2014 (7) TMI 129 - AT - Income Tax

Condonation of delay for filing an appeal before CIT(A) - illness of MD - Delay and defect in memos Penalty u/s 271 - Held that - The assessee has not only explained the cause of delay but has also submitted evidence to substantiate the claim - The evidence on record show that the MD was keeping ill intermittently - It is not necessary that only when a person is immobile or bedridden he would not be able to attend to his day to day activities - Even when a person is afflicted with illness quite intermittently, it not only takes a toll on him physically but also mentally - It so much preoccupies his mind that, it is quite possible that many other acts or duties, which he could otherwise have attended to if not ill, escapes his attention. Relying upon Collector of Land Acquisition V/s. Mst. Katiji and others 1987 (2) TMI 61 - SUPREME Court - when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay - there is sufficient cause for condoning delay - CIT(A) was not justified in dismissing the appeals on the ground without pointing out the defect and allowing opportunity to the assessee to rectify it thus, the order of the CIT(A) is set aside with a direction to decide the appeal on merit after condoning delay Decided in favour of Assessee. Imposition of penalty u/s 271(1)(c) of the Act Held that - At this stage it will be premature to impose penalty u/s 271(1)(c) of the Act, when assessee s appeals against assessment orders are still pending - It may be recalled that CIT(A) dismissed in limine appeals preferred by the assessee against the assessment orders - Though, technically penalty proceeding u/s 271(1)(c) of the Act can be invoked during pendency of quantum appeal, but to avoid multiplicity of proceeding and unnecessary harassment to the assessee it is always advisable to wait for the decision of the appellate authorities on quantum additions the order of the CIT(A) is set aside and the matter is remitted back to the AO Decided in favour of Assessee.

Summary

Issues Involved:
1. Dismissal of assessee's appeals due to delay and defect in appeal memos.
2. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

Issue 1: Dismissal of Assessee's Appeals Due to Delay and Defect in Appeal Memos

Facts and Background:
The assessee, an Indian company engaged in manufacturing machine tools and executing job works, filed returns for AY 2005-06 to 2007-08, which were reopened under Section 147 of the Income Tax Act. The Assessing Officer made various additions, including depreciation as per Companies Act, unexplained creditors, and partly disclosed deposits. The assessee filed appeals before the CIT(A) with a delay of 145 days, citing the illness of the Managing Director (MD) as the reason for the delay. The CIT(A) dismissed the appeals in limine due to the delay and defect in appeal memos, without condoning the delay.

Assessee's Arguments:
The assessee argued that the CIT(A) was not justified in dismissing the appeals without condoning the delay, as the delay was due to the MD's illness, supported by medical evidence. The assessee also contended that the CIT(A) was not technically qualified to assess the severity of the MD's illness and that the dismissal without allowing an opportunity to rectify the defect in the appeal memos violated principles of natural justice.

Tribunal's Findings:
The Tribunal noted that the CIT(A) dismissed the appeals on the grounds of delay and improper verification of appeal memos. It concluded that the CIT(A) was not competent to assess the severity of the MD's illness and that the medical evidence provided by the assessee was sufficient to explain the delay. The Tribunal referred to the Supreme Court's judgment in Collector of Land Acquisition V/s. Mst. Katiji, emphasizing that substantial justice should be preferred over technicalities and that sufficient cause for delay should be interpreted elastically to ensure justice.

Decision:
The Tribunal set aside the CIT(A)'s order and directed the CIT(A) to decide the assessee's appeals on merit after condoning the delay. The CIT(A) was also instructed to allow the assessee to rectify any defects in the appeal memos. The Tribunal refrained from deciding the grounds on merits, as the CIT(A) had not considered them.

Conclusion:
The appeals were allowed for statistical purposes, and the case was remanded to the CIT(A) for a decision on merits after condoning the delay and allowing rectification of defects.

Issue 2: Imposition of Penalty under Section 271(1)(c) of the Income Tax Act

Facts and Background:
The Assessing Officer imposed penalties under Section 271(1)(c) for the same assessment years, citing disallowance of depreciation, unexplained credits, and unexplained deposits. The assessee argued that the additions were due to a difference of opinion and that the penalties were not justified. The CIT(A) confirmed the penalties.

Assessee's Arguments:
The assessee contended that depreciation was claimed based on a bona fide belief and that the other additions were agreed upon due to compelling circumstances and to avoid litigation. The assessee also argued that penalties should not be imposed when appeals against the assessment orders were pending.

Tribunal's Findings:
The Tribunal observed that the CIT(A) had dismissed the quantum appeals in limine, and the decision on merits could impact the penalty proceedings. It noted that while penalty proceedings can be initiated during the pendency of quantum appeals, it is advisable to wait for the appellate authorities' decision on the quantum additions to avoid multiplicity of proceedings and unnecessary harassment.

Decision:
The Tribunal set aside the CIT(A)'s order on penalties and restored the matter to the Assessing Officer. The Assessing Officer was directed to consider the imposition of penalties based on the outcome of the appellate authorities' decision on the quantum appeals.

Conclusion:
The penalty appeals were allowed for statistical purposes, and the matter was remanded to the Assessing Officer for reconsideration based on the appellate decision on the quantum additions.

Summary:
The Tribunal allowed the assessee's appeals for statistical purposes, setting aside the CIT(A)'s orders and remanding the matters for a decision on merits after condoning the delay and allowing rectification of defects in the appeal memos. The Tribunal also remanded the penalty matters to the Assessing Officer to reconsider the imposition of penalties based on the outcome of the quantum appeals.