2019 (8) TMI 1407 - AT - Income Tax

Condonation of delay in filling appeal before the CIT(A) - delay of 27 months - specific objection against the reopening of the assessment - As per the stand of the assessee its factory premises was put under attachment by the Excise department on 28.8.2012 and no business has been carried out by the company thereafter. Thus, notice sent on that address was not received by anyone because the factory premises was closed down - HELD THAT - Though equity in taxation matters is not a sound principle for adjudicating the controversy, but it is always to be kept in mind that where it is possible to draw two inferences from facts and where there is no evidence of intentional dishonesty or improper motive on the part of the assessee, then it would be just and equitable to draw such inference in such a manner that would lead to equity and justice. Neither the AO has acted in a fair manner nor the assessee has prosecuted its income tax proceedings before the ld.Revenue authorities diligently; nothing will happen to the authorities, but the punishment in the shape of tax liability on an addition of ₹ 27 crores amplified with the penalty of ₹ 9 crores, is in our understanding a quite disproportionate to the negligence of the assessee. If we weigh scale keeping in mind both these facts, then to our mind scale would tilt in favour of the assessee because by condoning the delay nothing is being taken away on merit from the department. It will be a just an opportunity to the assessee to explain its case. If something has been done illegally against it, then that illegality should not be regularized on account of technicalities. The other side could be compensated with some cost for lingering the litigation. Therefore, evaluating all these aspects, we are of the view that delay in filing the appeals before the CIT (A) deserves to be condoned subject to payment of cost of ₹ 50,000/- (Rupees fifteen thousand only). We accordingly condone the delay in filing the appeals before the CIT(A) and set aside the impugned orders. CIT(A) is a first appellate authority, it has not applied its mind on facts on the merit of the issues, therefore, we remit both the issues to the file of the CIT(A) for fresh adjudication on merit. It is needless to say that observation made hereinabove will not impair or injure the cast of the AO and will not cause any prejudice to the defence/explanation of the assessee on merit. The assessee will be liberty to raise any plea on merit for both the appeals, and the ld.CIT(A) shall decide appeals after providing due opportunity of hearing to the assessee. In the result, subject to payment of ₹ 50,000/- (Rupees fifty thousand only) by the assessee, appeals are allowed for statistical purpose

Issues Involved:
1. Delay in filing appeals before the CIT(A).
2. Validity of service of notice under section 148.
3. Legitimacy of the ex parte assessment and penalty orders.
4. Justification for additions made by the AO.
5. Condonation of delay and remittance for fresh adjudication.

Detailed Analysis:

1. Delay in Filing Appeals Before the CIT(A):
The appeals were delayed by 39 months for the assessment order and 27 months for the penalty order. The assessee filed applications for condonation of delay, which were not accepted by the CIT(A), leading to the dismissal of both appeals as time-barred. The Tribunal examined the reasons for the delay, including the attachment of the factory premises by the Excise Department and the subsequent lack of business operations, which hindered the receipt of notices and orders. The Tribunal emphasized the principle that "sufficient cause" for delay should be interpreted liberally to advance substantial justice, referencing Supreme Court judgments that support this view.

2. Validity of Service of Notice Under Section 148:
The assessee contended that the notice under section 148 was invalid as it was served beyond the six-year limit from the end of the relevant assessment year. The Tribunal noted discrepancies in the service of the notice, including evidence from postal tracking that suggested the notice was issued and delivered after the statutory period. The Tribunal highlighted that the AO did not address this objection in the ex parte order, which was a procedural lapse.

3. Legitimacy of the Ex Parte Assessment and Penalty Orders:
The AO passed an ex parte assessment order, adding substantial amounts to the assessee's income based on unaccounted sales and non-payment of statutory dues. The Tribunal criticized the AO for not considering the expenditure involved in the unaccounted production and for treating the gross production as profit. The Tribunal also noted that the penalty imposed was disproportionately high. The Tribunal emphasized that even in ex parte assessments, the AO must act fairly and not vindictively.

4. Justification for Additions Made by the AO:
The AO added ?24,04,65,705/- as unaccounted income from the sale of copper tubes and ?3,92,96,299/- under section 43B for non-payment of excise dues. The Tribunal found that the AO's approach was negligent and irresponsible, as he did not consider the necessary expenditure involved in the production. The Tribunal also noted that the assessee's books were impounded by the Excise Department, and the factory was under attachment, which the AO failed to account for.

5. Condonation of Delay and Remittance for Fresh Adjudication:
The Tribunal decided to condone the delay in filing the appeals, subject to a cost of ?50,000/-. The Tribunal set aside the impugned orders and remitted the issues back to the CIT(A) for fresh adjudication on merit. The Tribunal instructed the CIT(A) to consider all the facts and provide a fair opportunity to the assessee, ensuring that the observations made do not prejudice the assessee's defense.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, subject to the payment of ?50,000/- as a cost by the assessee. The CIT(A) was directed to adjudicate the appeals afresh on merit, providing due opportunity to the assessee. The Tribunal emphasized a justice-oriented approach in interpreting "sufficient cause" for delay, ensuring that substantial justice prevails over technicalities.

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