com 674 (Ahmedabad - Trib.), the Ahmedabad ITAT held that where previous tax consultant of assessee had not attended tax matter satisfactorily and new tax consultant had obtained various documents, and that these circumstances and his ill health caused delay in filing Miscellaneous Application against ex parte order passed on account of non-prosecution, keeping in view of rule 24 of Income-tax Appellate Tribunal, 1963, delay in filing Miscellaneous Application was to be condoned. 3.6 In the case of Kashmir Road Lines v. DCIT 2021] 123 taxmann.com 5 (Amritsar - Trib.), ITAT held that where assessee claimed condonation of delay of 124 days in filing appeal due to reason that appeal papers were prepared and handed over to Assistant of assessee's counsel for filling who failed to do so and ultimately appeal was filed belatedly through another local counsel and such contention was also supported by affidavit of previous counsel, since assessee had demonstrated bona fide reason and sufficient cause for such delay, same was to be condoned. 3.7 In our considered view, looking into the facts of the present case, this is a fit case forcondonation of delay. Accordingly, we are hereby condoning the delay of 1976 days in filing of the present appeal, in the interest of justice. ITA No. 164/Ahd/2022 Shri Pankaj HarilalMarothivs. ITO Asst.Year –2010-11 - 7 - 4. On merits, the facts of the case are that during the course of assessment, the Assessing Officer observed that on verification of stock statement taken at the time of survey proceedings, there was difference of Rs. 4,44,012/- in the case of M/s. Pankaj Textiles. The assessee during the course of assessment, accepted the difference and agreed to pay taxes on the additional income on account of excess stock under Section 69B of the Act. However, the assessee contested the levy of penalty under Section 271(1)(c) of the Act on the ground that the assessee agreed to pay the additional tax of Rs. 1 lakh approximately only with a view buy peace of mind and looking into facts of the instant case there was no excess stock at the premises of the assessee. However, the CIT(Appeals) dismissed the appeal of the assessee only on the ground that there was a delay of 5 days in filing of appeal before him. While dismissing the appeal of the assessee, the CIT(Appeals) did not discuss the merits of the case. 5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) confirming the penalty. Before us the Counsel for the assessee drew our attention to letter dated 19.03.2015 addressed to the Income Tax Officer, Ahmedabad during the course of assessment proceedings, wherein it was submitted that the assessee was running / operating a total of five firms from the same premises. At the time of survey, wherein the case of M/s. Pankaj Textiles, there was an excess stock of Rs. 4,44,012/- but this was due to the fact in physical accounting, stock belonging to M/s. Mahek Impex and M/s. Sonal Fabrics was, by mistake included in the stock of M/s. Pankaj Textile. Therefore, while there was an excess in physical stock of M/s. Pankaj Textile, there was a shortage in the case of M/s. Mahek Impex and M/s. Sonal Fabrics, and therefore, there was no overall excess in physical stock. However, while ITA No. 164/Ahd/2022 Shri Pankaj HarilalMarothivs. ITO Asst.Year –2010-11 - 8 - framing the assessment, this aspect was not considered by the Assessing Officer and he made addition of Rs. 4.44 lakhs only on account of excess physical stock found in the case of M/s. Pankaj Textile. However, in the instant facts, it is clear that there was no excess stock and the assessee decided to pay additional taxes of Rs. 1 lakh only with a view to end litigation and buy peace of mind. Accordingly, the Counsel for the assessee submitted that looking into facts of the instant case, there was no cause for levy of penalty under Section 271(1)(c) of the Act since it is not a case of concealment and all facts are admittedly on record. 6. In response, Ld. D.R. placed reliance on the observations made by CIT(Appeals) and Assessing Officer in their respective orders. 7. We have heard the rival contentions and perused the material on record. On going through the facts of the case we are of the view that CIT(Appeals) has erred in facts and in law in not condoning the minor delay of 5 days in filing of appeal before him. Further, even while dismissing of the assessee against the penalty order passed under Section 271(1)(c) of the Act, the Ld. CIT(Appeals) did not discuss the merits of the case at all. On going to the merits of the case, we are of the view that this is not a case of concealment of income and the excess stock found the case of M/s. Pankaj Textile was more or less neutralized on account of excess stock in the case of M/s. Sonal Fabrics and M/s. Mahek Impex. Further, at the time such excess stock was found by the Department, it is observed that since books of accounts were not written up to date of search, proper books stock could not be arrived at and as the physical stocks of various firms operating from the same premises were mixed, there arose a difference in the physical stocks as compared to the books stock. Accordingly, looking into the facts of the instant case we are of the considered ITA No. 164/Ahd/2022 Shri Pankaj HarilalMarothivs. ITO Asst.Year –2010-11 - 9 - view that at this is not a fit case for levy of penalty under Section 271(1)(c) of the Act. Accordingly, we are hereby directing that the levy of penalty under Section 271(1)(c) of the Act be set-aside. 8. In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 26/05/2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 26/05/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 22.05.2023 2. Date on which the typed draft is placed before the Dictating Member 22.05.2023 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 23.05.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .05.2023 6. Date on which the fair order comes back to the Sr.P.S./P.S 26.05.2023 7. Date on which the file goes to the Bench Clerk 26.05.2023 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................