Income Tax Appellate Tribunal - Hyderabad
Kitty Steels Limited, Hyderabad vs Assessee on 11 July, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
and SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
I.T.A. No. 840/Hyd/2010 - A.Y. 1996-97
M/s. Kitty Steels Ltd. Vs. The DCIT
Ghatkesar, RR Dist., AP Central Circle-1
PAN/GIR No. K-1 Hyderabad
Appellant Respondent
I.T.A. No. 841/Hyd/2010 - A.Y. 1996-97
M/s. Kitty Steels Ltd. Vs. The JCIT
Ghatkesar, RR Dist., AP Special Range-2
PAN/GIR No. K-1 Hyderabad
Appellant Respondent
Appellant by: Sri T.S. Ajay Gandhi
Respondent by: Sri V. Srinivas
Date of hearing: 11.07.2012
Date of pronouncement: 10.09.2012
ORDER
PER CHANDRA POOJARI, AM:
These two appeals by the assessee are directed against the different orders of the CIT(A)-I, Hyderabad dated 11.5.2010 for assessment year 1996-97.
2. The first ground in these appeals is with regard to dismissing of appeals in limine by the CIT(A) in limine by not condoning the delay in filing the appeals before him. The other ground in ITA No. 840/Hyd/2010 is with regard to sustaining of additions made by the Assessing Officer and upholding levy of interest u/s. 234A, 234B, 234C and 201(1A) of Income-tax Act, 1961. The CIT(A) in these cases neither adjudicated the issues relating to merit of the additions nor levy of interest or levy of penalty. Being so, these grounds raised by the assessee relating to 2 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== these issues are preposterous. Accordingly, the same are dismissed as not maintainable.
3. Now we will deal with the issue relating to non-admission of appeals by the CIT(A) on the reason that there is a substantial delay in filing the appeals and, therefore, the delay is not condoned. Brief facts of the issue are that the appeal relating to quantum additions for A.Y. 1996-97 was filed by the assessee before the CIT(A) belatedly and there was a delay of around 10 years in filing the appeal. Similar is the case in respect of penalty appeal. The assessee explained before the CIT(A) that the appeal was filed belatedly. Along with the appeal, the assessee filed an affidavit stating the reason for delay in filing the appeal and requesting for condoning the delay and admission of the appeal. In the said affidavit the director of the assessee company submitted that the company was to file an appeal against the order dated 30.3.1999 for A.Y. 1996-97 within 30 days from the date of service of assessment order. There was a search and seizure operation on the company and the residential premises of the director on 26.7.1995. Following the search, the department had initiated criminal proceedings against the director in charge of the affairs of the company and its family members. These were harrowing times for the directors and the sole aim was to avoid the extremely pernicious effect of the proceedings which was completely illegal. The directors of the company were so disturbed in those years that their health suffered, business ruined and had no strength or equanimity with which they could have attended the obligations of the company. Later the criminal proceedings were quashed and the search was declared completely illegal. However these took a long time and drained their energy and resources in all manners. In the mean time the business of the company suffered a lot. The profitability of the company declined, huge debts piled up on account of the losses and the company had to file petition before 3 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== the BIFR. After prolonged investigation the company was declared sick in the year 2006. In due course, the company had totally forgotten about the order of the income-tax department and its implication. Because of this the appeal was delayed on account of bona fide reason and was not intentional. The assessee requested for condonation of delay and admission of appeal.
4. On appeal, the CIT(A) found that there is no good and sufficient reason to condone the inordinate delay of around 10 years in filing the appeal. Accordingly, he dismissed both quantum and penalty appeals. Against this, the assessee is in appeal before us.
5. The learned AR submitted that the main issue is whether the CIT(A) was right in declining to condone the delay of about 10 years in the assessee filing the appeals before him. The AR narrated the following reasons for the delay in filing the appeals before the CIT(A):
• The management of the Company was not aware of the assessment and penalty orders till it received a letter of the department in BIFR proceedings in February 2009 (a copy of the letter submitted during hearing). Only then did the company know of demands existing against it. On enquiries done internally, it was believed that the orders could have been served on, and remained unattended at, lower levels.
• The assessee got photo copies of the orders at different dates from the department, resulting in the appeals being filed at different dates.
• The department raised demands aggregating to about Rs. 10 crores but no recoveries were attempted. As such, the management remained unaware of the orders.
• There is no doubt whatsoever that both the assessment and 4 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== penalty orders would have been set aside if they were considered on merits. The aggregate demand in them is about Rs. 10 crores.
• The Company and the Group were deeply engaged in fighting battles on several fronts simultaneously. These included:
- Income tax search and assessment proceedings
- Criminal prosecution proceedings launched by income tax department
- Several search and survey proceedings by Central Excise department
- Search and survey proceedings by Commercial Taxes department
- Search and survey proceedings by Customs
- Several applications to BIFR including appeal to Tribunal
- Pressures of recoveries of debts from financial institutions
- Labour unrest, strike and settlement by Industrial Tribunal
- Major fire in premises
- Winding up proceedings before High Court filed by several creditors
- Huge losses in business
6. The AR submitted that a cursory view of the assessment shows that the best judgment assessment was palpably wrong and unjustified. The assessee is a publicly listed company with audited accounts. It was funded by public financial institutions. AO ignored the accounts and the fact that audit was done. All additions made were of gross figures debited to the Profit and Loss Account of the company simply because the assessee did not appear before the AO. It is submitted that if the assessment were to be scrutinised on merits, it would be set aside without any doubt 5 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== whatsoever. The AR submitted that penalty u/s. 271(1)(C) was levied. A quick reading of the penalty order would convince anyone that it would never stand judicial scrutiny if it were considered on merits.
7. The learned AR submitted that the company went through very difficult times during the period 1995 to 2010. Some of the major incidents deserving mention are below.
1. On 26 July 1995 there was search and seizure by Income Tax authorities on the premises of company and on its directors and officials.
2. Various winding up proceedings were filed by creditors before High Court of Andhra Pradesh Hyderabad during 1996.
3. During the financial year 1996-97, several major customers like Sanghi Industries Ltd., MESCO Ltd., Loeche India Pvt Ltd., have cancelled their orders which reflected badly on the performance of the Company which lead to the downfall in the production and subsequently company went into losses.
4. On 12th April 1996 there was labour unrest and as a consequence of which the labour went on strike and the same was settled before the Industrial Tribunal on 30.10.2006 vide EP No 2/2006 and as per the orders amounts were paid to the respective workers.
5. On 15 May 1997, there was raid by sales tax authorities on the premises of the company and several records were seized.
6. On 14 October 1997 there was a major fire accident in the factory premises for which company filed an FIR before Ghatkesar PS. 6 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
========================
7. Prosecution proceedings were conducted and the directors were convicted on February 7, 1997. In 2000, the conviction was set aside in appeal.
8. There was search by Customs officials on February 13, 1997 on the factory premises and the residential premises of the officials.
9. In the year 1998, due to labour unrest and cancellation of orders company had incurred heavy losses which resulted in slipping of bank accounts under NP A. Thereafter banks and financial institutions proceeded before Debt Recovery Tribunal.
10. Company filed a reference before Board for Industrial and Financial Reconstruction (BIFR) for the FY 1997- 98 and got registered vide No 171/1999. Since company was incurring losses continuously its net worth had become negative.
11. The Company filed its further references vide Case No 272/2004 for the FY 1998-99, Case No 278/2004 for the year 1999-2000 before the BIFR and got registered respectively.
12. On 27.01.2000 the officials of the Central Excise have visited the factory premises and seized certain documents vide panchnama dated 27.1.2000.
13. The income tax department initiated proceedings against the company for TDS violations in 1997. It then launched prosecution proceedings in CC9/2000 dated 17.2.2000 with regard to alleged TDS violations. This was the second prosecution filed by the department. The proceedings relating to TDS also went to the High Court twice in writ petitions.
7 ITA Nos. 840 & 841 / Hyd/2010M/s. Kitty Steels Ltd.
========================
14. Financial Institutions (ICICI Ltd) and Banks initiated proceedings under SARFASI ACT 2002 and company was under constant threat of takeover of the unit and change of management.
15. Company was declared sick on 21.4.2006 by the BIFR.
16. There was a survey by the central excise authorities on the company on 6.2.2008.
17. There was a survey by Service Tax Wing of the Central Excise Department on 8·3·2009·
8. The AR submitted that the Company stands to lose about Rs. 10 crores by not filing the appeal. There is no reason for the assessee not to have filed the appeals except when it was prevented by good cause. Any management of a mid-sized single company facing such difficulties for a period of 15 years is likely to make lapses in statutory compliances, unwittingly and unintentionally. The behaviour and the delay in filing the appeal by the assessee is not abnormal and is understandable. Another management in the same situation is likely to have perhaps done that. It deserves the benefit of doubt.
9. The AR further submitted that the total tax levied was huge running into several crore rupees. Any person, in their place, without reasonable cause, would have filed the appeal and attempted to avoid the tax even if it was a legal and fair assessment. In this case it was bad assessment done and bad penalty levied. There is no reason for them not to have filed the appeals. It is against all human probabilities that the assessee would intentionally lapse in filing the appeals and incur a liability which would certainly have been deleted. It is also submitted that there can be no presumption of deliberateness in this case as the assessee runs a very serious risk of a huge loss.
8 ITA Nos. 840 & 841 / Hyd/2010M/s. Kitty Steels Ltd.
========================
10. The AR submitted that as per the circumstances narrated, there is no negligence on the part of the assessee. He relied on the decision of Supreme Court in MST. Katiji wherein it was held that 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 stand to benefit by resorting to delay. In fact, he runs a serious risk." This applies to the present case as well.
11. The AR further submitted that there is no mala fide or dilatory strategy. He relied on the decision of Supreme Court in the case of N Balakrishnan v M Krishnamurthy, (1988) 7 SCC 123:
wherein the Apex Court held that the Tribunal held that if the explanation does not smack of mala fide or it is not put forth as a part of dilatory strategy, Courts need to show utmost consideration to such litigant. There has been no mala fide on the part of the assessee nor is there a dilatory strategy - it is plain delay.
12. The AR submitted that grave miscarriage of justice itself is a ground to condone the delay. He relied on the judgement of Supreme Court in the case of O.P. Kathpalia vs. Lakhmir Singh AIR 1984 SC 1744, where the Supreme Court held that if the refusal to condone the delay results in grave miscarriage of justice, it would be a ground to condone the delay. In this case, if the delay is not condoned, it would result in the tax being levied on a bad assessment and a pernicious penalty order - a grave miscarriage of justice. This is a reasonable ground by itself to condone delay. The Supreme Court said in Mst Katiji (supra):
"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 9 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== injustice being done because of a non-deliberate delay." Further:
"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." The above observations squarely apply to the present case and may kindly be considered. The AR submitted that In the case of HS Sethi & others, the Tribunal, Hyderabad Bench had occasion to consider a delay of over 1500 days in the filing of an appeal before it by the directors of this company and the Tribunal was pleased to condone the delay. The ratio of the order is applicable to the present case as well.
13. The learned AR relied on the following judgements:
i) In the case of Collector, Land Acquisition vs. Mst. Katiji and Ors. (1987) 62 CTR (SC) 23 : (1987) 13 AIR 306(SC), the Hon'ble Supreme Court held that "The legislature has conferred the power to condone delay by enacting s. 5 of the Limitation Act of 1963 in order to enable the Courts to do substantial justice to parties by disposing of matters on '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 is 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 other Courts in the hierarchy.
ii) Auto Centre, 278 ITR 291, (All): "The approach of the Tribunal is pedantic, while in matters of condonation of 10 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== delay it should be pragmatic and liberal. In the matters of condonation of delay, a pragmatic view should be taken and there should be a liberal approach." "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."
iii) In Shakuntala Devi Jain vs. Kuntal Kumari AIR 1969 SC 575, the Hon'ble Supreme Court held that unless want of bona fides of such inaction or negligence as would deprive a party of the protection of s. 5 is proved, the application must not be thrown out or any delay cannot be refused to be condoned.
iv) In Shankarrao vs. Chandrasenkunwar (1987) Suppl. SCC 338, the Supreme Court took the view that the Court should not adopt an injustice-oriented approach in rejecting the application for condonation of delay.
v) In Nand Kishore v State of Punjab, (1955) 6 SCC 614, Supreme Court had condoned delay of 31 years.
vi) Addl CIT v Sterlite Industries, 102 TIJ 53, Mum/ 6 SOT 497
vii) In N. Balakrishnan vs. M. Krishnamurthy (1998) 7 SCC 123, the Apex Court explained the scope of limitation and condonation of delay, observed that "The primary function of a Court is to adjudicate the dispute 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. Rules of limitation are not meant to destroy the rights of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy for the redress of 11 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== the legal injury so suffered, the law of limitation is thus founded on public policy."
viii) Madhya Pradesh State Electricity Board v Union of India 331 ITR 50, (MP): Genuine hardship caused by not condoning delay has to be considered.
ix) CIT v Sanmac Motor Finance Ltd, 322 ITR 309 (Mad) where a delay of 1826 days was condoned for sufficient reason.
14. The learned AR submitted that the company came to know about the demands and the orders only in 2009 after the letter of the department in the BIFR matter came to its notice and it filed appeals soon after that, after obtaining copies from the department. In view of the above, it is prayed by the assessee that it was prevented by sufficient cause in filing the appeals late and the CIT(A) ought to have condoned the delays. This alone would further the cause of substantial justice. The department stands to lose nothing if the issues are considered on merit.
15. In the rejoinder, the AR relied on the judgement in the case of Devender Kaur & Ors. in ITA Nos. 23-25/Hyd/2000 dated 8th August, 2008
16. The learned DR submitted that the inordinate delay of around 10 years cannot be considered as reasonable and the appeals cannot be admitted as there is no good and sufficient reason to admit. He further submitted that the assessee has always been non-cooperative with the Department and he relied on the judgement of Punjab & Haryana High Court in the case of CIT vs. Ram Mohan Kabra (257 ITR 773) wherein held that "The provisions relating to prescription of limitation in every statute must not be construed so liberally that it would have the effect of taking away the benefit accruing to the other party in a mechanical manner. Where the Legislature spells out a period of limitation and provides for power to condone the delay as well, there such delay can be condoned only for sufficient and good reasons supported by 12 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== cogent and proper evidence. Now it is a settled principle of law that the provisions relating to specified period of limitation must be applied with their rigout and effective consequences."
17. Further he relied on the order of the Tribunal Chennai Bench Third Member in the case of JCIT vs. Tractors & Farm Equipments Ltd. (104 ITD 149) wherein the Tribunal held that "A distinction must be made between a case where the delay is inordinate and a case where the delay is of a few days, Whereas in the former case, the consideration of prejudice to the other side will be a relevant factor, so the case calls for a more cautious approach, in the latter case, no such consideration may arise and such a case deserves a liberal approach. No hard and fast rule can be laid down in this regard. The Court has to exercise the discretion on the facts of each case, keeping in mind that in considering the expression sufficient cause; the principle of advancing substantial justice is of prime importance. [Para 5] The law assists those who are vigilant, not those who sleep over their rights. This principle is embodied in the dictum: vigilantibus non dormientibus jura subveniunt. [Para 6] The delay cannot be condoned simply because the appellants case is hard and calls for sympathy or merely out of benevolence to the party seeking relief. In granting the indulgence and condoning the delay, it must be proved beyond the shadow of doubt that the appellant was diligent and was not guilty of negligence, whatsoever. The sufficient cause within the contemplation of the limitation provision must be a cause which is beyond the' control of the' party invoking the aid of the provisions. The cause for the delay in filing the appeal, which by due care and attention, could have been avoided, cannot be a sufficient cause within the meaning of the limitation provision. Where no negligence, or inaction, or want of bona fides can be imputed to the appellant, a liberal construction of the provisions has to be made in order to advance substantial justice. Seekers of justice must come with clean hands.
13 ITA Nos. 840 & 841 / Hyd/2010M/s. Kitty Steels Ltd.
======================== In the instant case, the assessee justified the delay only with reference to the affidavit of its director. In the said affidavit it was stated that the Commissioner (Appeal)'s order was misplaced and forgotten. It was found while sorting out the unwanted papers and thereafter steps were taken for the preparation of the appeal and consequently the delay was caused That clearly showed that the delay was due to the negligence and inaction on the part of the assessee. The assessee could have very well avoided the delay by the exercise of due care and attention. There existed no sufficient and good reason for the delay of 310 days. Therefore, reasonings adduced by the Accountant Member were! to be concurred with. (Para 8)"
18. The DR relied on the order of the Tribunal Hyderabad Bench in the case of Shri G. Nagabhushanam, Balarai, vs. ACITin IT(SS)A No. 28/Hyd/2008 dated 13th August, 2010 wherein the Tribunal held as under:
"3. We have heard both the parties and perused the materials available on record. In this case, there was an inordinate delay of 4294 days in filing the appeal. The main contention of the assessee's counsel is that the assessee has no money to pay the admitted tax and prayed to condone the delay. According to the learned counsel, the assessee was in great financial hardship, and as such, admitted tax was not paid before filing the appeal on earlier occasions. Though the assessee has taken this plea in the petition, no evidence of whatsoever is placed before this Tribunal explaining its financial difficulties. We are not able to appreciate the financial hardships of the assessee without any valid records before us to support his claim. We are also not able to understand whether the assessee is having sufficient cash in hand or bank balance. No asset and liability statement or bank account details are filed by the assessee before us. The delay cannot be condoned simply because the assessee's case is hard and calls for sympathy or merely out of benevolence to the party seeking relief. In granting the indulgence and condoning the delay, it must be proved beyond the shadow of doubt that 14 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== the assessee was diligent and was not guilty of negligence whatsoever. The sufficient cause within the contemplation of the limitation provisions must be a cause which is beyond the control of the party invoking the aid of the provisions. The cause for the delay in filing the appeal which by due care and attention could have been avoided cannot be a sufficient cause within the meaning of the limitation provision. Where no negligence, nor inaction, or want of bona fides can be imputed to the assessee a liberal construction of the provisions has to be made in order to advance substantial justice. Seekers of justice must come with clean hands. As the petition of the assessee clearly shows that the delay was due to negligence and inaction on the part of the assessee. The assessee could have very well avoided the delay by exercising due care and attention. In our opinion, there exists no sufficient and good reason for the inordinate delay of 4294 Days. Accordingly, we dismiss the appeal of the assessee without admitting the same."
19. The DR relied on the order of the Tribunal in the case of Agricultural Marketing Committee vs. ADIT (Exemptions-I) in ITA Nos. 1275 & 1276/Hyd/2011 dated 10th February, 2012 wherein it was held as under:
"4. In these cases, there are delays of 1559 days in filing the appeal for the assessment year 2003-04 and 1529 days for assessment year 2004-05. The assessee filed petitions for condoning the said delays and prayed for admitting these appeals. We have gone through the reasons advanced by the assessee in its petitions. It is admitted fact that there is no hard and fast rule which can be laid down in the matter of condonation of delay and courts should adopt a pragmatic approach and discretion on the facts of each case keeping in mind that in considering the expression 'sufficient cause' the principles of advancing substantial justice is of prime importance and the expression' sufficient cause' should receive a liberal construction. A liberal view ought to be taken in terms of delay of few days. However, when there was inordinate delay, one should be very cautious while condoning the delay. In the case of Collector Land Acquisition vs. Mst. Katiji 15 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== (167 ITR 471) (SC) wherein the Supreme Court laid down the following six' principles before condoning the delay:-
"(i) Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
(ii) Refusing to condone delay can result in a meritorious matter being thrown 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.
(iii) "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.
(iv) When substantial justice and technical consideration 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.
(v) 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 stand to benefit by resorting to delay. In fact, he runs a serious risk.
(vi) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so."
5. In the case of Vedabai alias Vaijayanatbai Baburao Patil (253 ITR 798) the Apex Court clearly laid down that the distinction must be made between a case where delay is inordinate and a case where the delay is of a few days. The law assists those who are vigilant, not those who sleep over their rights.
6. The delay cannot be condoned simply because the assessee's case is hard and calls for sympathy or merely out of benevolence to the party seeking relief. In 16 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== granting the indulgence and condoning the delay, it must be proved beyond the shadow of doubt that the assessee was diligent and was not guilty of negligence whatsoever. The sufficient cause within the contemplation of the limitation provision must be a cause which is beyond the control of the party invoking the aid of the provisions. The Hon'ble Supreme Court in the case of Ramlal v. Rewa Coalfields Limited AIR 1962 SC 361 has held that the cause for the delay in filing the appeal which by due care and attention could have been avoided, cannot be a sufficient cause within the meaning of the limitation provision. Where no negligence, nor inaction, or want of bona fides can be imputed to the assessee a liberal construction of the provisions has to be made in order to advance substantial justice. Seekers of justice must come with clean hands. In the present case, the reasons advanced by the assessee do not show any good and sufficient reason to condone the delays. The delays are not properly explained by the assessee. We find no reason for condoning such delays for the assessment years under consideration. The delay is nothing but negligence and inaction of the assessee which have been very well avoided by the exercise of due care and attention. In our opinion, there exists no sufficient or good reason for condoning inordinate delays of more than 1500 days for the years under consideration. In view of the above, we do not find any merit in the arguments advanced by the learned counsel for the assessee.
7. In the result, both the appeals filed by the assessee are dismissed."
20. Further he relied on the Special Bench decision in the case of Dy. CIT v. Oman International Bank SAOG [2006] 100 ITD 285 (Delhi)(SB) for the proposition that Third Member decision is as good as Special Bench decision and it should be followed. He relied on the order He also relied on the order of Tribunal in the case of AP Housing Board vs. DIT (Exemptions) in ITA No. 110/Hyd/08 dated 14.5.2010 wherein delay of 1013 days in filing the appeal was rejected because the assessee could not prove sufficient cause for filing the appeal belatedly.
17 ITA Nos. 840 & 841 / Hyd/2010M/s. Kitty Steels Ltd.
========================
21. The learned DR also relied on the judgement of Delhi High Court in the case of M.S. Nulon India Ltd. vs. CIT (219 ITR 736) (Del) wherein held that the assessee being in the profession of tax consultant cannot justifiably claim that it had no proper legal guidance. The delay could not be condoned on this count. He submitted that the assessee has not explained the delay in sufficient reasons and the reasons given are not supported by proper evidence. He also relied on the judgement of Supreme Court in the case of J.B. Advani & Co. (72 ITR 395), Raju Ramachandra Bhangde (148 ITR 391) (Bom), Mst. Katiji (167 ITR
471) (SC), Tribunal decision in the case of Kantilal K. Advani (25 ITD 57) (Bom), in the case of LR Talwar (52 ITD 44) (Del) and Mahendra Financial Corporation (29 ITD 302) (Hyd). The ratio of all these decisions is that in deciding a plea for condonation of delay a court cannot consider the merits of a case. A time barred appeal strikes at the very root of the Court's jurisdiction. Till such time the delay is condoned the Court has no legal authority to hear the case. For this the assessee must show not just reasonable cause but sufficient cause. The DR submitted that the assessee was in touch with the Income Tax Department on various issues, and was carrying on its activities without let or hindrance. Farm from explaining "each day's delay", the assessee is unable to offer even a generalised explanation. Under the circumstances, the delay does not even pass the test of 'reasonable cause', not to speak of 'sufficient cause'.
22. Further the DR argued that the delay in filing of these appeals was inordinate. It had to be borne in mind that the delay is about 10 years in these cases. Such exceptional delay could not be explained away by pleading various difficulties of the assessees'. Income-tax Act provides a period of 30 days to file an appeal against the order of the Assessing Officer before the CIT(A).
18 ITA Nos. 840 & 841 / Hyd/2010M/s. Kitty Steels Ltd.
======================== A line was, therefore, required to be drawn up to which the assessee could plead the difficulties such as :
• The management of the Company was not aware of the assessment and penalty orders till it received a letter of the department in BIFR proceedings in February 2009 (a copy of the letter submitted during hearing). Only then did the company know of demands existing against it. On enquiries done internally, it was believed that the orders could have been served on, and remained unattended at, lower levels.
• The assessee got photo copies of the orders at different dates from the department, resulting in the appeals being filed at different dates.
• The department raised demands aggregating to about Rs. 10 crores but no recoveries were attempted. As such, the management remained unaware of the orders.
• There is no doubt whatsoever that both the assessment and penalty orders would have been set aside if they were considered on merits. The aggregate demand in them is about Rs. 10 crores.
• The Company and the Group were deeply engaged in fighting battles on several fronts simultaneously. These included:
- Income tax search and assessment proceedings
- Criminal prosecution proceedings launched by income tax department
- Several search and survey proceedings by Central Excise department
- Search and survey proceedings by Commercial Taxes department
- Search and survey proceedings by Customs 19 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
========================
- Several applications to BIFR including appeal to Tribunal
- Pressures of recoveries of debts from financial institutions
- Labour unrest, strike and settlement by Industrial Tribunal
- Major fire in premises
- Winding up proceedings before High Court filed by several creditors
- Huge losses in business
23. According to the DR the expression used in section 249(3) was not merely reasonable cause but "sufficient cause". The expression "sufficient cause" was more strict and restricts you than "reasonable cause". The assessee was required to explain each day of delay. According to the DR the explanation given by the assessee as enumerated in para 5 of this order is not easy to believe and it is not substantiated. He submitted that the various decisions relied on by the assessee's counsel are distinguishable as they are delivered on their own facts. According to the DR the assessee's request for condonation of delay was rightly turned down by the learned CIT(A) and the assessees herein did not deserve any interference on the part of the Tribunal. Further, he submitted that the assessee in the case of Davinder Kaur & Others of similar group have filed their appeals in ITA Nos. 23- 25/Hyd/2000 wherein the delay was only 1579 days. When the assessees of similar group were able to file the appeals with a short delay of 1579 days how could be such an inordinate delay in the present cases. According to the DR, the assessees have not exercised due care or attention for filing the appeals within the statutory time limit and the assessees shown utter disregard to the statutory provisions of the Act.
24. We have carefully considered the various submissions. The issue before us is whether the CIT(A) is justified in refusing to 20 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== condone the delay around 10 years in filing these appeals against the order passed by the Assessing Officer. The assessee's herein explained the delay in filing the appeals as narrated in para 5 of this order on account of the following reasons:
• The management of the Company was not aware of the assessment and penalty orders till it received a letter of the department in BIFR proceedings in February 2009 (a copy of the letter submitted during hearing). Only then did the company know of demands existing against it. On enquiries done internally, it was believed that the orders could have been served on, and remained unattended at, lower levels. • The assessee got photo copies of the orders at different dates from the department, resulting in the appeals being filed at different dates.
• The department raised demands aggregating to about Rs. 10 crores but no recoveries were attempted. As such, the management remained unaware of the orders. • There is no doubt whatsoever that both the assessment and penalty orders would have been set aside if they were considered on merits. The aggregate demand in them is about Rs. 10 crores.
• The Company and the Group were deeply engaged in fighting battles on several fronts simultaneously. These included:
- Income tax search and assessment proceedings
- Criminal prosecution proceedings launched by income tax department
- Several search and survey proceedings by Central Excise department
- Search and survey proceedings by Commercial Taxes department
- Search and survey proceedings by Customs
- Several applications to BIFR including appeal to Tribunal
- Pressures of recoveries of debts from financial institutions
- Labour unrest, strike and settlement by Industrial Tribunal
- Major fire in premises
- Winding up proceedings before High Court filed by several creditors
- Huge losses in business 21 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
========================
25. Before the CIT(A) the assessees also explained that there was a search and seizure operation on the company and residential premises of the directors on 26.7.1995. Following the search, the Department had initiated criminal proceedings against the directors in-charge of the affairs of the company and their family members. There were harrowing times for the directors and the sole aim was to avoid the extremely pernicious effect of the proceedings which was completely illegal. The directors of the company were so disturbed in these years that their health suffered, business ruined, had no strength or equanimity with which they could have attended the obligations of the company, while criminal proceedings were quashed and search was declared completely illegal. However, this took a long time and drawn their energy and resources in all manners. In the meantime the business of the company suffered a lot. The profitability of the company had gone down, huge debts mounted up, the company had to file a petition before BIFR. After prolonged investigation, the company was declared sick in the year 2006. During this time, the only motive of the assessees is to keep the company as a going concern and had forgotten all the income-tax matters and its implications. The CIT(A) dismissed the plea of the assessees stating that the reasons explained by the assessees are vague and unsubstantiated and those reasons cannot be taken to establish sufficient cause for filing the appeal belatedly.
26. There was a delay of 3800 days in the case of ITA No. 840/Hyd/2010 as the assessment order was passed on 30.3.1999 and the appeal was filed before the CIT(A) on 22.7.2009. Thus the delay was 3800 days. In the case of penalty order which was passed on 22.9.1999, appeal was filed before the CIT(A) on 22.7.2009. Thus the delay was around 3560 days with reference to ITA No. 841/Hyd/2010. The contention of the assessee's 22 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== counsel is that in similar circumstances, in the same group of assessee viz., Smt. Davinder Kaur & Ors, in ITA No. 23-25/Hyd/ 2000 order dated 8.8.2008 the Tribunal has condoned the delay of 1579 days. Accordingly the AR requested to condone the delay of around 3800 days. In our opinion, the delayu of 1579 days was condoned as the assessee was able to explain the delay before the Tribunal with sufficient reasons. In the cases before us the delay was double the delay in the above cases. The assessee is required to show sufficient cause that the assessee was either bona fide or was prevented by sufficient cause from pursuing the remedy. Whether sufficient cause is made out or not is always depend upon the facts of the case and has to be established on record. The assessee has to establish that there was no negligence or in- action or want of bona fide and the right granted under law to challenge the order was not abandoned. It cannot be overlooked that on expiry of the period of limitation prescribed for seeking remedy, a corresponding right accrues in favour of the other party and the same should not be lightly interfered with. Coming to the facts of the present case, the assessee has to explain the period of delay by bringing the material on record to support the sufficient cause. The assessee has to show that the assessee is vigilant during this period and the delay was beyond its control. Condoning of inordinate delay of around 10 years should not frustrate the legitimate expectation of the other party as the Revenue would have come to the conclusion that the order of the CIT(A) has been accepted by the assessee and reached finality, especially the assessee should not take up the requisite legal remedies for such an inordinate length of time. The assessee placed reliance on various judgements. The observations in a judgement must be read in the context in which they appear as each case depends on its own facts. Slightest change in the facts of the case will differ the decision. In deciding the cases one 23 ITA Nos. 840 & 841 / Hyd/2010 M/s. Kitty Steels Ltd.
======================== should avoid the temptation to decide the case by matching the colour of one case against the colour of another. To decide, therefore, on which side of the line a case falls, the broad resemblance to another case is not decisive. Being so, we are not in a position to borrow support from order/judgement cited by the assessee. However, considering the findings of the CIT(A) that the assessee has not substantiated the reasons advanced for delay before the CIT(A), we feel it appropriate to remit the issue back to the file of the CIT(A) with a direction to the assessees to place necessary evidence, as pleaded before us in its petition in the form of additional evidence in support of their claim, if any, before the CIT(A) as the delay occurred before the CIT(A) only. If the assessees fail to substantiate their claims even after additional evidence, the CIT(A) has to draw adverse inference that the assessees have no reasonable and sufficient cause to file the appeals by such an inordinate delay.
27. In the result, both the appeals are partly allowed for statistical purposes.
.Order pronounced in the open court on 10th September, 2012.
Sd/- Sd/-
(ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated the 10th September, 2012 Copy forwarded to:
1. M/s. Kitty Steels Ltd., c/o. M/s. Gandhi & Gandhi, Chartered Accountants, 1002, Paigah Plaza, Basheerbagh, Hyderabad-500
063.
2. The Deputy Commissioner of Income-tax, Central Circle-1, 7th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad-500 004.
3. The Joint Commissioner of Income-tax, Special Range-2, Aayakar Bhavan, Basheerbagh, Hyderabad-500 004.
4. The CIT(A)-I, Hyderabad.
5. The CIT (Central), Hyderabad
6. The DR - A Bench, ITAT, Hyderabad.
Tprao