Case Law Details
Chandigarh Overseas Pvt. Ltd Vs DCIT (ITAT Chandigarh)
Conclusion: Even if the assessee was unrepresented, CIT(A) should have adjudicated the issues before him based on the case record before him but unfortunately, CIT(A) chose not to do so and dismissed the assessee’s appeal without examining the case on merits. Therefore, the condonation of delay was allowable and substantial justice required that the issues should be re-examined by CIT(A).
Held: The main issue for consideration was the issue of condonation of delay of 1385 days. Assessee has filed an application praying for condonation of delay and had filed an affidavit supporting the averments made in the condonation of delay application. As per the assessee it did not receive any notice of hearing of assessee’s appeal before the CIT(A) and, therefore, assessee was unable to get itself represented before CIT(A) during the course of such hearings. Assessee was not aware of the fact that the CIT(A) had passed the order ex-parte against the assessee. It was trite law that the First Appellate Authority was duty bound to adjudicate the issues before him on merits irrespective of the fact whether assessee had made any submission before him or not. Therefore, even if the assessee was unrepresented, CIT(A) should have adjudicated the issues before him based on the case record before him but unfortunately, CIT(A) chose not to do so and dismissed the assessee’s appeal without examining the case on merits. Therefore, substantial justice required that the issues should be re-examined by CIT(A). Accordingly, the appeal was restored to the office of the Ld. First Appellate Authority with the direction to adjudicate the appeal on merits of the case after giving proper opportunity to the assessee. Assessee was directed to duly comply with the notices issued by CIT (A) in this regard, failing which, CIT (A) should be at liberty to adjudicate the appeal before him ex-parte qua the assessee in accordance with law.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This appeal is preferred by the assessee against the order dated 30.12.2016 passed by the Learned Commissioner of Income Tax (Appeals)-3, Gurgaon [in short the ‘Ld.CI T(A)’], for the assessment year 2012-13.
2.0 The assessee has raised the following grounds:
“1. That the orders of the Ld.CI T(A) are illegal, erroneous and perverse and thus needs to be quashed.
2. That the Ld.CIT(A) is not justified in concurring with the order passed by the A.O., while confirming the quantum additions and taxes imposed by Assessing Officer without granting sufficient opportunity to the assessment proceedings and without appreciating the facts of the present case.
3. That the Ld.CIT(A) is not justified in passing the impugned order without proper service of the notice to the appellant company.
4. That the appellant craves leave to add, amend or delete any of the grounds of appeal on or before the disposal of the present appeal.”
2.1 At the outset, the Ld. AR submitted that the appeal before the Tribunal was time barred by 1385 days. The Ld. AR drew our attention to the application filed by the assessee praying for condonation of delay in filing the appeal before the Tribunal. Referring to the said application, the Ld. AR submitted that this appeal has been filed against the order of the Ld.CIT(A), which was decided ex-parte by the Ld.CIT(A)-3, Gurgaon on 30.12.2016 but the original copy of the said appellate order was yet to be served on the assessee although the assessee had applied for the same and had consistently been following up the matter. It was further submitted that the Ld.CIT(A) had fixed the date of hearing of the appeal on 02.11,2015, 24.10.2016 and 23.12.2016 but the notices of hearing were not served on the assessee because of change in address due to change in management and, therefore, the Ld.CIT(A) had decided the appeal ex-parte qua the assessee. It was submitted that it was only after the local Income Tax Officer had proceeded for recovery of the outstanding tax, the assessee had come to know that its appeal had been dismissed ex-parte by the Ld.CIT(A). It was further submitted that the change in address had happened because a new management had acquired the assessee company on 15.10.2014 and a share-purchase agreement was also executed in this regard. It was further submitted that as per the share-purchase agreement, the new management was under the belief that it was the responsibility of the old management to take action/comply with any old income tax proceedings which had been initiated prior to the acquisition of the company and that the old management was liable for the old income tax liabilities. It was further submitted that the new management was not even aware of the ongoing proceedings for the captioned assessment year although the new address of the company had duly been intimated to the concerned Assessing Officer (AO) when the return of income for assessment year 2016-17 was filed. It was further submitted that only on becoming aware of the dismissal of appeal ex-parte by the Ld.CIT(A) on receiving intimation of recovery proceedings in the year 2019, that the present management moved an application before the Ld.CIT(A), Gurgaon for supply of a copy of the impugned order and the same was supplied by the Ld.CIT(A) on 17.12.2020 i.e. almost after one year and three months from the date of request letter dated 05.09.2019. The Ld. AR further submitted that it was soon after the receipt of copy of the order from the Ld.CIT(A) i.e. on 17.12.2020 that the assessee had filed the appeal before the Tribunal on 15.01.2021 and, thus, the assessee had acted within the due time from the date of receipt of order and filed the appeal before the Tribunal. The Ld. AR submitted that, thus, the assessee had a bonafide and justifiable reason for not filing the captioned appeal before the Tribunal within the limitation period as calculated from the date of the order of the Ld.CIT(A). It was submitted that since the above narrated circumstances were beyond the control of the assessee, the assessee’s appeal should be admitted by condoning the delay.
2.2 The Ld. AR further pointed out that the order passed by the Ld.CIT(A) was ex-parte qua the assessee. It was submitted that since the assessee had not received any notice for the date of hearing before the Ld.CIT(A) (as has been elaborated in the delay condonation application also), the assessee could not represent itself before the Ld.CIT(A) and it was prayed that the appeal be restored to the file of the Ld.CIT(A) to be heard on merits of the case after giving an opportunity to the assessee in this regard.
3.0 Per contra, the Ld.CIT DR vehemently opposed the assessee’s prayer for condonation of delay and argued that the assessee’s allegation regarding non-service of notice was factually incorrect because no notice had been received back in the office of the Ld.CIT(A) unserved. It was submitted that, therefore, it was apparently a case of non-compliance by the assessee and now at a later stage, when the assessee came to realize that it had to pay a huge amount of tax, the assessee subsequently cooked up a story to cover up its own default. It was further argued by the Ld.CIT DR that since the assessee had not intimated the Department of any change in address, the Department cannot be saddled with the responsibility of serving the notice on the new address. The Ld.CIT DR prayed that the assessee’s appeal should be dismissed at the very threshold itself without condoning the delay.
3.1 The Ld.CIT DR further submitted that even if the assessee’s appeal was to be admitted after condonation of delay, the order of the Ld.CIT(A) should be upheld on merits as the Ld.CIT(A) has confirmed all the additions made by the AO.
4.0 We have heard the rival submissions and have also perused the records. The main issue for consideration before us is the issue of conndonation of delay of 1385 days. In this regard, the assessee has filed an application praying for condonation of delay and has filed an affidavit supporting the averments made in the condonation of delay application. For a ready reference, we are reproducing the contents of the affidavit filed by the assessee through its Director Shri Tejinder Pal Setia:
“AFFIDAVIT OF TEJINDER PAL SETIA, S/O SHRI BAL KRISHAN SETIA DIRECTOR CHANDIGARH OVERSEAS PVT LTD.
I the above named deponent do hereby solemnly affirm and declare as under:
1. That the deponent is filing application for condonation of delay in filing appeal.
2. That the accompanying application for condonation of delay has been drafted on the instructions of the deponent and the deponent has read the contents of the same which are true and correct to the best of knowledge and belief of the deponent based on information derived from official record available with the deponent and the same may be read as part of the present affidavit and the contents of the same are not being repeated except for few facts.
3. That the deponent filed an appeal against the assessment order dated 30.03.2015 having received the copy on 28.04.2015 on 22.05.2015 passed by Deputy CIT Central Circle-1, Chandigarh u/s 144 r.w.s. 143(3) of Income Tax Act, 1961.
4. That the Id CIT (A) fixed the appeal on 02.11.2015, 24.10.2016 and 23.12,2016 but since the notices were not served on the appellant because of the change of the address and the appeal was decided by CIT (A)-3, Gurgaon on 30.12.2016 however, the copy of order was not served upon the appellant despite of the fact that the appellant had applied for the same with giving facts and circumstances as per copy of the same annexed herewith as Annexure A dated 05.09.2019 for the ready reference of this Hon’ble Bench, when the new management which took over became aware of the same through the local Income Tax Officer who asked for recovery of huge outstanding demand for the year under appeal.
5. That the present new management acquired the appellant company M/S Chandigarh Overseas Pvt. Ltd on 15.10.2014 in view of share-purchase agreement also enclosed herewith as ANNEXURE B.
6. That as per point NO. 2.2.7 and 2.2.8 of Share-purchase agreement (supra) it was assumed that it was the responsibility of old management to take action for any income tax proceedings initiated before acquiring the company who are liable’ for all the tax liabilities.
7. That the present new management was not made aware of the ongoing proceedings for the current assessment year i.e. A.Y. 2012-13 and since even the address of the company was changed though the same was intimated to the concerned assessing officer wherein the new returns were being filed at the new address of SCO 249 (Basement) Sector 44-C Chandigarh wherein the return for AY 2016-17 was filed on 15.10.2016 which was on record of the Income Tax Department copy of which is enclosed as per ANNEXURE C.
8. That in view of above facts, the present management did not get any notice or any order (if any) sent to the company there being change in the new management and the correspondence address as well.
9. That on getting aware about the penalty proceedings and recovery of demand for the year under appeal in Sept 2019 u/s 271(l)(c) in 2019 when contacted the Id A.O., it was made aware that the impugned appeal stands disposed off by the Id CIT (A)-3, Gurgaon, resultantly the present management wrote an application to the Id CIT(A) Gurgaon for the supply of copy of the appellate orders vide speed post dated 05.09.2019 requesting the Id CIT (A) for the supply of impugned order, copy of the same annexed as ANNEXURE A which was supplied to the appellant company on 17.12.2020 as per the evidence annexed herewith as ANNEXURE D.
10. That in view of above explained facts and circumstances, that the appellant being the new management received the impugned orders of CIT(A)-3, Gurgaon, on 17.12.2020, copy at ANNEXURE D, wherein the appeal is filed within the permitted time allowed for filing the appeal of two months i.e., on 15.01.2021 being rather less than one month, the impugned delay may kindly be condoned in the interest of justice.
4.1 A perusal of the above reproduced affidavit would show that as per the assessee it did not receive any notice of hearing of assessee’s appeal before the Ld.CIT(A) and, therefore, the assessee was unable to get itself represented before the Ld.CIT(A) during the course of such hearings. It has also been deposed in the affidavit that the assessee was not aware of the fact that the Ld.CIT(A) had passed the order ex-parte against the assessee. It has further been deposed that the assessee came to know of the first appellate order having been passed only when the local AO started making efforts for recovery of the outstanding tax dues. Although, the Ld.CIT DR has argued that these explanations and contentions of the assessee are an afterthought and that the fault was on the part of the assessee who had not complied with the notices issued by the Ld.CIT(A), we are of the considered opinion that no assessee would benefit by not attending to the income tax proceedings especially when the assessee has already been saddled with a huge tax demand after passing of the assessment order. Therefore, in our considered view, the bonafides of the assessee cannot be doubted.
4.2. We note that more often than not, the Higher Courts have been liberal in condoning the delay. The Hon’ble Apex Court in the case of Bhivchandra Shankar More Vs. Balu Gangaram More & Ors. in Civil Apeal No. 4669 of 2019 [arising out of SLP (Civil) No. 28938 of 2014J on the condonation of delay, has held as under:-
“15. It is a fairly well settled law that “sufficient cause ” should be given liberal construction so as to advance sustainable justice when there is no inaction, no negligence nor want of bonafide could be imputable to the appellant. After referring to various judgments, in B. Madhuri, this Court held as under:-
“6. The expression “sufficient cause” used in Section 5 of the Limitation Act, 1963 and other statutes is elastic enough to enable the courts to apply the law in a meaningful manner which serves the ends of justice. No hard-and-fast rule has been or can be laid down for deciding the applications for condonation of delay but over the years courts have repeatedly observed that a liberal approach needs to be adopted in such matters so that substantive rights of the parties are not defeated only on the ground of delay. “
16. Observing that the rules of limitation are not meant to destroy the rights of the parties, in N. Balakrishnan v. M. Krishnamurthy (1998) 7 SCC 123, this Court held as underv-
“11. Rules of limitation are not meant to destroy the rights of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. The law of limitation fixes a lifespan for such legal remedy for the redress of the legal injury so suffered. Time is precious and wasted time would never revisit. During the efflux of time, newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts.
So a lifespan must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. The law of limitation is thus founded on public policy. It is enshrined in the maxim interest reipublicae up sit finis litium (it is for the general welfare that a period be put to litigation). Rules of limitation are not meant to destroy the rights 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. ” As pointed out earlier, an appeal under Section 96 CPC is a statutory right. Generally, delays in preferring appeals are required to be condoned, in the interest of justice, where there is no gross negligence or deliberate inaction or lack of bonafide is imputable to the party seeking condonation of delay. “
4.3 Similarly, the Hon’ble Apex Court in the case of N. Balakrishnan Vs. M. Krishnamurthy, vide Judgement dated 03.09.1998, opined that a Court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the Court is always deliberate. The Court went on to opine that in every case of delay there can be lapse on the part of the litigants concerned but that alone is not enough to turn down his plea and shut the door against him. The Hon’ble Apex Court further held that if the explanation does not smack of mala fides or it is not put forth as a part of a dilatory strategy, the court should show utmost consideration to the
suitor. It was further held that there is no presumption that the delay in approaching the court is always deliberate and the words “sufficient cause” u/s 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice.
4.4 Therefore, in view of the settled judicial precedent and in the interest of substantial justice, we deem it appropriate to condone the delay of 1385 days and we admit the appeal. 5.0 On merits of the case, the Ld. AR has demonstrated that the Ld.CIT(A) has passed the order, dismissing the assessee’s appeal ex-parte and has not adjudicated the issues before him on merits. This contention of the Ld. AR is correct as a perusal of the impugned order shows that the Ld.CIT(A) has given a categorical observation in respect of each addition being confirmed that since no submissions had been received by the assessee, the addition made by the AO was being confirmed. It is trite law that the First Appellate Authority is duty bound to adjudicate the issues before him on merits irrespective of the fact whether the assessee has made any submission before him or not. Therefore, even if the assessee was unrepresented, the Ld.CIT(A) should have adjudicated the issues before him based on the case record before him but unfortunately, the Ld.CIT(A) chose not to do so and dismissed the assessee’s appeal without examining the case on merits. Therefore, substantial justice requires that the issues should be reexamined by the Ld.CIT(A). Accordingly, we restore the appeal to the office of the Ld. First Appellate Authority with the direction to adjudicate the appeal on merits of the case after giving proper opportunity to the assessee. We also direct the assessee to duly comply with the notices issued by the Ld. First Appellate Authority in this regard, failing which, the Ld. First Appellate Authority shall be at liberty to adjudicate the appeal before him ex-parte qua the assessee in accordance with law.
5.0 In the final result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced on 13.06.2022.
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