ACCESS DIAMONDS PRIVATE LIMITED , MUMBAI V. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-7(1) , MUMBAI

ITA 600/MUM/2023

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Access Diamonds Pvt. Ltd. appealed against the order of the CIT(A)-49, Mumbai, which had dismissed their earlier appeal regarding the disallowance of a VAT refund write-off. The company had written off a VAT receivable from FY 2008-09 and FY 2009-10 in AY 2012-13, which was later received and taxed in AY 2015-16. The primary legal contention was whether the write-off in AY 2012-13 and subsequent receipt in AY 2015-16 constituted double taxation. The Tribunal found merit in the company's argument and directed a verification of the tax treatment in AY 2015-16 to ensure no double taxation occurred.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300106 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-06-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 26-02-2023
• Other Referred Cases: Ramesh Chand Vs. Management of Delhi, Shri Pankaj Hiralal Marothi Vs. ITO, 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, 1961, Maharashtra Value Added Tax Act, 2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 154; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM आयकर अपील सं/ I.T.A. No.600/Mum/2023 (निर्धारण वर्ा / Assessment Year: 2012-13) Access Diamonds Pvt. Ltd Office No. 15, Floor- Mezzanine, Laxmidas Khimji Market, 36/38, Kalbadevi Road, Vitthalwadi, Mumbai- 400002. बिधम/ Vs. DCIT, Central Circle-7(1) Aayakar Bhavan, Mumbai-400020. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AAHCA0551C (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) सुनवाई की तारीख / Date of Hearing: 28/06/2023 घोषणा की तारीख /Date of Pronouncement: 01/09/2023 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Ld. CIT(A)-49, Mumbai dated 30.06.2016 for AY. 2012-13. 2. There is a delay of 2366 days [i.e, six (6) years & 05 months] in filing of this appeal before this Tribunal. 3. First of all will deal with the application filed by the Ld. AR of the assessee Shri Manish Panwar for condonation of in-ordinate delay. It is noted that the assessee is a private limited company engaged in the business of trading of Gold Bullion and Bars. For the assessment year under appeal, the assessee had filed its return of income after declaring loss of Rs. (8,932)/- on 27.09.2012. The return of income was initially processed u/s.143 (1) of the Income Tax Act, 1961. Thereafter, the case of assessee was selected for scrutiny. Assessee by: Shri Vimal Punmiya Revenue by: Shri Dharmvir D Yadav (Sr. DR) ITA No.600/Mum/2023 A.Y. 2012-13 Access Diamonds Pvt. Ltd. 2 4. The AO noted that during the year under consideration, the assessee had written-off the Refund receivable in respect of Maharashtra Value Added Tax (MVAT in short) for the Financial Year 2008-09 and 2009-10 (i.e. AY. 2009-10 & AY. 2010-11). The AO did not allow the write-off of VAT receivable, and passed the assessment order dated 27.03.2015 making addition of Rs. 13,03,839. [After making such an adjustment, the loss returned by assessee increased to Rs.12,94,907/-.] 5. Being aggrieved by the AO’s order u/s. 143(3) of the Act, the assessee preferred an appeal before Ld. CIT(A), who was pleased to dismiss it by order dated 30.06.2016. 6. Aggrieved by the order of Ld. CIT(A), the assessee has preferred this appeal before this Tribunal, and drew my attention to the fact that the amount (VAT refund) which assessee had written off this year (AY 2012-13) was received in AY 2015-16, and assessee had duly offered the same for taxation in AY 2015-16; and therefore the impugned action of Ld. CIT(A) will tantamount to double taxation [of the refund of MVAT] and therefore pleaded to admit this appeal for the interest of justice. With these background facts in mind, let me look at the reasons for delay. In this regard, it was brought to my notice that the assessee was under the bonafide impression that the Ld. AR Shri Manish Panwar who was entrusted with the filing of appeal before this Tribunal would have filed the same within the prescribed time limit as per the Act. But, according to assessee, Shri Manish Panwar, the Ld AR without informing the assessee, left the country; ITA No.600/Mum/2023 A.Y. 2012-13 Access Diamonds Pvt. Ltd. 3 and this fact, assessee came to know only recently while casually inspecting about the status of appeal. According to assessee, this information of Shri Manish Panwar leaving the country without filing the appeal before the Tribunal came as a rude shock to it, and then immediately took steps to file the appeal before this Tribunal. For buttressing the aforesaid facts, assessee’s director Shri Hanwant Singh has filed a sworn affidavit which has been notarized dated 23.05.2023. In this regard, it is noted from the contents of the affidavit (supra) that Ld. AR Shri Manish Panwar who was entrusted with the filing of appeal had left India, and assessee was on a bonafide belief that Shri Manish would have filed the appeal before the Tribunal on time until it was recently found out that he omitted to do so. In this context, it is to be borne in mind that initial burden was on assessee to prove the aforesaid facts. However, it is noted that since it is a negative burden, an assertion on oath by assessee that Ld. AR had left country, in absence of any positive material brought on record by revenue would suffice [refer ratio of decision of Hon’ble Supreme Court in case of Ramesh Chand Vs. Management of Delhi JT2023 (7) SC1]. For, condoning delay, the Ld. AR has relied on the following Hon’ble Supreme Court decision (infra) which has been considered by the Tribunal in the case of Shri Pankaj Hiralal Marothi (infra) wherein the Hon’ble Courts have directed the lower authorities, to liberally condone the delay. Per-Contra, the Ld. DR opposed the admission of the appeal being delayed inordinately and wants me not to condone the delay/admit the appeal for hearing. The assessee before this Tribunal ITA No.600/Mum/2023 A.Y. 2012-13 Access Diamonds Pvt. Ltd. 4 has filed the decision of this Tribunal in the case of Shri Pankaj Hiralal Marothi Vs. ITO (ITA. No.164/Ahd/2022 for AY. 2010-11) wherein there was delay of 2366 days and judicial precedents/case laws of Hon’ble Apex Court were cited and discussed and thereafter the Tribunal condoned the delay by holding as under: - “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 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 ITA No.600/Mum/2023 A.Y. 2012-13 Access Diamonds Pvt. Ltd. 5 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 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. ITA No.600/Mum/2023 A.Y. 2012-13 Access Diamonds Pvt. Ltd. 6 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 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. ITA No.600/Mum/2023 A.Y. 2012-13 Access Diamonds Pvt. Ltd. 7 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.” 7. Respectfully following the judicial precedents laid by Hon’ble Supreme Court cited by Tribunal in Shri Pankaj Hiralal Marothi (supra) and taking note of the cause for the delay in filing appeal before this Tribunal, I am inclined to condone the delay and note that ITA No.600/Mum/2023 A.Y. 2012-13 Access Diamonds Pvt. Ltd. 8 assessee after realizing the omission on the part of Shri Manish Panwar to file timely the appeal, immediately appointed a new Ld. AR and filed the appeal on 27.02.2023 along with condonation of delay. Therefore, the delay caused in filing of appeal cannot be attributed to any lapse on the part of assessee; and assessee should not suffer for the omission on the part of the Ld. AR as discussed supra. Therefore, taking into consideration the contents of the sworn affidavit of the assessee’s director and reason for delay as discussed supra as well as the issue of double taxation brought to my notice, the delay caused in filing of Appeal is condoned in the interest of justice. 8. Coming to the merits of the addition, it is noted the assessee company is a trader of Gold Bullion and Bars. It is noted that under erstwhile indirect tax laws, a person trading in goods had to obtain registration under Maharashtra Value Added Tax Act, 2002 (MVAT Act). Under MVAT Act, when a taxpayer procures goods locally, it has to remit MVAT to the vendor. Similarly, when a taxpayer sells its goods, it collects MVAT from the customer and deposits the same with the MVAT Authorities. A taxpayer is liable to take credit of the MVAT paid to the vendor on procurement which is called input tax credit. Similarly, a taxpayer is liable to deposit the MVAT collected from the customer on sale of goods which is called output tax liability. And a taxpayer can utilize the said input tax credit to set-off against the output tax liability as well as claim refund of the accumulated balance of the input tax credit at the end of the year. In the assessee's ITA No.600/Mum/2023 A.Y. 2012-13 Access Diamonds Pvt. Ltd. 9 case, it has accumulated MVAT during FY 2008-09 and FY 2009-10 and the assessee claimed such accumulated MVAT as refund. And the MVAT refund claimed pertaining to FY 2008-09 and FY2009-10 is tabulated below;- Sr. No Financial Year Amount (Rs.) 1. 2008-09 19,627 2. 2009-10 12,84,212 Total 13,03,839 9. Since the assessee did not receive the refunds of the aforesaid VAT refund, till AY. 2012-13 (FY. 2011-12), the VAT receivable/refundable balances were written-off by the assessee in FY 2011-12 (AY 2012-13.). Subsequently, in AY 2015-16, the assessee received MVAT refund amounting to Rs. 13,03,839/- along with interest thereon amounting to Rs. 1,33,724/- (Total Rs. 14,37,563/-). The assessee treated the said receipts of Rs. 14,37,563/- as income and disclosed the same under Indirect Income for the period AY 2015-16. Thus, according to assessee, the MVAT Refund which was written off by assessee in this relevant assessment year i.e. AY. 2012-13 and the interest thereon amounting to Rs.14,37,563/- was brought to tax in the subsequent period FY 2014-15 [AY 2015-16]. Hence, in light of the above, the assessee pleads that additions made by the AO to be deleted. Per contra, the Ld. DR submits that these facts needs verification. 10. It is noted that assessee is aggrieved by the action of AO/Ld. CIT(A) in making/confirming an addition of Rs.13,03,839/-. In this regard, it is noted that assessee has claimed as written off of ITA No.600/Mum/2023 A.Y. 2012-13 Access Diamonds Pvt. Ltd. 10 Rs.13,03,839/- which was VAT re-fund not received from Maharashtra VAT Department on account of excess input tax credit over-output tax payable for purchases and sale made during AY. 2009-10 & AY. 2010-11. This written off was not accepted by AO/Ld. CIT(A). It has been brought to my notice that this amount (Rs.13,03,839/- VAT Refund) which was written off in this year (AY. 2012-13), was received/refunded to assessee in Nov, 2014. And it was offered by assessee for taxation along with interest in AY. 2015-16 as discernible from page no. 96 of the PB (Return of Income for AY. 2015-16) and has already been taxed. In order to demonstrate that assessee has already offered the refund VAT amounting to Rs.13,03,839/-, the Ld. AR drew our attention to page no. 6 of PB which is the profit & loss account which shows that assessee has claimed administrative expenses to the tune of Rs.17.26 Lakhs which included VAT paid/written off (refer page no. 12 of PB Scheduled-19 of Rs.1,303,839/-). In order to show that assessee had received Rs.13,03,839/- (VAT Refund of FY 2008-09 & 2009-10 which has been written off by assessee in AY. 2012-13) the Ld. AR drew my attention to page 90 which is the profit & loss account for AY. 2015- 16, which shows that assessee has offered Rs.55,03,99,782/- which includes VAT Refund of Rs.13,03,839/- and interest on VAT refund of Rs.1,33,724/- (refer page no. 96 PB). Thus, it is found that the assessee has offered for tax the VAT refund of Rs.13,03,839/- which assessee had written off in the relevant assessment year i.e. AY. 2012-13. Therefore, according to the assessee since the assessee has already ITA No.600/Mum/2023 A.Y. 2012-13 Access Diamonds Pvt. Ltd. 11 offered the VAT refund of Rs.13,03,839/- along with interest of Rs.1.33 Lakhs for taxation in AY. 2015-16 when assessee received it, the action of the AO in this assessment year (AY. 2012-13) disallowing the same and taxing it would tantamount to double taxation which is not permissible. Since I have noticed assessee has offered the sum of Rs.13,03,839/- subsequently in AY. 2015-16, the action of AO/Ld. CIT(A) disallowing the same amount of Rs.13,03,839/- in this AY. 2012-13, cannot be sustained. However, since this fact has not been verified by AO, the impugned order of Ld. CIT(A) is set aside for the limited purpose to the AO to verify whether assessee has offered this amount (Rs.13,03,839/- refund of VAT disallowed this year) for taxation in AY. 2015-16 as discussed supra, and if it is found that assessee has offered the same for taxation then, no disallowance of the same amount this year is not warranted. 11. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on this 01/09/2023. Sd/- (ABY T. VARKEY) JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 01/09/2023. Vijay Pal Singh, (Sr. PS) ITA No.600/Mum/2023 A.Y. 2012-13 Access Diamonds Pvt. Ltd. 12 आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुंबई / ITAT, Mumbai