2015 (4) TMI 912 - AT - Income Tax

Condonation of delay in furnishing the appeal - Mistake found in order of CIT appeal - Bonafide belief for not to claim deduction under section 80P of the Income Tax Act,1961, resulting in delay in appeal - Held that - The assessee has in the appeal filed against the order of CIT(A) raised preliminary issue against the dismissal of appeal in limine. The CIT(A) had dismissed the condonation petition moved by the assessee holding that there was no merit in the claim of the assessee vis- -vis deduction claimed under section 80P of the Act. The CIT(A) has further noted that the assessee by way of ground of appeal No.1 had raised the issue of deduction under section 80P of the Act. However, we find that the CIT(A) by mistake has made the said observation. The perusal of the ground of appeal filed with the Form No.35 reflects that one issue raised by the assessee i.e. while taxing the interest on Government Securities as an independent taxable income at ₹ 95,77,140/-, the learned AO erred in not setting off the loss on sale Government Securities amounting to ₹ 214,17,311/- against the profit on sale of units of mutual funds as stated earlier. The assessee had not raised any issue with regard to denial of deduction under section 80P of the Act. The order of CIT(A) on such surmises was thus, incorrect. The second aspect of the issue is whether the assessee is entitled to the condonation of delay in filing the appeal late before CIT(A). The Hon ble Supreme Court in MST. Katiji & Ors. 1987 (2) TMI 61 - SUPREME Court had laid down the proposition that while considering the application for condonation of delay, sufficient cause pleaded by the party should be considered. The Hon ble Supreme Court further held that sufficient cause for the purpose of condonation of delay should be interpreted with a view to do even-handed justice on merits in preference to approach which scuttles a decision on merits. The assessee before us has pleaded for the condonation of delay in filing the appeals late before the CIT(A), especially in the circumstances where the assessee was initially under the bonafide belief that it was not entitled to the deduction under section 80P of the Act and hence, the appeals were not filed in time. However, the issue now raised is the correct computation of income in the hands of the assessee i.e. where on the one hand, the Assessing Officer had taxed gains arising on sale of securities in the hands of the assessee, similar loss arising on the sale of securities merits to be considered to the set off against the said gains on sale of securities. The second aspect pointed out by the assessee was the status of the assessee society wherein though it was formulated by the State government to carry on the specific purpose, but same could not be carried on as necessary approvals were not granted to the assessee. Thereafter, there was a decision to wind up the affairs but same could not be wound up because of holding up of money with cooperative societies which in turn, were in liquidation. In the entirety of the above said facts and circumstances, we are of the view that there was a reasonable cause for the delay in filing the appeals in time before the CIT(A) and since the assessee society was operating under the supervision of State government, we are of the view that the said delay in filing the said appeal late by 1178 days in assessment year 2006-07, before the CIT(A), merits to be condoned. Accordingly, we condone the same. - Decided in favour of assessee.

Summary

Issues Involved:
1. Non-condonation of delay in filing the appeal by the CIT(A).
2. Correct computation of income in the hands of the assessee.
3. Entitlement to deduction under section 80P of the Income Tax Act, 1961.

Detailed Analysis:

Non-condonation of Delay in Filing the Appeal:
The primary issue in the appeals was the non-condonation of delay by the CIT(A) in filing the appeals. The assessee filed the appeals late by 1178 days for the assessment year 2006-07, 821 days for the assessment year 2007-08, and 726 days for the assessment year 2008-09. The CIT(A) rejected the petition for condonation of delay, observing that the assessee's claims were devoid of merits and that the delay could have been avoided by exercising due care and attention. The CIT(A) noted that the reasons attributed by the assessee, such as the mistaken belief regarding the deduction under section 80P, were not sufficient.

The Tribunal considered the assessee's plea that the delay was due to a mistaken belief that there was no merit in the claim for deduction under section 80P. The Tribunal referred to the Hon'ble Supreme Court's decision in Collector, Land Acquisition Vs. MST. Katiji & Ors., which emphasized that sufficient cause for condonation should be interpreted to do even-handed justice on merits. The Tribunal found that the assessee had a reasonable cause for the delay, as it was initially under the bonafide belief that it was not entitled to the deduction under section 80P. Given the circumstances, the Tribunal condoned the delay for all three assessment years and restored the appeals to the file of CIT(A) for a decision on the merits.

Correct Computation of Income:
The second issue was the correct computation of income by the Assessing Officer (AO). The AO had taxed the gains from the sale of securities but did not set off the losses from the sale of government securities against these gains. The assessee argued that the real income had not been assessed correctly due to this oversight. The Tribunal noted that the AO's failure to set off the losses against the gains resulted in an over-assessment of income.

The Tribunal observed that the CIT(A) had dismissed the appeal in limine without considering the merits of the case. The Tribunal emphasized that the issue now raised was the correct computation of income, which included setting off the losses from the sale of securities against the gains. The Tribunal directed the CIT(A) to decide the issue on the merits after affording a reasonable opportunity of hearing to the assessee.

Entitlement to Deduction under Section 80P:
Although the CIT(A) had noted that the assessee raised the issue of deduction under section 80P, the Tribunal found that this observation was incorrect. The assessee had not raised any issue regarding the denial of deduction under section 80P in the grounds of appeal filed with Form No.35. The Tribunal clarified that the primary issue was the correct computation of income, not the deduction under section 80P.

Conclusion:
The Tribunal allowed the appeals of the assessee by condoning the delay in filing the appeals and restoring the matters to the file of CIT(A) for a decision on the merits. The issues on merits were not decided by the Tribunal in view of the setting aside of the appeals to the CIT(A). The Tribunal emphasized the importance of considering sufficient cause for condonation of delay to ensure justice on merits.