2022 (5) TMI 244 - AT - Income Tax

Condonation of delay - proof of sufficient cause of delay - CIT(A) dismissing the appeal of the assessee by not condoning the delay of the assessee thereby not deciding the appeal on merit - denial of deduction u/s 10AA - HELD THAT - The claim of the assessee should not be rejected on the technicalities. The assessee has not filed the appeal before the Ld. CIT(A) within the due time which is explained with reasons but CIT(A) going into the technicalities of the things dismissed the appeal as barred by limitation. In our opinion appeal is a legal right vested in a person who is aggrieved by an order of the lower authority and should not be deprived of the same on technical issues. In cases of MST Katiji Ors. 1987 (2) TMI 61 - SUPREME COURT wherein the Apex Court has held that the legislature has conferred power to condone the delay by enacting section 5 of the Limitation Act, 1963 in order to enable the courts to do substantial justice to parties by disposing of matter on merits and the expression sufficient cause as provided in Section 5 is adequately elastic to enable the court to apply the law in a meaningful manner so that the ends of justice is served. The court observed that everyday s delay must be explained does not imply a pedantic approach. The doctrine must be applied in a rational, common sense and pragmatic manner. The court held that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. In the present case, the assessee is not benefitted in any manner by filing the appeal before the Ld. CIT(A) after the due time. We, accordingly set aside the order of the Ld. CIT(A) .The ground 1 to 5 are allowed. Disallowing the exemption u/s 10AA - As relying on M/S YOKOGAWA INDIA LTD. 2016 (12) TMI 881 - SUPREME COURT , TEI TECHNOLOGIES PVT. LTD. 2012 (9) TMI 47 - DELHI HIGH COURT and BLACK VEATCH CONSULTING PVT. LTD. 2012 (4) TMI 450 - BOMBAY HIGH COURT assessee cannot be denied the legitimate exemption as provided under the Statute citing the technicalities. Accordingly we direct the AO to allow the exemption u/s 10AA of the Act from the business profits of Rs. 6,48,75,288/-. However, since the amount of exemption has not been verified by the AO, we are restoring the issue to the file of AO for the purpose of limited verification of the amount of exemption u/s 10AA of the Act. Needless to say that the deduction has to be allowed after verification.

Summary

Issues involved:
Delay in filing appeal before CIT(A) and condonation of delay, Dismissal of appeal by CIT(A) based on limitation, Entitlement to exemption u/s 10AA of the Act, Setting off brought forward losses against exemption, Legal right to appeal, Exemption u/s 10AA of the Act in respect of profit from export, Verification of exemption amount by AO.

Delay in filing appeal before CIT(A) and condonation of delay:
The appeal was filed by the assessee against the order of the CIT(A) for the assessment year 2016-17. The primary issue raised was the delay in filing the appeal and the subsequent dismissal by the CIT(A) for not condoning the delay. The assessee had filed the return of income on 24.11.2016, revised it on 25.11.2016 due to an inbuilt e-filing system error. The delay in filing the appeal was explained, but the CIT(A) dismissed it as barred by limitation. The ITAT emphasized the legal right to appeal and cited the need for substantial justice, ultimately setting aside the CIT(A)'s order and allowing the appeal.

Entitlement to exemption u/s 10AA of the Act:
The assessee, engaged in manufacturing specialized refractories, was eligible for exemption u/s 10AA of the Income Tax Act for profits derived from exports. However, due to an e-filing system error, the exemption claimed was automatically adjusted against brought forward losses, reducing the exemption amount. The ITAT noted that the assessee fulfilled all conditions for exemption u/s 10AA in the first assessment year and should not be deprived of legitimate claims due to technicalities. Citing the decision of the Hon'ble Supreme Court, the ITAT emphasized the need for substantial justice and allowed the exemption to the assessee.

Setting off brought forward losses against exemption:
The issue revolved around setting off brought forward losses against the exemption claimed u/s 10AA of the Act. The ITAT held that the exemption must precede any adjustment of losses. Referring to relevant court decisions, the ITAT directed the AO to allow the exemption of Rs. 6,45,41,233/- from the business profits of Rs. 6,48,75,288/-. The matter was restored to the AO for limited verification of the exemption amount, emphasizing the need for proper verification before allowing the deduction.

Legal right to appeal:
The ITAT stressed the importance of the legal right to appeal, stating that individuals aggrieved by lower authority orders should not be deprived of this right due to technical issues. Citing the decision of the Hon'ble Supreme Court, the ITAT highlighted the need for substantial justice and the flexibility provided by the law to condone delays in filing appeals. The ITAT set aside the CIT(A)'s order and allowed the appeal, emphasizing the importance of upholding legal rights even in cases of procedural errors.

This detailed analysis covers the key issues involved in the legal judgment delivered by the Appellate Tribunal ITAT Kolkata.