Income Tax Appellate Tribunal - Kolkata
Assistant Commissioner Of Income-Tax vs Nivedan Vanijya Niyojan Ltd. on 31 August, 1992
Equivalent citations: [1993]44ITD215(KOL)
ORDER
R.V. Easwar, Judicial Member
1. This appeal filed by the department is directed against the order of the Commissioner of Income-tax (Appeals) dated 7-1-1991 for the assessment year 1987-88. The only ground raised in the appeal is as under:
For that on the facts and in the circumstances of the case, the Learned Commissioner of Income-tax (Appeals) erred in deleting the addition of Rs. 20,90,829 made by the Assessing Officer under Section 41(1) of the Income-tax Act, 1961 accepting fresh evidences produced before him which were not produced earlier before the Assessing Officer in violation of Rule 46A(2) of the Income-tax Rules, 1962.
2. There is a delay of 50 days in filing the appeal. The facts which give rise to the delay are as under :
The order of the CIT(A) was received by the CIT, WB-VI, Calcutta on 5-3-1991, and, therefore, the appeal to the Tribunal ought to have been filed on or before 4-5-1991. The appeal was filed on 3-5-1991 originally and also was numbered by the office of the Tribunal as ITA No. 1427 (Cal.) of 1991. On 9th May, 1991, the ITO (judicial) at Calcutta filed a letter with the Assistant Registrar of the Calcutta Benches of the Tribunal informing him that the appeal filed on 3-5-1991 in the assessee's case may be treated as withdrawn. The appeal was posted for hearing immediately and by order dated 31-5-1991, the Tribunal dismissed the appeal as withdrawn. The operative portion of the order of the Tribunal is as under:
The CIT vide his letter dated 9-4-1991 expressed his desire not to pursue the appeal and seeks permission to withdraw the same. Permission is granted and the appeal is dismissed as not pressed and withdrawn.
The reference in the order to the letter of the CIT dated 9-4-1991 is a mistake and the correct date should be 9-5-1991.
3. Thereafter, the department again preferred an appeal to the Tribunal on 24-6-1991 in the assessee's case against order of the CIT(A) (impugned order) and raised the same ground which was raised earlier. The appeal papers were accompanied by a letter dated 24-6-1991 signed by the Assistant Commissioner of Income-tax, Investigation Circle 5(4), Calcutta, who is the Assessing Officer containing an Explanation for the delay of 50 days in filing the appeal. The letter is as under:
No. AC In v. Cir-5(4)/91-92/Cal/760 dated 24-6-1991 To The Assistant Registrar, Income-tax Appellate Tribunal, Calcutta Bench, 225/C, J.C. Bose Road, Calcutta, Sub : Condonation of delay in filing appeal- M/s. Nivedan Vanijya Niyojan Ltd. Assessment year 1987-88.
Sir, Kindly refer to the above.
The order of the Ld. CIT(A)-VIII, Calcutta dated 7-1-1991 in the above case in appeal no. 245(A)/VIII/90-91/5(2) was received in the office of the Commissioner of Income-tax, West Bengal-VI, Calcutta on 5-3-1991 and as such appeal before the Income-tax Appellate Tribunal was to have been filed by 4-5-1991 against this order. That the appeal could not be filed in due time for the following reasons--
1. Necessary papers and documents for filing of the appeal before ITAT were submitted by me to the Judicial Wing of the Department on 3-5-1991 originally and the appeal was lodged.
2. By the Department's letter no. JS/1429/CT/4A/167/91/92 dated 9-5-1991 the appeal originally filed was withdrawn.
3. Authorisation dated 14-6-1991 for filing of the appeal reached me on 18-6-1991 from the Judicial Wing of CIT, WB-VI, Calcutta.
4. After receipt of the said authorisation three working days i.e., 19-6-1991, 20-6-1991 and 21-6-1991 were taken up for preparation of papers necessary for filing of the appeal.
5. 22-6-1991 and 23-6-1991 were holidays and the office was closed.
Under the circumstances narrated above the delay of fifty days in filing this appeal before the ITAT was due to circumstances beyond the control of the Department and hence the same kindly be condoned.
Affidavit duly confirmed is enclosed with this petition for condonation.
Yours faithfully, Sd. R.K. De Enclo: Affidavit (R.K. De) 24-6-1991 AC In v. Cir-5(4) Cal.
The letter was also accompanied by an Affidavit of the Assessing Officer. When the matter was posted for hearing before the Bench on 21-5-1991, the Bench directed the CIT concerned to file a proper affidavit explaining the reasons for the delay in filing the appeal in view of the peculiar circumstances of the case. Accordingly, the CIT,WB-VI filed an Affidavit before the Tribunal which is under:
AFFIDAVIT BEFORE THE TRIBUNAL I, ShriG.L. Sanglyine working as CIT.,WB-VI, Calcutta at 54, Rafi Ahmed Kidwai Road, Calcutta-16 solemnly affirm and declare as under:--
1. That the order of the Ld. CIT(A)-VIII Calcutta dated 7-1-1991 in the above case in appeal No. 254/(A)-VIII/90-91/5(2) was received in my office on 5-3-1991 and as such appeal before the ITAT was to be filed by 4-5-1991 against the order.
2. That I was out of station for attending Conference of Chief Commissioners and Commissioners of Income-tax in New Delhi from 1-5-1991 to 4-5-1991 (5-5-1991 was Sunday).
3. That the original appeal in this case was filed by mistake on 3-5-1991 vide No. JS/1246/CT/4A/167/91-92 without my authorisation. On detection of the mistake the appeal was withdrawn on 9-5-1991 vide letter No. JS/1429/CT/4A/167/91-92.
4. That I authorised the appeal in question on 8-5-1991 on 9-5-1991 I enquired about the fact of the appeal from the Judicial Wing and it was found that further decision in this matter could not be taken up due to misplacement of the relevant folder but ultimately it was found that the file was lying with the Authorised Representative in connection with the withdrawal matter.
5. That the file was received in the Judicial Wing on 19-6-1991. The Stenographer of Judicial Wing was busy with the other CIT for typing the grounds of appeal from 11-6-1991 to 13-6-1991. The grounds of appeal were prepared and sent to A.C., Circle-5(4), Calcutta on 14-6-1991 and the A.C. received the requisition from his section on 18-6-1991.
6. That after receipt of the said requisition three working days i.e., 19-6-1991, 20-6-1991 and 21-6-1991 were taken up for preparation of the papers afresh necessary for filing of the appeal.
7. That on 22-6-1991 and 23-6-1991 was Saturday and Sunday.
8. That under these circumstances the appeal was filed on 24-6-1991. Therefore, the delay in filing of the appeal before the ITAT may kindly be condoned.
Sd. G.L. Sanglyine (G.L. SANGLYINE) Commissioner of Income-tax, West Bengal-VI, Calcutta
4. At the time of hearing, the Ld. counsel for the assessee opposed the application for the condonation of the delay. Our attention was invited to the letter dated 23-3-1992 written by the assessee's authorised representative containing his objections to the condonation of the delay. In short, it was pointed out that when the original appeal was filed in time, there cannot be any reason for delay in filing second appeal for the same assessment year against the same order of the CIT(A). It was also pointed out that the Assessing Officer had not stated any reason for the delay from 4-5-1991 till 18-6-1991 on which date the letter of authorisation to file the appeal is stated to have been received by him. It was submitted that this cannot be sufficient cause for condonation of the delay. Another objection that was raised was that, there is no provision in law for filing the second appeal against the same order after the disposal of the appeal earlier. It was pointed out that the order of the Tribunal passed earlier has become final, and, therefore, the department cannot file any appeal on the same issue for the same year.
5. We have carefully considered the rival submissions. We have also perused the affidavit filed by the Assessing Officer as well as the CIT. On a perusal of the record, we find that the averment of the CIT in the affidavit that the original appeal was filed on 3-5-1991 without his authorisation is correct. The authorisation which was filed along with the original appeal is not the original of the authorisation, but, was only a copy certified to be true copy by the Head Clerk, Judicial Section, Scrutiny Wing, Calcutta of the office of the CIT,WB-VI, Calcutta. The original was called for by us and was also produced by the Ld. Departmental Representative. We found that the original authorisation also had not been signed by the CIT which bears out his averment in paragraph 3 of his affidavit. When the original appeal has not been properly authorised as required by Section 253(2) of the Income-tax Act. It is no appeal in the eyes of law and even the order passed by the Tribunal on the same in ITA No. 1427 of 1991 dated 31-5-1991 is a nullity in the eyes of law. It should be remembered that authorisation under Section 253(2) of the Act, the person who has the right to appeal is the Commissioner of Income-tax and not the Income-tax Officer. The Income-tax Officer when he filed the appeal under the direction of the CIT performs only a ministerial function (Please see the decision of the Supreme Court in CIT v. Anil Kumar Roy Chowdhwy [1967] 66 ITR 367, if the CIT is the person who is to be treated as an appellant for all practical purposes as directed by the Supreme Court, the appeal filed by the department on 3-5-1991 cannot be taken as a proper appeal in the eyes of law, since, it has not been filed as directed by the CIT. It is no appeal at all in the eyes of law. The subsequent withdrawal and the order of the Tribunal permitting the withdrawal are therefore of no consequence. It is not the case, as was sought to be made out by the Ld. counsel for the assessee, of a second appeal being filed against the same order after the first appeal has been disposed of. There is no first appeal and the appeal filed on 24-6-1991 is the appeal that has to be recognised as a proper appeal. This appeal has been filed after a delay of 50 days and we are satisfied that on the facts brought out by the CIT as well as the Assessing Officer in their affidavits there was sufficient cause for the delay in filing the appeal. After the CIT authorised the appeal on 8-5-1991, the judicial section of the department could not find the file, since the records of the assessee were lying with the Departmental Representative before the Tribunal. On receipt of the record on 19-6-1991, the appeal was prepared and after attaching the relevant annexures, the same was filed on 24-6-1991. We are satisfied that the delay of 50 days in filing the appeal was due to reasonable cause. We condone the same, admit the appeal and proceed to dispose it of on merit.
16. The only ground raised by the department is against the acceptance of what is stated to be fresh evidence produced before the CIT(A). Rule 46A(2) of the Income-tax rules is pressed into service. The order of the CIT(A) is not questioned on merits. We have to therefore, see whether there was any such violation of Rule 46A as would cause prejudice to the department. In the assessment, the ITO invoked the provisions of Section 41(1) of the Act and added an amount of Rs. 15,37,202 to the assessment. This amount represented the credit balances as on 31-8-1985 in the names of the following persons :--
SI. No. Name and address of the Credit balance
trade creditor as on 31-8-1985
1. M/s Mira Cloth Stores Rs. 5,66,895.50
288A, Mahatma Gandhi Road,
Calcutta
2. M/s Tere Tex Rs. 6,47,307.00
288A, Mahatma Gandhi Road,
Calcutta
3. M/s Sree Trading Company, Rs. 3,22,999.47
160, Jamunalal Bajaj St.
Calcutta
Rs. 15,37,201.97
Now, it is to be noticed that these balances were closing balances as on the last day of the earlier accounting year. Therefore, they were the opening balances for the accounting year in question. The ITO found that there were no such firms by the name of M/s Mira Cloth Stores and M/s Tere Tex at the addresses given above. He, therefore, concluded that the liabilities were not genuine. Because, the liabilities were treated by him as non-genuine, he took the view that it is a case of cessation of the liability which would justify the resort to Section 41(1). He also noticed from the relevant ledger accounts which were seized by the department that the liabilities even though paid of during the relevant year of account, such payments were only a make-believe affair. In addition to the amount of Rs. 5,66,895 in the account, of M/s Mira Cloth Stores, ITO also noticed from the ledger account of the said firm that there was a credit of Rs. 5,53,628. The explanation offered by the assessee was that the cheque issued on 31-8-1985 to the said firm by the assessee-company was returned without being honoured and the credit entry represented a reversal entry to take note of the fact that the cheque had been returned without being honoured. This explanation was not accepted by the Assessing Officer who added the amount also under Section 41(1) of the Act. The total amount thus added Rs. 20,90,829.
7. The assessee appealed to the CIT(A). The CIT(A) noticed that the correct addresses of M/s Mira Cloth Stores and M/s Tere Tex, as per the address in their bank account, which was with the New Bank of India and State Bank of India, was 228, Mahatma Gandhi Road and not as given in para 6 above. He found that the ITO had enquired in the address at 288A Mahatma Gandhi Road, and, therefore could not find those firms there. He further noticed that the provisions of Section 41(1) were not applicable, since there was no remission or cessation of any liability. He took the view that the ITO has treated the purchases made by the above three concerned as bogus purchases, and, therefore, the question of invoking the provisions of Section 41 (1) did not arise. It was his view that if the purchases are taken as bogus purchases, the allowances given in the year should be withdrawn and there was no justification for invoking the provisions of Section 41(1). He also found from the copies of the ledger account that the entire amount of Rs. 15,37,202 appearing in the ledger account of the firms concerned as liabilities were paid by the assessee during the accounting year relevant for the assessment year under appeal and when such payment has been made the question of cessation of liability does not arise to justify the application of Section 41(1) of the Act. The CIT(A) further noticed that the ITO had by way of abundant precaution reopened the assessment year 1986-87 under Section 147(a) of the Act, and, therefore, he deleted the addition of Rs. 20,90,829 made in the assessment year under appeal under Section 41(1) and directed the Assessing Officer to add the amount, if found to be bogus at the reassessment to be made under Section 147(a) for the earlier year 1986-87.
8. It is against this conclusion of the CIT(A) that the revenue has preferred the appeal before us. We are unable to appreciate the grievance of the department. The Ld. Departmental Representative submitted that the CIT(A) erred in admitting the copies of the bank account of M/s Mira Cloth Stores and M/s Tere Tex and the copies of the ledger account of all the three concerns, both of which were fresh evidence, without affording an opportunity to the Assessing Officer to examine the same. We are unable to agree. The Assessing Officer himself has stated that he has examined the ledger accounts appearing at ledger folio nos. 44, 45 and 47 relating to tne above three concerns and noticed the credit balances. When such is the position and the original ledger account marked NV-8 itself is lying with the ITO having been seized by the department, we are unable to appreciate how the production of the copies of the ledger a/c before the CIT(A) can be stated to be filing of fresh evidence. The ledger accounts, copies of which were filed before us, also did not show the addresses of three firms. The Ld. counsel for the assessee submitted that the addresses given against the three firms in the assessment order were not furnished by the assessee. The correct addresses were found in the bank account of the three firms which were furnished by the assessee before the CIT(A). However, even assuming that the production of the bank accounts of M/s Mira Cloth Stores and M/s Tere Tex showing the correct addresses can be taken as fresh evidence, it is not clear as to how the department can be stated to be agrieved by this. It is to be remembered that the ITO has himself reopened the assessment for the assessment year 1986-87. The direction of the CIT(A) is that the amount of the liabilities if found bogus, should be assessed in the assessment year 1986-87. It is open to the ITO while proceeding with the reassessment to call upon the assessee to substantiate the claim that it has effected purchases to the extent of Rs. 15,37,202 from those persons and while doing so, can also direct the assessee to furnish all the evidence in support of the claim, including the genuineness of the firms, and utilise such occasion to examine the bank accounts of the two firms also as one of the means of ascertaining of genuineness of those firms. In our view the interests of the department have been sufficiently safe-guarded by the action of the ITO in re-opening the assessment for the assessment year 1986-87. The CIT(A) also cannot be stated to have relied upon the evidence produced before him while deleting the addition under Section 41(1). The very reasoning of the ITO himself would go against the addition being sustained under Section 41(1). The ITO has himself stated that the liabilities to the said three firms were non-existent. If that is so, it does follow that there cannot be any cessation of liabilities, since it would be a contradiction in terms to say what was bogus ceased to exist subsequently. Bogus liabilities are liabilities, which never existed at any point of time and therefore cannot "cease" subsequently. The provisions of Section 41(1) cannot apply to such a situation. That apart, the very ledger accounts scrutinised by the ITO show that the liabilities have been paid during the year of account. A liability which has been discharged cannot be treated as a case of cessation so as to justify the application of Section 41(1). Even on this, the conclusion of the CIT(A) has to be upheld.
9. The provisions of Rule 46A(3) ensure justice and fair play by making it obligatory on the part of the first appellate authority to give an opportunity to the ITO to examine the evidence produced during the appeal proceedings for the first time. However, this rule, which is primarily intended to safeguard the revenue, cannot be read and applied in a mechanical or a wooden manner, so that even in cases where the first appellate authority has not relied on such additional or fresh evidence in reaching his decision or even on the very reasoning or findings of the ITO, the assessment cannot be sustained, it is still necessary to find fault with the procedure adopted by the appellate authority and restore the issue to him with directions to follow the procedure prescribed by the said rule. It seems to us that such a futile or meaningless exercise reducing the exalted position enjoyed by the rule to an empty formality or ritual cannot be adopted by shutting our minds to the question whether the failure of the first appellate authority to afford an opportunity to the ITO while admitting fresh evidence has caused any damage or prejudice to the case of the department in real terms or whether the grievance is merely imaginary without any substance. In the present case, as seen earlier, the ITO has ensured that the claim for deduction of the liabilities of Rs. 20,90,829 receives full scrutiny by reopening the assessment for the assessment year 1986-87. The CIT(A) has not also relied so much on the fresh evidence in deleting the addition as on the facts that the liabilities, being considered bogus, can be disallowed on general principles themselves in the year to which they relate and further that they, having been paid during the relevant year of account, cannot fall for being considered under Section 41(1). On a consideration of all the facts of the case and the findings of the CIT(A), we are of the opinion that the CIT(A) did not commit any error in deleting the addition of Rs. 20,90,829 made under Section 41(1) of the Act, nor did he commit any such violation of the provisions of Rule 46A(2) or (3) of the Income-tax Rules as would cause prejudice to the interests of the department. We see no merit in the appeal. We uphold the order of the CIT(A) and dismiss the appeal.