Income Tax Appellate Tribunal - Hyderabad
Cheminor Drugs Ltd. (Now Merged With Dr. ... vs Dy. Commissioner Of Income Tax, Special ... on 30 December, 2005
Equivalent citations: [2007]105ITD613(HYD)
ORDER
N.D. Raghavan, Vice President
1. This an appeal of the assessee challenging the order dated 20.11.2002 of the CIT(A)-II, Hyderabad, as erroneous.
2.1 Brief facts of the case as gathered from the record are THESE:
Assessee company filed return of income for the assessment year 1993-94 on 2.12.1093, declaring a total income of Rs. 37,09,9.80. Originally, assessment was completed under Section 143(3) of the Act on 16.3.1995, determining the total income of the assessee at Rs. 8,83,458. Thereafter, the Commissioner AP-I, passed an order dated 5.6.1996 under Section 263 of the Act, setting aside the said assessment, and directing the Assessing Officer to recompute the deduction allowable under Section 80HHC in accordance with law and in conformity with the findings given.
2.2 In the reassessment made under Section 143(3) read with Section 263 on 24.7.1996 in pursuance of the said order of the CIT, the Assessing Officer determined the total income of the assessee, other than Long Term capital Gains at Rs. 21,41,460. Aggrieved by the said order of reassessment, assessee initially preferred an appeal directly before the Tribunal, being ITA No. 1869/Hyd/96. The said appeal was dismissed by the Tribunal in limine on the ground that it was not maintainable.
2.3 Thereafter, assessee preferred appeal before the CIT(A) which was considered to be with a delay of over five and half years since the date of service of the reassessment order dated 24.7.1996 passed in pursuance of the order of Commissioner under Section 263. Assessee has also filed a petition seeking condonation of the said delay. However, the CIT.(A) was of the view that the delay was not satisfactorily explained. He also referred to the decision of the Punjab and Haryana High Court in the case of CIT v. Rammohan Kabra , wherein considering the refusal of the Tribunal to condone the delay of five days in the filing of the appeal by the Revenue, dismissed the Reference by the Revenue under Section 256(2) on the ground that the time limit should not be construed lightly, by treating condonation as a matter of routine, though the delay involved in that case was barely of five days and that too on account of 'bona fide human error', as against over five and half years involved in this case, according to him for inexplicable reason in as much as the assessee has chosen to file appeal before the Tribunal, while it ought to have been field before the CIT(A). The CIT(A) therefore, not convinced with the explanation of the assessee for the delay in filing the appeal before him, rejected the prayer for condonation and dismissed the appeal unadmitted. Aggrieved by this action of the CIT(A), assessee preferred the present appeal before us.
3. The learned Counsel for the assessee submitted THAT: The Appellate Commissioner erred in dismissing the appeal on the ground that the assessee has not made out a good cause for the belated filing of appeal before him. He failed to appreciate that the assessee had field an appeal against the order of the Assessing Officer dated 24.7.1996 under the provisions of Section 143(3) read with Section 263 of the Act, mistakenly before the Tribunal and as soon as it was dismissed as not maintainable filed the appeal before the correct forum, i.e. the first appellate authority. He ought to have held that the period between the date of the assessment order passed under Section 143(3) read with Section 263, viz. 24.7.1996 to the date of receipt of the order of the Tribunal, viz. 1.2.2,002 was fully and adequately explained. He should have held that the appeal in question has been filed before him on 8.3.2002, with hardly some marginal delay. The CIT(A) ought to have appreciated that the assessee was pursuing remedy bona fide but in a wrong forum. The mistake was not wanton or deliberate and that the assessee did not gain any benefit by delaying the filing of the appeal, and on the contrary, the assessee has not only wasted precious time in securing relief, but also lost valuable money in the form of appeal institution fees, advocate fees etc. in preferring appeal initially before the Tribunal and on receipt of the order of the Tribunal, before the correct forum, viz. before the CIT(A) and now before the Tribunal. Not withstanding the loss thus suffered, the sequence of events clearly establish the bona fide conduct of the assessee. The Appellate Commissioner should have applied the well known principles applicable to condonation of delay and condoned the delay and should have heard the appeal on merits. Reliance is also placed on the decision of the Tribunal in the case of Prominent Builders & Investors (P) Ltd. v. IAC 11 ITD 327.
4. On the other hand, the learned representative for the Revenue countered, to say in brief, by defending the order impugned, besides submitting that even after the receipt of the Tribunal order dismissing the appeal of the assessee as not maintainable, there was delay in filing the appeal before the CIT(A).
5.1 Rival submissions heard and relevant orders read. After doing so, we are of the considered opinion that the stand of the assessee has substantial force unlike the defence of the Revenue for the reasons following-
5.2 It is no doubt true that the appeal before the CIT(A) impugning the reassessment order of the Assessing Officer dated 24.7.1996, passed under Section 143(3) read with Section 263, was time barred by over five and half years, and it was indeed a substantial delay. However, the assessee was not silent during the intervening period of five and half years, as it has (mistakenly) filed an appeal against that order of the Assessing Officer before the Tribunal, being ITA No. 1869/Hyd/96. Thus, the assessee was pursuing for a remedy against that reassessment order of the Assessing Officer, but before a wrong forum. It is the contention of the assessee that filing of the appeal directly before the Tribunal was on account of a bona fide mistake, and it was not a deliberate or wanton act and by that mistake the assessee did not gain any benefit except delaying the filing of the appeal to its disadvantage, including unnecessary payment of appeal institution fee, advocate fee, etc. We find force in this contention of the assessee. The bona fide intention of the assessee is evident from the fact that the appeal before the Tribunal against the order of the Assessing Officer dated 24.7.1996 was filed without any delay and within a reasonable time. On receipt of the order of the Tribunal dismissing the said appeal of the assessee on the ground that it was not maintainable, assessee preferred the appeal before the correct forum, i.e. the CIT(A), on 8.3.2002, who himself states in his order under column No. 5 that the section under which order appealed against was passed is Section 143(3) read with Section 263 of the Income Tax Act. Further even though the Revenue would contend that the assessee has committed a delay of 38 days since the date of receipt of Tribunal's order in filing the appeal before the CIT(A), which the assessee is bound to explain , the explanation furnished by the assessee in this regard before us is that it is not 38 days delay, but definitely less than 30 days, which deserves condonation. In our considered opinion, if the huge delay of 5-1/2 years in filing appeal could be condoned, which appears to be due to the wrong advice given to the assessee, by pursuing a wrong forum instead of the correct forum, then the aforesaid delay of 38 days, or as the case may be, less than 30 days, may not be necessary to be explained for the reason that such days of around 30 days stated above could be deemed ,to be within the appealable time prescribed under the statute by treating the order of the Tribunal, as the wake up call that the assessee has to go to the correct forum of the first appellate authority. Hence, interest of justice would give a perfect licence to treat the receipt of the order of the Tribunal as if the date of receipt of the re-assessment order, so as to enable the assessee to go to a right consultant, having suffered earlier under a wrong consultant, and correctly prepare the appeal before the proper appellate forum.
5.3 We may now consider the reasonableness of the cause for the delay in preferring the first appeal before the CIT(A) in the light of the case-law on the point. As already noted above, the reason for the delay in the instant case is prosecuting an appeal before a wrong forum, viz. directly before the Tribunal instead of before the CIT(A), on the basis of a wrong advice-
5.4 In the case of Firm Bishan Das Brij Lal (Judgment Debtor) v. Firm Brij Mohan Lakhmi Narain (Decree holder) AIR 1935 Lahore 844, the Lahore High Court, in similar circumstances examining the provisions of Section 5 of the Limitation Act, 1908 held that time spent in another proceeding with due diligence in another Court extends limitation. Relevant portion of the head note of the said decision reads as under-
An appeal is not time barred when sufficient cause within the meaning of Section 5 is shown, by the appellant for not filing it within time as he was prosecuting with due diligence his application for review in the lower . appellate Court.
5.5 Similarly, in the case of Noor Beg (Judgment debtor) v. Ch. Abdul Rahman, Official Receiver AIR (31) 1944 Oudh 193, wherein a review application before the lower court was preferred instead of preferring an appeal before the appellate court, it was held as per relevant portion of the head note as follows-
The time taken by a review application may be excluded unless the application has not been made in good faith. The period need not however invariably be excluded. The mere fact that the grounds shown in the application were not such grounds as are referred to in the provisions in R.1 of O.47 for such an application does not by itself warrant the inference that the application was made in bad faith merely with the object of gaining time; (17) 4 AIR 1917 PC 156 Applied; (40)27 AIR 1940 Oudh 310; (42) 29 AIR 1942 All. 82; 208 I.C. 85(Oudh) and (16) 3 AIR 1916 Cal 670- Disting.
5.6 Further, the Supreme Court in the case of Concorde of India Insurance Co. Ltd. v. Smt. Nirmala Devi 118 ITR 507, considering the question as to whether a wrong advice of the counsel would constitute a reasonable cause for delay in prosecuting an appeal, after referring to the decisions relied upon by the Revenue including the one of Supreme Court in State of West Bengal v. Administrator, Howrah Municipality ), reaffirming the view taken in State of Kerala v. Krishna Kurup Madhava Kurup , observed as under-
We are not able to agree with this reasoning. A company relies on its legal adviser and the manager's expertise is in company management and not in law. There is no particular reason why when a company or other person retains a lawyer to advise it or him on legal affairs, reliance should not be placed on such cousnel. Of course, if there is gross delay too patent even for laymen or if there is incomprehensible indifference the shield of legal opinion may still be vulnerable. The correct legal position has been explained with reference to the Supreme Court decision in a judgment of one of us in State of Kerala v. Krishna Kurup Madhava Kurup :
The law is settled that mistake of counsel may in certain circumstances be taken into account in condoning delay although there is no general proposition that mistake of counsel by itself is always a sufficient ground. It is always a question whether the mistake was bona fide or was merely a device to cover an ulterior purpose such as laches on the part of the litigant or an attempt to save limitation in an underhand way. The High Court unfortunately never considered the matter from this angle. If it had, it would have seen quite clearly that there was no attempt to avoid the Limitation Act but rather to follow it albeit on a wrong reading of the situation.
The High court took the view that Mr. Raizada being an Advocate of 34 years' standing could not possibly make the mistake in view of the clear provisions on the subject of appeals existing under Section 39(1) of the Punjab Courts Act, and therefore, his advice to file the appeal before the District Court would not come to the rescue of the appellant under Section 5 of the Limitation Act. The Supreme Court upset this approach.
I am of the view that legal advice given by the Members of the legal profession may sometimes be wrong even as pronouncement on questions of law by courts are sometimes wrong. An amount of latitude is expected in such cases for, to err is human and laymen, as litigants are, may legitimately lean on expert counsel in legal as in other departments, without probing the professional competence of the advice. The court must, of course, see whether, in such cases there is any taint of mala fides or element of recklessness or ruse. If neither is present, legal advice honestly sought and actually given, must be treated as sufficient cause when an application under Section 5 of the Limitation Act is being considered. The State has not acted improperly in relying on its legal advisers.
The ratio laid down by the Apex Court in that case, as per the relevant portion of the head-note is as under-
Held that the law is settled that mistake of counsel may in certain circumstances be taken into account in condoning the delay although there is no general proposition that mistake of counsel by itself is always a sufficient ground. It is always a question whether the mistake was bona fide or was merely advice to cover an ulterior purpose such as laches on the part of the litigant or an attempt to save limitation in an underhand way. The court must see whether, in such cases, there is any taint of mala fide or element of recklessness or ruse. If neither is present, legal advice honestly sought and actually given, must be treated as sufficient cause when an application under Section 5 of the Act is begin considered.
5.7. In the case of Prominent Builders and Investors P.Ltd., cited supra, relied upon by the learned Counsel for the assessee highlighting that the said case-law squarely applies and fits into the facts and circumstances of the instant case, the Tribunal has condoned therein too huge delay of 15 months, in the light of the case-law discussed above. The relevant portion of the head note of the said decision would be useful and worthwhile to be extracted as hereunder-
The assesses filed the appeals at the original stage before the Tribunal on the advice of its counsel and it was clear that the advice of the counsel was a bona fide one. The assessee had acted all along with reasonable diligence in prosecuting the appeals before the Tribunal. Under the circumstances, it has to be accepted that the assessee took up the matter before the Tribunal in good faith and as such, the time taken in prosecuting the appeal before the Tribunal had to be excluded for the purpose of computing the period of limitation. The assessee's bond fides were also proved from the fact that before the Tribunal's order was served, it filed the appeals before the competent authority. What is to be seen in such cases is whether there is any taint of mala fides or element of recklessness or ruse. If neither is present, the legal advice, honestly and actually given, must be treated as sufficient cause for condoning the delay for the purpose of computing the limitations.
Therefore, the delay in filing the appeals before the Commissioner(Appeals) in the instant case, was required to be condoned.
Facts and circumstances, huge delay caused and the reason therefor being almost the same on the identical issue involved, as in the instant case, the aforesaid decision of the Delhi Bench of the Tribunal, which has duly taken in aid the decisions of the Apex Court and other Courts discussed above, squarely applies to the instant case, in the absence of any material to prove that the assessee has not acted bona fide or in good faith and with due diligence while initially prosecuting its appeal against the order of reassessment dated 24.7.1996 directly before the Tribunal instead of before the CIT(A).
5.8 In the case of CIT v. Ram Mohan Kabra, cited supra and relied upon by the learned CIT(A) in the order impugned herein, though the delay involved in filing appeal by the Revenue before the Tribunal was only five days and was claimed to be on account of 'bona fide human error', the appellant was found to be inert and not alert, and it was in that context that the Hon'ble High Court held that the time limit should not be construed lightly, by treating condonation as a matter of routine. The said decision of the Punjab and Haryana High Court is not applicable to the facts of the instant case, as the assessee herein was all along alert, and even prior to filing appeal before the correct forum, viz. CIT(A), was fighting for its cause, but before a wrong forum, viz. Tribunal, on account of wrong advice of the counsel.
5.9 In the light of the foregoing discussion, considering totality of facts and entirety of circumstances of the case, we have no hesitation to set aside the order impugned herein and restore the appeal to the file of the CIT(A) himself with a direction to condone the delay in the filing of the appeal by the assessee before him, and then give a decision on the merits of the appeal, after giving opportunity of being heard to the assessee and also duly considering any relevant stand or material that may be relied upon by the assessee in support of its contentions, and if necessary to the Assessing Officer too, before passing a speaking order in accordance with law.
6. In the result, appeal of the assessee is allowed hereby.