M/s Sewak Ice & Cold Storage, Hathras V. Dy. C.I.T.,Circle-3(1), Etah

ITA 457/AGR/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60160 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-06-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 10-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Unexplained investment; Income from undisclosed sources; Opportunity of being heard; Peak credit; Period of limitation; Condonation of delay
• Section: 68; 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 456 & 457/AGRA/2010 ASSTT. YEAR : 2003-04 M/S. SEWAK ICE & COLD STORAGE (P) LTD., VS. D.C.I. T., CIRCLE 3(1), RAM LILA GROUND, SADABAD, HATHRAS. ETARH. (PAN : AAHCS 7242 L) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ GARGH, ADVOCATE. RESPONDENT BY : SHRI WASEEM ARSHAD, SR. D.R. DATE OF HEARING : 21.06.2012 DATE OF PRONOUNCEMENT OF ORDER : 22.06.2012 ORDER PER BHAVNESH SAINI, J.M.: BOTH THE APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST DIFFERENT ORDERS OF LD. CIT(A), GHAZIABAD DATED 22.10.2010 FOR THE ASSESSME NT YEAR 2003-04. 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED TH E MATERIAL AVAILABLE ON RECORD. BOTH THE APPEALS ARE DECIDED SEPARATELY AS UNDER : ITA NO. 456/AGRA/2010 ITA NO. 456 & 457/AGRA/2010 2 3. THIS APPEAL IS FILED ON THE FOLLOWING GROUNDS : 1. BECAUSE THE LD. CIT(A) HAS WRONGLY, ILLEGALLY A ND ARBITRARILY CONFIRMED THE ADDITION OF THE ENTIRE CR EDITS IN BANK ACCOUNT IN THE INCOME AS UNEXPLAINED DEPOSITS. 2. BECAUSE THE ENTIRE DEPOSITS IN BANK ACCOUNT HAV E BEEN ADDED AS UNEXPLAINED DEPOSITS. THE DEPOSITS IN BANK WHETH ER ADMITTED BY THE APPELLANT OR TREATED BY THE ASSESSING OFFICER AS UN EXPLAINED DO NOT MAKE ANY DIFFERENCE. 3. BECAUSE UNDER THE FACTS AND CIRCUMSTANCES OF TH E CASE ONLY THE PEAK CREDIT IN THE BANK ACCOUNT COULD HAVE BEEN ADDED IN THE INCOME OF UNEXPLAINED DEPOSIT. THE REST OF THE DEPO SIT BEING COVERED FROM PREVIOUS WITHDRAWAL CANNOT BE ADDED IN INCOME AS UNEXPLAINED DEPOSITS. 4. THE FACTS OF THE CASE ARE THAT ORIGINAL ASSESSME NT ORDER WAS PASSED U/S. 144 OF THE IT ACT ON DATED 26.04.2005 AND THE ADDITION UNDER CONSIDERATION WAS MADE IN A SUM OF RS.35,03,011/- ON ACCOUNT OF UNEXPLAINE D DEPOSITS IN THE BANK ACCOUNT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA D MADE DEPOSITS IN DIFFERENT DATES OF BANK DRAFTS AGGREGATING TO RS.35,03,011/-. THE BOOKS OF ACCOUNT WERE NOT PRODUCED BEFORE THE AO DESPITE ISSUE OF STATUTORY N OTICE. THEREFORE, THE AMOUNT OF DRAFTS OF RS.35,03,011/- WAS ADDED TO THE TOTAL INC OME U/S. 69 OF THE IT ACT. THE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A) WHO H AS, VIDE ORDER DATED 07.12.2005, CONFIRMED THE ADDITION. THE MATTER REAC HED BEFORE THE TRIBUNAL IN ITA NO. 16/AGRA/2006 AND VIDE ORDER DATED 25.05.2007, T HE TRIBUNAL CONFIRMED THE ADDITION ON ACCOUNT OF UNEXPLAINED DEPOSIT IN THE B ANK ACCOUNT FOR LACK OF ITA NO. 456 & 457/AGRA/2010 3 EVIDENCE. HOWEVER, WITH REGARD TO ALTERNATE CLAIM O F THE ASSESSEE BEFORE THE LD. CIT(A) THAT ONLY PEAK AMOUNT CAN BE SUBJECTED TO TA X AS UNEXPLAINED INVESTMENT, THE TRIBUNAL FOUND THAT THIS PLEA HAS NOT BEEN EXAM INED BY THE LD. CIT(A) AND NO ORDER HAS BEEN PASSED THEREON. ACCORDINGLY, FOR LIM ITED PURPOSE, THE MATTER WAS REMANDED TO THE LD. CIT(A), SO THAT HE CAN EXAMINE THE CLAIM OF PEAK ADDITION AND THE LD. CIT(A) WAS DIRECTED TO DECIDE THE ALTERNATE CLAIM IN ACCORDANCE WITH LAW BY GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE RELEVANT FINDING OF THE TRIBUNAL HAVE BEEN INCORPORATED IN PARA 2.2 OF THE APPELLATE ORDER AND THE COPY OF TRIBUNAL ORDER DATED 25.05.2007 HAS BEEN FI LED AT PAGE 1 TO 10 OF THE PAPER BOOK AND RELEVANT FINDING OF THE TRIBUNAL ARE NOTED IN PARA 20 OF THE ORDER OF THE TRIBUNAL. THE LD. CIT(A) TOOK UP THE MATTER AND ASS ESSEES COUNSEL SUBMITTED BEFORE HIM THAT THE ASSESSEE SUBMITTED THE STATEMEN T TO THE AO, BUT THE ASSESSEE WAS NOT REQUIRED TO EXPLAIN THE CREDITS IN THE BANK ACCOUNT. IN THE BANK ACCOUNT FROM THE ASSESSEES ACCOUNT BOOKS, NAMES OF THE PAR TIES ON WHOSE BEHALF DRAFTS WERE RECEIVED ARE MENTIONED. COPIES OF THE ACCOUNTS OF THE PARTIES, IN WHICH DRAFTS WERE CREDITED AND ACCOUNTED FOR, HAVE BEEN FILED. T HUS, THE CREDITS IN THE BANK ACCOUNT ARE FULLY PROVED AND EXPLAINED. THE PEAK CR EDIT IN THE BANK ACCOUNT IS OF RS.2,23,163.57 AS ON 14.06.2002 (PB-12). COPY OF TH E BANK STATEMENT AND PEAK CREDIT WAS SUBMITTED BEFORE THE LD. CIT(A) FOR VERI FICATION. THE LD. CIT(A) DISCUSSED THE ISSUE WITH THE LD. COUNSEL FOR THE AS SESSEE AT THE APPELLATE STAGE AND ITA NO. 456 & 457/AGRA/2010 4 HE WAS ASKED WHETHER THE ASSESSEE ACCEPTS THAT CRED ITS APPEARING IN THE BANK STATEMENT AND WITHDRAWALS / CLEARANCE FROM THAT WOU LD REPRESENT ASSESSEES UNACCOUNTED INCOME ? TO THIS QUESTION, THE LD. COUN SEL FOR THE ASSESSEE HAS REPLIED THAT THE ASSESSEE DID NOT ACCEPT THAT THESE CREDIT ENTRIES REPRESENT THE ASSESSEES UNACCOUNTED INCOME. 4.1 THE LD. CIT(A), CONSIDERING THE EXPLANATION OF THE ASSESSEE AND THE MATERIAL ON RECORD DID NOT ACCEPT THE CLAIM OF ASSESSEE OF P EAK ADDITION AND CONFIRMED THE ADDITION BY FOLLOWING THE DECISION OF JURISDICTIONA L ALLAHABAD HIGH COURT IN THE CASE OF BHAIYALAL SHYAM BEHARI, 276 ITR 38. THE FIN DINGS OF THE LD. CIT(A) IN PARA 5 TO 6 ARE REPRODUCED AS UNDER : 5. HAVING CAREFULLY CONSIDERED THE RELEVANT ASPECTS OF THIS CASE AND ALSO THE LEGALITY IN RESPECT OF PEAK THEOR Y, I AM OF THE VIEW THAT THE APPELLANTS ALTERNATE CLAIM OF PEAK CREDIT IS NOT ACCEPTABLE. 5.1 ON THE PEAK CREDIT THEORY, THE LEGAL POSITION IS AS UNDER : WHERE THERE IS MORE THAN ONE ITEM OF ADDITION, THE POSSIBILITY OF SUCH ADDITION BEING OVERLAPPING CANN OT BE RULED OUT. WHERE THERE ARE MANY CREDITS, ALL TREATED AS N ON-GENUINE, WITHDRAWAL FROM ONE ACCOUNT SHOULD BE TREATED AS AV AILABLE FOR CREDIT IN ANOTHER. SETTING OFF WITHDRAWALS AGAINST LATER CREDITS TO ARRIVE AT THE PEAK CREDIT IS A PERMISSIBLE EXERC ISE, IF THE ACCOUNTS ARE CONCEDED AS ASSESSEES OWN ACCOUNTS IN DIFFERENT NAMES. SIMILARLY, ADDITIONS FOR LOW GROSS PROFITS C AN BE GIVEN CREDIT FOR INVESTMENTS WITH SIMILAR SET OFFS BETWEE N ADDITIONS KNOWN AS TELESCOPING. BOTH THESE PRACTICES ARE RECO GNIZED IN PRECEDENTS UNDER THE INCOME TAX LAW. TELESCOPING HA S EVEN HAD JUDICIAL RECOGNITION IN ANANDTHARAM VEERASINGHA IAH & ITA NO. 456 & 457/AGRA/2010 5 CO. VS. CIT (1980) 123 ITR 457 (SC). THE SYSTEM OF LIMITING ADDITION TO PEAK CREDIT IN THE CASE OF CASH CREDITS HAS ALSO BEEN IN VOGUE. THE PRINCIPLE BEHIND BOTH THE CONCESSIONS IS THAT THE OVER ALL ADDITION CANNOT AMOUNT TO AN INCOME BEYOND , WHAT IS POSSIBLE. BUT THESE PRINCIPLES ARE NOT, HOWEVER, TO BE ACCEPTED ROUTINELY, AS FOR EXAMPLE, WHERE WITHDRAWAL MAY NOT BE AVAILABLE FOR REINTRODUCTION OR FOR MEETING EXPENDI TURE, IF THERE IS NO PROBABILITY OF SUCH AMOUNT CONTINUING TO BE A VAILABLE WITH THE ASSESSEE. IN BHAIYALAL SHYAM BEHARI VS. CIT (2005) 276 ITR 38 (ALL.), THE ASSESSEE CLAIMED THE BENEFIT OF PEAK CR EDIT. THE CLAIM WAS THAT THE DEPOSITS WERE GENUINE, SO THAT THE BEN EFIT OF PEAK CREDIT WAS AN ALTERNATIVE ONE. IT STANDS TO REASON THAT THE ADDITION COULD BE LIMITED TO PEAK CREDIT, AS BETWEE N THE CREDITS WHICH ARE NOT GENUINE. WHERE THE ASSESSEE CLAIMED T HEM TO BE GENUINE DEPOSITS, HE CANNOT IN THE SAME BREATH ASK FOR THE BENEFIT OF PEAK CREDIT ADDITION. THE TRIBUNALS FIN DING THAT THE BENEFIT CANNOT BE GIVEN IN SUCH A CASE WAS UPHELD B Y THE HIGH COURT ON THE GROUND, THAT THERE WAS NO INFIRMITY IN THE ORDER OF THE TRIBUNAL. THE DECISION APPEARS TO BRING THE PRI NCIPLE OF ESTOPPEL AGAINST THE ASSESSEE. 5.2, AS I HAVE ALREADY MENTIONED ABOVE, THE APPELL ANTS COUNSEL HAS TAKEN A STAND THAT THE CREDIT ENTRIES APPEARING IN THE BANK STATEMENT ARE NOT REPRESENTING APPELLANTS UNACCOUN TED MONEY AND THESE REPRESENT THE ADVANCE RECEIVED FROM DIFFERENT FARMERS. IN SUCH CIRCUMSTANCES, IF WE APPLY THE DISCUSSION MADE ABOV E AND THE RATIO OF THE JURISDICTIONAL HIGH COURT IN CASE OF BHAIYALAL SHYAM BEHARI (SUPRA) TO THE FACTS OF PRESENT CASE; IT GIVES INFE RENCE THAT THE ASSESSEE CANNOT BE GIVEN ADVANTAGE OF ITS ALTERNATIVE PLEA O F PEAK CREDIT. THERE IS NO CONVINCING EXPLANATION AS TO HOW THE ADVANCE RECEIVED FROM ONE FARMER CAN BE WITHDRAWN AND THEN GIVEN TO ANOTHER F ARMER FOR DEPOSIT WITH THE APPELLANT. 5.3. THEREFORE, ALL THE CREDITS HAVE TO BE TREATED AS UNEXPLAINED SEPARATELY AND THE ADDITION, AS MADE BY THE AO ON T HIS SCORE, STANDS CONFIRMED. 6. IN THE RESULT, THE APPEAL IS DISMISSED. ITA NO. 456 & 457/AGRA/2010 6 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND REFERRED TO THE ORDER OF THE TRIBUNAL DATED 25.05.2007, THROUGH WHICH THE MATTER WAS REMANDED TO THE LD. CI T(A) AFTER CONSIDERING THE THEORY OF PEAK ADDITION, COPY OF WHICH IS FILED AT PAGE 1 TO 10 OF THE PAPER BOOK. HE HAS FILED COPY OF BANK STATEMENT FROM PAGES 11 T O 17 OF THE PAPER BOOK AND SHOWN PEAK CREDIT AT PAGE 12 OF THE PAPER BOOK IN A SUM OF RS.2,23,163-57 AND SUBMITTED THAT THE AO MADE ADDITION U/S. 69 OF THE IT ACT AS PER PARA 21 OF THE ASSESSMENT ORDER AND SUBMITTED THAT IN THE CASE OF BHAIYA LAL SHYAM BEHARI (SUPRA), THE ADDITION WAS MADE U/S. 68 OF THE IT AC T. HE HAS FURTHER SUBMITTED THAT IN THE BANK ACCOUNT, DRAFTS HAVE BEEN DEPOSITED BY DIFFERENT PERSONS AND AMOUNTS WERE WITHDRAWN IN CASH. THEREFORE, THE ADDITION COU LD BE MADE ONLY OF PEAK AMOUNT. HE HAS RELIED UPON THE ORDER OF ITAT, AGRA BENCH IN THE CASE OF CHANDRABHAN BANSAL, 79 ITD 639 AND THE ORDER OF ITA T, AHMEDABAD BENCH IN THE CASE OF S.P. ENTERPRISES, 77 TTJ 69 ON THE PROPOSIT ION THAT PEAK ADDITION COULD BE MADE WHEN THE DETAILS ARE AVAILABLE OF THE FUNDS FR OM KNOWN SOURCES. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDER OF THE LD. C IT(A) AND SUBMITTED THAT SEVERAL DRAFTS WERE DEPOSITED IN THE BANK ACCOUNT OF THE AS SESSEE WHICH WERE NOT EXPLAINED BY THE ASSESSEE. THE IDENTITY AND THE SOURCE OF THE SAME WERE NOT EXPLAINED. THEREFORE, THE TRIBUNAL VIDE ORDER DATED 25.05.2007 CONFIRMED THE ADDITION OF ITA NO. 456 & 457/AGRA/2010 7 RS.35,03,011/- ON MERITS. HOWEVER, THE ISSUE OF PEA K CREDIT WAS REMANDED TO THE FILE OF THE LD. CIT(A) TO EXAMINE THE SAME AS PER L AW AND THE LD. CIT(A) EXAMINED THE ISSUE AS PER LAW BY FOLLOWING THE DECISION OF H ONBLE ALLAHABAD HIGH COURT ABOVE AND AS SUCH, THERE IS NO MERIT IN THE APPEAL OF THE ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE DEPOSITED SEVERAL BANK DRAFTS IN HIS BANK ACCOUNT TOTALING TO RS.35,03,011/- AND IDENTITY AND SOURCE OF THE SAME HAVE NOT BEEN EXPLAINED. THEREFORE, THE TRIBUNAL IN THE FIRST INS TANCE CONFIRMED THE ADDITION ON MERITS VIDE ORDER DATED 25.05.2007. THE ASSESSEE SU BMITTED BEFORE THE TRIBUNAL IN THE FIRST INSTANCE AS PER PARA 16 OF THE TRIBUNAL O RDER (PB-8) THAT THE NAMES OF PARTIES ON WHOSE BEHALF THE DRAFTS WERE RECEIVED AR E MENTIONED IN THE BOOKS OF ACCOUNT AND THE BANK ACCOUNT AND COPIES OF ACCOUNTS OF THESE PARTIES WERE ALSO FURNISHED WHEREIN THE DRAFTS WERE DULY CREDITED AND ACCOUNTED FOR. THE ASSESSEE, THEREFORE, CLAIMED BEFORE THE TRIBUNAL THAT CREDITS IN THE BANK ACCOUNT ARE FULLY PROVED. THE ASSESSEE ALSO SUBMITTED THAT IN THE SET ASIDE PROCEEDINGS, THE ASSESSEE DID NOT ACCEPT THAT THE CREDIT ENTRIES APPEARING IN THE BANK ACCOUNT REPRESENT ASSESSEES UNACCOUNTED MONEY. THE ASSESSMENT ORDER WAS PASSED EXPARTE U/S. 144 OF THE IT ACT. THEREFORE, THERE IS NO QUESTION OF D ISPUTING THE ADDITION BEFORE THE AO. THUS, THE ASSESSEE IN SEVERAL PROCEEDINGS AT DI FFERENT LEVEL HAS CLAIMED THAT ITA NO. 456 & 457/AGRA/2010 8 THE AMOUNTS RECEIVED THROUGH BANK DRAFTS FROM VARIO US PARTIES ARE GENUINE DEPOSITS / INVESTMENT AND THE ASSESSEE CLAIMED THAT SOURCE O F THE SAME HAVE BEEN EXPLAINED, THOUGH THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED B Y THE TRIBUNAL AND CONFIRMED THE ADDITION ON ACCOUNT OF UNACCOUNTED INVESTMENT U /S. 69 OF THE IT ACT. THEREFORE, THE DECISION OF HONBLE ALLAHABAD HIGH C OURT IN THE CASE OF BHAIYA LAL SHYAM BEHARI (SUPRA) AS REPRODUCED IN THE ORDER OF THE LD. CIT(A) SQUARELY APPLIES IN THE CASE OF THE ASSESSEE IN FAVOUR OF THE REVENU E. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF BHAIYA LAL SHYAM BEHARI (SUPRA ) HAS HELD THAT PRINCIPLE OF PEAK CREDIT IS NOT APPLICABLE IN THE CASES WHERE TH E DEPOSITS REMAINED UNEXPLAINED U/S. 68 OF THE IT ACT. IT WOULD NOT APPLY IN THE CA SE OF DIFFERENT DEPOSITORS WHERE THERE HAS BEEN NO TRANSACTION OF DEPOSITS AND ITS R EPAYMENT BETWEEN THE PARTICULAR DEPOSITOR AND THE ASSESSEE. IN ORDER TO ADJUDICATE UPON THE PLEA OF PEAK CREDIT, THE FACTUAL FOUNDATION HAS TO BE LAID BY THE ASSESSEE A ND HE HAS TO OWN ALL CASH CREDIT ENTRIES IN THE BOOKS OF ACCOUNT AND ONLY THEREAFTER CAN THE QUESTION OF PEAK CREDIT BE RAISED. THE SAID DECISION WAS LATER ON FOLLOWED BY HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VIJAY AGRICULTURAL IND USTRIES, 294 ITR 610 AND HELD AS UNDER : HELD, THAT IN RESPECT OF THE SQUARED UP ACCOUNTS OF THE T WO DEPOSITORS, THE ASSESSING OFFICER HIMSELF HAD TAKEN THE PEAK CREDIT AS UNEXPLAINED DEPOSIT AND ADDED IT UNDER SECTION 68 O F THE ACT. SO FAR AS THE REMAINING DEPOSITS WERE CONCERNED THERE WAS NO TRANSACTION BETWEEN THE DEPOSITORS AND THE ASSESSEE. THE PRINCI PLE OF PEAK CREDIT AND COULD NOT APPLY IN CASE OF DIFFERENT DEPOSITORS WHERE THERE HAD ITA NO. 456 & 457/AGRA/2010 9 BEEN NO TRANSACTION OF DEPOSITS AND REPAYMENT BETWE EN A PARTICULAR DEPOSITOR AND THE ASSESSEE. THE TRIBUNAL WAS NOT JU STIFIED IN DIRECTING THE ASSESSING OFFICER TO TAKE THE PEAK CREDIT FOR T HE PURPOSES OF SECTION 68 OF THE ACT. 6.1 SINCE IN THE CASE OF ASSESSEE, IT IS NOT IN DIS PUTE THAT DIFFERENT DRAFTS WERE DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE IN TH E NAME OF DIFFERENT PERSONS, THEREFORE, PEAK THEORY CANNOT BE APPLIED IN THE CAS E OF ASSESSEE. FURTHER, FROM THE BANK STATEMENT, IT IS CLEAR THAT AFTER DEPOSIT OF B ANK DRAFTS IN THE ACCOUNT IN THE NAME OF DIFFERENT PERSONS, CASH WAS WITHDRAWN IN EA CH AND EVERY CASE, BUT NO EVIDENCE WAS FURNISHED WHETHER THE AMOUNTS WERE PAI D TO THE SAME DEPOSITORS OF THE DRAFTS OR TO SOME OTHER PARTIES. THEREFORE, THE ASSESSEE WOULD NOT BE ENTITLED TO TAKE BENEFIT OF PEAK CREDIT ADDITIONS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THERE IS NO DIFFERENCE WITH REGARD TO THE LEGAL PRO POSITION CONSIDERED U/S. 68 AND 69 OF THE IT ACT. THE LD. CIT(A), THEREFORE, ON PR OPER APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTLY CONFIRMED THE ADDITION. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). THE DECIS ION OF THE TRIBUNAL CITED BY THE ASSESSEES COUNSEL CANNOT BE GIVEN PREFERENCE AGAIN ST THE DECISION OF JURISDICTIONAL ALLAHABAD HIGH COURT. WE ACCORDINGLY DISMISS THE AP PEAL OF THE ASSESSEE IN ITA NO. 456/AGRA/2010. ITA NO. 457/AGRA/2010 ITA NO. 456 & 457/AGRA/2010 10 7. THIS APPEAL IS FILED BY THE ASSESSEE FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT ON THE SAME FACTS AS HAVE BEEN NOTED ON MERITS. THE APPEAL OF THE ASSESSEE BEFORE THE LD. CIT(A) WAS TIME BARRED BY 2 YEARS. T HE ASSESSEE WAS ASKED TO EXPLAIN THE DELAY IN FILING THE APPEAL. THE ASSESSE E SUBMITTED BEFORE THE LD. CIT(A) THAT THE APPEAL WAS NOT FILED BY THE C.A. IN TIME A ND THUS THERE WAS DEFAULT ON THE PART OF THE C.A.. WHEN THE ASSESSEE RECEIVED DEMAND NOTICE U/S. 221(1) DATED 13.05.2009, IT CAME TO THE NOTICE OF ASSESSEE THAT THE APPEAL WAS NOT FILED BY THE EARLIER COUNSEL. AFFIDAVIT OF DIRECTOR OF THE ASSES SEE COMPANY WAS ALSO FILED IN SUPPORT OF THE SAME. THE ASSESSEE, THEREFORE, PRAYE D THAT THE DELAY MAY BE CONDONED. THE ASSESSEE RELIED UPON SEVERAL DECISION S IN SUPPORT OF THE ABOVE CONTENTION THAT WHERE THE ASSESSEE ENGAGED A COUNSE L, HE WOULD BE JUSTIFIED IN PRESUMING THAT THE COUNSEL WOULD ATTEND THE CASE. T HEREFORE, THE ASSESSEE CANNOT BE MADE TO SUFFER FOR THE NEGLIGENCE OF THE COUNSEL . THE GIST OF THE DECISIONS HAVE BEEN QUOTED BY THE LD. CIT(A) IN THE IMPUGNED ORDER . THE SAME ARE AS UNDER : (I). MAHAVEER PRASAD JAIN VS. CIT, 172 ITR 331 (MP ). (II). RAM LAL & SONS VS. ITO, 99 TTJ (ASR.) 63 (III). SHAKTI CLEARING AGENCY (P) LTD. VS. ITO 127 TAXMAN 49(RAJKOT)(MAG.) (IV). SMT. F.P. GOEKWARD VS. ACWT ITR TRIBUNAL TAX REPORT VOL. 3 PAGE 476 (V). GANGA SAHAI RAM SWARUP VS. ITAT, 271 ITR 512(A LL.) (VI) KRIPA SHANKER VS. CWT, 181 ITR 183 (ALL.) (VII). ALECTRITY HOUSING LTD. VS. ACIT, 327 ITR 139 ITA NO. 456 & 457/AGRA/2010 11 7.1 THE LD. CIT(A), HOWEVER, DISMISSED THE APPEAL O F THE ASSESSEE IN LIMINE BY NOT CONDONING THE DELAY. HIS FINDINGS IN PARA 3 TO 3.3 ARE AS UNDER : 3. AFTER CAREFUL APPLICATION OF MIND, I FIND THAT ALTHOUGH COURTS HAVE TAKEN A LIBERAL VIEW IN MATTERS OF COND ONATION OF DELAY IN APPEAL; AT THE SAME TIME, IN P.K. RAMCHANDRAN VS. S TATE OF KERALA AIR 1998 (SC) 2276, IT WAS POINTED OUT THAT THE LAW OF LIMITATION CANNOT BE DISREGARDED ON EQUITABLE GROUNDS. IN THE PRESENT CASE, THE DELAY IS INORDINATE OF NEARLY TWO YEARS. THE AFFIDA VIT FILED IS OF PRESENT ADVOCATE, WHICH IS A SELF SERVING AND CANNOT BE GIV EN MUCH CREDENCE. THE FAULT LAY WITH THE APPELLANT & WITH ITS PREVIOU S COUNSEL BUT NONE OF THEM HAS FURNISHED ANY AFFIDAVIT. IF AT ALL THE MISTAKE IS OF THE PREVIOUS COUNSEL; HIS AFFIDAVIT AND THAT TOO WITH J USTIFIED EXPLANATION ALONG WITH PERSONAL APPEARANCE BEFORE THE UNDERSIGN ED, WAS ESSENTIAL REQUIREMENT FOR EVEN CONSIDERING THIS CONTENTION AN Y FURTHER. 3.1. RELIANCE IS PLACED IN THE CASE OF NIHALKARAN VS. CWT (1989) 175 ITR 14 (MP) WHEREIN IT HAS BEEN HELD PRAYER FOR CONDONATION OF DELAY, WHERE REFERENCE A PPLICATION WAS BARRED BY LIMITATION. THE CONTENTION WAS THAT THE CLERK OF THE ASSESSEE H AD TAKEN THE CASE PAPERS TO THE OFFICE OF THE COUNSEL BUT THOSE PAPERS GOT MIXED UP IN THE DISPOSED OF FILES. IN SUPPORT OF TH E CONTENTION, AN AFFIDAVIT WAS FILED BY THE CLERK OF THE APPLICAN T WITHOUT DISCLOSING IN THE AFFIDAVIT, AS TO WHETHER THE PAPE RS WERE HANDED OVER BY THE CLERK OF THE APPLICANT TO THE CO UNSEL. THE COUNSEL HAD NOT FILED ANY AFFIDAVIT. THE AFFIDAVIT OF THE CLERK OF THE APPLICANT ALSO DID NOT DISCLOSE THE STEPS TAKEN BY THE APPLICANT FOR FILING AN APPLICATION U/S. 27(3), FRO M JULY 11, WHEN THE APPLICATION SHOULD HAVE BEEN FILED, TILL O CT. 8, WHEN THE PAPERS WERE ALLEGED TO HAVE BEEN LOCATED. AS TH E APPLICANT HAD FAILED TO PLACE ON RECORD ALL THE FACTS, IN ACT ION OR WANT OF DILIGENCE ON THE PART OF THE APPLICANT WOULD NOT EN TITLE THE APPLICANT TO THE BENEFITS OF THE PROVISIONS OF SEC. 5 OF THE LIMITATION ACT. AS THE APPLICANT HAD FAILED TO MAKE OUT A CASE THAT THERE WAS SUFFICIENT CAUSE FOR DELAY IN FILING THE APPLICATION IN TIME, THE APPLICATION FOR CONDONATION OF DELAY W AS REJECTED. ITA NO. 456 & 457/AGRA/2010 12 3.2. IN ABSENCE OF ANY JUSTIFIABLE REASON ON RECOR D, I FIND THAT THE DELAY HAS NOT BEEN EXPLAINED AND THE DELAY TANT AMOUNTS TO GROSS NEGLIGENCE FOR WHICH LAW DOES NOT SUGGEST ANY LIBER AL ATTITUDE. SUCH NEGLIGENT AND UNEXPLAINED MISTAKE CANNOT BE EXONERA TED, OTHERWISE THE LEGAL PROVISION REGARDING CONDONATION OF DELAY WILL BE RENDERED REDUNDANT. 3.3 SUCH CASE OF INORDINATE DELAY WITHOUT REASONAB LE CAUSE CANNOT BE CONDONED. CONSEQUENTLY, THIS APPEAL IS NO T ADMITTED. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND SUBMITTED THAT THE LD. CIT(A) HAS FA CTUALLY RECORDED INCORRECT FINDING WITH REGARD TO FILING OF THE AFFIDAVIT BY T HE PRESENT ADVOCATE. HE HAS REFERRED TO PB-5, WHICH IS THE AFFIDAVIT OF THE SHR I PANKAJ SINGHAL, DIRECTOR OF THE ASSESSEE-COMPANY. HE HAS SUBMITTED THAT INCIDENTALL Y, THE NAME OF THE COUNSEL FOR THE ASSESSEE IS ALSO MR. PANKAJ GARGH. THEREFORE, T HE LD. CIT(A) INCORRECTLY MENTIONED THESE FACTS IN THE APPELLATE ORDER. HE HA S SUBMITTED THAT IN THE AFFIDAVIT OF THE DIRECTOR OF THE ASSESSEE COMPANY, IT WAS SPE CIFICALLY EXPLAINED THAT ALL THE PAPERS WERE HANDED OVER TO THEIR REGULAR INCOME-TAX ADVISOR, M/S. UMESH AMITA & CO., C.A. ALONG WITH FEES OF THE TRIBUNAL AND SIG NED ALL THE PAPERS. THE TAX CONSULTANTS ASSURED THAT THEY WILL FILE THE APPEAL IN A DAY OR TWO. IT IS ALSO STATED IN THE AFFIDAVIT THAT WHEN HE RECEIVED NOTICE U/S. 221 (1) DATED 13.05.2009 (PB-7), THE SAME WAS SHOWN TO THE COUNSEL FOR THE ASSESSEE SHRI PANKAJ GARGH, ADVOCATE, WHO ARGUED THE MATTER BEFORE THE TRIBUNAL AND IT CAME T O KNOW THAT THE APPEAL HAS NOT ITA NO. 456 & 457/AGRA/2010 13 BEEN FILED. ACCORDINGLY, PAPERS WERE TAKEN AWAY FRO M THE EARLIER C.A. AND HANDED OVER TO THE PRESENT ADVOCATE AND APPEAL WAS ACCORDI NGLY FILED WITH THE REQUEST OF CONDONATION OF DELAY. IT IS, THEREFORE, AVERRED IN THE AFFIDAVIT OF THE DIRECTOR OF THE ASSESSEE COMPANY THAT THE APPEAL COULD NOT FILED WI THIN TIME DUE TO LAPSE ON THE PART OF THE EARLIER C.A. THE LD. COUNSEL FOR THE AS SESSEE, THEREFORE, SUBMITTED THAT THE ASSESSEE MAY NOT BE MADE TO SUFFER FOR THE NEGL IGENCE OF COUNSEL AND RELIED UPON THE SAME JUDGMENTS WHICH WERE RELIED UPON BEFO RE THE LD. CIT(A) AND GIST OF THE SAME HAS BEEN INCORPORATED IN THE APPELLATE ORD ER. HE HAS ALSO SUBMITTED THAT THE LD. CIT(A) INSTEAD OF CONSIDERING THE FACTUAL P OSITION, DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE AFFIDAVIT IS FILED OF THE PRESENT ADVOCATE. HE HAS FURTHER SUBMITTED THAT THE LD. CIT(A) ALSO NOTED TH AT THE FAULT LAY WITH THE ASSESSEE OR THE PREVIOUS COUNSEL, BUT NONE OF THEM HAVE FURN ISHED ANY AFFIDAVIT. THEREFORE, THE LD. CIT(A) WRONGLY DISMISSED THE APPEAL OF THE ASSESSEE DUE TO LIMITATION POINT. HE HAS ALSO RELIED UPON THE ORDER OF THE ITAT, MUMB AI BENCH IN THE CASE OF ANGELA J. KAZI VS. ITO, 10 SOT 139, IN WHICH THE DE LAY OF SEVEN YEARS WAS CONDONED BECAUSE THE EXPLANATION OF THE ASSESSEE DI D NOT SMACK MALA FIDE OR WAS NOT PUT FORTH AS A DILATORY STRATEGY. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDER OF THE LD. CIT(A). ITA NO. 456 & 457/AGRA/2010 14 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD. WE MAY NOTE HERE THAT THE ASSESSMENT ORDER IN THIS CAS E WAS PASSED ON 26.04.2005 EXPARTE U/S. 144 OF THE IT ACT MAKING THE ADDITIONS OF RS. 26,33,328/- ON ACCOUNT OF ADVANCE FROM THE FARMERS AND ADDITION OF RS.35,0 3,011/- AS UNEXPLAINED DEPOSITS IN THE BANK ACCOUNT. THE AO VIDE SEPARATE ORDER DATED 22.03.2007 LEVIED PENALTY OF RS.22,55,104/- ON ACCOUNT OF ADDITIONS M AINTAINED BY THE LD. CIT(A) IN A SUM OF RS.26,33,328/- AND RS. 35,03,011/- (TOTAL RS.61,36,339/-). THE AO ON THE AFORESAID ADDITIONS LEVIED THE PENALTY. IT MAY ALSO BE NOTED HERE THAT THE ASSESSEE PREFERRED APPEAL AGAINST THE QUANTUM ADDITIONS ON M ERITS BEFORE THE TRIBUNAL IN ITA NO. 16/AGRA/2006, WHICH WAS DECIDED VIDE ORDER DATED 25.05.2007. THE TRIBUNAL DELETED THE ADDITION OF RS.26,33,328/-. HO WEVER, THE ADDITION OF RS.35,03,011/- WAS CONFIRMED ON MERITS, HOWEVER, TH E MATTER WAS REMANDED TO THE FILE OF LD. CIT(A) FOR LIMITED PURPOSE FOR DECIDING THE ISSUE OF APPLICABILITY OF ADDITION OF PEAK CREDIT ON SUCH ADDITIONS. THE ISSU E OF PEAK CREDIT REMAINED SUBJECT MATTER IN APPEAL BEFORE US IN ITA NO. 456/AGRA/2010 ABOVE, IN WHICH WE HAVE CONFIRMED THE ORDER OF THE LD. CIT(A). THE ABOVE FA CTS, THEREFORE, WOULD SHOW THAT THE PENALTY LEVIED BY THE AO ON THE AFORESAID TWO A DDITIONS REMAINED SUBJECT MATTER IN APPEAL BEFORE THE LD. CIT(A), WHICH IS CH ALLENGED BEFORE US IN THE PRESENT APPEAL IN ITA NO. 457/AGRA/2010. THE LD. CIT(A) CON FIRMED THE PENALTY ORDER BY DISMISSING THE APPEAL OF THE ASSESSEE HOLDING IT TO BE TIME BARRED AND WITHOUT ITA NO. 456 & 457/AGRA/2010 15 ADMITTING THE SAME. IT IS WELL SETTLED LAW THAT PEN ALTY CANNOT BE LEVIED ON THE AMOUNTS /ADDITIONS, WHICH HAVE ALREADY BEEN DELETED ON QUANTUM APPEALS. NO BASIS WOULD BE LEFT FOR LEVY OF PENALTY IF ADDITION ON WH ICH PENALTY WAS LEVIED HAS ALREADY BEEN DELETED BY THE APPELLATE AUTHORITIES. HOWEVER, BY VIRTUE OF DISMISSING THE APPEAL OF THE ASSESSEE CONSIDERING IT TO BE TIM E BARRED, THE LD. CIT(A) CONFIRMED THE LEVY OF PENALTY ON THE AMOUNT OF ADDI TION OF RS.26,33,328/-, WHICH HAS ALREADY BEEN DELETED AND CANCELLED BY THE TRIBU NAL VIDE ORDER DATED 25.05.2007. SINCE THE ORDER OF THE TRIBUNAL WAS DEL IVERED AFTER THE LEVY OF PENALTY, THEREFORE, SUCH CIRCUMSTANCES AND PECULIAR FACTS SH OULD HAVE BEEN CONSIDERED BY THE LD. CIT(A) IN THE PENALTY APPEAL INSTEAD OF DIS MISSING THE APPEAL OF THE ASSESSEE HOLDING IT TO BE TIME BARRED. BY DISMISSIN G THE APPEAL OF THE ASSESSEE CONSIDERING IT TO BE TIME BARRED, THE LEVY OF PENAL TY ON THE ADDITION OF RS.26,33,328/- ON WHICH THE TRIBUNAL HAS ALREADY DE LETED THE ADDITION, STANDS CONFIRMED. IN SUCH CIRCUMSTANCE, THE ASSESSEE WOULD SUFFER BECAUSE OF NO FAULT ON THE PART OF THE ASSESSEE. SUCH PECULIAR AND EXCEPTI ONAL CIRCUMSTANCES SHALL HAVE TO BE CONSIDERED WHILE CONSIDERING THE CONDONATION OF DELAY IN THE MATTER. THIS FACT WAS NEITHER CONSIDERED BY THE LD. CIT(A) NOR HAVE B EEN PLEADED BY THE PARTIES ANYWHERE, BUT ON GOING THROUGH THE ENTIRE MATERIAL ON RECORD, IT TRANSPIRES THAT THE ASSESSEE HAD ALREADY SUFFERED AT THE HANDS OF ITS C OUNSEL IN NOT FILING THE APPEAL WITHIN THE PERIOD OF LIMITATION AND FURTHER THE ASS ESSEE WOULD SUFFER ON ACCOUNT OF ITA NO. 456 & 457/AGRA/2010 16 NEGLIGENCE OF THE COUNSEL BECAUSE NO PENALTY IS LEV IABLE ON THE ADDITION, WHICH IS ALREADY DELETED BY THE TRIBUNAL. THE DECISION CITED BY THE LD. COUNSEL FOR THE ASSESSEE MAKES OUT A CASE THAT FOR THE NEGLIGENCE O F THE COUNSEL, THE APPEAL OF THE ASSESSEE SHOULD NOT BE DISMISSED. FURTHER, THE DECI SIONS CITED ABOVE SUPPORT THE CASE OF THE ASSESSEE, PARTICULARLY THE PECULIAR FAC TS, NOTED ABOVE CLEARLY MAKE OUT A CASE THAT THE DELAY IN FILING THE APPEAL SHOULD BE CONDONED BY THE LD. CIT(A). FURTHER, WE FIND THAT THE LD. CIT(A) INCORRECTLY NO TED THE FACT IN THE IMPUGNED ORDER THAT AFFIDAVIT OF THE PRESENT COUNSEL HAS BEE N FILED. IN FACT, THE AFFIDAVIT OF SHRI PANKAJ SINGHAL, THE DIRECTOR OF THE ASSESSEE C OMPANY WAS FILED BEFORE THE LD. CIT(A) (PB-5) EXPLAINING THE REASONS FOR DELAY IN F ILING THE APPEAL DUE TO NEGLIGENCE OF THE COUNSEL. THE LD. CIT(A) UNDER MIS TAKEN BELIEF DID NOT TAKE COGNIZANCE OF THE CORRECT FACTS. IN THAT EVENT, THE LD. CIT(A) FURTHER NOTED IN THE IMPUGNED ORDER THAT THE FAULT LAY WITH THE ASSESSEE AND THE PREVIOUS COUNSEL, BUT NONE OF THEM FILED THEIR AFFIDAVITS. IT WOULD, THER EFORE, SHOW THAT THE LD. CIT(A) DID NOT CONDONE THE DELAY BECAUSE NO AFFIDAVIT OF THE A SSESSEE OR THE EARLIER COUNSEL WAS FILED, OTHERWISE, THE LD. CIT(A) WOULD HAVE CON DONED THE DELAY IF THE AFFIDAVIT OF THE ASSESSEE HAD BEEN FILED BEFORE HIM. IN FACT, THE AFFIDAVIT IS FILED BY THE DIRECTOR OF THE ASSESSEE COMPANY, AS NOTED ABOVE. T HEREFORE, CONSIDERING THE OBSERVATIONS OF THE LD. CIT(A) AND HIS FINDINGS GIV EN IN THE APPELLATE ORDER, THE DELAY IN FILING THE APPEAL BEFORE THE LD. CIT(A) IS LIABLE TO BE CONDONED IN THE ITA NO. 456 & 457/AGRA/2010 17 MATTER CONSIDERING THE EXPLANATION OF THE ASSESSEE IN THE AFFIDAVIT ALREADY FILED. THUS, THE SOLE OBJECTION OF THE LD. CIT(A) HAS ALSO BEEN MET BY THE ASSESSEE BY PROVING THAT THE PROPER AFFIDAVIT WAS FILED BEFORE THE LD. CIT(A). IT, THEREFORE, APPEARS THAT THE LD. CIT(A) WITHOUT CONSIDERING THE ACTUAL AND RELEVANT FACTS, DISMISSED THE APPEAL OF THE ASSESSEE AS TIME BARRED . CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES AND THE PECULIAR FACT OF DE LETION OF ONE OF THE MAJOR ADDITIONS BY THE TRIBUNAL WOULD MAKE OUT A CASE OF THE ASSESSEE THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM NOT FILING T HE APPEAL BEFORE THE LD. CIT(A) WITHIN THE PERIOD OF LIMITATION. IN SUCH CIRCUMSTAN CES, THE DELAY SHOULD HAVE BEEN CONDONED BY THE LD. CIT(A) IN FILING THE APPEAL BEF ORE HIM. IN VIEW OF THE ABOVE DISCUSSION, WE ARE SATISFIED THAT THE ASSESSEE HAD SUFFICIENT CAUSE FOR NOT PRESENTING THE APPEAL WITHIN THE PERIOD OF LIMITATION BEFORE T HE LD. CIT(A). WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) AND CONDONE THE D ELAY IN FILING THE APPEAL BEFORE THE LD. CIT(A) BEYOND THE PERIOD OF LIMITATION. SIN CE THE DELAY IS CONDONED IN THE MATTER AND THE LD. CIT(A) HAS NOT DECIDED THE APPEA L OF ASSESSEE ON MERITS, THEREFORE, THE APPEAL OF THE ASSESSEE IS RESTORED T O THE FILE OF LD. CIT(A) WITH THE DIRECTION TO REDECIDE THE APPEAL ON MERITS BY GIVIN G REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. SINCE I T IS AN OLD MATTER PERTAINING TO ASSESSMENT YEAR 2003-04, THEREFORE, THE LD. CIT(A) IS DIRECTED TO DISPOSE OF THE ITA NO. 456 & 457/AGRA/2010 18 APPEAL OF THE ASSESSEE PREFERABLY WITHIN THE PERIOD OF TWO MONTHS FROM THE RECEIPT OF THIS ORDER. AS A RESULT, THE APPEAL IS ALLOWED A S INDICATED ABOVE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO . 456/AGRA/2010 IS DISMISSED AND ITA NO. 457/AGRA/2010 IS ALLOWED AS INDICATED A BOVE. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY