Satish Kumar Garg Vs DCIT (ITAT Jaipur)
ITAT held that misplacing of CIT(A) order by regular tax consultant is not deliberated delay on part of assessee and it should be condoned.
At the outset, it is noted that there is a delay in filing the present appeal by 31 days. In this regard, the ld. AR submitted as under:-
1. That in the aforesaid matter, the impugned order was passed by CIT(A)-2-Udaipur, on dated 23.07.2019, which was received on dated 02.09.2019. Accordingly, the appeal was to be filed on/before 01.11.2019 however, the same has been filed on dated 02.12.2019. Thus, delay of 31 days has occurred.
2. In this connection, it is submitted that, after receipt of the said order, the assessee handed over the same to his regular tax consultant Shri Ramesh Chand Goyal Sharma (Chartered Accountant) for further action if any. Unfortunately, however, at that point of time Sh. Ramesh Chand Goyal was busy in Audits so he placed the papers in/with some other files/papers, not related to this matter and even forgot to complete the task given to him.
3. That it is only sometime in the third week of November, after completion of audit the staff was arranging the audit files with relevant audit working papers, then only this order came in the notice of Shri Ramesh Chand Goyal. After receipt of this order, immediate efforts have been made to file the appeal.
4. That under these circumstances firstly, there was no delay attributable on the part of the applicant assessee. In any case, these circumstances were beyond the control and anticipation of the humble applicant assessee. The delay occurred because of the misplacing o f papers by the regular tax consultant, as stated above and the poor assessee was helpless.
5. That the delay was unintended and not deliberate. In the past, there was no such delay ever occurred. In any case, it was a minor delay of 31 days and the issue involved been directly covered, such delay deserves to be kindly condoned.
In support, reliance was also placed on the Hon’ble Supreme Court decision in the case of Collector, Land & Acquisition v. Mst. Katiji8s Others (1987) 167 ITR 471 (SC), Vedabai Aoias Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil (2002) 122 Taxman 114 and Delhi Tribunal in ACIT vs. Jay Dee Securities 85 Finance Ltd. (2017) 88 com 626.
After hearing both the parties and considering the affidavit of the assessee which is placed on record, we find that there was a reasonable cause for the delay in filing the present appeal and the delay is hereby condoned and the appeal is admitted for adjudication.
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal filed by the assessee against the order of ld. CIT(A)-2, Udaipur dated 23.07.2019 wherein the assessee has taken the following grounds of appeal:-
“1. The impugned addition made in the order u/s 143(3) of the Act, dated 26.03.2013 is bad in law and on facts of the case, for what o f jurisdiction and various other reasons and hence, kindly be deleted.
2. The ld. CIT(A) erred in law as well as on the facts of the case in confirming the addition to the extent of Rs. 80,250/- on account o f undisclosed interest income. The addition so made and confirmed by the ld. CIT(A), is contrary to the provisions of law and facts hence, kindly be deleted.
3. The ld. CIT(A) erred in law as well as on the facts of the case by confirming the addition to the extent of Rs. 3,15,275/- on account o f excess stock found during survey at M/s Kutubminar AC Products. The addition so made and confirmed by the CIT(A), is contrary to the provisions of law and facts hence, kindly be deleted. ”
2. At the outset, it is noted that there is a delay in filing the present appeal by 31 days. In this regard, the ld. AR submitted as under:-
“1. That in the aforesaid matter, the impugned order was passed by CIT(A)-2-Udaipur, on dated 23.07.2019, which was received on dated 02.09.2019. Accordingly, the appeal was to be filed on/before 01.11.2019 however, the same has been filed on dated 02.12.2019. Thus, delay of 31 days has occurred.
2. In this connection, it is submitted that, after receipt of the said order, the assessee handed over the same to his regular tax consultant Shri Ramesh Chand Goyal Sharma (Chartered Accountant) for further action if any. Unfortunately, however, at that point of time Sh. Ramesh Chand Goyal was busy in Audits so he placed the papers in/with some other files/papers, not related to this matter and even forgot to complete the task given to him.
3. That it is only sometime in the third week of November, after completion of audit the staff was arranging the audit files with relevant audit working papers, then only this order came in the notice of Shri Ramesh Chand Goyal. After receipt of this order, immediate efforts have been made to file the appeal.
4. That under these circumstances firstly, there was no delay attributable on the part of the applicant assessee. In any case, these circumstances were beyond the control and anticipation of the humble applicant assessee. The delay occurred because of the misplacing o f papers by the regular tax consultant, as stated above and the poor assessee was helpless.
5. That the delay was unintended and not deliberate. In the past, there was no such delay ever occurred. In any case, it was a minor delay of 31 days and the issue involved been directly covered, such delay deserves to be kindly condoned. ”
3. In support, reliance was also placed on the Hon’ble Supreme Court decision in the case of Collector, Land & Acquisition v. Mst. Katiji8s Others (1987) 167 ITR 471 (SC), Vedabai Aoias Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil (2002) 122 Taxman 114 and Delhi Tribunal in ACIT vs. Jay Dee Securities 85 Finance Ltd. (2017) 88 com 626.
4. After hearing both the parties and considering the affidavit of the assessee which is placed on record, we find that there was a reasonable cause for the delay in filing the present appeal and the delay is hereby condoned and the appeal is admitted for adjudication.
5. Ground No. 1 was not pressed during the course of hearing. Hence, the same is dismissed as not pressed.
6. In Ground No. 2, the assessee has challenged the confirmation of addition of Rs 80,250/-.
7. In this regard, the ld AR submitted that during the course of search, the assessee surrendered an amount of Rs.8 Lakhs in his hands on account of advance given to different parties. The surrender was made on the basis of noting found on Annexure LP-2 seized from the residence of assessee. The Ld. AO made the addition on the ground that the assessee has surrendered the amount of advance given but the interest earned on these advances is not declared in the return of income and on this basis, addition of interest amount of Rs.96,000/- was made, adopting the rate of interest of 12% per annum on advance given of Rs.8,00,000/- for whole year. During the course of first appeal, the “hundis” seized were submitted before CIT(A)- Udaipur clearly mentioning the period for which the amounts have been advanced. The dates of money given was ranging from 02.09.2010 to 20.09.2010 therefore it was prayed that the addition of interest for the entire year is unjustified. During the course of appeal proceedings, ld.CIT(A) accepted the contention that the amount have been advanced in the month of September, 2010, however, the contention of assessee that the amounts have been given for two months only, supported by seized material, remained unadjudicated and the interest was calculated from September, 2010 to March, 2011. Further, the Ld. CIT(A) enhanced the rate of interest adopted by AO at 12% p.a to 18% p.a. on the basis of one hundi in the name of M/s Adiya Mineral.
8. In the above factual background, the ld AR submitted that the action of ld.CIT(A) in enhancing the rate of interest from 12% p.a. to 18% p.a. has resulted into the enhancement made by the CIT(A) and the enhancement has been made without following the mandatory requirement of law i.e. issuing notice u/s 251(2) . No such show-cause u/s 251(2) has been issued by the CIT(A), hence the complete enhancement has been made without providing a reasonable opportunity which is against the mandatory requirement of section 251(2) and principle of natural justice, hence the enhancement made by CIT(A) deserves to be deleted. In support of the contentions, reliance was placed on the case of M/s Shree Jee Jewellers vs ITO (ITA No.393/JP/2017 dated 27.01.2020). In view of these facts, the enhancement made by CIT(A) from rate of interest of 12% p.a to 18% p.a. resulting into enhancement of Rs.26,250/- may kindly be deleted. Further, reliance was placed on the written submissions and the contents thereof read as under:
“2.1 It is important to note that in these types of transaction the amount of interest is received in advance. This fact is further supported by the “hundiess”eized from the assessee wherein the amount of interest is quantified at the time of giving loan and received in advance. Kindly refer Hundi of Aaditya Mineral Product dated 20.09.2010 placed at PBP-3 wherein it is clearly mentioned that “advance interest of Rs.5600/- paid ”
2.2 It is clear from the above that at the time of search the fact was before the concerned officer also and duly explained and therefore, surrender of principal was given and accepted. Considering the explanation supported by the documents seized, no separate question for interest arises during the search.
2.3 Under these circumstances, when it is an established practice of receiving the interest in advance, the assessee has utilized the said interest received while giving the loans and the same has been included in principal amount of loan. Notably, while making surrender the assessee surrender the entire amount of loans given which was out of own money and interest received in advance therefore making separate addition for the amount of interest already included in the amount of surrender resulted into double addition, hence kindly be deleted in full.
2.4 The assessee specifically submitted this fact before ld. CIT(A) but this remained un-adjudicated.
2.5 In view of these facts and circumstances, it has been a practice of receiving entire amount of interest as advance which got clubbed with the loan given for which surrender has been made, therefore no separate addition is warranted.
2.6 Without prejudice to the above, it is further submitted that the interest has been rightly calculated from the month of September but the same has been calculated till March, 2011 whereas the amount of loans has been given for two months only. In the case of Kiran Industries, Jai Jinendra Textiles, MP Enterprises, it was specifically mentioned in the seized papers that the interest of two months is paid means the amount has been given for two months only. Thus, calculating the interest till 31.03.2011 is contrary to the facts and unjustified.
2.7 During the course of appeal proceedings, Ld.CIT(A), on the basis of one hundi i.e. Aditya Mineral Products, wherein rate of interest of 1.5 per month was mentioned drawn an inference that all the loans have been given at the rate of 18%, whereas on the other hand various hundis specifically mentioned period of two months as pointed out in Para 2.3 above, this contention was ignored that all the loans were of two moths duration only. At the one hand, hundi of Aditya Mineral Products has been completely relied upon but the fact mentioned on that hundi itself that interest of Rs.5600/- with respect to this has been received in advance and this proves that it has been the practice of the assessee to receive interests in advance was ignored. In the case of Aditya Mineral interest of Rs.5600 was paid and by working out the interest at 1.5% per month the duration of this hundi come out less than two months (around 1 months and 24 days), still ignoring this fact interest of 7 months was sustained by CIT(A). Thus, the approach adopted by the ld.CIT(A) is highly contradictory and unjustified. Every content of the evidence is of equal importance and it is unjustified to pick and choose only unfavorable content for the sake of making additions only.
2.8 Without prejudice to this, even if it is assumed that the interest has been earned separately then also the interest should be calculated @12% p.a. for two months only. If this contention is accepted, the amount of interest to be added would be as follows:
