Brief of the Case
Assessee unaware of penalty order as the same received by a casual worker who left, is a sufficient cause for late filing of appeal – ITAT
ITAT Mumbai held In the case of M/s. National Pharmaceuticals vs. ITO that there is no straight jacket formula can be applied to check sufficient reasons for late filing of appeal. It will depend on the facts and circumstances of the particular case. In this case the reason for late filing was that assessee was not aware of the penalty order as the penalty order was received by some casual worker that also left company. It was held that It is a sufficient reason for late filing of appeal.
Facts of the Case
In this case CIT (A) has declined the request of the assessee to condone the delay of eight months and five days. In its written submissions, the assessee has pleaded that it has filed an appeal in the quantum proceedings before the ITAT. In the penalty proceedings, it was requested to the AO that the penalty proceedings be kept in abeyance till the disposal of the quantum appeal of the assessee before the ITAT. Thereafter, the assessee did not receive any notice from the AO in the penalty appeal. The assessee was under bonafide belief that the penalty proceedings have been kept in abeyance. However, later on it was revealed that the penalty order was passed by the AO which was also sent on the address of the assessee.
Contention of the Assessee
The ld counsel of the assessee submitted that delay in filing the appeal before the CIT (A) was because of the reason that the assessee was not aware of the passing of the penalty order. There was no intentional delay on the part of the assessee in filing the appeal.
The assessee has pleaded that the assessee is a small pharmaceutical unit and do not have much administrative staff. The assessee came to the knowledge of passing of the penalty order when the Department started pressing for the recovery of the penalty amount. It has been submitted that the penalty order might have been received by some casual worker of the assessee firm. The person who might have received the penalty order would have left the employment of the assessee firm that is why the assessee could not get the knowledge of the service of the penalty order upon the assessee.
Held by CIT (A)
CIT (A) declined the request of the assessee to condone the delay in filing of appeal. It was held that the assessee has not disclosed the name of the specific employee who had received the penalty order and also that the assessee has not disclosed the exact date of leaving of the job by the said employee.
Held by ITAT
The assessee has submitted that it was not aware of the service of penalty order. It is the belief of the assessee that it might have been received by some casual worker of the assessee. When the assessee itself was not aware that who actually had received the notice, then the CIT (A) should not have expected from the assessee the name of the employee who actually received penalty order. Had the assessee been in knowledge as to who had received the notice, then in that case the assessee might have been aware of the receipt of the penalty order. Hence, the rejection of the application of the assessee on this ground cannot be justified.
Also present appeal is a penalty appeal and not a quantum appeal. The levy of penalty in comparison to the levy of tax is different as the former has some characteristic of penal consequence as the very name of it suggests. Under such circumstances, without hearing the assessee on merits, the consequences of levy of penalty can be said to be harsh. The Hon’ble Supreme Court in the case of G. Ramegowda, Major and others v. Special Land Acquisition Officer, Bangalore (1988) 2 SCC 142, while relying upon various other decisions of the Hon’ble Supreme Court itself viz. Ramlal, Motilal and Chhotelal v. Rewa Coalfield Ltd. (1962) 2 SCR 762; Shakuntala Devi Jain v. Kuntal Kumari(1969) 1 SCR 1006 ; Concord of India Insurance Co. Ltd. V. Nirmala Devi(1979) 3 SCR 694; Lala Mata Din v. A. Narayanan(1970) 2 SCR 90 ; Collector, Land Acquisition v. Katiji etc. (1987) 2 SCC 107, has held that “ There is, it is true, no general principle saving the party from all mistakes of its counsel. If there is negligence, deliberate or gross inaction or lack of bona fide on the part of the party or its counsel there is no reason why the opposite side should be exposed to a time-barred appeal. Each case will have to be considered on the particularities of its own special facts. However, the expression ‘sufficient cause’ in Section 5 must receive a liberal construction so as to advance substantial justice and generally delays in preferring appeals are required to be condoned in the interest of justice where no gross negligence or deliberate inaction or lack of bona fides is imputable to the party seeking condonation of the delay.”
In State of Nagaland v. Lipok AO and others (2005) 3 SCC 752, the Ho’ble Supreme Court, after referring to New India Insurance Co. Ltd. V. Shanti Misra(1975) 2 SCC 840, N. Balakrishnan v. M. Krishnamurthy AIR 1998 SC 3222, State of Haryana v. Chandra Mani(1996) 3 SCC 132 and Special Tehsildar, Land Acquisition v. K.V. Ayisumma (1996) 10 SCC 634, came to hold that adoption of strict standard of proof sometimes fails to protect public justice and it may result in public mischief. In Improvement Trust, Ludhiana v. Ujagar Singh and others(2010) 6 SCC 786, it has been held that while considering an application for condonation of delay no straitjacket formula is prescribed to come to the conclusion if sufficient and good grounds have been made out or not. It has been further stated therein that each case has to be weighed from its facts and the circumstances in which the party acts and behaves.
In view of above judicial pronouncements and facts of the case, we are of the view that the reasons for delay in filing the appeal by the assessee constitute sufficient cause for condonation of delay. The delay in filing the appeal is therefore condoned and accordingly matter restored to CIT (A).
Accordingly, appeal of the assessee allowed for statistical purpose.