TMI Blog2005 (9) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... wance of revenue expenditure on replacement is only going to be beneficial to the assessee-company since it is going to increase its asset base and the depreciation will be available for future years. On this advice, the assessee-company has taken a conscious and deliberate decision, not to contest the assessment orders as the company had gone into a massive expansion programme aggregating to Rs. 55 crores and it wanted to claim large depreciation and interest expenses in future years when the profits will arrive. It is clear that this advice was given by the C.A. and accepted by the company, even though the decision is available in favour of the assessee on replacement of machinery being held as revenue expenditure by the Hon'ble Apex Court in the case of CIT v. Mahalakshmi Textile Mills Ltd.[ 1967 (5) TMI 4 - SUPREME COURT] . Subsequently; the Hon'ble High Courts and the Tribunal Benches are consistently taking a view from the very beginning that the expenditure incurred on replacement of machinery is a revenue expenditure. The word sufficient cause as enumerated in section 249(3) in the context of condonation of delay should be a liberal construction so as to give substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansion programme by the assessee in all aggregating to Rs. 55 crores, there was a large depreciation base and interest expenses requiring set off against future profits and, accordingly, disallowance of expenditure on account of replacement is only going to be beneficial to the assessee-company since it is going to get absorbed into the increased asset base, stretching the depreciation benefit thereon, exponentially for future years. The assessee-company acted on the advice as at that point of time it was beneficial to it and, therefore, for more than four years the assessee chose not to file the appeals for both the assessment years. Subsequently, it was noticed after four years that on account of wrong calculation, depreciation increased for all these years and the claim of replacement of assets should have been pursued before the higher forum. Accordingly, the assessee preferred these appeals before the CIT (Appeals) along with condonation application. The CIT (Appeals), after going through the assessee's assertions and case laws in favour of the assessee as well as against the assessee, refused to condone the delay by passing a speaking order on this issue. Aggrieved, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 998 respectively, disallowed the above replacements as capital expenditure. The assessment orders aforesaid were served on the company for assessment year 1995-96 on 12-3-1998 and for assessment year 1996-97 on 18-3-1998. At the time of finalisation of assessment proceedings aforesaid, the assessee-company had gone on a massive expansion programme aggregating to Rs. 55 crores, and there was a large depreciation base and interest expenses requiring set off against future profits and I felt that the disallowance of revenue expenditure of earlier years is only going to be beneficial to the company since it is going to get absorbed into the increased asset base, stretching the depreciation benefit thereon, exponentially for future years. Accordingly, I advised the management of the assessee-company not to prefer an appeal against the assessment order for assessment years 1995-96 and 1996-97 aforesaid and, accordingly, no appeals were preferred before the first appellate authority. However, it is now noticed that on account of wrong calculation of depreciation figures for the aforesaid years, the claim for replacement of assets ought to have been pursued to its logical and legal conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was availability of large depreciation and interest expenses as required for set off against future profits. Accordingly, it was advised by him that the disallowance of revenue expenditure on replacement is only going to be beneficial to the assessee-company since it is going to increase its asset base and the depreciation will be available for future years. On this advice, the assessee-company has taken a conscious and deliberate decision, not to contest the assessment orders as the company had gone into a massive expansion programme aggregating to Rs. 55 crores and it wanted to claim large depreciation and interest expenses in future years when the profits will arrive. It is clear that this advice was given by the C.A. and accepted by the company, even though the decision is available in favour of the assessee on replacement of machinery being held as revenue expenditure by the Hon'ble Apex Court in the case of CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710. Subsequently; the Hon'ble High Courts and the Tribunal Benches are consistently taking a view from the very beginning that the expenditure incurred on replacement of machinery is a revenue expenditure. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 249(3) of the Act, there should be sufficient cause for the assessee for not presenting the appeal within the time allowed. The relevant provision reads as under: 249. Form of appeal and limitation.-(1) and (2) (3) The [....][Commissioner (Appeals)] may admit an appeal after the expiration of the said period if he is satisfied that the appellant had sufficient cause for not presenting it within that period. Under section 249(3) of the Act, the appellate authority may, on good and sufficient reason for the delay being shown, admit an appeal after the expiry of the period of limitation. But the period for filing of an appeal cannot be extended simply because the appellant's case is hard and calls for sympathy or merely out of benevolence to the party seeking relief. In granting the indulgence and condoning the delay the appellate authority must be satisfied that there has been diligence on the part of the appellant and it was not guilty of negligence or whatsoever. The sufficient cause within the contemplation of these provisions must be a cause which is beyond the control of the party invoking the aid of the provisions. The cause for delay in filing the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct under the provisions of section 249(3) of the Act which envisages that there should have been a sufficient cause for not presenting the appeal within that period as prescribed. Where the applicant has failed to show sufficient cause for condonation of delay, the application for condonation of delay is liable to be rejected. In the present case in hand, the assessee was not availing any alternative before any of the forum and it was advised wrongly by the counsel and on the advice of C.A., it has acted and with deliberate and due care has taken a decision not to file any appeal against the assessment orders. The Hon'ble Apex Court in the case of Binod Bihari Singh v. Union of India [1993] 1 SCC 572, 580 was of the view that it was not at all a fit case where the anxiety to render justice to a party so that just cause was not defeated, a pragmatic view should be taken by the Court in considering the sufficient cause for condonation of delay under section 5 of the Limitation Act. Even though a liberal approach has to be adopted, but that does not mean that any plea without any plausible or acceptable basis, and not even hearing semblance or rationality has to be accepted, and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, rejected. As the application under section 27(3) of the Act is barred by limitation, it deserves to be rejected on this ground alone. Further, the Hon'ble Delhi High Court in the case of MS. Nulson India Ltd. v. CIT [1996] 219 ITR 736 has held that: Admittedly, the application under section 264 of the Act was filed beyond one year and there was a delay of 11/2 months in filing the application. It was stated in the application seeking condonation of delay that the delay occurred because the assessee was not given proper legal guidance when he received the assessment orders. It was, however, pointed out by Mr. B. Gupta, learned counsel for the revenue, that the assessee is not only having the services of a chartered accountant but also of a tax consultant who was a former Indian Revenue Service person working in the Income-tax Department. The plea, therefore, that the petitioner could not get proper legal guidance cannot be held to be valid. 11. It is to be noted that there is a landmark decision of the Supreme Court in the issue of limitation of appeals in the case of Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 at page 473. While advocating a liberal appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral approach. No hard and fast rule can be laid down in this regard. The Court has to exercise the discretion on the facts of each case keeping in mind that in construing the expression 'sufficient cause', the principle of advancing substantial justice is of prime importance. In our view in this case, the approach of the learned Civil Judge is wholly erroneous and his order is unsustainable. It is evident that the discretion under section 5 of the Limitation Act is exercised by the Civil Judge in contravention of the law laid down by this Court, that the expression 'sufficient cause' should receive liberal construction, in a catena of decisions (see State of West Bengal v. Administrator, Howrah Municipality AIR 1972 SC 749; [1972] 1 SCC 366 and Smt. Sandhya Rani Sarkar v. Smt. Sudha Rani Debi AIR 1978 SC 537; [1978] 2 SCC 116). The High Court in exercising its jurisdiction under section 115 of the Civil Procedure Code, failed to correct the jurisdictions error of the Appellate Court. 13. Further, the Hon'ble Punjab and Haryana High Court in the case of CIT v. Ram Mohan Kabra [2002] 257 ITR 773 held as under: The provisions relating to prescription of limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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