RUSHABH PRECISION BEARINGS, MUMBAI V. ACIT - 7(2), MUMBAI

ITA 3270/MUM/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5118 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2003-2004
• Appeal Filed On: 15-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHA RAMDHANDRAN
• Keywords: Depreciation; Opportunity of being heard; Period of limitation; Time period of passing order; Condonation of delay
• Section: 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA no.3270/Mum./2018 (Assessment Year : 2003–04) Rushabh Precision Bearings Fida Mansion, 2 nd Floor 4, Babijan Street, Nagdevi Mumbai 400 002 PAN – AAACR5214N ................ Appellant v/s Asstt. Commissioner of Income Tax Circle–7(2), Mumbai ................ Respondent Assessee by : None Revenue by : Ms. Sudha Ramdhandran Date of Hearing – 18/04/2022 Date of Order – 21/06/2022 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the assessee challenging the ex parte order dated 03/12/2007 passed under section 250 of the income tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals) (“learned CIT(A)”), for the assessment year 2003–04. 2. When the appeal was called for hearing neither any one appeared on behalf of assessee nor was any application seeking adjournment filed Rushabh Precision Bearings ITA No.3270/Mum./2018 Page | 2 in the present case. From the perusal of record, we noticed that the appeal has been listed on various occasions since February 2019 and the same has been adjourned mostly at the request of assessee. Thus, we are proceeding to hear this appeal ex parte qua the assessee after hearing the learned Departmental Representative (“learned DR”) and perusal of material available on record. 3. In its appeal, the assessee has raised following grounds: “Being aggrieved by the Order dated 3 rd December 2007 passed by the Commissioner of Income tax (Appeals) VII, Mumbai (hereinafter referred to as CIT(A)), under Section 250 of the Income-tax Act 1961, Rushabh Precision Bearings Ltd. Mumbai (hereinafter referred to as Appellant) hereby submits the following grounds of appeal for your kind and sympathetic consideration: 1. On the facts and in the circumstances of the case and in law the Appellant contends that the learned CIT(A) erred in confirming the disallowance made by the Assistant Commissioner of Income Tax -7(2), Mumbai with regard to the Appellant's claim of depreciation of Rs. 12.40,161, for the reason that no manufacturing activity was carried out during the year. 2. On the facts and in the circumstances of the case and in law the Appellant contends that the learned CIT(A) erred in confirming the disallowance made by the Assistant Commissioner of Income Tax -7(2), Mumbai with regard toe Appellant's claim of deferred tax adjustment Rs. 8,64,623 for the reason that no details were furnished at the time of the hearing. 3a. On the facts and in the circumstances of the case and in law the Appellant contends that the learned CIT(A) erred in confirming the disallowance made by the Assistant Commissioner of Income Tax -7(2), Mumbai with regard to the Appellant's claim of Bad debts of Rs.10,86,96,928, treating the claim of Bad debts written off by the Appellant as an erroneous claim. 3b. On the way of facts and circumstances of the case, the A.O. and CIT (A) has failed to appreciate that the bad debts claimed has been written off in the books of accounts and the condition section 36 are fulfilled. Rushabh Precision Bearings ITA No.3270/Mum./2018 Page | 3 4. That the additions and disallowances made by A.O. and upheld by the CIT(A) are illegal, bad in law and without jurisdiction. 5. That the order passed by CIT (A) is without giving reasonable and proper opportunity of being heard to the Appellant. 6. In the view of the case and circumstances of the case this appeal was presented by the sufficient cause for not appearing and filling the submission of documents of appeal. 4. The present appeal is filed along with an application seeking condonation of delay in filing the present appeal. The condonation application is supported by an affidavit of Shri Rajesh Vora, Chairman and Managing Director of the assessee company. In the affidavit, it has been submitted that the impugned order passed by the learned CIT(A) was received by the company in January 2008 and the present appeal was filed on 16/05/2018. Thus, there is a delay of 10 years in filing the present appeal. It has further been submitted that effective premises of the assessee at Wadhwan, Gujarat, where all the papers on records are maintained, was under attachment by Labour Authorities and Provident Fund Authorities, since the year 2004. Due to an ongoing labour dispute with the workers‟ union, the workers were not allowing any one from the management to enter the factory premises because of which the assessee could not produce any records before the lower authorities. It is further submitted that the said dispute went up to the Hon‟ble Supreme Court in August 2007. It has further submitted that Winding Up petition being Company Petition No. 18 of 1998 was filed against the company before the Hon‟ble High Court of Bombay in the year 1998. Thereafter, pursuant Rushabh Precision Bearings ITA No.3270/Mum./2018 Page | 4 to the Winding Up order dated 30/03/2010 passed by the Hon‟ble High Court, Official Liquidator was appointed. Subsequently, the winding up order was recalled in February 2018 and Official Liquidator handed over the position of the premises to the management in April 2018 and only thereafter the present appeal was filed on 16/05/2018. It has further been submitted that during this period, assessee‟s promoters/directors were also declared insolvent by the appropriate Authorities, making it difficult for the assessee to pursue any assessments/appeals. In view of the fact that the assessee was under financial distress since 1998, which finally got over in 2018 and regular business of the company started from April 2018 onwards, assessee prayed that the delay of 10 years in filing the present appeal be condoned. In support of its submissions made in the affidavit, assessee has also submitted copies of minutes recorded at the time of handing over opposition of factory premises, copies of various orders passed by the Hon‟ble High Court in respect of the winding up proceedings in the case of the assessee as well as orders passed by concerned authority in respect of the labour dispute. 5. The learned DR vehemently opposed the request for condonation of huge delay of 10 years in filing the present appeal. 6. We have considered the submissions and carefully perused the application seeking condonation of delay along with supporting affidavit as well as other annexure filed by the assessee. From the perusal of record, Rushabh Precision Bearings ITA No.3270/Mum./2018 Page | 5 it is evident that winding up proceedings against the assessee was initiated in the year 1998 and winding up petition being Company Petition No. 18 of 1998 was filed before the Hon‟ble Bombay High Court. We find that the said Company Petition was allowed by the Hon‟ble High Court vide order dated 30/03/2010 and the Hon‟ble High Court also directed appointment of liquidator vide said order. Finally, vide order dated 05/02/2018, Hon‟ble High Court recalled its earlier order dated 30/03/2010 and also discharged Official Liquidator appointed pursuant to the said order. Thereafter, the Official Liquidator handed over the position of the factory and other assets to the management in April 2018 and only subsequent thereto the present appeal was filed on 16/05/2018. At this stage, it is relevant to note certain provisions of Companies Act, 1956, which was in existence at the time of filing of winding up petition before the Hon‟ble High Court. Part VII of the Companies Act, 1956 deals with provisions pertaining to winding up of a company. Chapter II of Part VII further deals with provisions pertaining to winding up by the Court. As per section 457(1)(a) of the Companies Act, 1956, Liquidator shall have the power, with the sanction of the Court, to institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company. Further, it is pertinent to note the provisions of section 446 of the Companies Act, 1956, which reads as under: “(1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, Rushabh Precision Bearings ITA No.3270/Mum./2018 Page | 6 shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose.” Thus, as per section 446 of the Companies Act, 1956, when the winding up order is passed by the Court, no suit or other legal proceedings, inter-alia, shall be commenced against the company, except with the leave of the Court. The term „suit or other legal proceeding’ used in Section 446 of the Companies Act, 1956 is wide enough to even include within its ambit the present appeal. While dealing with the issue, whether such a leave/permission is required to be taken prior to initiation of proceedings, Hon‟ble jurisdictional High Court in Erach Boman Khavar vs. Tukaram Sridhar Bhat, [2008] 81 SCL 416 (BOM.), observed as under: “33. Having heard learned counsel appearing for the parties, the first contention which needs consideration is: whether failure to obtain permission prior to institution of suit debars the Court from granting such leave subsequently. This question has already been answered by the Apex Court in the case of Bansidhar Shankarlal (supra) and reiterated by the Apex Court in the recent judgment in the case of State of Jammu & Kashmir (supra) wherein the Apex Court held that the failure to obtain leave prior to institution of suit would not debar the Court from granting such leave subsequently and that the only consequence of this would be that the proceedings would be regarded as having been instituted on the date on which the leave was obtained from the High Court. 7. It is further pertinent to note that the provisions of section 458A of the Companies Act, 1956, which reads as under: “Notwithstanding anything in the Indian Limitation Act, 1908 (9 of 1908) or in any other law for the time being in force, in computing the period of limitation prescribed for any suit or application in the name and on behalf of a company which is being wound up by the Court, the period from the date of commencement of the winding up of the company to the date on which the winding up order is made (both inclusive) and a period of one year immediately following the date of the winding up order shall be excluded.” Rushabh Precision Bearings ITA No.3270/Mum./2018 Page | 7 Thus, period from the date of commencement of the winding up of the company to the date on which winding up order is passed by the Court and a further period of one year from the date of winding up order, is excluded for the purpose of computation of limitation period for any suit or application in the name and on behalf of the company. While interpreting section 458A of the Companies Act, 1956, Hon‟ble jurisdictional High Court in M. Thankamani vs. Official Liquidator, [1996] 85 COMP CASE 318 (Bombay), observed as under: “In our opinion, under section 458A, no new cause of action arises in favour of the official liquidator. The cause of action accrued in favour of the company enures for the benefit of the official liquidator. Section 458A of the Companies Act on its plain reading shows how and to what extent the period is to be excluded and that the period is only from the commencement of the winding up proceedings to the passing of the winding up order and one year thereafter. It nowhere provides that the limitation once started would come to an end forever. The limitation started under the Limitation Act would continue subject to the exclusion of the period mentioned under section 458A.”. 8. In view of the above legal position, we will analyse some of the relevant facts as stated in the affidavit supporting the application seeking condonation of delay. In the present case, winding up petition was filed against the company in the year 1998 and the winding up order was ultimately passed by the Hon‟ble High Court on 30/03/2010. Thus, even if the provisions of section 458A of the Companies Act 1956 are said to be applicable to present case, the period from filing of the winding up petition till 30/03/2010 and a further period of one year from the date of Rushabh Precision Bearings ITA No.3270/Mum./2018 Page | 8 winding up order i.e. till 30/03/2011, can be the excluded for the purpose of computation of limitation period of present appeal. In the present case, the impugned order by learned CIT(A) was passed on 03/12/2007. As the due date for filing the appeal against the aforesaid impugned order before the Tribunal was falling during the exclusion period, as stated in section 458A of the Companies Act, 1956, in our considered view, the limitation period in the present case started from 31/03/2011. However, the present appeal was filed by the assessee on 16/05/2018, i.e. after a more than 7 years from 31/03/2011. Further, in the present case, despite the cause of action having arisen after passing of the impugned order by learned CIT(A) and Official Liquidator also having power to initiate proceedings in the name of and on the behalf of the assessee, with the leave of the Court, no action was taken for filing the appeal against the impugned order. Further, section 446 of the Companies Act, 1956 only stays the commencement or continuation of any suit or other legal proceeding, except with the leave of the Court, inter-alia, after passing of the winding up order. The entire purpose or the scheme behind this section is to protect the company, if the order of winding up is made or a provisional liquidator is appointed, so that the Court itself, if possible, disposes of the matters pertaining to the assets and properties of the company. However, neither in the application nor in the affidavit supporting the same there is any claim or any supporting document that the Hon‟ble Court was approached for such permission on behalf of the Rushabh Precision Bearings ITA No.3270/Mum./2018 Page | 9 assessee. From the facts stated in the affidavit, it is evident that the assessee initiated the process of filing appeal against the impugned order only after the Official Liquidator handed over the position of factory and other assets to the management of the assessee, pursuant to recall of winding up order dated 30/03/2010 by the Hon‟ble High Court. 9. Thus, in view of above and in the facts and circumstances of the present case, we are of the considered view that the assessee has failed to prove any sufficient cause for not preferring the appeal within the limitation period. As a result, appeal by the assessee is barred by limitation and therefore, is dismissed. As we are dismissing the appeal on the ground of delay, the issues raised in the grounds of appeal are kept open for adjudication, if they arise in assessee‟s case in future. 10. In the result, appeal by the assessee is dismissed. Order pronounced in the open court on 21/06/2022 Sd/- PRAMOD KUMAR VICE PRESIDENT Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 21/06/2022 Rushabh Precision Bearings ITA No.3270/Mum./2018 Page | 10 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai