NOVA INTERGRATED SYSTEMS LTD, MUMBAI V. DCIT 1(3)(2), MUMBAI

ITA 5527/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0174 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 09-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Keywords: Reasonable cause; Revenue expenditure
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ITA NO. 5527 / MUM/20 16 ( ASSESSMENT YEAR : 2012 - 13 ) M/S. NOVA INTEGRATED SYSTEMS LTD., 1 ST FLOOR, BOMBAY HOUSE MODI STREET, FORT MUMBAI 400 001 VS. DCIT 1(3)(2), AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400 020 PAN/GIR NO. AACCH0670G APPELLANT ) .. RESPONDENT ) ASSESSEE BY MS. ARATI VISSANJI & SHRI AJIT SHAH REVENUE BY SHRI R.P.MEENA DATE OF HEARING 05 / 03 /201 8 DATE OF PRONOUNCEMENT 07 / 03 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 3, MUMBAI DATED 28/06/2016 FOR A.Y.2012 - 13, WHEREIN CIT(A) HAS DISMISSED THE APPEAL ON THE PLEA THAT THERE WAS NO REASONABLE CAUSE FOR DELAY OF 80 DAYS IN FILING THE APPEAL. HOWEVER, THE CIT(A) HAS NOT GIVEN ANY OF HIS VERDICT ON MERIT OF THE CASE. 2. IT WAS ARGUED BY LEARNED AR THAT PROJECT EXPENDITURE WAS WRITTEN OFF BY ASSESSEE TO THE P & L ACCOUNT DUE TO ABANDONMENT OF THE PROJECT UNDERTAKEN, WHICH IS REVENUE IN NATURE, HOWEVER, IN THE COMPUTATION OF INCOME FILED ALONGWITH THE RETURN, THE ASSESSEE HAD ACCEPTED THE SAME AS CAPITAL IN NATURE. AS PER LEARNED AR AFTER THE ASSESSMENT ORDER WAS ITA NO .5527/MUM/2016 M/S. NOVA INTEGRATED SYSTEMS LTD., 2 PASSED, ASSESSEE CAME TO KNOW THE DECISION OF HONBLE KOLKATA HIGH COURT IN CASE OF BINANI CEMENT LTD., WHEREIN SIMILAR EXPENDITURE ON ABANDONMENT OF PROJECT WAS TREATED AS REVENUE EXPENDITURE, THEREFORE, ASSESSEE FILED THE APPEAL BEFORE CIT(A). HOWE VER, SINCE THE ORDER OF THE KOLKATA HIGH COURT WAS PRONOUNCED ON 23/03/2015, THE APPEAL WAS FILED THEREAFTER, WHICH RESULTED INTO DELAY OF 80 DAYS IN FILING THE APPEAL. HOWEVER, THE CIT(A) DISMISSED THE APPEAL MERELY ON THE GROUND THAT THERE WAS A DELAY AN D THE REASONABLE CAUSE FOR DELAY WAS NOT EXPLAINED TO HIS SATISFACTION. ACCORDINGLY, IT WAS REQUESTED THAT DELAY SHOULD BE CONDONED AND APPEAL SHOULD BE DECIDED ON MERIT OR TO BE RESTORED TO THE FILE OF CIT(A) FOR DECIDING ON MERIT. 3. ON THE OTHER HAND, L EARNED CIT DR OPPOSED THE PRAYER OF THE LEARNED AR AND CONTENDED THAT ASSESSEE ITSELF IN ITS RETURN OF INCOME HAS ACCEPTED THE LOSS O N ABANDONMENT OF PROJECT AS CAPITAL IN NATURE WHICH WAS ALSO ACCEPTED BY AO VIDE ORDER DATED 06/01/2015 PASSED U/S.143(3). UNDER THESE FACTS AND CIRCUMSTANCES, THERE WAS NO REASON FOR FILING ANY APPEAL AGAINST THE ORDER OF AO. IT WAS ALSO SUBMITTED THAT DECISION OF THE KOLKATA HIGH COURT WAS NOT OF JURISDICTIONAL HIGH COURT, THEREFORE CANNOT BE MADE A SUFFICIENT REASON FOR DEL AY IN FILING APPEAL. HE VEHEMENTLY ARGUED THAT SUCH DELAY SHOULD NOT BE CONDONED AND CIT(A) HAS CORRECTLY DISMISSED THE APPEAL FOR THE DELAY. 4. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAD ALS O DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS CITED BY LEARNED AR AND ALSO RELIED UPON THE ITA NO .5527/MUM/2016 M/S. NOVA INTEGRATED SYSTEMS LTD., 3 ORDER PASSED BY THE HONBLE SUPREME COURT IN THE CASE OF N. BALAKRISHNAN DATED 03/09/2018 WHEREIN HONBLE SUPREME COURT OBSERVED THAT RULES OF LIMITATION ARE NOT MEAN T TO DESTROY RIGHT OF PARTY - SUFFICIENT CAUSE UNDER SECTION 5 SHOULD RECEIVE LIBERAL CONSTRUCTION SO AS TO ADVANCE JUSTICE. 5. FROM THE RECORD, WE FOUND THAT EXPENDITURE ON ABANDONMENT PROJECT DEBITED IN P & L ACCOUNT WAS ADDED BACK IN THE COMPUTATION O F INCOME FILED ALONGWITH RETURN OF INCOME, HOWEVER, VIDE NOTE NO.4 OF THE NOTES FORMING PART OF THE COMPUTATION OF TOTAL INCOME, THE ASSESSEE HAD DULY FURNISHED THE RELEVANT FACTS VIS - - VIS PROJECT EXPENDITURE WRITTEN OFF . ASSESSEES RETURN WAS ACCEPTED BY THE AO VIDE ORDER DATED 06/01/2015 U/S.143(3) OF THE IT ACT. THEREAFTER, THERE WAS A JUDGMENT OF HONBLE KOLKATA HIGH COURT IN THE CASE OF BINANI CEMENTS LTD., DATED 23/03/2015, WHEREIN HONBLE COURT HELD THAT EXPENDITURE ON AN ABANDONMENT PROJECT IS REVE NUE IN NATURE AND CAN BE CLAIMED AS DEDUCTION IN THE YEAR OF ABANDONMENT OF THE PROJECT. THUS, DECISION OF HONBLE HIGH COURT WAS A GROUND EVEN FOR FILING OF APPEAL BEFORE THE CIT(A). HOWEVER, THERE WAS A DELAY OF 80 DAYS IN FILING THE SAID APPEAL AS PER CIT(A). AS PER CIT(A), THERE IS NO COGENT REASON FOR DELAY IN FILING THE APPEAL, THEREFORE, HE DISMISSED THE APPEAL ON THE GROUND OF DELAY ITSELF. THE CIT(A) HAS NOT GIVEN ANY VERDICT ON THE MERIT OF THE ASSESSEES CLAIM. AS PER OUR CONSIDERED VIEW THE DE CISION OF HONBLE HIGH COURT ON A PARTICULAR ISSUE WAS SUFFICIENT CAUSE FOR FILING AN APPEAL TO CLAIM SUCH EXPENDITURE AS REVENUE. S INCE ASSESSEE GOT AWARE OF THIS JUDGMENT AND THEREAFTER FILED ITA NO .5527/MUM/2016 M/S. NOVA INTEGRATED SYSTEMS LTD., 4 AN APPEAL SO AS TO MAKE THEIR CLAIM FOR ALLOWABILITY OF SUCH E XPENDITURE, THE R E OCCASIONED A DELAY OF 80 DAYS . HONBLE SUPREME COURT IN CASE OF MST. KATIJI & ORS [1987] 167 ITR 471 HAVE HELD THAT FOR THE SUBSTANTIAL CAUSE OF JUSTICE DELAY IN FILING APPEAL SHOULD BE CONDONED AND APPEAL SHOULD BE HEARD ON MERIT. PRE CISE OBSERVATION WAS AS UNDER: - '3. THE LEGISLATURE HAS CONFERRED THE POWER TO CONDONE DELAY BY ENACTING SECTION 51 OF THE LIMITATION ACT OF 1963 IN ORDER TO ENABLE THE COURTS TO DO SUBSTANTIAL JUSTICE TO PARTIES BY DISPOSING OF MATTERS ON DE MERITS. THE EXPRESSION 'SUFFICIENT CAUSE' EMPLOYED BY THE LEGISLATURE IS ADEQUATELY ELASTIC TO ENABLE THE COURTS TO APPLY THE LAW IN A MEANINGFUL MANNER WHICH SUBSERVES THE ENDS OF JUSTICE THAT BEING THE LIFE - PURPOSE OF THE EXISTENCE OF THE INSTITUTION OF COURTS. IT I S COMMON KNOWLEDGE THAT THIS COURT HAS BEEN MAKING A JUSTIFIABLY LIBERAL APPROACH IN MATTERS INSTITUTED IN THIS COURT. BUT THE MESSAGE DOES NOT APPEAR TO HAVE PERCOLATED DOWN TO ALL THE OTHERS COURTS IN THE HIERARCHY. 6. THE HONBLE SUPREME COURT IN THE A FORESAID CASE FURTHER OBSERVED THAT : - ORDINARILY, A LITIGANT DOES NOT STAND TO BENEFIT BY LODGING AN APPEAL LATE. REFUSING TO CONDONE DELAY 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. EVERY DAY'S DELAY MUST BE EXPLAINED ' DOES NOT MEAN THAT A PEDANTIC APPROACH SHOULD BE MADE. WHY NOT EVERY HOUR'S DELAY , EVERY SECOND'S DELAY? THE DOCTRINE MUST BE APPLIED IN A RATIONAL, COMMON SENSE AND PRAGMATIC MANNER. WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATIONS ARE PITTED AGAINST EACH OTHER, THE CAUSE OF SUBSTANTIAL JUSTICE DESERVES TO BE PREFERRED, FOR THE O THER SIDE CANNOT CLAIM TO HAVE VESTED RIGHT IN INJUSTICE BEING DONE BECAUSE OF A NON - DELIBERATE DELAY. THERE IS NO PRESUMPTION THAT DELAY IS OCCASIONED DELIBERATELY, OR ON ACCOUNT OF CULPABLE NEGLIGENCE, OR ON ACCOUNT OF MALA FIDES. A LITIGANT DOES NOT STA ND TO BENEFIT BY RESORTING TO DELAY. IN FACT, HE RUNS A SERIOUS RISK. IT MUST BE GRASPED THAT THE JUDICIARY IS RESPECTED 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. ITA NO .5527/MUM/2016 M/S. NOVA INTEGRATED SYSTEMS LTD., 5 7. FURTHERMORE, THE HON'BLE SUPREME COURT IN THE CASE OF VEDABAI ALIA VAIJAYANATABAI BABURAO PATIL VS. SHANTARAM BABURAO PATIL 253 ITR 798 HELD THAT THE COURT HAS TO EXERCISE THE DISCRETION ON THE FACTS OF EACH CASE KEEPING IN MIND THAT IN CONS TRUING THE EXPRESSION 'SUFFICIENT CAUSE', THE PRINCIPLE OF ADVANCING SUBSTANTIAL JUSTICE IS OF PRIME IMPORTANCE. THE COURT HELD THAT THE EXPRESSION 'SUFFICIENT CAUSE' SHOULD RECEIVE LIBERAL CONSTRUCTION. 8. FOLLOWING THE JUDICIAL PRONOUNCEMENTS LAID DO WN IN THE ABOVE DECISIONS OF HONBLE SUPREME COURT VIS - - VIS FOLLOWING DECISIONS , DELAY DESERVES TO BE CONDONED. ACCORDINGLY, WE RESTORE THE MATTER BACK TO THE FILE OF THE CIT(A) FOR DECIDING ON MERITS. A. CHAMANLAL BRAS PVT LTD V. THE PUNJAB STATE (1961) , 12 STC 643 (PUNJ.) B. ASHOK AUTOMOBILES (RANCHI) PVT LTD, 174 ITR 566,567. C. K.S.P. SHANMUGAVELNADAR, 153 ITR 596 (MAD.) D. BRIJINDAR SINGH V. KANSHI RAM, AIR 1917 PC 156 E. ASIBAI V. GOMATHI, AIR 1979 MAD 115,116 F. PUNJAB STATE CO - OPERATIVE MILK PRODUCERS FEDERATION LTD V. STATE OF PUNJAB, (1999) 116 STC 324,326 (PUNJ.) 9 . FURTHERMORE, AS PER THE PROVISIONS OF SUB - SECTION 6 OF SECTION 250, ORDER OF THE COMMISSIONER - APPEALS SH OULD BE IN WRITING AND SHALL STATE THE POINTS FOR DETERMINING THE DECISI ON THERE ON AND THE REASONS FOR DECISION. HOWEVER, THE ORDER PASSED BY CIT(A) CANNOT BE SET TO BE IN TERMS OF PROVISIONS OF SECTION 250 SUB - SECTION 6 OF THE IT ACT. ITA NO .5527/MUM/2016 M/S. NOVA INTEGRATED SYSTEMS LTD., 6 10. IN VIEW OF ABOVE DISCUSSION, WE ARE INCLINED TO AGREE WITH LEARNED AR MS. ARATI VISSAN JI THAT THERE WAS SUFFICIENT REASON FOR DELAY OF 80 DAYS IN FILING THE APPEAL WHICH DESERVES TO BE CONDONED IN THE SUBSTANTIAL INTEREST OF JUSTICE. A C CORDINGLY, WE RESTORE THE MATTER BACK TO THE FILE OF CIT(A) FOR DECIDING ON MERITS. 11 . IN THE RESULT, AP PEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 07 / 03 /201 8 SD/ - ( AMARJIT SINGH ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOU NTANT MEMBER MUMBAI ; DATED 07 / 03 / 201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//