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TMI Blog2023 (6) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the consequential assessment order under section 143(3) of the Act was passed, assessing the income of the assessee multiple times to that returned by the assessee, that the assessee was alarmed and had consulted another counsel, who when asked about the status of the appeal against the order passed under section 263 of the Act, was appraised by the assessee of the fact that no appeal was filed. That it was then that the assessee was advised by the later counsel to file appeal against the order passed u/s 263 of the Act, since he had good case. That therefore, on the advice of the later counsel, the present appeal was filed belatedly. An affidavit of the assessee stating the above facts on oath was also filed before us. 3. The ld. counsel for the assessee contended that there being sufficient cause for the delay in filing appeal, in the interest of justice, the delay needed to be condoned. He relied on various case laws in this regard. We will deal with these case laws while adjudicating the issue. 4. The ld.DR vehemently opposed the application for condonation of delay filed by the assessee stating that there was inordinate delay of 284 days and no sufficient cause was adduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finislitium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right 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." Having so dealt with the purpose of law of limitation, the Hon'ble Court in the said decision also held that condonation of delay is a matter of discretion of the Court, which is to be exercised on the basis of acceptability of the explanation for the delay, with the length of delay being of no consequence; that what would be a prime point for consideration of the delay, was whether there was a satisfactory explanation for the impugned delay. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied in a manner to sub-serve the ends of justice and therefore a justifiable liberal approach had to be adopted on principle. The Hon'ble Court has given reasons for adopting a liberal approach stating that : * ordinarily a litigant does not stand to benefit by lodging an appeal late, * and by refusing to condone delay, a meritorious matter will be thrown out at the very threshold and cause of justice defeated, * as opposed to that if delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties; * that when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, because either side cannot claim to have vested right in injustice being done because of nondeliberate delay * that there was no presumption that delay was occasioned deliberately, and in fact a litigant does not stand to benefit by resorting to delay; * that 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 Hon'ble Court elucidated these aspects for adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the community, does not deserve a litigant-nongrata status. The Courts therefore have to be informed with the spirit and philosophy of the provision in the course of the interpretation of the expression "sufficient cause". So also the same approach has to be evidenced in its application to matters at hand with the end in view to do even handed justice on mertis in preference to the approach which scuttles a decision on merits. Turning to the facts of the matter giving rise to the present appeal, we are satisfied that sufficient cause exists for the delay. The order of the High Court dismissing the appeal before it as time barred, is therefore. set aside. Delay is condoned. And the matter is remitted to the High Court." 8. In the case of Maniben Devraj Shab Vs. Municipal Corporation of Brihan Mumbai, (2012) 5 SCC 157, Hon'ble Apex Court emphasised that liberal and justice oriented approach is required to be adopted while condoning the delays, but at the same time, the Hon'ble Court took note of rights acquired by the successful litigant on the expiry of period of limitation and taking note of the same held that the expression "sufficient cause" would derive colour from the factual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of the Hon'ble Court in this regard at para-11 of its order is as under: '5. It is a settled position that an application for condonation of delay has to be liberally construed, as held by the Apex Court in various cases (see Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 (SC). However, this liberal construction of the sufficient cause while condoning delay has to be counter balanced by ensuring that the law of limitation which provides for definite consequence on the rights of the parties does not become ineffective. The rule of limitation is provided for general welfare of the society so as to put a period beyond which a party cannot agitate an issue in litigation. The rationale for the same is that once a litigation is decided, the dispute must repose. This is particularly so, if the party aggrieved by the order does not agitate the issue before the appellate forum within the time provided. The opposite party can then proceed on the basis that the dispute is settled and arrange its affairs on that basis. Thus, if the aggrieved party has not moved the appellate forum within the prescribed time, resulting in other securing an accrued rights, then the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant case, the assessee justified the delay only with reference to the affidavit of its director. In the said affidavit it was stated that the Commissioner (Appeal) 's order was misplaced and forgotten. It was found while sorting out the unwanted papers and thereafter steps were taken for the preparation of the appeal and consequently the delay was caused. That clearly showed that the delay was due to the negligence and inaction on the part of the assessee. The assessee could have very well avoided the delay by the exercise of due care and attention. There existed no sufficient and good reason for the delay of 310 days. Therefore, reasonings adduced by the Accountant Member were to be concurred with. [Para 8]" 11. What can be culled out from the above is that the in matters of condonation of delay the principles to be applied rest on the basic premise that : * Rule of limitation is to provide certainty to litigations and thus avoid consequential anarchy due to unending period for launching litigations and is thus for benefit of general public. * It is not for denying rights of parties to legal remedy but only to ensure prompt redressal by litigants to the remedy available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 263 of the Act on being 6.3.2019, the date by which the appeal was filed before the ITAT being on or before 5.5.2019; that consequential assessment order under section 143(3) was passed on 30.12.2019 after which he approached the second counsel who advised him to file appeal against the order under section 263 and in regard to which he filed an appeal on 12.2.2020 resulting delay of 284 days. 14. Above facts, relating to the chronology of events have not been controverted by the ld.DR before us. Therefore, it can be safely read from the same that the assessee promptly pursued the legal action which was advised by the second legal counsel on receipt of consequential order under section 143(3)/263 and filed appeal against the order passed by the ld.Pr.CIT under section 263. What has to be seen now is whether, this explanation of the assessee for the delay was bona fide, reasonable and did not exhibit any negligence or laxity in pursuing its appeal in appellate remedy. The facts as stated by the ld. counsel for the assessee that he was advised by the earlier counsel not to file appeal against the order passed u/s 263 of the Act has not been found to be false by the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of the consequential assessment framed which there was a possibility of avoiding if appeal were filed against the order passed u/s 263 of the Act. Therefore noting that there is no negligence or laxity attributable to the assessee for the delay in filing appeal, and to subserve the ends of justice we find that it is a fit case for condoning the delay of 283 days in the present appeal. The impugned delay in filing the present appeal is accordingly condoned. 15. We shall now proceed to deal with the appeal before us. 16. As transpires from order of the ld.Pr.CIT the assessee was deriving income from dealing in water purifier, water RO and water treatment plant under the name and style of proprietorship concern viz. "M/s. Unitech Water Solutions". For the impugned year i.e. Asst.Year 2014-15, the assessee had filed return of income declaring income at Rs. 17,01,720/-. The assessee's case was selected for scrutiny under CASS and assessment ultimately finalized under section 143(3) of the Act at an income of Rs. 17,41,830/-, making minor addition on account of disallowance of interest on TDS of Rs. 30,577/- and disallowance of 10% telephone expenses of Rs. 9,548/-, thus resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. Shah. He also noted that the issue of disallowance under section 40A(3) of the Act for payments made in cash also not been examined by the AO. His findings in this regard at para-7 of his order are as under: "7. The A.O. has not called for any details regarding the source or nature of addition to capital of Rs. 12,08,080/- or the unsecured loan of Rs. 11,78,000/- from Mr.Hiral R. Shah. Even the confirmation has not been called for. The issue of disallowance u/s 40A(3) out of payments in cash exceeding Rs. 20,000/- has also not been examined." 18. Thus, finding that the AO had completed assessment without conducting necessary inquiries as warranted by the facts of the case, he held the assessment order to be erroneous and prejudicial to the interest of the Revenue, and accordingly he set aside the order passed by the AO under section 143(3) of the Act to the file of the AO to be framed de novo. His findings in this regard at para-8of his order are as under: "8. As discussed above, the Assessing Officer has completed the assessment in a summary manner without conducting necessary and proper enquiries as warranted by the facts of the case. Hence, the order passed by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s Instruction No.20/2015 dated 29.12.15; * CBDT's Instruction No.5/2016 dated 14.07.16; In view of the above, CIT was not justified in invoking jurisdiction u/s 263 of the Act in respect of issues other than "commission expenses": 21. We are not in agreement with this contention of the ld. counsel for the assessee. The facts and documents on record before us and placed in PB by the ld. counsel for the assessee comprising of 170 pages itself demolishes the very premise and basis of the assessee's arguments for setting aside the ld.Pr.CIT order that it was a case of limited scrutiny. On page No.4 to 6 is placed screen-shot of the reasons for scrutiny selection in the present case, which categorically mentions "Type of Scrutiny : COMPLETE" and "Reasons for scrutiny selection": "Non-Corporate assessees having income from business to which section 44AB applies" "large commission expenses and low net profit". As per the documents placed before us by the ld. counsel for the assessee, it is clear and evident that it was a case of complete scrutiny and not limited scrutiny as canvassed by the ld. counsel for the assessee before us. Therefore, argument of the ld. counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justify proceedings u/s 263. Reliance is placed on the followings: * Malabar Industrial Co. Ltd. vs. CIT - 243 ITR 83 (SC); * Kwality Steel Suppliers vs. CIT - 395 ITR 1 (SC); * CIT vs. Mehsana District Co-op. Milk Producers Union Ltd. - 263 ITR 645 (Guj) * CIT vs. D. P. Karia-266 ITR 113 (Guj); * CIT vs. Arvind Jewellers - 259 ITR 502 (Guj); * Sir Dorabji Tata Trust vs. DCIT(E) - (2021) 188 ITD 38 (Mum); Torrent Pharmaceutical, vs DCIT -(2021) 173 ITD 130 (Ahd); 23. The contention of the ld. counsel for the assessee that the issues were examined threadbare at the original assessment stage was made out from Annexure-A, filed along with written submissions before us as under: 24. We are not in agreement with this contention of the Ld. Counsel for the assessee. In fact on going through the evidences and documents filed before us, regarding queries raised during the assessment proceedings, we agree with the ld.Pr.CIT that the AO had conducted no inquiry at all during the assessment proceedings with regard to any of the issues for which the assessee's case was selected for scrutiny assessment i.e. the issue relating to commission expenses or the aspect of low n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Gohil 7 1,00,000/- Menakshi Tushar Gohil 2,50,070/- Mureshbhai Juthani 6,56,577/- Manish Rama 80,000/- Total 22,40,340/- From the above chart, it is seen that you have paid Rs. 7,00,000/-to Shri Naba Daka. However, the PAN of Shri Naba Daka (BJWPD9099M) mentioned in the confirmation is found invalid. The PAN is also not mentioned in the confirmation ledger of Radha S.Shah. Similarly, in the confirmation of Tushar Gohil who has been paid commission of Rs. 1,00,000/- and salary of Rs. 1,41^200/j, the PAN mentioned on ledger a/c is found invalid. Moreover, the purpose for paying commission/salary to the above mentioned persons and the nature of services rendered by these parties have not been clarified by you nor has the Assessing Officer made any enquiries in this regard." 26. When confronted with these facts, the submissions made by the assessee before the ld.Pr.CIT were only to the effect that the higher commission is justified on account of increase in sales as compared to the preceding year by 7.2% and the PAN of NabaDaka is not invalid. The submissions of the assessee in this regard are reproduced at para 3(ii) of the order as under: It is abundantly clear from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27. Next contention of the ld. counsel for the assessee before us that there is no finding of error by the ld.Pr.CIT in the assessment framed by the AO and twin conditions viz. assessment order is erroneous and prejudicial to the interest of the Revenue not being satisfied, the exercise of revisionary jurisdiction under section 263 was not in accordance with law. His submissions in brief in this regard are as under: "It is settled law that if two views are possible as regards a particular issue and AO adopts either of two such views, then CIT cannot invoke jurisdiction u/s 263. Mere fact that different view could have been taken doesn't justify proceedings u/s 263. Reliance is placed on the followings: * Malabar Industrial Co. Ltd. vs. CIT - 243 ITR 83 (SC); * Kwality Steel Suppliers vs. CIT - 395 ITR 1 (SC); * CIT vs. Mehsana District Co-op. Milk Producers Union Ltd. 263 ITR 645 (Guj) * CIT vs. D. P. Karia- 266 ITR 113 (Guj); * CIT vs. Arvind Jewellers - 259 ITR 502 (Guj); * Sir Dorabji Tata Trust vs. DCIT(E) - (2021) 188 ITD 38 (Mum); * Torrent Pharmaceutical, vs DCIT -{2021) 173 ITD 130 (Ahd); 28. We are not in agreement with the contentions also. As held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are there by the assessee on this count. Therefore, vis-à-vis the issue of disproportionately large expenses claimed by the assessee, the assessee surely has no case on merits, since it has not even been examined by the AO during assessment proceedings, and even before the ld.Pr.CIT the assessee failed to give any reasonable explanation for justifying the increase in expenses. 33. As for the commission expenses, as noted above by us, the same was not examined by the AO at all during the assessment proceedings, and even before the ld.Pr.CIT the assessee was unable to justify the genuineness of its claim. Therefore, the contention of the ld. counsel for the assessee, that even on merits, no addition is called for in respect of the issues raised by the ld.Pr.CIT, we find, is devoid of any merits, and therefore is rejected. 34. The next contention raised by the ld. counsel for the assessee is that ld.Pr.CIT without invoking Explanation 2 to section 263 of the Act, could not have applied the same for holding the assessment order as erroneous. The contention of the ld. counsel for the assessee is that the ld.Pr.CIT had held the assessment order to be erroneous on account of ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." 34. As is evident from the above, section 263 empowers Commissioners/ Pr.Commissioners to exercise revisionary power where they find any order passed by the AO to be erroneous so as to cause prejudice to the interest of the Revenue. Explanation 2 to the section lists circumstances in which the assessment order passed will be deemed to be erroneous, which amongst other, includes an order passed without making inquiries or verification which should have been made as per clause (a) of the Explanation, which clause has been invoked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate inquiry, we see no reason why pointedly the Explanation also needs to be brought to the notice of the assessee while applying it to the case. 36 Once the ld.Pr.CIT brings to the notice of the assessee the reason why he finds the assessment order to be erroneous, which in the present case was inadequate inquiries conducted by the AO on the nature of disclosure made by the assessee during the survey in excess stock found, he need not specifically point out that he has invoked Explanation-2 to sub-clause (a) to the section which is to the same effect of inadequate inquiries conducted qualifying as error in assessment order. The fact that he clearly brings out the reason why he found assessment order erroneous, is sufficient in itself and self-explanatory. It need not to be technically qualified by pointing out the specific clause in respect to which the reason pertained. The entire objectives of confronting anything to the assessee in the process of rendering justice is to offer an opportunity to other party to come up with his/her arguments or contentions in defense. In the present case, it is not disputed that the assessee had been specifically pointed out the error in the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (PAFPL)? (b) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is correct in cancelling the impugned order u/s. 263 of the I.T. Act and allowing all the grounds of the Assessee?" 40. The Revenue had challenged the order of the ITAT setting aside the order passed by the ld.Pr.CIT under section 263 of the Act on account of inadequate inquiry made by the AO on unsecured loans received by it from two parties. The question framed before the Hon'ble High Court was therefore whether the ITAT order was correct when adequate inquiries were not made by the AO. The Hon'ble High Court answered the question against the Revenue, noting that the ITAT had given a finding of fact that the AO had made full inquiries in detail and accepted the genuineness of the loans received by the assessee, and such view of the AO was plausible view, and therefore the assessment cannot be said to be erroneous or prejudicial to the interest of the Revenue. Hon'ble High Court held that in view of such finding of the fact arrived at by the Tribunal, no question of law arose and the appeal of the Revenue was accordingly dismissed. 41. At para-5 of the judgment, Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the eyes of law. This contention raised by the ld. counsel for the assessee, is therefore, rejected." 27. In view of the above, we do not find any merit in the contention of the ld. counsel for the assessee that the order u/s 263 of the Act needs to be set aside for not having confronted the assessee with invocation of Explanation 2 to the said section." In view of the contentions of the ld. counsel for the assessee that in the absence of Explanation 2 to Section 263, the provision contained in clause (a) cannot be relied upon, is dismissed. 35. The last contentions of the ld. counsel for the assessee before us was that theld.CIT(A) could not have set aside the issue to the AO to denovo assessment. In this regard he has relied upon the decision of Hon'ble Delhi High Court in the case of ITO Vs.D.G. Housing Projects Ltd., (2012) 343 ITR 329 (Delhi). His submissions in brief in this regard are as under: * In any case, CIT himself ought to have examined the order passed by AO on merits and then ought to have established that AO's order is erroneous and prejudicial to the interest of the revenue. Without doing so, CIT could not have set aside the issue to the file of AO wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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