Income Tax Appellate Tribunal - Mumbai
The Phoenix Mills Ltd , Mumbai vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "A", MUMBAI
BEFORE SHRI R.K. GUPTA, J.M. AND SHRI A.L. GEHLOT, A.M.
ITA No. 6240/M/2007
Assessment Year: 1999-2000
M/s Phoenix Mills Ltd., ... Appellant
462, Senapati Bapat Marg,
Lower Parel, Mumbai - 400 013.
(PAN - AAACP3326J)
Vs.
Asstt. Commissioner of Income-tax, ...Respondent
Circle 7(1), Mumbai.
Appellant by : Mr. A.V. Sonde
Assessee by : Mr. R.N. Jha
ORDER
PER A.L. GEHLOT, A.M.:
This appeal filed by the assessee is directed against the order of CIT(A)- XIX, Mumbai, passed on 13 t h August, 2008 for the assessment year 1999-2000, wherein the assessee has raised the following grounds of appeal:-
"1. On the f acts and in the circumstances of the case and in law, the learned CIT(A) erred in holding the delay in f iling the appeal cannot be condoned. The appellant prays that the delay be condoned and appeal should be taken up for hearing.
2. On the f acts and in the circumstances of the case and in law, the learned CIT(A) erred in not deciding the issue on merits and not allowing the payments made to processing department of the appellant at Rs. 2,61,36,753/-. The appellant prays that the same may kindly be heard and allowed.
3. On the f acts and in the circumstances of the case and in law, the learned CIT(A) erred in not deciding the issue on merits and not allowing the payments made to common staff of Rs. 20,06,098. The appellant prays that the same may kindly be heard and allowed."2 ITA NO. 6240/M/07
Phoenix Mills Ltd.
2. Briefly the facts relating to ground No. 1 are that the assessee filed the appeal before the CIT(A) belatedly by 1358 days and requested for condonation of the said delay in filing the appeal. The CIT(A) did not condone the delay and dismissed the assessee's appeal in limine by observing that at this stage it is not just and proper on the part of the appellant to raise the issue after a gap of almost four years. Under section 249(3) of the IT Act, the first appellate authority may on good and sufficient reasons for the delay being shown, admit the appeal after the expiry of limitation of time for filing the appeal. The CIT(A) further held that such delay in filing the appeal should be ordinarily accompanied by a petition showing and explaining the cause of the appellant not being able to file the appeal within the period of limitation and praying for the condonation of delay. The CIT(A) relied upon certain decisions and concluded that this is a case where it can be said that the appellant has not been able to give sufficient reasons to show that the delay has to be condoned in the present case.
3. The learned AR while explaining the delay in filing the appeal before the CIT(A) referred the affidavit of Shri Kiran Gandhi, Chief Accountant & Finance Controller dated 12 t h January, 2006. In the said affidavit it was affirmed by Shri Kiran Gandhi that assessment order u/s 143(3) dated 28.03.2002 was received by M/s Rajesh Rajeev & Associates, chartered Accountant on behalf of the assessee. It is further affirmed that their AR M/s Rajesh Rajeev & Associates, has not given specific advise in respect of filing of appeal before the CIT(A) therefore same could not be filed within specified date. The said assessment was reopened u/s 147 on 31.03.2005. An appeal also filed against that order, which has been disposed off by the CIT(A) vide order dated 14.11.2005. During the appellate proceedings before the CIT(A), the assessee engaged new AR, who was scrutinized the papers and advised to file this appeal before the CIT(A). It was also affirmed that the delay in filing of appeal from is attributable to the earlier AR, 3 ITA NO. 6240/M/07 Phoenix Mills Ltd.
M/s Rajesh Rajeev & Associates who failed to inform the appellant company, the necessity of filing appeal against the disallowance made in the original assessment order u/s 143(3) of the Act.
4. The learned AR submitted that delay in filing appeal due to mistake of counsel that itself is sufficient cause for condonation of delay. He relied upon the judgment of the Apex Court in the case of Concord of India Insurance Co. Ltd. V. Smt. Nirmala Devi and Others, [1979] 118 ITR 507(SC) wherein the Apex Court held that the law is settled that mistake of counsel may in certain circumstances be taken into account in condoning the delay although there is no general proposition that mistake of counsel by itself is always a sufficient ground. It is always a question whether the mistake was bona fide or was merely a device to cover an ulterior purpose such as laches on the part of the litigant or an attempt to save limitation in an underhand way. The court must see whether, in such cases, there is any taint of mala fides or element of recklessness or ruse. If neither is present, legal advice honestly sought and actually given, must be treated as sufficient cause when an application under s. 5 of the Act is being considered. The learned AR submitted that delay in filing appeal before CIT (A) was not deliberately. The learned AR relied upon the another judgment of Hon'ble Supreme Court in the case of N. Balakrishnan V. M. Krishnamurthy, AIR 1998 SC 3222.
5. As regards submissions of affidavit from earlier chartered Accountant the learned AR submitted that on identical set of facts Hon'ble Madras High Court in the case of Areva T and D India Ltd., (formerly known as Alstom Ltd.) V. JCIT, [2006] 287 ITR 555 (Mad.), has accepted the affidavit filed by the party. In the said case the delay was on account of advice by counsel, tribunal insisted on affidavit from counsel and the counsel declined to give any such affidavit sworn to by the director of assessee filed before the Tribunal. The Tribunal ought to have been given finding whether assessee had given sufficient cause in affidavit sworn to by the director of assessee. The 4 ITA NO. 6240/M/07 Phoenix Mills Ltd.
Court held that the Tribunal was not correct in dismissing appeal on account of limitation. On merit, the learned AR relied upon the decision of ITAT, Mumbai Bench "D" in the case of Sterlite Industries (India) Ltd. V. Addl. CIT, [2006] 6 SOT 497 (Mum.).
6. The learned DR, on the other hand, relied upon the order of CIT(A) and submitted that the appeal filed by the assessee is not maintainable as the CIT(A) has passed order u/s 249(2) by dismissing the appeal in limine as same was submitted beyond the prescribed time limit . The learned DR further submitted that an appeal can be filed u/s 253 before ITAT against the order of CIT(A) only in the specified circumstances stated in the section .He submitted that there is no provision u/s 253 for filing appeal against the order of CIT(A) u/s 249(2) of the Act. The learned DR further submitted that there was substantial delay of three years and nine months for which the assessee did not furnish sufficient cause. The CIT(A) has discussed this aspect of the matter elaborately in his order. The learned DR further submitted that the reasons for delay in filing of appeal cannot be made but they must be existed and the assessee did not furnish the reasons for such delay. Without prejudice to the above, the learned DR further submitted that reason has to be sufficient and proper reasons. Mere filing of affidavit of staff does not constitute sufficient evidence. The learned DR further submitted that the decision of not filing appeal is the decision of the assessee and not the decision of the AR. The learned DR submitted that decisions cited by the learned AR are distinguishable on facts. The learned DR in support of his contentions relied upon the following judgments:-
i. JCIT Vs. Tractors & Farm Equipments Ltd., [2007] 104 ITD 149 (Chennai)(TM).
ii. V. Hemraj Onkarji Mali, [2009] 311 ITR (AT) 416 (Indore). Iii Madhu Dadha Vs. ACIT, [2009] 317 ITR 458 (Mad.) 5 ITA NO. 6240/M/07 Phoenix Mills Ltd.
7. In the rejoinder, the learned AR submitted that the ITAT has power to admit appeal dismissed in limine by CIT(A), for which he relied upon the judgment of Hon'ble Supreme Court in the case of Mela Ram and Sons v. Commissioner of Income-tax reported in 29 ITR 607(SC). It is also the submissions of the learned AR that the judgments relied upon by the learned DR are distinguishable on facts.
8. We have heard the learned representatives of the parties, perused the record and gone through the decisions cited. Before coming to the merit of the issue, we would like to deal with the issue raised by the learned DR that whether the ITAT has power to admit such appeal dismissed by the CIT(A) in limine under the facts and circumstances of the case that the appeal was filed beyond the prescribed time limit before CIT(A). A right of appeal is a statutory one, and, unless there is anything explicit in the statute or the rules made there under, such right cannot be restricted. The construction which deprives the parties of valuable rights should be avoided. That taking the plea of limitation when there is a judgment or order against which the statute provides a right of appeal but none is preferred within the time prescribed therefore, the respondent acquires a valuable right, of which he cannot be deprived by an order condoning delay and admitting the appeal behind his back. And when such an order is passed ex parte, he has a right to challenge its correctness at the hearing of the appeal. That is the position under the general law, and there is nothing in the provisions of Act, which enacts a different principle. Therefore, if an appeal is admitted without the fact of delay in presentation having been noticed clearly it must be open to the department to raise the objection at the time of the hearing of the appeal. That would also appear to be the practice obtaining before the Tribunal. Similar considerations would apply to other objections of a preliminary character, such as the one based on section 249(2) of the Income Tax Act, 1961, one should be slow to adopt a construction which deprives parties of valuable rights. Therefore, the contentions 6 ITA NO. 6240/M/07 Phoenix Mills Ltd.
relating to preliminary issues are open to consideration at the time of the hearing of the appeal, and that the jurisdiction of the CIT(A) is not limited to the hearing of the appeal on the merits of the assessment only. In this view, the orders of the CIT(A) holding that there were no sufficient reasons for excusing the delay and rejecting the appeals as time-barred would be orders passed under section 250 of the Income Tax Act,1961 and would be open to appeal, and it would make no difference in the position whether the order of dismissal is made before or after the appeal is admitted.
8.1 The supreme court in case of Meal Ram & Sons V. Commissioner of Income-tax, [1956] 29 ITR 607(SC) resolved the judicial conflict. The facts in brief of that case were that for the relevant assessment years, the ITO assessed the income of appellant- firm and issued a notice of demand on account of income-tax and super-tax. The appellant preferred an appeal against the assessment, and it was actually received in the office of the AAC out of time. But the appeal was registered and notice of hearing under section 31 of the 1922 Act was issued. The appellant prayed for condonation of the delay on the ground that following on the partition of the country the conditions were very unsettled and that curfew order had been promulgated and was in force, that the post office did not accept registered letters and that the traffic on the road was closed, and that in view of those exceptional circumstances, it had sufficient cause for not presenting the appeals in time. At the hearing, the AAC passed orders holding that there was no sufficient ground for condoning the delay, and rejected the appeal in limine. On further appeal, the Tribunal dismissed the same on the ground that the orders of the AAC, were in substance passed under section 30(2) of the 1922 Act and not under section 31 of the 1922 Act, and that no appeal lay against them under section 33 of the 1922 Act. On reference, the High Court agreed with the view taken by the Tribunal. On appeal to the Supreme Court held that Section 30 of the 1922 Act confers a right of 7 ITA NO. 6240/M/07 Phoenix Mills Ltd.
appeal on the assessee, section 31 of the 1922 Act provides for the hearing and disposal of the appeal, and section 33 of the 1922 Act confers a right of further appeal against orders passed under section
31.Under section 33 of the 1922 Act it is only orders under section 31 that are appealable. An order declining to condone delay and dismissing the appeal as barred by time is an order under section 31 of the 1922 Act, if it is passed in appeal against an order of assessment, and is one which affirms it. When power is granted to an authority to be exercised at his discretion, it is necessarily implicit in the grant that he may exercise it in such manner as the circumstances might warrant. And if the AAC has discretion to excuse the delay, he has also discretion in appropriate cases to decline to do so. Therefore the refusal to excuse delay is an order under section 30(2) of the 1922 Act. The Apex Court has held that a right of appeal is a substantive right, and is a creature of the statute. Section 30(1) of the 1922 Act confers on the assessee a right of appeal against certain orders, and an order of assessment under section 23 of the 1922 Act is one of them. The appellant therefore had a substantive right under section 30(1) to prefer appeals against orders of assessment made by the ITO. Section 30(2) of the 1922 Act, enacts a period of limitation within which this right is to be exercised. It is well established that rules of limitation pertain to the domain of adjectival law, and that they operate only to bar the remedy but not to extinguish the right. An appeal preferred in accordance with section 30(1) of the 1922 Act must, therefore, be an appeal in the eye of law, though having been presented beyond the period mentioned in section 30(2) it is liable to be dismissed in limine. There might be a provision in the statute that at the end of the period of limitation prescribed, the right would be extinguished, but there is none such here. On the other hand, in conferring a right of appeal under section 30(1) and prescribing a period of limitation for the exercise thereof separately under section 30(2), the legislature has envinced an intention to maintain the distinction well-recognised under the general law 8 ITA NO. 6240/M/07 Phoenix Mills Ltd.
between what is a substantive right and a procedural law. Therefore, it must be held that an appeal presented out of time is an appeal, and an order dismissing it as time-barred is one passed in appeal. Section 31 of the 1922 Act is the only provision relating to the hearing and disposal of appeals, and if an order dismissing an appeal as barred by limitation is one passed in appeal, it must fall within section 31. And as section 33 confers a right of appeal against all orders passed under section 31, it must also be appealable. Thus the law laid down by the Apex Court in the case of Meal Ram & Sons V. Commissioner of Income-tax, [1956] 29 ITR 607(SC) is that an appeal presented out of time is an appeal, and an order dismissing it as time barred is one passed in appeal and that section 250 of Income Tax Act 1961(Section 31 of the Act 1922) should be liberally construed so as to include not only orders passed on a consideration of the merits of the assessment but also orders which dispose of the appeal on preliminary issue, such as limitation and the like.
8.2 On the basis of above law laid down by the Apex Court we can say that If the CIT(A) holds that the appeal does not comply with the requirements of section 249(2) of the Income Tax Act,1961 and rejects it on that ground, the order must be one made under section 250 of the Income Tax Act,1961 .All the orders under section 250 of the Income Tax Act,1961 being appealable under section 253 of the Income Tax Act,1961.The order of dismissal for non-compliance with section 249(2) of the Income Tax Act,1961, not filing appeal in time is also be appealable. In the light of above discussions we do not find substance in submission of the Learned DR therefore his contention is rejected.
8.3 Now we come to the merit of the case. In the case of condo nation of delay in filing appeal the entire controversy would revolve on the showing or not of sufficient cause while praying for condonation of delay. In other words, where there is sufficient cause 9 ITA NO. 6240/M/07 Phoenix Mills Ltd.
shown and the application for condonation of delay has been moved bonafide, the court would normally condone the delay but where the delay has not been explained at all and, in fact, there is unexplained and inordinate delay coupled with negligence or sheer carelessness, the discretion of the court in such cases would normally tilt against the applicant. The period of limitation has to be construed somewhat strictly and advantages that accrue to non-applicant would normally not been taken away in a routine manner or for no plausible cause or reason. The law of limitation is normally to be construed strictly as it has the effect of vesting for one and taking away right from the other. To condone the delays in a mechanical or a routine manner may amount to jeopardizing the legislative intent behind Section 5 of the Limitation Act. Statutes of limitation are designed to effectuate a beneficent public purpose viz. to prevent the taking away from one what he has for long been permitted to consider his own and on the faith of which he plans his life, habits and expenses. Long dormant claims are often more of cruelty than of justice in them. This principle is more based on public policy. Its aim being to secure the quiet of the community and to prevent oppression. These rules have been viewed by some as an infamous power created by positive law to decrease litigation and encourage dishonest defenses'. This may not be wholly true but still the limitation vests a definite right in a party after a lapse of period prescribed under law. It interposes a statutory bar after a certain period giving quietus to the rights arising from a judgment which is sought to be impugned. In other words, the law of limitation is thus founded on public policy. It is enshrined in the maxim "interest reipublicae ut sit finis litium" (it is for the general welfare that a period be part to litigation). The very scheme of proper administration of justice pre-supposes expediency in disposal of cases and avoidance of frivolous litigation. Where the parties chose to sleep over their rights for prolonged periods without any just cause, can hardly claim equity in justice particularly faced with the statutory provisions of Section 5 of the Act. In construing enactments which 10 ITA NO. 6240/M/07 Phoenix Mills Ltd.
provide period of limitation for institution of proceedings, the purpose is to intimate people that after lapse of certain time from a certain event, a proceeding will not be entertained where a strict grammatical construction is normally the safe guide. Law is not an exercise in linguistic discipline but the substance of legislative intention can also not be frustrated merely by uncalled for equity or sympathy. The provision of limitation should be construed strictly but at best its application could be liberalised where actual sufficient cause in its true sense is shown by an applicant who has acted bona fide and with due care and caution. An interpretation or application of the statutory provisions which would frustrate its very object necessarily has to be avoided. The law of procedure undisputedly takes in its ambit and scope the need to act expeditiously and not to delay the progress of the legal proceedings. The law of limitation stricto senso is not law of procedure simplicitor but has the effect of creating a legal bar in exercise of a right which otherwise would have been available to a party but for lapse of time. As already noticed, the law of limitation is based on public policy and helps effective and proper administration of justice. It is expected of every litigant, to act within the period of limitation. It is only by way of an exception and upon showing sufficient cause that Appeals, if otherwise permissible, could be entertained beyond the prescribed period of limitation. It also be noticed that in the case of State of West Bengal vs. Administrator, Howrah Municipality, AIR 1972 SC 749, the Supreme Court held that expression "sufficient cause" should receive a liberal construction so as to advance the purpose of justice particularly when there is no motive behind delay. This necessarily implies that parties must act bonafidely, expeditiously and with due care. A casual or a negligent litigant who has acted with utter irresponsible attitude, cannot claim the condonation of delay in law when the right has accrued to the other side. The expression "sufficient cause" will always have relevancy to reasonableness. The actions which can be condoned by the Court should fall within the realm of normal human conduct or 11 ITA NO. 6240/M/07 Phoenix Mills Ltd.
normal conduct of a litigant. It is neither expected nor can it be a normal conduct of a public servant or a litigant that they would keep the files unmoved, unprocessed for months together on their tables.
8.4 How the power of condonation of delay is to be exercised, has been explained by the Apex Court in the case of Collector, Land Acquisition v Mst. Katiji And Others- 167 ITR 471 (SC) as under:-
( Pages 472 )" 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 "suff icient cause " employed by the Legislature is adequately elastic to enable the courts to apply the law in a meaningf ul manner which sub serves the ends of justice that being the lif e-purpose of the existence of the institution of courts. It is common knowledge that the court has been making a justif iably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the other courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that:
1. Ordinarily, a litigant does not stand to benef it by lodging an appeal late.
2. 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 af ter hearing the parties.
1. " Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted af ter the prescribed period if the appellant or the applicant satisf ies the court that he had suff icient cause for not preferring the appeal or making the application within such period."
( Page 473) 3. " Every day's delay must be explained" does not mean that 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.
4. When substantial justice and technical considerations are pitted against each other, the 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.
5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of malafides. A litigant does not stand to benef it by resorting to delay. In f act, he runs serious risk.
12 ITA NO. 6240/M/07Phoenix Mills Ltd.
6. 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."
8.5 Here we would also like to refer the finding of the Apex Court in the case of N. Balakrishnan V. M. Krishnamurthy, AIR 1998 SC 3222. The Apex Court held as under:-
"11. Rules of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation f ixes a life span for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a lif e span must be f ixed for each remedy. Unending period for laundering the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim interest reipublicae up sit f inis litium ( it is for the general welf are that a period be put to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively f ixed period of time.
12. A court knows that refusal to condone delay would result in foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words 'suff icient cause' under section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi Jain V. Kuntal Kumari, AIR 1969 SC 575 and State of West Bengal V. the Administrator, Howah Muni-capacity, AIR 1972 SC
749."
8.6 Now we would like to go through the cases relied upon by the learned DR. The case of JCIT Vs. Tractors & Farm Equipments Ltd., [2007] 104 ITD 149 (Chennai)(TM) is distinguishable on facts as in that case, the delay was not condoned by the ITAT on the ground that as the delay was due to negligence and in action on the part of the assessee and the assessee could have very well avoided the delay 13 ITA NO. 6240/M/07 Phoenix Mills Ltd.
by exercise of due care and attention. Similarly, the decision of ITAT in the case of ITO V. Hemraj Onkarji Mali, [2009] 311 ITR (AT) 416 (Indore).In that case there was no reasonable cause for delay. A conscious decision had been taken by the senior officer of the rank of Commissioner not to file appeal. The assessee had not taken proper steps to show that the cause is beyond reasonable doubt for the delay.In the case of Madhu Dadha Vs. ACIT, [2009] 317 ITR 458 (Mad.) the court while dismissing the appeal noticed that the assessee had not explained the cause of delay in filing the appeal. Thus the facts of the case under consideration are different therefore the said judgments are distinguishable on facts.
8.7 In the light of the above discussion and considering to make justice oriented approach, we find that there was sufficient cause for condoning the delay in the institution of appeal before the CIT(A) by the assessee. The CIT(A) ought to have condoned the delay keeping in view of the laws laid down by the Apex Court in the above cases cited and ratio laid down by the Hon'ble Madras High Court in the case of Areva T and D India Ltd., Vs. JCIT, [2006] 287 ITR 555 (Mad) wherein on identical set of facts, affidavit filed by the Director of the assessee company for the delay in filing the appeal, the delay was condoned. Since the matter has been sent back to the file of the CIT(A) on the first ground of appeal itself, therefore, we do not express any opinion on merit of the case. We remit the matter back to the file of the CIT(A) and the CIT (A) is directed to condone the delay and decide the appeal on merit after providing reasonable opportunity of being heard to both the sides.
14 ITA NO. 6240/M/07Phoenix Mills Ltd.
9. In the result, the appeal of the assessee is allowed.
Pronounced on this 23 r d day of March, 2010
Sd/- Sd/-
(R.K. GUPTA) (A.L. GEHLOT)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 23 r d March, 2010
Copy to:-
1) The Appellant.
2) The Respondent.
3) The CIT (A) concerned.
4) The CIT concerned.
5) The Departmental Representative, "A" Bench, I.T.A.T.,
Mumbai.
By Order
//true copy//
Asst. Registrar,
I.T.A.T., Mumbai.
Kv
S.No. Description Date Intls
1. Draft dictated on 5.03.10 Sr.P.S./P.S
2. Draft placed before author 09.03.10 Sr.P.S/PS
3 Draft proposed & placed before JM/AM
the second Member
4 Draft discussed/approved by JM/AM
second Member
5 Approved Draft comes to the Sr.P.S./P.S
Sr.P.S./PS
6. Kept for pronouncement on Sr.
P.S./P.S.
7. File sent to the Bench Clerk Sr.P.S./P.S
8 Date on which file goes to the
Head Clerk
9 Date of Dispatch of order