ITAT explains Reasons for delay in pronouncement of order during Lockdown

ITO Vs Adul Kayum Ahmed Mohd. tamboli (ITAT Mumbai)

The hearing of the matter was concluded on 19/02/2020 and in terms of Rule 34(5) of Income Tax (Appellate Tribunal) Rules, 1963, the matter was required to be pronounced within a total period of 90 days. As per sub-clause (c) of Rule 34(5), every endeavor was to be made to pronounce the order within 60 days after conclusion of hearing. However, where it is not practicable to do so on the ground of exceptional and extraordinary circumstances, the bench could fix a future date of pronouncement of the order which shall not ordinarily be a day beyond a further period of 30 days. Thus, a period of 60 days has been provided under the extant rule for pronouncement of the order. This period could be extended by the bench on the ground of exceptional and extraordinary circumstances. However, the extended period shall not ordinarily exceed a period of 30 days.

 Although the order was well drafted before the expiry of 90 days, however, unfortunately, on 24/03/2020, a nationwide lockdown was imposed by the Government of India in view of adverse circumstances created by pandemic covid-19 in the country. The lockdown was extended from time to time which crippled the functioning of most of the government departments including Income Tax Appellate Tribunal (ITAT). The situation led to unprecedented disruption of judicial work all over the country and the order could not be pronounced despite lapse of considerable period of time. The situation created by pandemic covid-19 could be termed as unprecedented and beyond the control of any human being. The situation, thus created by this pandemic, could never be termed as ordinary circumstances and would warrant exclusion of lockdown period for the purpose of aforesaid rule governing the pronouncement of the order. Accordingly, the order is being pronounced now after the re-opening of the offices.

Faced with similar facts and circumstances, the co-ordinate bench of this Tribunal comprising-off of Hon’ble President and Hon’ble Vice President, in its recent decision titled as DCIT V/s JSW Limited (ITA Nos. 6264 & 6103/Mum/2018) order dated 14/05/2020 held as under: –

7. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 7th January 2020, this order thereon is being pronounced today on 14th day of May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides as follows:

(5) The pronouncement may be in any of the following manners: —

(a) The Bench may pronounce the order immediately upon the conclusion of the hearing.

(b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date for pronouncement.

(c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board.

8. Quite clearly, “ordinarily” the order on an appeal should be pronounced by the
bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression “ordinarily” has been used in the said Assessment Year :2009-10 rule itself. This rule was inserted as a result of directions of Hon’ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that “We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in  the similar lines as are laid down by the Apex Court in the case of Anil Rai  (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters  heard by them within a period of three months from the date case is closed for judgment”. In the ruled so framed, as a result of these directions, the expression “ordinarily” has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any “extraordinary” circumstances.

9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon’ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon’ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that “In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Hon’ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020”. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus “should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure…”. The term ‘force majeure’ has been defined in Black’s Law Dictionary, as ‘an event or effect that can be neither anticipated nor controlled’ When such is the Assessment Year :2009-10 position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an “ordinary” period.

10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon’ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon’ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed “while calculating the time for disposal of matters made timebound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”. The extraordinary steps taken suo motu by Hon’ble jurisdictional High Court and Hon’ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words “ordinarily”, in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case.

Deriving strength from the ratio of aforesaid decision, we exclude the period of lockdown while computing the limitation provided under Rule 34(5) and proceed with pronouncement of the order.

FULL TEXT OF THE ITAT JUDGEMENT

1. Aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2009-10 contest the order of Ld. Commissioner of Income-Tax (Appeals)-34, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-34/ITO-22(1)(1)/IT-335/16-17, dated 12/07/2018 on following grounds: –

1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) is right in deleting the addition made by AO holding that the entire consideration is not taxable during the year whereas the assessee transferred his right of development during the year under consideration and possession has also been handed over and has received part consideration.

2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in estimating the income @ 10% without appreciating the disallowance made by AO as per provisions of section 40A(3) of the Income Tax Act when the Ld. CIT(A) himself has stated that the assessee is not eligible for showing income as per provisions of section 44AD of the Income Tax Act.

3. The appellant prays that the order of the Ld. CIT(A) on the above ground be reversed and that of the Assessing Officer be restored.

As evident, the primary subject matter of appeal is to determine the question of accrual of certain income.

2.1 We have carefully heard the rival submissions and perused relevant material on record including documents placed in the paper book. Our adjudication on the subject matter of the appeal would be as given in succeeding paragraphs.

2.2 Briefly stated, the assessee, being resident individual, is stated to be engaged as civil contractor under proprietorship concern namely M/s Tamboli Developer. An assessment was framed for year under consideration u/s. 143(3) r.w.s. 147 of the Act on 30/12/2016 wherein the income of the assessee was determined at Rs.276.69 Lacs as against returned income of Rs.2.82 Lacs filed by the assessee on 09/06/2010 which, prima-facie, was processed u/s 143(1).

2.3 Pursuant to receipt of certain information from Additional Director of Income Tax (I & CI)-Unit-1, Mumbai, the case was re-opened u/s.147 by issuance of notice u/s. 148 on 30/03/2016. The reasons for reopening the case were duly supplied to the assessee. The statutory notices u/s.143(2) and 142(1) were issued in due course. The reasons for re­opening the case, as extracted in assessment order, would reveal that it came to notice that M/s Tamboli Developer i.e. proprietorship concern of the assessee, had transferred certain development rights to M/s. Shivalik Ventures Pvt. Ltd. (M/s Shivalik) vide agreement dated 23/07/2008 for a consideration of Rs.336 Lacs, out of which an amount of Rs.100.80 Lacs was stated to be received during financial year 2008-09. It was observed that since assessee transferred the development rights and handed over the possession of property, the aforesaid transfer qualified to be treated as transfer u/s. 53A of Transfer Property Act, 1882 and therefore, resultant gains would be chargeable to tax as Business Profits. Since assessee followed mercantile system of accounting, the entire amount received/receivable on sale of development rights would be taxable in the year of signing of development agreement and handing over of possession of land. Upon verifying the return of income, it was seen that the said amount was not offered to tax as business income. In the above background, reassessment proceedings were initiated against the assessee.

2.4 The property in question was property bearing CTS no. 19(pt), Village Bandra (E), Near Golibar Kabrastan, Golibar, Santacruz(E), Mumbai admeasuring 1046.43 Square Meters. The development rights of the same were acquired by the assessee during FYs 2004-05 & 2005­06, from two cooperative societies i.e. M/s Evergreen SRA Co-op Society and M/s Nilofar CHS Ltd. The said property was stated to be encroached upon and in use and occupation of slum. Due to technical difficulties, the assessee could not proceed with further re-development of the property and approached M/s Shivalik for the same. The assessee and M/s Shivalik formed a joint venture entity namely Shivalik Tamboli Venture for the redevelopment of the property. As per the terms of joint venture agreement, M/s Tamboli Developers handed over the development rights to M/s Shivalik for Rs.336 Lacs and received part payment of Rs.100.80 Lacs against the same.

2.5 The assessee defended its stand by submitting that as per the terms of the agreement, the assessee was to perform his work on the basis of receipt of fund from M/s Shivalik. Further, the funds were received from M/s Shivalik which were spent for ground level activities and the balance amount was already offered for taxation.

2.6 In response to notice u/s 133(6), M/s Shivalik confirmed that the assessee was to do ground level work activities like collecting consent, taking care of local elements and do all the activities with the slum dwellers so that letter of intent could be issued. For the same, the assessee was to bear all the expenses and the payment was to be made in trenches as per assessee’s activities. The sale consideration was stated to be revised from Rs.336 Lacs to Rs.422.40 Lacs, out of which the amount of Rs.373.80 Lacs was already paid to the assessee.

2.7 During the course of assessment proceedings, the assessee submitted a chart showing amount received from M/s Shivalik and expenses incurred by the assessee for ground level work. The assessee reflected expenditure of Rs.83.65 Lacs against receipt of Rs.100.80 Lacs. The business receipts were shown at Rs.35.09 Lacs and the assessee offered income of 8% against business receipts of Rs.35.09 Lacs.

2.8 However, Ld.AO opined that the said accounting treatment was not in consonance with mercantile system of accounting being followed by the assessee. The income accrued to the assessee out of transfer of development right would be Rs.336 Lacs. As per the term of the agreement, the assessee parted with development rights and the possession of the land was also given. Therefore, the transfer was completed during the year and the taxability of business receipts would not be dependent upon actual receipt thereof. Hence, entire amount of Rs.336 Lacs was to be brought to tax.

2.9 Upon perusal of expenditure, it was noted that an expenditure of Rs.42 Lacs was paid through bearer cheques and therefore the same would not qualify as deduction u/s 40A(3) of the Act.

2.10 Finally, the amount of Rs. 336 Lacs was treated as business income against which the expenditure of Rs.58.80 Lacs was allowed to the assessee and the balance amount of Rs.277.20 Lacs was determined as business income.

3.1 Aggrieved as aforesaid, the assessee assailed the assessment before Ld. CIT(A) vide impugned order dated 12/07/2018 wherein the assessee drew attention to clause-17 of the joint venture agreement and submitted that as per the agreement, only an amount of Rs,100.80 Lacs accrued to the assessee upon execution of the agreement. The balance consideration was conditional receipt upon fulfilment of certain conditions by the assessee as laid down in the agreement and therefore, the assessee did not have any legally enforceable right under the agreement to receive the balance amount. Reliance was placed on Accounting Standard-9 issued by The Institute of Chartered Accountants of India with respect to revenue recognition. A plea was also raised that the stated receipts were capital receipts. Another argument was that the provisions of Sec. 2(47)(v) regarding part performance of contract referred to u/s 53A of the Transfer of property Act, 1882 related to capital gains chargeable u/s 45 of the Income Tax Act. However, the said development rights were business assets and even Ld.AO assessed the income as Business Income and therefore the definition of transfer as defined in Sec. 2(47)(v), was not applicable.

3.2 Convinced with assessee’s, Ld. CIT(A) concluded the issue in assessee’s favor by observing as under: –

4.4. I have carefully considered the facts of the case, documents produced before me and submissions of AR. It is observed that the appellant had procured the development rights from 2 Co-operative Societies named Nilofar Co-op. Hsg. Soc. Ltd. and Evergreen SRA Co-op. Hsg. Soc. (Proposed). It is an undisputed fact that the property was under serious encroachment and occupation of slums and was declared as censuedslum. As the appellant was not able to re-develop the property, thus he executed a Joint Venture Development Agreement with M/s Shivalik Ventures Pvt Ltd to assign its rights to the transferee. On perusing the Clause No. 17 of the Joint Venture Agreement, it is observed that the appellant was entitled to receive the Joint Venture consideration of Rs.3,36,00,000/- in various stages, as under: –

a) Rs. 1,00,80,000/- was receivable on execution of the agreement to acquit, release, discharge the rights in favour of M/s Shivalik Ventures Pvt Ltd;

b) Rs. 1,66,00,000/- was receivable on obtaining a revised Letter of Intent (LOI) and Intimation of Approval (LOA);

c) Rs. 67,20,000/- was receivable upon all the Slum Dwellers vacating the property and shifting to alternate temporary accommodation.

On perusing the Clause no.6 of Joint Venture Agreement, it is observed that the appellant was responsible to perform the various activities and work assigned thereon, being;

a) To procure the revised Letter of Intent (LOI) and Intimation of Approval (IOI) from the Slum Rehabilitation Authority;

b) Procure resolution from M/s Nilofer Co-operative Housing Society agreeing to consent the re-development of property and shift to permanent Rehabilitation Tenement;

c) To procure resignation and NOC from the previous architects;

d) To shift all Slum Dwellers to temporary alternate and handover on vacating the properties and handover the same to M/s Shivalik Ventures Pvt Ltd for re­development;

e) To shift all Slum Dwellers from temporary alternate accommodation to permanent accommodation constructed.

Assessment Year :2009-10 As per Clause No. 8, the appellant was solely responsible and obliged to settle all claims in regard to FSI to be consumed at its own costs and expenses. As per Clause No. 12, the appellant was required to incur all costs, charges and expenses required to obtain the revised Letter of Intent (LOI) and Intimation of Approval (IOA). Accordingly, as per above stated terms and conditions described in Joint Venture Agreement dated 25/07/2008, the appellant was entrusted with several responsibilities and to perform its part of obligation under the contract which is spread over the years. Further, the appellant was entitled to recover the consideration under Joint Venture in phased manner and therefore AO is not correct in holding that the entire consideration under Joint Venture Agreement had accrued during impugned year. The AO issued notice u/s 133(6) to M/s Shivalik Ventures Pvt Ltd and in reply, it is submitted that the appellant was required to perform the work including of leveling the ground. It is informed that a supplementary agreement was executed on 05/04/2012 and additional consideration of Rs.86,40,000/- was fixed, resultantly the aggregated consideration of Joint Venture was of Rs.4,22,40,000/-. The said party had furnished the year-wise break-up of various payments made to the appellant of Rs.3,73,80,000/- which is spread in 5 years and Rs.48,60,000/- is still outstanding. I find that AO had not looked into the terms and conditions of the Joint Venture Agreement which mandated the appellant to perform various work, obtain permissions etc and subject to fulfilment of the performance, the payments of the contract were to be released. The AO’s contention about part performance u/s 53A of transfer of Property Act, 1882 would not apply since Sec.2(47)(v) relate to transfer of a capital asset whereas, in impugned case, the appellant had offered the income under the head Income from business. The AO had incorrectly considered the Joint Venture Agreement as relating to transfer of development right without considering the various work to be performed by the appellant at various levels by both the parties and that the payments had been recovered in phased manner of 5 years in accordance to the work completed by the appellant.

The Hon’ble Jurisdictional High Court in Mrs. Hemal Raju Shette (ITA no-2348 of 2014) decided that:

“In the present case, from the reading of the above clauses of the agreement the deferred consideration is payable over a period of four years i.e. 2006-07, 2007-08, 2008-09 and 2009-10. Further the formula prescribed in the agreement itself makes it clear that the deferred consideration to be received by the respondent-assessee in the four years would be dependent upon the profits made by M/s. Unisol in each of the years. Thus, in case M/s. Unisol does not make net profit in terms of the formula for the year under consideration for payment of deferred consideration then no amount would be payable to the respondent-assessee as deferred consideration. The consideration of Rs.20 crores is not an assured consideration to be received by the Shete family. It is only the maximum that could be received. Therefore, it is not a case where any consideration out of Rs.20 crores or part therefore (after reducing Rs.2.70 crores) has been received or has accrued to the respondent-assessee. As observed by the Apex Court in Morvi Industries Ltd. v. CIT [1971] 82 ITR 835. “The income can be said to accrue when it becomes due…. The moment the income accrues, the assessee gets vested right to claim that amount, even though not immediately.” In fact, the Assessment Year :2009-10 application of formula in the agreement dated 25th January, 2006 itself makes the amount which is receivable as deferred consideration contingent upon the profits of M/s. Unisol and not unascertained amount. Thus, in the subject assessment year no right to claim any particular amount gets vested in the hands of the respondent-assessee. Therefore, entire amount of Rs.20 crores which is sought to be taxed by the Assessing Officer is not the amount which has accrued to the respondent-assessee. The test of accrual is whether there is a right to receive the amount though later and such right is legally enforceable. In fact as observed by the Supreme Court in E.D. Sassoon & Co. Ltd. v. CIT [ 1954] 26 ITR 27 “It is clear therefore that income may accrue to an assessee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody. There must be as is otherwise pressed debitum inpresenti, solvendum in future …. …. ….”. In this case all the co-owners of the shares of M/s. Unisol have no right in the subject assessment year to receive Rs.20 crores but that is the maximum which could be received by them. This amount which could be received as deferred consideration is dependent/ contingent upon certain uncertain events, therefore, it cannot be said to have accrued to the respondent-assesses. The Tribunal in the impugned order has correctly held that what has to be taxed is the amount received or accrued and not any notional or hypothetical income. As observed by the Apex Court in CIT v. Shoorji Vallabhdas & Co. (1962] 46 JTR 144 “Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which liability to tax is attracted, viz., the accrual of its income or its receipt; but the substance of the matter is income, if income does not result, there cannot be a tax, even though in book-keeping an entry is made about a hypothetical income, which does not materialize.”

Also, in the case of Sassoon & Co. Ltd v. CIT reported in 26 ITR 27 Hon’ble Supreme Court laid the principle that an income can be held to accrue only when the assessee acquired a right to receive that income.

Accordingly, AO is not justified in holding that the entire consideration of Rs.3,36,00,000/- under Joint Venture Agreement had accrued during current year. Accordingly, the addition made by AO of Rs.3,36,00,000/- cannot be upheld.

4.5. The next question that needs to be answered is about the income that would have been earned by the appellant during impugned year under Joint Venture. The AO had allowed Rs.58,80,000/- as deductible expenses on considering the payments made by Account payee cheques. The appellant had furnished a tabular chart along with profit and loss account of 5 years from A.Y.2008-09 to 2012-13 which is reproduced as under:

The return of income has been filed accordingly which has been accepted by the Revenue.

4.6.  It is observed that the amounts received by the appellant over 5 years from M/s Shivalik Ventures Pvt Ltd is disclosed of Rs.3,73,80,000/- and the amounts spent for the project is of Rs.2,56,65,690/-, resultantly the balance Gross amount of Rs.1,17,14,310/- has been considered as income from Joint Venture. However, on perusal of the P & L account, it is also observed that the appellant had claimed various other expenses against the contract receipts and had disclosed the nominal profit of Rs.3,19,806/-. The submission of AR about applicability of Sec.44AD is rejected since his case does not fall within the definition of eligible business as the gross receipts exceeds Rs.40,00,000/-. The appellant had filed the affidavits of certain contractors who had performed various work in Joint Venture Project. Also, M/s Shivalik Ventures Pvt. Ltd. in reply to notice u/s 133(6), informed the AO that the appellant was required to perform various work including of the levelling of land at its own cost. Accordingly, on considering the nature of business, terms of agreement and information available on record, it would be appropriate to estimate the income of impugned year @ 10% of the consideration received by the appellant of Rs. 1,00,80,000/- at Rs.10,08,000/- (10% of Rs.1,00,80,000/-) that would meet an end of justice. I direct AO to sustain the addition at Rs.10,08,000/- and delete the balance addition of Rs.2,67,12,000/- i.e. (Rs. 2,77,20,000 /- minus Rs. 10,08,000/-). In the result, the ground nos. a to f are partly allowed, Aggrieved as aforesaid, the revenue is in further appeal before us. It appears that the assessee has accepted the verdict of Ld. CIT(A).

3.3 It is evident that Ld. CIT(A) has held that the provisions of Sec.2(47)(v) defining the term transfer would not be applicable since the income was assessed as Business Income. The Ld. CIT(A), after considering the terms of Joint Venture Agreement, also came to a conclusion that only part-payment accrued to the assessee during the year whereas the balance receipts were conditional receipts which were payable only in the event of assessee performing various work, obtain requisite permissions etc. The payments were subject to fulfilment of certain contractual performance by the assessee. The said facts were confirmed by M/s Shivalik also, in response to notice u/s 133(6).

3.4 Another finding is that the payment was received in various trenches over next 5 years and the same has already been offered to tax in those years after deducting related expenditure. The detail of the same has already been tabulated in the impugned order, which is extracted hereinabove. These facts remain uncontroverted before us.

4. Upon careful consideration of the impugned order, we find that Ld. CIT(A) has clinched the issue in correct perspective. The assessee was engaged as civil contractor and the income earned from the stated project was assessed as Business Income. Therefore, the term transfer as defined in Sec.2(47)(v), would not apply since the same is applicable only in case of capital assets held by the assessee. The development rights were held as business assets. Proceeding further, it is evident from the terms of the Joint Venture Agreement that only part income accrued to the assessee on execution of the project agreement. The balance consideration was conditional receipt and was to accrue only in the event of assessee performing certain obligations under the agreement. Another pertinent fact to be noted is that the payments received in subsequent years have already been offered to tax. The same was in line with assessee’s arguments that the balance receipts were conditional receipts. The response by M/s Shivalik also confirmed the same. Therefore, no fault could be found in the impugned order in estimating the income @10% of gross receipts. Once the income is estimated, no further disallowance u/s 40A(3) would be warranted. Therefore, we confirm the stand of Ld. CIT(A) in the impugned order.

Reasons for delay in pronouncement of order

5.1 Before parting, we would like to enumerate the circumstances which have led to delay in pronouncement of this order. The hearing of the matter was concluded on 19/02/2020 and in terms of Rule 34(5) of Income Tax (Appellate Tribunal) Rules, 1963, the matter was required to be pronounced within a total period of 90 days. As per sub-clause (c) of Rule 34(5), every endeavor was to be made to pronounce the order within 60 days after conclusion of hearing. However, where it is not practicable to do so on the ground of exceptional and extraordinary circumstances, the bench could fix a future date of pronouncement of the order which shall not ordinarily be a day beyond a further period of 30 days. Thus, a period of 60 days has been provided under the extant rule for pronouncement of the order. This period could be extended by the bench on the ground of exceptional and extraordinary circumstances. However, the extended period shall not ordinarily exceed a period of 30 days.

5.2 Although the order was well drafted before the expiry of 90 days, however, unfortunately, on 24/03/2020, a nationwide lockdown was imposed by the Government of India in view of adverse circumstances created by pandemic covid-19 in the country. The lockdown was extended from time to time which crippled the functioning of most of the government departments including Income Tax Appellate Tribunal (ITAT). The situation led to unprecedented disruption of judicial work all over the country and the order could not be pronounced despite lapse of considerable period of time. The situation created by pandemic covid-19 could be termed as unprecedented and beyond the control of any human being. The situation, thus created by this pandemic, could never be termed as ordinary circumstances and would warrant exclusion of lockdown period for the purpose of aforesaid rule governing the pronouncement of the order. Accordingly, the order is being pronounced now after the re-opening of the offices.

5.3 Faced with similar facts and circumstances, the co-ordinate bench of this Tribunal comprising-off of Hon’ble President and Hon’ble Vice President, in its recent decision titled as DCIT V/s JSW Limited (ITA Nos. 6264 & 6103/Mum/2018) order dated 14/05/2020 held as under: –

7. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 7th January 2020, this order thereon is being pronounced today on 14th day of May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides as follows:

(5) The pronouncement may be in any of the following manners: —

(a) The Bench may pronounce the order immediately upon the conclusion of the hearing.

(b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date for pronouncement.

(c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board.

8. Quite clearly, “ordinarily” the order on an appeal should be pronounced by the
bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression “ordinarily” has been used in the said Assessment Year :2009-10 rule itself. This rule was inserted as a result of directions of Hon’ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that “We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in  the similar lines as are laid down by the Apex Court in the case of Anil Rai  (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters  heard by them within a period of three months from the date case is closed for judgment”. In the ruled so framed, as a result of these directions, the expression “ordinarily” has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any “extraordinary” circumstances.

9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon’ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon’ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that “In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Hon’ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020”. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus “should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure…”. The term ‘force majeure’ has been defined in Black’s Law Dictionary, as ‘an event or effect that can be neither anticipated nor controlled’ When such is the Assessment Year :2009-10 position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an “ordinary” period.

10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon’ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon’ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed “while calculating the time for disposal of matters made timebound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”. The extraordinary steps taken suo motu by Hon’ble jurisdictional High Court and Hon’ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words “ordinarily”, in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case.

Deriving strength from the ratio of aforesaid decision, we exclude the period of lockdown while computing the limitation provided under Rule 34(5) and proceed with pronouncement of the order.

Conclusion  

6. The revenue’s appeal stands dismissed.

This order is pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details of the same on the notice board.