Adithiya Construction Material Pvt. Ltd. (Formerly known as Meld Chemicals P. Ltd.), CHENNAI V. ITO, CHENNAI

ITA 446/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77390 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 10-06-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 14-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Recovery proceedings; Additional evidence; Reasonable cause; Right to appeal; Condonation of delay
• Section: 142(1); 147; 148; 37; 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NOS. 443 TO 446/MDS/2013 ( / ASSESSMENT YEARS: 2002-03 & 2003-04) M/S. ADITHIYA CONSTRUCTION MATERIAL PVT. LTD., (FORMERLY KNOWN AS MELD CHEMICALS P.LTD.) F-53, SIPCOT INDL. ESTATE, GUMIDIPOONDI-601 201. VS INCOME TAX OFFICER, COMPANY CIRCLE-IV(1), AAYAKAR BHAVAN, CHENNAI-34. PAN: AACCM4976C ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. T.N.SEETHARAMAN, ADVOCATE /RESPONDENT BY : MR. S.DAS GUPTA, JCIT / DATE OF HEARING : 10 TH JUNE, 2014 /DATE OF PRONOUNCEMENT : 17 TH JULY, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: ALL THESE FOUR APPEALS ARE FILED BY THE ASSESSEE AG AINST COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, CHENNAI DATED 30.11.2012 FOR THE ASSESSMENT YEARS 2002-03 & 2003-04 ARISING OUT OF T HE ASSESSMENT ORDERS PASSED UNDER SECTION 144 READ WIT H SECTION 147 AND 271(1)(C) OF THE ACT. THE ASSESSE E CHALLENGES THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN NOT CONDONING DELAY IN NON-PAYMENT OF ADVANCE 2 ITA NO. 443 TO 446/MDS/2013 TAX SUSTAINING ADDITIONS ON MERITS AND ALSO CONFIR MING LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 2. COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSEE FILED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPE ALS) AGAINST ASSESSMENT ORDERS PASSED UNDER SECTION 144 READ WITH SECTION 147 AND ALSO ORDERS PASSED UNDER SECTI ON 271(1)(C) OF THE ACT FOR THE ASSESSMENT YEARS 2002- 03 AND 2003-04. COUNSEL SUBMITS THAT APPEALS WERE FILED B EFORE THE COMMISSIONER OF INCOME TAX (APPEALS) WITH DELAY FOR WHICH PETITION PRAYING FOR CONDONATION OF DELAY WAS FURNI SHED BEFORE HIM. COUNSEL FURTHER SUBMITS THAT SINCE ASSESSEE D ID NOT PAY ADVANCE TAX PETITION UNDER PROVISO TO SECTION 249(4 ) WAS ALSO FILED BEFORE THE COMMISSIONER OF INCOME TAX (A PPEALS) REQUESTING TO CONDONE THE DELAY IN NON-PAYMENT OF A DVANCE TAX AND ADMIT THE APPEAL FOR HEARING AND DECIDING T HE SAME ON MERITS. 3. AS FAR AS NON-PAYMENT OF ADVANCE TAX IS CONCERNE D, COUNSEL SUBMITS THAT ASSESSEE DID NOT CARRY ON ANY MANUFACTURE OR TRADING ACTIVITIES AND ITS FACTORY PREMISES AT F-53, SIPCOT COLONY, GUMIDIPOONDI AND REMAINS CLOSE D. 3 ITA NO. 443 TO 446/MDS/2013 COUNSEL SUBMITS THAT ASSESSEE HAD CONTENDED THAT IT ACTED AS A CONDUIT FACILITATOR FOR BUSINESS TRANSACTIONS OF CERTAIN MUMBAI PARTIES AND THAT THE MONIES DEPOSITED IN THE TWO BANK ACCOUNTS DID NOT BELONG TO AND WERE NOT RELATE D TO ANY BUSINESS TRANSACTION OF THE ASSESSEE COMPANY. THERE WAS ALSO CHANGE IN SHAREHOLDING AND DIRECTORS OF THE CO MPANY IN FEBRUARY, 2003. THE COMPANY HAD ALSO NO STAFF FOR MAINTENANCE OF ACCOUNTS AND FOR STATUTORY COMPLIANC E. COUNSEL SUBMITS THAT IN THE ABSENCE OF ANY MANUFACT URING OR TRADING ACTIVITIES THERE IS NO INCOME LIABLE TO TAX AND THERE WERE ONLY LOSSES ON ACCOUNT OF TAXES, FIXED MINIMUM ELECTRICITY CHARGES ETC. IN SUCH CIRCUMSTANCES, THE RE WAS NO LIABILITY TO PAY ADVANCE TAX BY THE ASSESSEE, HENCE THERE IS GOOD AND SUFFICIENT REASON FOR NOT PAYING ANY AMOUN T OF ADVANCE TAX. HOWEVER, THE COMMISSIONER OF INCOME TA X (APPEALS) DID NOT CONDONE THE DELAY FOR NON-PAYMENT OF ADVANCE TAX IN EXERCISE OF POWERS CONFERRED ON HIM UNDER PROVISO 249(4) OF THE ACT. 4. AS FAR AS CONDONATION OF DELAY IN FILING OF APPE ALS IS CONCERNED, REFERRING TO THE PETITION FILED BEFORE T HE 4 ITA NO. 443 TO 446/MDS/2013 COMMISSIONER OF INCOME TAX (APPEALS) COUNSEL REITER ATES THE CONTENTIONS AS UNDER:- THE ASSESSEE COMPANY THOUGH INCORPOR ATE D ON 13.12.1999, DUE TO ADVERSE MARKET CONDITIONS, IT DID NOT CARRY ON A NY M ANUFA C T URE OR TRADING ACTIVITIES AND ITS FACTORY PREMISES AT F-5 3, SIPCOT COM PLEX, GUMDIPOONDI CHENNAI REMAINS CLOSED. THERE WAS A CHANGE IN THE SHAREHO LDING AN D DIRECTORS OF THE COMPANY IN FEBRUARY 2003. SRI S . HARI NARAYANAN AND S RI . C . J . R A JESH JOINED AS DIRECTORS OF THE COMPANY FROM 17 . 02.2003 AND SRI . M . GOM ATHI S ANKAR AND SRI . S . SURENDRANATHAN RESIGNED AS DIRECTORS ON 28 . 02 . 2003 . THE COM PANY ALSO HAD NO STAFF FOR MAINTENANCE OF ACCOUNTS AND FOR STATUTORY C OMPLIAN CES . IT APPEARS THAT THE INCOME TAX OFFICER, CO MPANY W ARD IV(1), CHENNAI HAD ISSUED NOTICE U/S 148 ON 16.06 . 2005 . THE NOTICE WAS SE RVED BY AFFIXTURE. NOTICES U/S 143(2) AND 142(1) IS SUED ON 06.01.2006 WERE ALS O SERVED BY AFFIXTURE AT THE ADDRESS OF M/S AB L E ADDS , THE BUSINESS P REMISES O F SRI.S.SURENDRANATHAN, WHO CEASED TO BE A DIRECTOR OF THE COMPANY THR EE YE AR S EARLIER . THE ASSESSMENT WAS COMPLETED U/S 144 R.W . S 147 ON 01 . 03.2006 AND TH E ASSESSMENT ORDER AND NOTICE OF DEMAND WAS SERVED A T THE ADDRESS OF M / S ABLE AD DS. TH E NOTICE S ISSUED U/S 148, 143(2) AND 142( 1) DID NOT COME TO THE KNOWLEDGE OF T HE PRESEN T DIRECTORS, WHO WERE INFORMED OF THE EXPARTE ASSESSM E NT ORDER ONLY IN A UGUST 2 007, WHEN RECOVERY PROCEEDINGS WERE IN I TIATED AGAINST THE ERSTWHILE DIRECTORS. T HE PETITIONER/APPELLANT HAS THEREAFTER OBTAINED PROFES SIONAL ADVICE A ND HAS FILED THE APPEAL . THE PETITIONER/APPELLANT H UMBLY SUBMITS T HAT THE DEL AY I N FILING THE APPEAL OCCURRED UNDER THE CIRCUMSTANCE S NARRATED ABOVE AND IS BON AFIDE. THE PETITIONER/APPELLANT SUBMITS THAT THERE ARE NO LACHES ON ITS PA RT 5 ITA NO. 443 TO 446/MDS/2013 THE COUNSEL SUBMITS T H AT THE AP PEAL INVO L VES LARGE AMOUNTS AND THE PETITIONER WOU L D BE PUT T O GREAT H ARDSHIP AN D SUFFER I NG IF THE VALUABLE RIGHT OF APPEAL IS DENIED . 5. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT COMMISSIONER OF INCOME TAX (APPEALS) HAVING ADJUDIC ATED THE APPEALS ON MERITS AND CONFIRMING ADDITIONS MADE IN THE ASSESSMENTS AND PENALTY LEVIED UNDER SECTION 271(1) (C) OF THE ACT WENT WRONG IN NOT CONDONING THE DELAY IN FI LING OF APPEALS BY THE ASSESSEE. COUNSEL FOR THE ASSESSEE PLACING RELIANCE ON THE JURISDICTIONAL HIGH COURT IN THE CA SE OF VIJAYESWARI TEXTILES LTD. VS. CIT (256 ITR 560) SUB MITS THAT JURISDICTIONAL HIGH COURT HELD THAT THE TRIBUNAL IS IN ERROR IN NOT CONDONING THE DELAY WHEN IT HAD CONSIDERED THE MATTER ON MERITS AND REJECTED THE APPEAL ON MERITS. 6. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDERS OF LOWER AUTHORITIES IN NOT CONDONING THE DE LAY BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND SUSTAINING THE ADDITIONS AND THE PENALTY UNDER SECTION 271(1)(C) O F THE ACT. 6 ITA NO. 443 TO 446/MDS/2013 7. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND SUBMISSIONS MADE BEFORE US. IN THE COURSE OF HE ARING COUNSEL FOR THE ASSESSEE WITH REGARD TO THE ADDITI ONS MADE AND SUSTAINED BY THE COMMISSIONER OF INCOME TAX (AP PEALS) IN THESE TWO ASSESSMENT YEARS FURNISHED ADDITIONAL EVIDENCES ALONG WITH PETITION UNDER RULE 29 OF THE INCOME- TAX APPELLATE TRIBUNAL RULES AND PRAYS FOR ADMISSI ON OF THE SAME AS THESE EVIDENCES COULD NOT BE PRODUCED BEFOR E THE LOWER AUTHORITIES. THE ADDITIONAL EVIDENCES CONSIST OF THE FOLLOWING:- 1) PROCEEDINGS OF THE COMMERCIAL TAX OFFICER, KILPAUK ASSESSMENT CIRCLE DATED 29.1.2010 IN ITS CASE FOR SALES TAX ASSESSMENT FOR 2001-02 AND 2002-03 UNDER THE TAMIL NADU GENERAL SALES TAX ACT. 2) ORDER U/S.33(6B) OF BOMBAY SALES TAX ACT, 1959 DATED 29.3.2006 PASSED BY THE ASSISTANT COMMISSIONER OF SALES TAX (E-205) ENFORECEMENT BRANCH, MUMBAI IN THE CASE OF M/S. J.K.PETROCHEMICAL INDUSTRIES FOR THE PERIOD 7 ITA NO. 443 TO 446/MDS/2013 1.4.2001 TO 31.3.2002 AND 1.4.2002 TO 30.3.2003. 3) TRADING AND PROFIT AND LOSS ACCOUNT OF THE PETITIONER/APPELLANT FOR THE YEARS ENDED 31.3.2002 AND 31.3.2003. THE ASSESSEE ALSO FURNISHED REASONS AS TO WHY THESE EVIDENCES COULD NOT BE PRODUCED BEFORE THE LOWER AU THORITIES AND REQUESTED THE TRIBUNAL TO ADMIT THE ADDITIONAL EVIDENCES. 8. WE HAVE GONE THROUGH THE PETITION FOR ADMISSION OF ADDITIONAL EVIDENCES AND THE ADDITIONAL EVIDENCES P RODUCED BEFORE US AND FIND THAT THE SAME COULD NOT BE FURN ISHED BEFORE THE LOWER AUTHORITIES ON JUSTIFIABLE REASON. THEREFORE, WE ADMIT THE ADDITIONAL EVIDENCES. WE ALSO FIND THA T THE COMMISSIONER OF INCOME TAX (APPEALS) ADJUDICATED TH E ISSUES ON MERITS AFTER CALLING FOR REMAND REPORT FR OM THE ASSESSING OFFICER CONFIRMING THE ADDITIONS AND THE PENALTY LEVIED UNDER SECTION 271(1)(C) ON THE ONE HAND AND ON THE OTHER HAND HE DID NOT CONDONE THE DELAY IN FILING T HE APPEALS BY THE ASSESSEE. 8 ITA NO. 443 TO 446/MDS/2013 9. ON A PERUSAL OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VIJAYESWARI TEXTILES LTD. (SUPRA), WE F IND THAT THE HONBLE HIGH COURT CONSIDERED A SITUATION WHERE THE TRIBUNAL WITHOUT CONDONING THE DELAY ADJUDICATED THE ISSUE O N MERITS AND DECIDED AGAINST THE ASSESSEE. IN SUCH A SITUAT ION, THE HONBLE HIGH COURT HELD THAT TRIBUNAL IS IN ERROR I N NOT CONDONING THE DELAY AND ALSO FELL IN ERROR IN ADJUD ICATING THE ISSUE ON MERITS OBSERVING AS UNDER:- THE TRIBUNAL HAS EVEN WHILE PURPORTING TO REJECT T HE APPEAL ON THE GROUND THAT IT WAS BARRED BY LIMITATI ON PROCEEDED TO CONSIDER THE MERITS OF THE CASE ELABORATELY AND HAS REJECTED THE APPEAL ON THE MERI TS AS WELL. IT IS EVIDENT THAT THE TRIBUNAL, WHILE HO LDING THAT THE DELAY WAS NOT CONDONABLE, WAS ITSELF NOT CONVINCED THAT THE APPEAL SHOULD BE REJECTED ON THA T GROUND. THE REASON FOR SEEKING CONDONATION OF DELAY WAS THE DEATH OF THE SENIOR ASSISTANT OF THE COMPAN Y, WHO WAS IN CHARGE OF INCOME-TAX WORK AND WHO DIED SHORTLY AFTER THE RECEIPT OF THE ORDER WHICH WAS TO BE APPEALED AGAINST, WHICH EVEN WAS A LITTLE LATER FOLLOWED BY THE DEMISE OF THE MOTHER OF THE AUTHORIZED REPRESENTATIVE OF THE COMPANY. THE CIRCUMSTANCES WERE SUFFICIENT TO CONDONE THE DELAY, THE DELAY BEING A PERIOD OF ABOUT 60 DAYS IN FILING THE APPEAL. IT IS NOT IN DISPUTE THAT THE TRIBUNAL HAS POWER TO CONDONE THE DELAY. THE TRIBUNAL HAS PROCEEDED TO CONSIDER THE CASE ON THE MERITS, WE CONSIDER IT TO BE IN THE INT EREST OF JUSTICE THAT WE SHOULD EXAMINE THE CORRECTNESS O F THEIR FINDING WHICH IS ALSO ONE OF THE QUESTIONS REFERRED TO US. 9 ITA NO. 443 TO 446/MDS/2013 WE THEREFORE HOLD THAT THE TRIBUNAL WAS IN ERROR IN NOT CONDONING THE DELAY AND THAT IT WAS AL SO IN ERROR IN HOLDING THAT THE ADDITIONAL BONUS OF TH REE PER CENT COULD NOT BE CLAIMED AS EXPENDITURE UNDER SECTION 37 OF THE ACT. MATTERS RELATING TO CONDONATION OF DELAY ARE INDEED DISCRETIONARY AND ARE NORMALLY LEFT TO THE TRIBUNAL AND THIS COURT WILL NOT ORDINARILY INTERF ERE WITH THE DISCRETION. IN THIS CASE, AS WE HAVE ALREA DY POINTED OUT THE TRIBUNAL DID NOT STOP WITH THE ORDE R DECLINING TO CONDONE THE DELAY BUT CONSIDERED THE MATTER ON MERITS AND HAS PRACTICALLY TREATED THE APPEAL AS BEING PROPERLY BEFORE IT AND HAS ANSWERED THE QUESTION BROUGHT BEFORE IT WITH REFERENCE TO TH E MATERIAL PLACED ON RECORD. IT IS, IN THE CIRCUMSTAN CES, WE HOLD THAT THE TRIBUNAL WAS IN ERROR IN NOT CONDONING THE DELAY. THE QUESTION REGARDING THE CORRECTNESS OF THE TRIBUNALS HOLDING THAT THE DELA Y IS NOT TO BE CONDONED IS THEREFORE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE QUESTION REGARDING THE CORRECTNESS OF THE TRIBUNAL S HOLDING ON THE ALLOWABILITY OF THE ADDITIONAL AMOUN TS PAID AS BONUS IS ALSO ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 10. ON GOING THROUGH THE PETITION FILED BY THE ASSE SSEE FOR CONDONATION OF DELAY IN FILING THE APPEALS AS WELL AS PETITION FILED UNDER PROVISO TO SECTION 249(4) FOR NON-PAYME NT OF ADVANCE TAX, WE FIND THAT ASSESSEE HAS A REASONABLE CAUSE IN NOT FILING THE APPEAL IN TIME AND PAYING ADVANCE TAX. SINCE THERE IS REASONABLE CAUSE IN NOT FILING THE APPEALS IN TIME AND ALSO IN VIEW OF THE DECISION OF THE HONBLE JURISDI CTIONAL HIGH COURT CITED ABOVE, WE CONDONE THE DELAY IN FILING O F APPEALS AND RESTORE THE APPEALS TO THE FILE OF THE COMMISSI ONER OF 10 ITA NO. 443 TO 446/MDS/2013 INCOME TAX (APPEALS) TO ADJUDICATE THE ISSUES AFRES H ON MERITS TAKING INTO CONSIDERATION THE ADDITIONAL EVI DENCES PRODUCED BY THE ASSESSEE BEFORE US. THUS, WE SET AS IDE THE IMPUGNED ORDER AND RESTORE ALL THESE APPEALS TO THE FILE OF THE COMMISSIONER OF INCOME TAX (APPEALS) TO CONSIDER TH E ISSUES ON MERITS AFTER PROVIDING ADEQUATE OPPORTUNI TY TO THE ASSESSEE. 11. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY, THE 17 TH DAY OF JULY, 2014 AT CHENNAI. SD/- SD/- ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDR A PRASAD ) . ( ' )* ) ACCOUNTANT MEMBER / , JUDICIAL MEMBER/ ) , ) /CHENNAI, - /DATED, 17 TH JULY, 2014 SOMU /0 10 /COPY TO: 1. APPELLANT (SHRI. T.N.SEETHARAMAN, ADVOCATE, 384 (O LD NO.196) LLOYDS ROAD, CHENNAI-86. 2. /RESPONDENT 3. 2 () /CIT(A) 4. 2 /CIT 5. 0 6 /DR 6. /GF .