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2014 (11) TMI 190 - AT - Income TaxCondonation of delay delay of 542 days Held that - The assessee has been diligently pursuing remedies against the order of the revenue authorities - only when they did not find any success before the CIT(A), the instructing Counsel contacted Dr. Rakesh Gupta who specialized in arguing the matters before the High Court and the Supreme Court and when the case was discussed in the conference, Dr. Rakesh Gupta brought to the notice that a mistake occurred in not filing any appeal against out the order of CIT U/s.263 - the asssese has explained the delay as it was under a bonafide belief that the remedy lies in filing an appeal against the order of the AO passed u/s 143 r.w.s.263 - It is a case of pursuing the remedy in a wrong forum - It was a case of the assessee under a mistaken advise did not file the appeal against order passed u/s 263 by the CIT - the assesee has shown a sufficient cause and reason to explain the whole of the delay covered by the period between the last day of limitation and the date on which the appeal was actually filed - the assessee was pursuing the legal remedy throughout the period and it was a case of pursuing the wrong remedy on mistaken advise delay condoned and appeal admitted. Revision by CIT u/s 263 - Doctrine of merger - The AO in his order u/s 143(3) considered the issue of stock difference and rejected the contentions of the assessee - it cannot be said that there is non application of mind by the AO nor that the AO was negligent - the AO has applied his mind and after carefully considering the facts and circumstances of the case took a possible view - the order passed by the CIT (Central) u/s 263 is bad in law - For the proposition that the revision u/s 263 is bad in law, when the AO duly applied his mind relying upon CIT vs. Bharat Aluminium Co.Ltd. 2007 (5) TMI 228 - DELHI HIGH COURT - even otherwise, the issue of stock difference and the taxability of income was subject matter of appeal before the CIT(A), Ludhiana - The CIT(A) Ludhiana up held the order of the AO - Hence there is merger of the order of the AO with that of the order of the CIT(A) thus, CIT(Central), Gurgaon does not have jurisdiction to invoke revisionary powers u/s 263 thus, the order passed u/s 263 by the CIT(Central), Gurgaon is set aside Decided in favour of assessee.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Legality and jurisdiction of the order passed under Section 263 of the Income Tax Act. 3. Merits of the addition of Rs. 53,04,111/- directed by the CIT. 4. Confirmation of penalty levied under Section 271(1)(c) of the Income Tax Act. Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The assessee filed an appeal against the order of the CIT(Central) Gurgaon passed under Section 263 of the Income Tax Act with a delay of 542 days. The assessee argued that the delay was due to a bonafide belief that the remedy lay in appealing against the order of the AO passed under Section 143(3) read with Section 263, which was due to lack of proper guidance. The affidavit submitted supported this claim. Reliance was placed on several case laws, including the Supreme Court judgment in Collector, Land Acquisition vs. MST Katiji, which emphasized a justice-oriented approach and condonation of delay when sufficient cause is shown. The Tribunal noted that the assessee had diligently pursued remedies against the revenue authorities' orders and had not given up the case at any stage. The delay was attributed to mistaken advice and pursuing the remedy in a wrong forum. The Tribunal, following the principles laid down in the case of Improvement Trust Ludhiana vs. Ujagar Singh, condoned the delay and admitted the appeal. 2. Legality and Jurisdiction of the Order Passed Under Section 263: The assessee challenged the order of the CIT(Central) Gurgaon passed under Section 263 on grounds of being barred by limitation, illegal, without jurisdiction, and contrary to law and facts. The CIT had directed the AO to reframe the assessment order and add Rs. 53,04,111/- to the income of the assessee, based on an alleged stock difference. The Tribunal observed that the AO had considered the issue of stock difference extensively in the original assessment order and had taken a possible view after applying his mind. The CIT(A) had also upheld the AO's findings. Therefore, the Tribunal held that the CIT's order under Section 263 was bad in law, as the AO had duly applied his mind, and the issue had already merged with the CIT(A)'s order. The Tribunal relied on several case laws, including CIT vs. Bharat Aluminium Co.Ltd. and Ranka Jewellers vs. ACIT, to support its decision. 3. Merits of the Addition of Rs. 53,04,111/- Directed by the CIT: The CIT had directed the AO to add Rs. 53,04,111/- to the income of the assessee, based on an alleged stock difference of Rs. 13,54,07,937/- found during the search. The assessee argued that the AO had already dealt with the issue of stock and suppressed sales in the original assessment order, and the surrender of Rs. 10 crores was made under coercion and threat. The Tribunal found that the AO had considered the issue of stock difference in detail and had taken a considered decision. The CIT(A) had also upheld the AO's findings. Therefore, the Tribunal held that the CIT's direction to add Rs. 53,04,111/- was not justified, as the AO had already applied his mind and taken a possible view. The Tribunal quashed the CIT's order under Section 263 as bad in law. 4. Confirmation of Penalty Levied Under Section 271(1)(c) of the Income Tax Act: The assessee also appealed against the order of the CIT(A) confirming the penalty levied under Section 271(1)(c) of the Income Tax Act. Since the Tribunal quashed the assessment order passed under Section 154, which was based on the order passed under Section 263, the penalty order did not have any legs to stand on. The Tribunal, therefore, quashed the penalty order under Section 271(1)(c) and allowed the appeal of the assessee. Conclusion: Both appeals of the assessee were allowed. The delay in filing the appeal was condoned, the order passed under Section 263 was quashed as bad in law, and the penalty order under Section 271(1)(c) was also quashed. The Tribunal emphasized a justice-oriented approach and the importance of considering the merits of the case rather than disposing of it on technicalities.
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