Gujarat High Court
Ilaxi vs Commissioner on 29 December, 2011
Author: M.R. Shah
Bench: M.R. Shah
Gujarat High Court Case Information System
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OJCA/384/2011 18/ 18 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
CIVIL
APPLICATION No. 384 of 2011
In
STAMP
NUMBER No. 2111 of 2011
For
Approval and Signature:
HONOURABLE
MR.JUSTICE M.R. SHAH
&
HONOURABLE
MS JUSTICE SONIA GOKANI
=========================================================
1
Whether Reporters of Local Papers may be allowed to see the judgment ?
2To be referred to the Reporter or not ?
3Whether their Lordships wish to see the fair copy of the judgment ?
4Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5Whether it is to be circulated to civil judge ?
========================================================= ILAXI TEXTILES INDUSTRIES - Applicant(s) Versus COMMISSIONER OF INCOME TAX - Respondent(s) ========================================================= Appearance :
MR TUSHAR P HEMANI for Applicant MR MANISH R BHATT Sr Advocate with Mrs MAUNA M BHATT for Respondent ========================================================= CORAM :
HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MS JUSTICE SONIA GOKANI 29/12/2011 CAV JUDGMENT (Per : HONOURABLE MS JUSTICE SONIA GOKANI)
1. Present Application under Section 5 of the Limitation Act has been preferred by the applicant-M/s. Ilaxi Textiles Industries to condone the huge delay of 1745 days in filing the Misc. Civil Application for restoration of the Income Tax Reference being Reference No. 17 of 1996, which was closed by the order of the Court dated 22nd August 2006.
2. The facts leading to the present Application in nutshell are as under :-
2.1 The applicant-assessee was a partnership firm carrying on its business in crimping yarn. It used to purchase the yarn and get the cloth manufactured by outsourcing the same and such manufactured cloth was termed as grey cloth.
2.2 The applicant filed its return of income on 24th July 1984 declaring its income at NIL. The Assessing Officer initiated inquiry and various details were called for, to examine whether the quantitative details furnished in respect of consumption of yarn and production of cloth were in order.
2.3 On 17th February 1987, applicant filed a revised return disclosing unsold closing stock of yarn valuing Rs.5,50,456/= and paid tax of Rs. 97,684/= in respect of the income declared by way of this revised return. The Government, in the meantime, issued different circulars granting immunity to the assessees, referred to as Amnesty Circulars or Amnesty Scheme. After the assessment was completed on the basis of revised return filed by the applicant, the Assessing Officer determined the total income of the applicant at Rs. 4,55,556/=. Simultaneously, penalty proceedings under Section 271 [1](c) of the Income Tax Act, 1961 ["Act" for short] for concealment of the income had been initiated.
2.4 This initiation of penalty proceedings was objected to and challenged by the applicant before the Commissioner of Income-Tax [Appeals] essentially on the ground that the revised return was preferred suo moto without waiting for any decision of the Assessing Officer and taking benefit of amnesty scheme declared by the CBDT Circular. It was submitted that the applicant was assured by the Assessing Officer that penalty would not be leviable as per the instructions issued under the Amnesty Scheme, as the revised return was filed on 17th February 1987. In appeal, the CIT [A] deleted the total amount of penalty levied by the Assessing Officer to the tune of Rs. 6,97,270/=.
2.5 Aggrieved revenue challenged this order of CIT [A] by way of an appeal before the Income Tax Appellate Tribunal ["Tribunal" for short] and this appeal was partially allowed where order of CIT (A) was set aside although there was a reduction made in the penalty amount levied by Assessing Officer from Rs. 6,97,270/= to Rs. 3,48,635/=.
2.6 Being aggrieved by such an order of the Tribunal, applicant preferred a Reference Application under Section 256 (1) of the Act before the Tribunal proposing three questions for reference. After detailed hearing, the reference was rejected by the Tribunal vide its Order dated 29th March 1994.
2.7 This was further challenged by an application preferred under Section 256(2) of the Act before the High Court with a prayer to direct the Tribunal to refer the questions raised in the Reference Application for its advice. This request of the assessee was acceded to by the Court and pursuant thereto, the Tribunal referred the proposed questions vide its Order dated 18th July 1995.
2.8 Such a reference was registered as Income Tax Reference No. 17 of 1996 before the High Court and both the sides were issued notices Though served, nobody appeared on behalf of applicant, though the said Reference was made at the instance of applicant. Thereafter, aforesaid Reference came up for hearing before the Division Bench on 22nd August 2006 and for want of prosecution, it passed the following order :
"Present is a Reference by the Income-Tax Appellate Tribunal, Ahmedabad Bench "B", at the instance of the Assessee. Office report shows that the Assessee is served, unfortunately, none-appears for the Assessee. The Reference is closed for want of prosecution."
2.9 That thereafter, after a period of 1745 days the applicant has preferred the present application with a request to condone the huge delay of 1745 days in preferring the restoration application for restoration of aforesaid Income Tax Reference.
3.1 It is the say of the applicant that the said order was served on the Income Tax Department. It is also further averred that Chartered Accountants viz., M/s. Jagga Sheth & Associates were entrusted the matter of another firm of partners of the applicant-firm viz., Ilaxi Textiles Industries Private Limited. In that matters of another firm, the Chartered Accountant when visited the Income Tax Department by end of 2010 he came to know about the impugned order of closure of the reference. At his instance, copy of the order was given to him by the Department somewhere in the month of March 2011. It is averred that out of the four partners who are senior citizens, one died some years ago; one resides at Surat and is suffering from various health issues; and one partner goes very often to USA, as his family members are settled there and one partner has settled at Bangalore. Coordination amongst the partners took some more time and as the decision was taken with the consensus to approach the Court for appropriate relief, an advocate was to be appointed. Matter being very old, all the requisite information and papers for preparing the present Misc. Civil Application took further time upto June 2011. As the preparation could be completed by 4th July 2011, an application for recalling the impugned order dated 22nd August 2006 is filed along with present application for condonation of delay of 1745 days.
3.2 The applicant has urged that the applicant-firm had suo moto and voluntarily filed the revised return without any deduction by the Assessing Officer, therefore, when immunity was granted by way of amnesty scheme, levying of penalty by the Assessing Officer and reduction by the Tribunal gives a substantive right in favour of the assessee to challenge such an order and, therefore, any procedural delay in approaching the Court of law should be viewed liberally.
4.1 On issuance of the notice, affidavit-in-reply is filed by the Department objecting seriously to this application. It is contended that the Reference under Section 256 (2) of the Act had been made at the instance of the applicant himself, and therefore, when the registration of such a reference is being intimated to the party concerned and when the notice was also issued requiring the applicant to file the paper book, the tacit silence maintained by the applicant is clearly indicative of negligence on the part of the applicant. It is further contended that though mention is made of the fact that there was discontinuance of the business activities in the year 2000, it is not stated anywhere whether the partnership firm stood dissolved or not. Moreover, no query had been made at any point of time by the applicant firm with regard to the reference filed before the High Court and this vindicates the stand of the Department that this speaks volume of negligence on the part of the applicants.
4.2 It is also urged that the revised return filed by the applicant was not voluntary nor suo motu. The Assessing Officer had examined various persons under Section 131 of the Act which had led the petitioners to file the revised return, so much so that one of the partners was also cross-examined coupled with the fact that action under Section 133A of the Act was carried out by the Investigating Wing and thus, having been left with no option, the revised return was filed.
5.1 Heard learned counsel Mr. Tushar Hemani for the applicant. He fervently urged the Court to keep in mind the objectives of Section 5 of the Limitation Act. He also further urged that there is neither any mala fides on the part of the applicant, nor such a delay had caused any advantage to the petitioner and disadvantage to the Department while condoning the delay. Whether there was any reasonable cause or not, needs to be explained - rest is immaterial. He further urged that substantive justice is far more important than the procedural details and it is a well laid down principle over the years by the Apex Court that procedural law is the handmade of the substantive rights. He touched the merits of the case only for justifying the condonation of delay. However, as per his submissions, unless the delay is condoned, that aspect of merit is not to be further gone into. Following are the authorities sought to be relied upon to substantiate his stand for condonation of delay and grant of subsequent prayer of setting aside the closure of reference.
[1] ITO v. S. Raman Chettier [55 ITR 630 (SC)] [2] CIT v. CA Taktawala [309 ITR 417 (Guj)] [3] K.V Produce & Ors. v. CIT [252 ITR 17 (Ker)] [4] Anand Kumar Saraf & Ors. v. CIT [211 ITR 562(Cal)] [5] CIT v. Suresh Changra Mittal [251 ITR 9 (SC)] [6] Sir Shadilal Sugar & General Mills Limited v. CIT [168 ITR 705 (SC)];
[7] CIT v. Reliance Petroproducts Pvt Limited [322 ITR 158 (SC)] [8] Taiyabji Lakmanji v. CIT [131 ITR 643 (Guj)] [9] Pradip J Mehta v. CIT [300 ITR 231 (SC)].
5.2 So as to avoid making this order bulky, all authorities need no dilation. Emphasis was also made on the judgment of the Apex Court in case of Collector, Land Acquisition v. Mst. Katiji & Ors., reported in 167 ITR 471 where the Apex Court has emphasized the life purpose of the existence of the institution of the Courts. It has reiterated the need for liberal approach while considering request of condoning delay by holding thus;
"The Legislature has conferred the power to condone delay by enacting Section 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 the 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.
And such a liberal approach is adopted on principle as it is realized that :
Ordinarily, a litigant does not stand to benefit by lodging an appeal late, Refusing to condone delay can result in a meritorious mater 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.
"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.
When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the otherwise cannot claim to have vested right in injustice being done because of non-deliberate delay.
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 restoring to delay. In fact, he runs a serious risk.
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."
The Apex Court, of course, was considering the cause of the State which had sought condonation of delay and emphasized on the doctrine of equality before the law and to avail and accord similar treatment to the State as a litigant.
5.3 Yet another decision, which is emphasized by learned counsel Mr. Hemani is that of N. Balakrishnan v. M. Krishnamurthy, reported in [(1998) 7 SCC 123]. The Apex Court, in this authority, once again reiterated that sufficient cause should be construed liberally and acceptability of explanation for the delay is the sole criterion and not the length of the delay. It also further held that in absence of anything depicting mala fides or deliberate as a dilatory tactics, the Courts should ordinarily condone the delay, by holding thus :
"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 promptly. The object of providing a legal remedy is to repaid the damage cause by reason of legal injury. The law of limitation fixes a lifespan for such legal remedy for the redress of the legal injury so suffered. The law of limitation is thus founded on public policy. It is enshrined in the maxim interest reipublicae up sit finis litium (it is for the general welfare that a period be put to litigation). Rules of limitation are not meant to destroy the rights 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 fixed period of time.
Condonation of delay is a matter of discretion of the Court. Section 5 of the Limitation Act does not say that such discretion can be exercised only if the delay is within a certain limit. Length of delay is no matter, acceptability of the explanation is the only criterion. Sometimes, delay of the shortest range may be uncondonable due to a want of acceptable explanation whereas in certain other cases, delay of a very long range can be condoned as the explanation thereof is satisfactory. In every case of delay, there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy, the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time, then the Court should lean against acceptance of the explanation. A court knows that refusal to condone the delay would result in approaching the court is always deliberate. The words "sufficient cause" under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice."
6.0 Learned sr. counsel Shri Manish Bhatt empathetically argued in support of the Department challenging the stand of the petitioner seriously. According to the learned counsel, the decision of the apex court directing the liberal approach in the event of sufficiency of the cause would be applicable only in those cases where the corresponding vigilance is found on the part of the applicant. If there is complete inaction on the part of the applicant, it cannot take advantage of its own wrong. He also urged that the law of limitation, as rightly pointed out, is founded on public policy and it is necessary to put an end to litigation at some point of time. He further urged that merely at the sweet will of the parties, litigation cannot be kept alive artificially for an indefinite period. He also urged that the applicant had abandoned the cause, when it chose not to engage a lawyer in the reference registered by the Court, and thereafter, never paid any attention to such a pending reference. He sought to rely upon the decision of the Apex Court in case of Lanka Venkateshwarlu (D) by L.Rs. v. State of A.P. & Ors., reported in AIR 2011 SC 1199. The Apex Court in this decision turned down the order of the High Court condoning the delay after having recorded that the delay was caused on account of inefficiency and inaptitude of the Government Pleaders. The Court held that the concept of liberal approach and justice oriented approach cannot be employed to jettison the substantial law of limitation. In the words of the Apex Court;
24. Having recorded the aforesaid conclusions, the High Court proceeded to condone the delay. In our opinion, such a course was not open to the High Court, given the pathetic explanation offered by the respondents in the application seeking condonation of delay.
25. This is especially so in view of the remarks made by the High Court about the delay being caused by the inefficiency and ineptitude of the government pleaders. The displeasure of the Court is patently apparent from the impugned order itself. In the opening paragraph of the impugned order the High Court has, rather sarcastically, dubbed the government pleaders as without merit and ability. Such an insinuation is clearly discernable from the observation that "This is a classic case, how the learned government pleaders appointed on the basis of merit and ability (emphasis supplied) are discharging their function protecting the interest of their clients". Having said so, the High Court, graphically narrated the clear dereliction of duty by the concerned government pleaders in not pursuing the appeal before the High Court diligently. The High Court has set out the different stages at which the government pleaders had exhibited almost culpable negligence in performance of their duties. The High Court found the justification given by the government pleaders to be unacceptable. Twice in the impugned order, it was recorded that in the normal course, the applications would have been thrown out without having a second thought in the matter. Having recorded such conclusions, inexplicably, the High Court proceeds to condone the unconscionable delay.
26. We are at a loss to fathom any logic or rationale, which could have impelled the High Court to condone the delay after holding the same to be unjustifiable. The concepts such as "liberal approach", "justice oriented approach", "substantial justice" can not be employed to jettison the substantial law of limitation. Especially, in cases where the Court concludes that there is no justification for the delay. In our opinion, the approach adopted by the High Court tends to show the absence of judicial balance and restraint, which a Judge is required to maintain whilst adjudicating any lis between the parties. We are rather pained to notice that in this case, not being satisfied with the use of mere intemperate language, the High Court resorted to blatant sarcasms. The use of unduly strong intemperate or extravagant language in a judgment has been repeatedly disapproved by this Court in a number of cases. Whilst considering applications for condonation of delay under Section 5 of the Limitation Act, the Courts do not enjoy unlimited and unbridled discretionary powers. All discretionary powers, especially judicial powers, have to be exercised within reasonable bounds, known to the law. The discretion has to be exercised in a systematic manner informed by reason. Whims or fancies; prejudices or predilections can not and should not form the basis of exercising discretionary powers."
It is apt to mention here that in this decision, reference is also made of the judgment of N. Balakrishnan [Supra], while deciding this matter.
One of the main focuses of this judgment is that the Court cannot disregard the substantive law of limitation when there is no justification for the delay and it is required of the Courts to exercise the discretionary powers, particularly the judicial powers within the reasonable bounds known to the law and such discretion has to be coupled with the reasonings.
7.1 Having regard to the material facts pleaded before this Court and having considered the detailed submissions of both the sides, this application for condonation of delay, for the reasons to be enlisted hereinafter, merits no consideration.
7.2 At the outset, it is required to be mentioned that the original cause is of the year 1984. In wake of the filing of the return by the assessee-firm, declaring the income at NIL, inquiry by the Assessing Officer had begun. It appears from the pleadings that many parties were examined and cross-examination of one of the partners also took place. The bone of contention between the parties is whether the filing of the revised return was in wake of amnesty scheme and prior to any such inquiry or whether the same was out of compulsion and not voluntary, else pleaded. Be that as it may, the fact remains that the penalty proceedings initiated by the Assessing Officer culminated into levying of penalty on the assessee firm and the entire sum was deleted by the order of the CIT [A]. The Tribunal, however, set-aside the order of the CIT[A] and partially permitted levying of penalty, and that order sought to be challenged before the High Court by proposing the questions by way of a Reference. When the Tribunal denied to make a reference under Section 256 (1) of the Act, the challenge was made under Section 256(2) of the Act and by a conscious effort, the High Court permitted filing of such a reference by directing the Tribunal to refer the questions proposed to the High Court and pursuant thereto, Reference was registered as I.T Reference No. 17 of 1996.
Admittedly, this was registered at the behest of the applicant. As submitted before this Court, the petitioner never wanted to engage a lawyer for pursuing his cause. Notice also was issued by the High Court to both the sides and petitioner was required to file the paper book for the purpose of deciding the reference. As stated hereinabove, Notice of Reference by this Court was served upon the applicant, however, he had chosen to remain absent and did not pursue the Reference further. All that is pleaded is that the business was discontinued and in the year 2000 the premise was sold off. It is not specified as to when the business premises were sold off. Moreover, notices issued were much earlier in time prior to the year 2000. As per the usual practice, after registration of the reference, notices are issued to the parties where onus is on the petitioner to file the paper book, and therefore, the ground raised by the petitioner of non-availability of any partners due to closure of the business activities will not be available with the applicant. Again, as mentioned hereinabove, there is no mention at all with regard to the disposal of the property by the partnership firm. And therefore, it can be said that there is no justification on the part of the petitioner firm nor is there any sufficient cause for the Court to hold that there was sufficiency of the cause which prevented the petitioner to approach this Court against the order of the closure of the reference.
7.3 We are conscious of the various decisions of the Apex Court emphasizing on liberal approach of the Court while deciding the application for condonation of delay. We are also aware of reiteratively emphasized principle that the procedurality and substantive right when are pitted against each other, substantive right shall always have primacy over procedural laws. Again, the petitioner also need not in a literal sense explain the delay of each day and such a doctrine has to be employed in a reasonable and pragmatic manner at the same time. We need to record the approach of the Apex Court in the decision of Lanka Ventakeshwarlu [Supra] that in the event when there is no justification for delay, the Court cannot marr the substantial law of limitation for upholding the concept of liberal approach. Merely because there is no mala fides on the part of the petitioner or only because there is no advantage that has been gained by causing the delay would itself not result the cause justifiable nor would that lend sufficiency to the cause, and thereby, allow the discretionary power in the form of judicial power to be exercised favouring the applicant, who has chosen not to wake up from his slumber for nearly five years after passing of the order of closure of the Reference.
7.4 It will not be out of place to make a mention at this stage that the reference was registered way back in the year 1996 for the issue which is of the year 1984. This being referred to at this stage only to point out that for a cause, which is so old, not even once any inquiry is made by any of the partners in the entire decade, otherwise status of IT reference would have come to their knowledge for sure. In the year 2006, the Reference was closed for want of prosecution. And thereafter also, for all these five years, no attempt is made on the part of the petitioner to know about the said Reference. As rightly pointed out by the learned counsel Shri Bhatt that the manner in which the order of closure of this Court was made known to the petitioner firm is also very intriguing. However, without delving into that aspect any further, it can be stated that even after the Chartered Accountant concerned came to know about the same somewhere in the month of December 2010, the present application is preferred in the month of August 2011. Old age of the partners; chronic illness and closure of business are the grounds put forth to justify the action of not paying any attention to the cause for all these years. There is nothing on the record to substantiate satisfactorily any of these aspects by way of any documentary proof. Even assuming without accepting the controversy of the cause, nowhere it explains the delay of all these years in not pursuing such an old cause. On the contrary, approach of the partnership firm and the partners appears to be absolutely lethargic, non-attentive and not inspiring any confidence in the explanation sought to be given.
7.5 Again, while approaching the High Court for getting the reference referred from the Tribunal, when that cause was allowed and the reference was registered, the pleadings itself is indicative that there was no intention to engage any lawyer at any stage. In such circumstances, there was all the more responsibility on the part of the petitioner to pursue the cause. It clearly is reflective that the firm abandoned the cause possibly to avoid recovery of penalty which was halved by the Tribunal, possibly to keep the cause alive artificially. Thus, though the reference was sought but the same was never meant to be pursued. If the Chartered Accountant would not have intimated closure of reference by the High Court as conveyed by the IT Department, the possibility cannot be ruled out that the applicant would not have woken up even now, as at no stage, there is any vigilance exercised by the applicant - not to talk of the due diligence required of the litigant to exercise discretionary power in its favour. The approach of the petitioner does not in any manner inspire confidence nor does it in any manner justify the cause sought to be put forth, much less the sufficient cause it is required to establish.
7.6 In view of the above and for the reasons stated hereinabove, present application fails and the same deserves to be dismissed and is accordingly dismissed. Notice discharged. No costs.
{M.R Shah, J.} {Ms. Sonia Gokani, J.} Prakash* Top