TMI Blog2018 (10) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... th September 2007 i.e., after closure of the financial year relevant to the impugned assessment year. Further, it requires verification whether the claim was allowed on actual write off. In view of the aforesaid, we restore the issue to the Assessing Officer to examine whether the assessee has passed accounting entries with regard to the provision for bad debt in terms of the ratio laid down in M/S SOUTHERN TECHNOLOGIES LTD. VERSUS JOINT COMMNR. OF INCOME TAX, COIMBATORE [2010 (1) TMI 5 - SUPREME COURT OF INDIA]. Penalty proceedings u/s 271(1)(c) - Held that:- The additions on the basis of which the penalty under section 271(1)(c) of the Act was imposed by the Assessing Officer in assessment year 2007–08 has been restored back to him for denovo adjudication while deciding assessee’s appeal. Therefore, in absence of such additions, penalty under section 271(1)(c) of the Act will have no leg to stand. - ITA no.5242/Mum/2014, ITA no.5735/Mum/2013, ITA no.5246/Mum/2014, ITA no.5244/Mum/2014, ITA no.5243/Mum/2014 And ITA no.5245/Mum/2014 - - - Dated:- 14-8-2018 - Shri Saktijit Dey, Judicial Member And Shri N.K Pradhan, Accountant Member For the Assessee : Shri R.C. Jain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee approached Shri Shrikant Dutt, Chartered Accountant to file an Affidavit stating that on his advice the appeal was not filed and for this purpose he came all the way from USA, however, he refused to obligeand declined file any affidavit. Thus, it was submitted, the delay in filing of appeal was due to bona fide cause. 5. Reiterating the statements made in the Affidavit, the learned Authorised Representative submitted, delay in filing the appeal was for bona fide reasons and due to reasonable cause. He submitted,the Executive Director of the Company, Pran Gopal Dutta, who was looking after all the affairs of the company suffered from prolonged illness and ultimately died in November 2012. He submitted, after the death of Executive Director, his wife became director of the company and was looking after the affairs of the company. However, since she was not quite aware of the affairs of the company and since the erstwhile Chartered Accountant Firm was handling the tax matters of the company, on their advice assessee did not file the appeal. Thus, he submitted, non filing of appeal was not deliberate but due to a reasonable cause. He submitted, the financial result o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the expiry of limitation provided under sub section (3) if it is satisfied that there was sufficient cause for not presenting it within the specified period. Though, filing of appeal beyond the limitation period is provided under the statute, however, it is subject to condition that the appellant must satisfy the Tribunal that the delay in filing the appeal is for sufficient cause. Therefore, what follows is, condonation of delay under section 253(5) of the Act is not automatic. What constitutes sufficient cause may vary from case to case and will depend upon the facts involved in a particular case. Therefore, no straight jacket formula can be applied for condonation of delay. Keeping in perspective the aforesaid legal position, we have to examine the facts of the present case and find out whether there is sufficient cause for filing the appeal belatedly. As discussed earlier, one of the employees of the assessee company had earlier filed an affidavit explaining the cause of delay by stating that due to the heavy loss suffered by the company it was under an impression that tax on the assessed income would be nil, therefore, no appeal need be filed. However, subsequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Commissioner (Appeals). It is also probable that after the death of the Executive Director, the freshly appointed director may not be well acquainted with the tax matters and the erstwhile Chartered Accountant firm could have kept the newly appointed Director in dark regarding the tax proceedings. Though, we are conscious of the fact that on earlier occasion the Bench has directed the assessee to file affidavit of the erstwhile chartered accountant to prove that on his advice appeal was not filed, however, the contention of the assessee that he refused to file any such affidavit is believable. When the assessee has disengaged the earlier chartered accountant and appointed a new one, it is possible that the earlier chartered accountant might have refused to oblige the assessee. 8. It is relevant to observe, there was delay in filing of two quantum and three penalty appeals before the learned Commissioner (Appeals) and the affidavits filed by the assessee explaining cause of delay in all these appeals was identical. Further, though, the learned Commissioner (Appeals) while dealing with the issue of delay condonation in all these appeals has stated about the contradictions in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to recovery of the outstanding demand but also exposed to levy of penalty and filing of prosecution. Further, in such circumstances, if the appeal is dismissed on the ground of delay even if the assessee has a strong case on merit still it suffers due to technical default. Therefore, when substantial justice is pitted against technicalities, the judicial view must tilt in favour of justice rather than technicalities. Applying the aforesaid legal principle, to the facts of the present case we are of the considered opinion that delay in filing the present appeal was due to sufficient cause and for bona fide reasons. Therefore, we are inclined to condone the delay and admit the appeal for hearing on merit. 10. In ground no.1, the assessee has challenged the disallowance of depreciation amounting to ₹ 79,63,943. 11. Brief facts are, the assessee company was engaged in the business of software development and allied activities. In course of assessment proceedings, the Assessing Officer noticed that the assessee has claimed depreciation of ₹ 79,63,943, on Intellectual Property Rights IX Platform . On further verification, he found that the opening capital work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed Representative submitted, since the expenditure was incurred for a project which was abandoned, it is to be allowed asrevenue expenditure. In this context, he drew our attention to the decision of the Hon'ble Jurisdictional High Court in CIT v/s Ideal Cellular Ltd., [2016] 76 taxmann.com 77 (Bom.). 14. The learned Departmental Representative relying upon the observations of the learned Commissioner (Appeals) submitted that the assessee has not demonstrated that the asset on which depreciation was claimed was put to use. Hence, assessee s claim was rightly disallowed. 15. We have considered rival submissions and perused materials on record. On careful reading of the orders of the Departmental Authorities and submissions made by the assessee before them, we find that the assessee has taken contradictory stand. On the one hand assessee has claimed that it has put the asset to use for the purpose of its business while on the other hand it has claimed allowance of the expenditure as loss in respect of an abandoned project. If the assessee has created an asset by incurring expenditure and has also claimed depreciation, it presupposes the asset not only came to existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for the impugned assessment year since the amount was not recoverable. In this context he drew our attention to the Balance Sheet and Ledger Account copies placed in the paper book. The learned Authorised Representative submitted, assessee s claim being in consonance with the provision contained under section 36(1)(vii) of the Act, is allowable. In support of such submission, he relied upon the decision of the Hon'ble Supreme Court in Vijaya Bank v/s CIT, [2010] 190 taxman 257 (SC). 19. We have considered rival submissions and perused materials on record. The reasoning on which the Assessing Officer has rejected the claim of bad debt is, it is in the nature of provision. The learned Commissioner (Appeals) while sustaining such disallowance has observed that the actual write off was effected in the accounts of the assessee on 30th September 2007.Explanation 1 to section 36(1)(vii) of the Act makes it clear that bad debt allowable under the said provision shall not include any provision. However, the Hon'ble Supreme Court in Southern Technologies Ltd. v/s JCIT, [2010] 320 ITR 577 (SC) has held that after insertion of Explanation 1 to section 36(1)(vii) of the Act if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condonation of delay only on the basis of quantum of delay is not acceptable. If the explanation of the assessee was accepted by the learned Commissioner (Appeals) in two appeals, the same is also acceptable in other appeals, there being no change in the explanation of the assessee. Therefore, the learned Commissioner (Appeals), in our considered view, was not justified in dismissing the appeal in limine without condoning the delay. In such circumstances, ordinarily, we would have restored the appeals to the learned Commissioner (Appeals) for deciding on merit. However, considering the fact that the Assessing Officer has passed the assessment orders ex parte and the learned Commissioner (Appeals) has also not decided the issues on merit and further, while dealing with the issue of disallowance of depreciation in assessment year 2007 08, which is a common issue in these appeals also, we have restored it to assessing officer, we are inclined to restore the issues relating to the additions/disallowances made by the Assessing Officer back to him for denovo adjudication after due opportunity of being heard to the assessee. 23. These appeals are allowed for statistical purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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