2014 (10) TMI 652 - AT - Income Tax

Condonation of delay to be granted or not Liberal approached adopted - Claim of remuneration paid to partners The explanation of the assessee for delay in filing the appeal before the CIT(A) was that a rectification application was pending before the AO and it was not decided by the CIT(A) - Held that - A specific ground was also taken by the assessee that the AO has not disposed of the rectification application within the period of six months - This ground of the assessee was not decided by the CIT(A) in his order - So far as the finding of the CIT(A) that the pendency of application u/s.154 cannot be termed as a sufficient cause for filing the appeal is concerned, there is no infirmity of finding that the provisions of section 250 and section 154 of the Act, operate in different field - while considering the question of limitation in taxing matter, a liberal approach has to be adopted relying upon N.Balakrishnan vs. M.Krishnamurthy 1998 (9) TMI 602 - SUPREME COURT OF INDIA - Revenue could not point out that there was any deliberate act for delay or the assessee has tried to take advantage of delay - The Revenue also could not point out any mala fide on the part of the assessee. CIT(A) ought to have examined whether there is a deliberate attempt on the part of the assessee to avoid liability of tax in making belated claim and thereby filing the appeal after prescribed period - the delay in filing of the appeal is about a month - taking a liberal view the delay is condoned and the appeal is to be remitted back to the CIT(A) for fresh adjudication Decided in favour of assessee.

Summary

Issues Involved:
1. Delay in filing the appeal before the CIT(A).
2. Disallowance of enhanced remuneration to partners.
3. Non-disposal of the rectification application under Section 154 within the prescribed time limit.

Detailed Analysis:

1. Delay in Filing the Appeal Before the CIT(A):
The appellant argued that the delay in filing the appeal was due to the pending rectification application under Section 154, which was not decided by the Assessing Officer (AO). The CIT(A) rejected this explanation, stating that the pendency of the application under Section 154 does not constitute a sufficient cause for the delay. However, the Tribunal noted that in taxing matters, a liberal approach should be adopted regarding the question of limitation. Citing the Supreme Court's judgment in N. Balakrishnan vs. M. Krishnamurthy, the Tribunal emphasized that unless there is a deliberate attempt to delay or a mala fide intention, the delay should be condoned. The Tribunal found no evidence of deliberate delay or mala fide intention by the assessee and thus condoned the delay, restoring the appeal to the file of the CIT(A) for fresh adjudication.

2. Disallowance of Enhanced Remuneration to Partners:
During the assessment proceedings, the assessee voluntarily revised the Profit & Loss account to correct a typographical error, increasing the disclosed income from Rs. 32,00,000 to Rs. 82,00,000. Consequently, the remuneration to partners was also revised from Rs. 3,00,000 to Rs. 20,00,000. The AO accepted the revised income but disallowed the enhanced remuneration of Rs. 17,00,000, citing lack of evidence of payment and tax payment by partners. The CIT(A) upheld this disallowance, stating that the revised return was filed beyond the limitation period and thus was non-est. The Tribunal, however, noted that the partnership deed authorizing the remuneration was on record and that the AO had accepted the revised income. It held that the deduction of remuneration was within the permissible limits under Section 40(b) and that there was no condition requiring tax payment by partners for the allowance of remuneration. The Tribunal directed the CIT(A) to adjudicate this issue on merits upon remand.

3. Non-Disposal of the Rectification Application Under Section 154:
The assessee filed a rectification application under Section 154, which was not disposed of by the AO within the prescribed six-month period. The CIT(A) did not address this specific ground raised by the assessee. The Tribunal highlighted that the AO's failure to dispose of the rectification application within the stipulated time should have been considered. Citing the Tribunal's decision in S. Lakha Singh, it noted that non-disposal within the prescribed time could imply that the rectification application should be treated as allowed. The Tribunal directed the CIT(A) to consider this aspect during the fresh adjudication.

Conclusion:
The Tribunal condoned the delay in filing the appeal, restored the matter to the CIT(A) for fresh adjudication, and directed the CIT(A) to address the merits of the enhanced remuneration claim and the non-disposal of the rectification application. The appeal was allowed for statistical purposes, emphasizing a liberal approach to procedural delays and ensuring substantive justice.