Admissibility of Condonation of delay in filing appeal before ITAT as Partner looking after income-tax matters was ill

 

Short Overview : Where the delay in filing appeal before Tribunal was due to continuous ill-health of partner of assessee-firm, who was looking after the income-tax matters and accounts of the firm, the said delay in filing the appeal was condoned considering the same as a reasonable cause.

Assessee sought condonation of delay of 116 days in filing appeal before Tribunal. It was submitted that the partner of the assessee-firm who was looking after the income-tax matters, finance and accounting affairs of the firm being 75 years old, was suffering from various old age related medical and health issues and was under constant medication. Due to continuous ill-health, the said partner was instructed by the doctor to take complete bed rest and not to attend office and due to his absence, the other partner who was unaware of the income-tax matters could not take necessary steps to file the appeal against the order of the CIT(A).

it is held that in view of the affidavits of the partners along with medical certificates filed before the Tribunal, it was noticed that the delay in filing the said appeal was due to reasonable cause. Therefore, the delay of 116 days in fling such appeal was condoned.     

Decision : In assessee’s favour.

 

IN THE ITAT, MUMBAI ‘SMC BENCH

SAKTIPT DEY, J.M.

Deekay Gears v. Asstt. CIT

ITA No. 2366/Mum/2018

A.Y. 2009-10

16 January, 2019

Assessee by: Dharmesh Shah

Revenue by: Chaltanya Aryaria

Saktutt Dey, J.M.

Aforesaid appeal has been filed by the assessee challenging the Order, dt. 21-9-2017, passed by the learned Commissioner (Appeals)-40, Mumbai, pertaining to assessment year 2009-10.

2. There is a delay of 116 days in filing the present appeal. The assessee has filed a petition seeking condonation of delay accompanied by an affidavit sworn by Shri Prithipal Singh Sachdev, a partner of the assessee firm. On the basis of the averments made in the delay condonation petition and the affidavit, the learned Authorised Representative submitted, Shri Prithipal Singh Sachdev is a partner of the firm who was looking after the income-tax matters, finance and accounting affairs of the firm. He submitted, the said partner, being 75 years old, is suffering from various old age related medical and health issues like ischemic heart diseases with poor cardiac function, peripheral neuropathy, prostate, diabetes and erratic high blood pressure, hence, is under constant medication. He submitted, due to the continuous ill-health, particularly from August, 2017 to April, 2018, the said partner was instructed by the doctor to take complete bed rest and not to attend office. He submitted, due to his absence, the other partner who was unaware of the income-tax matters could not take necessary steps as he was completely occupied with the business affairs. Thus, he overlooked/lost sight of filing of appeal against the order of the learned Commissioner (Appeals). The learned Authorised Representative submitted, since the delay is for bona fide reasons and due to reasonable cause, it should be condoned and the appeal be admitted for hearing on merits. In support of his contentions, the learned Authorised Representative relied upon a number of decisions including the decision of the Hon’ble.Supreme Court in Collector, Land Acquisition v. Mst Katyi & Ors. (1987) 167 ITR 471 (SC) : 1987 TaxPub(DT) 1279 (SC).

3. The learned Departmental Representative opposed condonation of delay.

4. I have considered rival submissions and perused material on record. Upon verifying the averments made in the delay condonation petition and the affidavits of the partners filed before me along with the medical certificates, I am of the view that the delay in filing the present appeal is due to reasonable cause. Accordingly, I am inclined to condone the delay of 116 days and admit the appeal for adjudication on merit.

5. Brief facts are, the assessee, a partnership firm, is engaged in the business of manufacturing of industrial gear and gear boxes. For the assessment year under consideration, the assessee filed its return of income on 30-9-2009, declaring total income of Rs 17,90,190. Assessment in case of the assessee was originally completed under section 143(3) of the Income Tax Act, 1961 (for short “the Act”) on 21-10-2011, by determining the total income at Rs 18,96,742. Subsequently, on the basis of information received from the Director General of Income Tax (Inv.), Mumbai, and Sales-tax Department, Government of Maharashtra, that certain purchases claimed to have been made by the assessee are not genuine, the assessing officer reopened the assessment under section 147 of the Act. During the re-assessment proceedings, the assessing officer called upon the assessee to prove the genuineness of purchases of Rs 52,22,979, claimed to have been made from five parties by furnishing necessary documentary evidences. Though, the assessee produced some documentary evidences to prove the genuineness of purchases made, however, the assessing officer did not find them convincing or acceptable. Therefore, he treated the purchases of Rs 52,22,979, as non-genuine and proceeded to estimate profit @ 12.5 per cent on such purchases which worked out to Rs 6,52,870. The aforesaid amount was added to the income of the assessee. Being aggrieved with such addition, the assessee preferred appeal before the first appellate authority.

6. It is evident, in the course of hearing before the learned Commissioner (Appeals), the assessee filed letter dt. 19-9-2017, seeking withdrawal of the appeal. Taking note of the aforesaid letter filed by the assessee, learned Commissioner (Appeals) dismissed the appeal as withdrawn. Against the aforesaid order of the learned Commissioner (Appeals), the assessee is in further appeal before Tribunal.

7. Explaining the reason for withdrawal of appeal filed before the first appellate authority, the learned Authorised Representative submitted, as the partner looking after the income-tax matters was not able to attend to it due to his continuous illness, the other partner since was completely occupied with the main business activity and was not aware of income-tax compliance’s and pending litigations, decided to withdraw the appeal filed before the learned Commissioner (Appeals). He submitted, he filed the letter of withdrawal before the first appellate authority without properly knowing the merits of the Issue and the consequences which may follow after withdrawal of appeal. He submitted, for the very same reason the said partner also decided against filing any appeal challenging the order of the learned Commissioner (Appeals) which resulted in delay in filing the present appeal. He submitted, only after the main partner who was looking after the income-tax matters partly recovered from his illness, he came to know about withdrawal of appeal and decided to contest the issue on merit by filing the appeal before the Tribunal. The learned Authorised Representative submitted, notwithstanding the fact that the assessee has filed a letter seeking withdrawal of the appeal, however, as per the provisions of section 251 of the Act, the learned Commissioner (Appeals) was incompetent to dismiss the appeal in limine without deciding it on merits. Therefore, he submitted, since learned Commissioner (Appeals) has not decided the appeal of the assessee on merit, the order passed has to be set-aside with a direction to decide assessee’s appeal on merit. In support of his contention, the learned Authorised Representative relied upon the following decisions :–

(i) CIT v. Rai Bahadur Hardutroy Motdal Chamaria (1967) 66 ITR 443 (SC) : 1967 TaxPub(DT) 0347 (SC);

(ii) Biswaranjan Bysack v. CIT (1967) 66 ITR 452 (SC) : 1967 TaxPub(DT) 343 (SC);

(iii) CIT v. Premkumar Arjundas Luthra (HUF), ITA No. 2336 of 2013, dt. 25-4-2016 ((2017) 154 DTR (Bom) 302 : (2017) 297 CTR (Bom) 614); and

(iv) M. Loganathan v. ITO (2013) 350 ITR 373 (Mad) : 2012 TaxPub(DT) 2791 (Mad-HC).

8. The learned Departmental Representative submitted, since the assessee filed a letter seeking withdrawal of appeal, it was not necessary for the learned Commissioner (Appeals) to decide the appeal on merit.

9. I have considered rival submissions and perused material on record. I have also applied my mind to the decisions relied upon by the learned Authorised Representative. Undisputedly, in the course of proceedings before the first appellate authority, the assessee had filed letter dt. 19-9-2017, seeking withdrawal of the appeal. Taking note of the said letter, learned Commissioner (Appeals) dismissed assessee’s appeal in limine without deciding it on merit. Therefore, the issue which arises for consideration before me is, whether as per the provisions of section 251 of the Act, learned Commissioner (Appeals) can permit withdrawal of the appeal by dismissing it in limine without deciding on merits. As per the provisions of section 251(1)(a) of the Act, the first appellate authority is conferred with the powers to decide an appeal against an order of assessment by confirming, reducing, enhancing or annulling the assessment. Even the power to set-aside an assessment order was taken away from the first appellate authority by the amendment brought to the statute in Finance Act, 2001, with effect from 1-6-2001. Therefore, while deciding an appeal filed by the assessee under section 246A of the Act, learned Commissioner (Appeals) has to act within the parameters laid out in section 251(1)(a) of the Act. Interpreting the aforesaid statutory provision, the Hon’ble jurisdictional High Court in Premkumar Arjundas Luthra (HUF) (supra) has held as under :–

“8. From the aforesaid provisions, it is very clear once an appeal is preferred before the Commissioner (Appeals), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the assessing officer to make further inquiry and report the result of the same to him as found in section 250(4) of the Act. Further section 250(6) of the Act obliges the Commissioner (Appeals) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arises for consideration with reasons in support. Section 251(1)(a) and (b) of the Act provide that while disposing of appeal the Commissioner (Appeals) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of section 251 of the Act also makes it clear that while considering the appeal, the Commissioner (Appeals) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the Commissioner (Appeals). Thus, once an assessee files an appeal under section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the Commissioner (Appeals) is obliged to dispose of the appeal on merits. In fact, with effect from 1-6-2001 the power of the Commissioner (Appeals) to set aside the order of the assessing officer and restore it to the assessing officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the power of the Commissioner (Appeals) is co-terminus with that of the assessing officer i.e., he can do all that assessing officer could do. Therefore just as it is not open to the assessing officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the Commissioner (Appeals) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the section 251(1)(a) and (b) and Explanation to section 251(2) of the Act which requires the Commissioner (Appeals) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the Commissioner (Appeals) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.”

10. Similar view was expressed by the Hon’ble Madras High Court in M. Loganathan (supra). If the ratio laid down in the aforesaid decisions is carefully examined, it clearly emerges that learned Commissioner (Appeals), notwithstanding the fact that the assessee has filed an application seeking withdrawal of the appeal, is obliged and duty-bound under the Act to decide the appeal on merits within the parameters of section 251(1)(a) of the Act. Thus, following the ratio laid down in the aforesaid decision, I have to hold that while dismissing assessee’s appeal in limine without deciding on merit, learned Commissioner (Appeals) has not exercised his power in consonance with the provisions of section 251(1)(a) of the Act. Accordingly, I am inclined to set aside the impugned order of the learned Commissioner (Appeals). However, since, the issues raised in the said appeal have not been decided on merit, I restore all the issues raised in the present appeal to the learned Commissioner (Appeals) for de novo adjudication. Consequently, the appeal filed by the assessee before the learned Commissioner (Appeals) is restored back to its original position. It is open for the assessee to raise all such issues before the first appellate authority for contesting the assessment order passed by the assessing officer. Needless to mention, the learned Commissioner (Appeals) must afford reasonable opportunity of being heard to the assessee before deciding the appeal. With the aforesaid observations, the grounds raised are allowed for statistical purposes.

11. In the result, appeal is allowed for statistical purposes.