TMI Blog2023 (6) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Assesses case was selected for scrutiny on account of large commission expenses, the facts before us reveal that the AO merely accepted whatever reply was filed by the assessee, which as noted above by us did not even justify the increase in commission expenses but contrarily revealed infirmities which should have prompted further inquiry by the AO. The finding of the ld.Pr.CIT, we hold, are correct that the assessment order was erroneous on account of no inquiry at all having been conducted on the issue of large commission expenses claimed. Issue of commission expenses and the issue of low net profit, we find that there was no inquiry conducted by the AO at all, and therefore, the ld.Pr.CIT was right in holding that the assessment order was erroneous causing prejudice to the Revenue. The assessee s arguments therefore that the issues were examined during the assessment proceedings is dismissed. Also since we have found the AO to have not conducted any inquiry on the issues for which complete scrutiny was directed in the present case, there cannot be any question of any view formed by the AO on the issues and hence the argument advanced on behalf of the assessee tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst 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 adduced by the assessee for the delay. He relied on the Third Member decision of the ITAT in the case of Tractors Farm Equipments Ltd., (2007) 104 ITD 149 (Chennai)(TM). Copy of the decision was placed before us. 5. We have heard contentions of both the parties; gone through the facts relating to delay in filing of the appeal as presented before us, and have also gone through various decisions of Courts on the issue of condonation of delay, which were cited before us. 6. Befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les 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 Court held that primary function of courts is to adjudicate the dispute between the parties and to advance substantial justice and the time limit fixed for approaching the Court is not for the reason that on expiry such time limit, a bad cause would become a good cause. The relevant portion of the judgment is as under: It is axiomatic that condonation of delay is a matter of discretion of the court Section 5 of the Limitation Act does not say that such discretion can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, 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 adopting a liberal and justice oriented approach on the issue of condonation of delay as under: 1. Ordinarily a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 matrix of each case and would largely depend upon the bona fide nature of the expression; that if the Courts find that there is no negligence on the part of the applicant and the cause shown for the delay does not lack bona fide, then the Court can condone the delay, but on the other hand, if the explanation is found to be concocted or the litigant found to be negligent in prosecuting his cause, then it would be legitimate for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 party moving an application for condonation of delay, must endeavour to explain the delay and show his bonafide in not having moved within the time prescribed (i.e. not being diligent). The law assist the vigilant and not the indolent as stated in the LatinMaxim Vigilantsbusennondormientibus jura suveniunt. . The reasons for explaining the delay has to be plausible and reasonable so that the Court can exercise its discreti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligence 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 and to prevent any dilatory tactics being adopted . That expiry of period of limitation does not render a bad cause good. That therefore based on the above premise, section 5 of the Limitation Act and section 253(5) of the Act provides power to condone delay on demonstrating sufficient cause to the satisfaction of the courts. This satisfaction accordingly has been held by Courts to be interpreted li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Revenue. Also it is highly plausible also for a legal consultant to have advised against filing appeal against the revisionary order under section 263 of the Act. There can be two reasons for it; (i) that the legal consultant found no financial implication in the revisionary order, since all the issues had been restored back to the AO for reconsideration and he would have presumed that no a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 resulting in total addition to the income of Rs. 40,105/-. The ld.Pr.CIT on examination of records of assessment found that the impugned order passed was erroneous since as per the ld.Pr.CIT the AO had made no inquiry on the issues for which the case of the assessee was selected for scrutiny. He noted that the assessee s case was selected for scrutiny on account of large commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,78,000/- 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 Assessing Officer is held to be erroneous and prejudicial to the interest of revenue . The order of the Assessing Officer u/s 143(3) dated 21/04/2016 is hereby set aside to the file of Assessing Officer to be framed denovo The Assessing Officer is directed to make all necessary enquiries/investigations and examine all the issues afresh after giving reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee that the ld.Pr.CIT s order on issues other than those mentioned for scrutiny selection was beyond the scope of revisionary power, does not survive. Even otherwise, the finding of the error by the ld.PCIT of non-examination of disproportionately large claim of expenses by the assessee in the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 net profit returned by the assessee. As per the assessee own admission as above, (Annexure - A) the only aspect examined by the AO during the assessment proceedings, if any, was in relation to commission expenses. Therefore, it is a clear and admitted case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- to P L account for the year under consideration. Name Amt. (Rs. ) Kamlesh S.Desai 66,750/- Naba Daka 7,00,000/- RajeshPatidar 1,55,000/- Rakesh Panchal 46,100/- Samarth D.Shah (HUF) 1,28,400/- Radha S.Shah 48,000/- Tushar 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the issue of low net profit, we find that there was no inquiry conducted by the AO at all, and therefore, the ld.Pr.CIT was right in holding that the assessment order was erroneous causing prejudice to the Revenue. The assessee s arguments therefore that the issues were examined during the assessment proceedings is dismissed. Also since we have found the AO to have not conducted any inquiry on the issues for which complete scrutiny was directed in the present case, there cannot be any question of any view formed by the AO on the issues and hence the argument advanced on behalf of the assessee that where two views were possible, revisionary proceedings are unjustified, needs to be rejected. 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 particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by CIT in view of contentions forming part of Annexure B . Thus, even on merits, there is no error in the order passed by AO in the case of the assessee for the year under consideration. 32. The same were reiterated during the course of oral arguments made before us. This contention of the ld. counsel for the assessee also merits no consideration. On merits, the case of the ld. counsel for the assessee is merely with respect to the issue of commission expenses. With respect to the other issues relating to disproportionately large expenses claimed by the assessee, noted by the ld.Pr.CIT to have not been examined by the AO relate to the case being selected for low net profit. No submissions on merits are there by the assessee on this count. Therefore, vis- -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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case justify, [including, (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]. Explanation 1. For the removal of doubts, it is hereby declared that, for the purposes of this sub-section, . .. .. . Explanation 2. For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanations do not enlarge the scope of the section but only explain the scope. Explanation 2 to section 263, clearly provides additional support to the dominant object of section 263, specifically pointing out situations where assessment orders will be deemed to be erroneous. The main provision of the section and its import has not been altered by the explanation. Therefore where section 263 itself has been invoked and the reason for finding the assessment order erroneous clearly pointed out to the assessee during revisionary proceedings to the effect that adequate inquiries were not conducted by the AO on the issue in question, Explanation 2 to section 263 (a) also being to the same effect of assessment orders being deemed to be erroneous on account of lack of adequate 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 surve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. In the case before Hon ble High Court in the decision relied upon by the Ld.AR, the Revenue had proposed the following questions as substantial question of law before the Hon ble High Court: (a) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is correct in holding that the PCIT was not empowered and entitled to revise assessment order u/s. 263 of the Act r/w Explanation 2 thereto by ignoring that the order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue in as much as the Assessing Officer has passed the assessment order without making inquires/verification in the light of the unsecured loans of Rs. 2.49 Crores received from M/s. Georgette Tradecom Pvt. Ltd (GTPL) and M/s. PurbaAgro Food Pvt. Ltd (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be read as a whole and observations in judgements should be considered in the context in which they are made and in the light of the questions that were before the court. The Hon ble apex court has held so in the case of CIT vs Sun Engineering Works Pvt. Ltd.198 ITR 297 (SC). In the case of Padma Sundra Rao v State of TN 255 ITR 147(SC) the Hon ble Apex Court had laid down that a ratio laid down by the Court have to be read in the context of the entire facts leading to the said ratio. 44. In view of our elaborate discussion as above, we hold that the assessee cannot derive any benefit from the judgment of Hon ble High Court in the case of Shreeji Prints P. Ld. (supra), to the effect that non-mentioning of Explanation 2 to section 263 in the show cause notice will render entire revisionary order as non-est in 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 vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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