2013 (12) TMI 1209 - HC - Income Tax

Condonation of delay - Held that - Whenever an explanation is given to condone the delay in filing the appeal, the Tribunal must exercise its discretion with a conscious application of mind on such explanation - The discretion of the Tribunal in such case must be exercised on such explanation and its sufficiency keeping in mind that the rejection of the application denies to the appellant an opportunity of hearing in appeal on merits - Unless the explanation is not bonafide, the right of hearing on merits may not be denied to the assessee - The fact that the Tribunal did not consider the reason, and observed that it was not a case to condone the delay has deprived the appellant the remedy of Second Appeal, which is the final authority on recording findings of fact - The Tribunal did not apply its mind to the explanation offered for condonation of delay in filing the appeal - Decided in favour of assessee.

Issues Involved:
1. Whether the assessee's right of appeal could be snatched for the delay of 46 days caused by mistake of its counsel?
2. Whether there was any delay on part of the assessee in applying to its assessing authority for certified copies of the original and supplementary partnership deeds?
3. Whether even otherwise the assessee's appeal could have been dismissed when the original and supplementary partnership deeds exist on the assessment record?
4. Whether the assessee could have been assessed as an Association of Persons and salary and interest paid to the partners disallowed in the face of the original and supplementary partnership deeds?

Detailed Analysis:

1. Delay in Filing Appeal:
The primary issue was whether the assessee's right of appeal could be denied due to a 46-day delay caused by the counsel's mistake. The Tribunal initially dismissed the appeal, stating that the explanation for the delay was not satisfactory. The Tribunal did not consider the affidavit provided by the counsel, which explained that the delay was due to "pressure of work and oversight." The High Court referenced several Supreme Court judgments, including Rafiq and another Vs. Munshi Lal and another, emphasizing that a party should not suffer due to the inaction or mistake of their counsel. The High Court concluded that the Tribunal failed to exercise its discretion properly and did not apply its mind to the explanation offered for condonation of delay.

2. Delay in Applying for Certified Copies:
The Tribunal did not explicitly address whether there was any delay on the part of the assessee in applying for certified copies of the original and supplementary partnership deeds. However, it was noted that the supplementary partnership deed was eventually produced, indicating that the assessee took steps to rectify the situation.

3. Dismissal of Appeal Despite Existence of Partnership Deeds:
The assessee argued that the appeal should not have been dismissed since the original and supplementary partnership deeds existed on the assessment record. The Tribunal's dismissal was primarily based on the delay in filing the appeal, rather than the merits of the case or the existence of the partnership deeds. The High Court's decision to set aside the Tribunal's order implies that the merits of the case, including the existence of the partnership deeds, should be considered upon proper condonation of delay.

4. Assessment as an Association of Persons:
The assessee contended that it should not have been assessed as an Association of Persons (AOP) and that the salary and interest paid to the partners should not have been disallowed. The assessment was completed disallowing Rs.46,800 towards salary to three partners, Rs.2,500 towards various expenses, Rs.1,252 as income tax, and Rs.18,689 towards interest to partners. The CIT (A) and the Tribunal upheld these disallowances due to the non-production of the supplementary partnership deed. However, the High Court's decision to remand the case for reconsideration of the delay condonation application suggests that these issues may be revisited once the appeal is properly heard.

Conclusion:
The High Court allowed the appeal, deciding that the Tribunal must exercise its discretion with a conscious application of mind on the explanation for the delay. The Tribunal's order dated 15.12.2003 was set aside, and the Tribunal was directed to decide the delay condonation application in accordance with the law, considering the affidavit of the counsel. The High Court emphasized that the rejection of the application denies the appellant an opportunity of hearing in appeal on merits, and unless the explanation is not bona fide, the right of hearing on merits should not be denied to the assessee.

← Previous Next →