2023 (3) TMI 1340 - ITAT BANGALORE

Jurisdiction of Single Member Bench of the Income Tax Appellate Tribunal - Monetary limit Rs.50 lakhs for hearing Appeal - appeals where total income determined by AO does not exceed Rs.50 lakhs - question for determination here is as to what is the impression left on the mind by the use of the clause “total income" as computed by the AO - HELD THAT:- It may be noted here that the criterion adopted for determining the jurisdiction of Single Member Bench is not the quantum of addition but the quantum of assessed addition. In the present case, the assessee returned loss of (-)Rs.1,05,73,207/-. AO made addition of Rs.1,06,13,329/- (disallowance of interest at Rs.99,02,829/- and disallowance of expenses at Rs.7,10,500/-) and finally he determined the income of (+) Rs.40,120/-.

Thus, assessed income in this case is only Rs.40,120/- and as such jurisdiction in this case will definitely be of SMC. It is therefore, have to look into only assessed income as stipulated in sub-section (3) of section 255 of the Act, therefore, the argument of ld. D.R. in this case is devoid of merit. Accordingly, this primary objection of ld. D.R. is dismissed. For this purpose, order of this coordinate bench of Tribunal in the case of Cawnpore Textiles Ltd [1990 (6) TMI 88 - ITAT ALLAHABAD-A] wherein the Tribunal has taken a similar view on this issue.

Delay of 93 days in filing the appeal - reasonable cause in filing the appeal by delay of 93 days - There is a technical defect in the appeals since the appeals were not filed within the period of limitation. The assessee filed an affidavit stating that the appeals were not filed because of the improper service of notice by the Department. The Revenue has not filed any counter-affidavit to deny the allegation made by the assessee.

Tribunal is bound to remove the injustice by condoning the delay on technicalities. If the delay is not condoned, it would amount to legalising an illegal order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto. Under the scheme of Constitution, the Government cannot retain even a single pie of the individual citizen as tax, when it is not authorised by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalise an illegal and unconstitutional order passed by the lower authority. Therefore, in my opinion, by preferring the substantial justice, the delay of 93 days has to be condoned.

Whether delay was excessive or inordinate? - There is no question of any excessive or inordinate when the reason stated by the assessee was a reasonable cause for not filing the appeal. As seen the cause for the delay. When there was a reasonable cause, the period of delay may not be relevant factor

When there is sufficient cause for not filing the appeal within the period of limitation, the delay has to be condoned irrespective of the duration/period. In this case, the non-filing of an affidavit by the Revenue for opposing the condonation of delay itself is sufficient for condoning the delay in filing the appeals before the CIT(A).

In case the delay was not condoned, it would amount to legalise an illegal and unconstitutional order. The power given to the Tribunal is not to legalise an injustice on technical ground but to do substantial justice by removing the injustice. The Parliament conferred power on this Tribunal with the intention that this Tribunal would deliver justice rather than legalise injustice on technicalities. Therefore, when this Tribunal was empowered and capable of removing injustice, in my opinion, the delay in filing the appeals before the CIT(A) has to be condoned and the appeals of the assessee have to be admitted and disposed of on merit.

Thus we condone the delay in filing the appeal before the CIT(A) and remit the issue to the file of the ld. CIT(A) to decide the issue on the merit of the additions made by the Assessing Officer. Since the assessment order was passed ex parte u/s. 144 of the Act, the CIT(A), if required, may call for the remand report from the Assessing Officer and confront the same to the assessee before deciding the appeal.

Disallowance of interest payment - A.R. submitted that the averments of the learned Assessing Officer in the order that the interest paid on loan to acquire shares of the promoters is the pre-acquisition cost and should therefore be added to the cost of shares is incorrect - HELD THAT:- In the present case there is specific provision in the memorandum that the assessee is permitted to acquire controlling interest as mentioned earlier, cl. 21 in the incidental objects clearly permits the assessee not only to acquire but also to hold shares in any other company. This power to hold shares is enough to permit the company to acquire and hold controlling interest in any other company. In my opinion, as such an activity can itself constitute a business when the real intention of the company is not to earn profit but to acquire and exercise control of the group company. When it is said that the shares were acquired to have controlling interest, it does not necessarily mean that the acquiring company should have majority share holding in the other company. Many group concerns may be holding shares in the other company and all their holdings put together will enable the group as a whole to exercise control on the other company.

We observe that it is for the assessee to decide as a businessman as to how much number of shares would be sufficient to control its stake and the motive of the company cannot be to earn profit if, it was to acquire controlling interest, which is the commercial expediency.

Thus as given a finding that the business of the assessee is to invest in shares and that the borrowing was for the purpose of business, the entire interest has to be allowed under s. 36(l)(iii) of the Act. Ground of appeal of the assessee allowed.

Disallowance being the expense incurred on legal and professional charges debited to P&L account - HELD THAT:- While adjudicating the earlier ground for making investment in shares is for business activity of the assessee company and it was carried in terms of the object clause mentioned in the Memorandum of Articles of Association and it cannot be considered as acquisition of capital assets. Accordingly, hold that the above expenditure incurred under the head “Professional and legal charges” to be allowed as expenditure incurred for wholly and exclusively for the purpose of business of the assessee and accordingly, this ground of the assessee is allowed.