2015 (2) TMI 406 - HC - Income Tax

Condonation of 2053 days in filing the appeals - entitlement to claim deduction under Section 40(b) - Held that - The procedure adopted by the Tribunal is highly prejudicial to the interest of the appellant/assessee inasmuch as the Tribunal having decided not to proceed with the matter on the ground of condonation of delay, cannot unilaterally decide the appeals on merits, more so when the appellant/assessee was not given proper opportunity to contest the matter in the main appeals on merits. The order of the Tribunal is also not in consonance with Section 253 (5) of the Income Tax Act. Section 253 (5) of the Income Tax Act mandates that an appeal should be admitted before ever an order is passed on merits. Once the appeal itself is not entertained, the question of going into the merits of the matter does not arise. We, therefore, find that the order of the Tribunal deciding the appeals of the assessee on merits, after dismissing the appeal itself on the question of delay, is an error apparent on the face of the record and that the order passed is without jurisdiction since, when there is no appeal, there is no question of deciding the issue raised in the appeal on merits. See Williamson Financial Services Ltd. Versus Commissioner of Income-Tax And Another. - Decided in favour of assessee by way of remand to the Tribunal for reconsideration.

Summary

Issues:
1. Appeal against order dismissing appeals as time-barred.
2. Justifiability of deduction claimed under Section 40(b) of the Income Tax Act, 1961.
3. Entitlement to make a claim for deduction in remand assessment proceedings.

Analysis:

Issue 1:
The appellant filed appeals against the order passed by the Income Tax Appellate Tribunal, challenging the dismissal of the appeals as time-barred. The Tribunal rejected the appellant's explanation for the delay of 2053 days in filing the appeals, citing insufficient particulars. Despite dismissing the appeals on the ground of delay, the Tribunal proceeded to decide on the merits of the appeals, which was deemed prejudicial to the appellant's interests. The High Court found this approach to be erroneous and without jurisdiction, emphasizing that an appeal should be admitted before deciding on the merits. The Court referred to Section 253(5) of the Income Tax Act and held that the Tribunal's order was not in accordance with the statutory mandate. Citing the decision of the Gauhati High Court in a similar case, the High Court set aside the Tribunal's order and remanded the matters back for reconsideration, highlighting the need for due process and proper consideration of the condonation of delay issue.

Issue 2:
The appellant claimed deduction of expenditure towards remuneration to partners and interest on capital accounts during the assessment proceedings under Section 143(3) r/w 256. The Assessing Officer disallowed the claim for expenditure under Section 40(b), leading to appeals before the Commissioner of Income Tax (Appeals) and subsequently before the Tribunal. The Tribunal directed the Assessing Officer to assume the net profit at 40% of the gross professional receipts but dismissed the appeals on the grounds of delay and lack of satisfactory explanation. The High Court observed that the Tribunal's decision to dismiss the appeals on merits without addressing the delay issue properly was unjust and ordered a remand for reconsideration, emphasizing the importance of following due process and statutory provisions.

Issue 3:
The appellant, engaged in the supply and training of manpower for the corporate sector, faced challenges regarding the deduction of expenditure in the assessment years 1995-1996 to 2000-2001. The Assessing Officer rejected the claim of expenditure, leading to a series of appeals and remand assessment proceedings. The High Court highlighted the appellant's statutory entitlement to make a claim for deduction in the remand assessment proceedings to arrive at a correct assessable income. The Court emphasized the need for a fair consideration of the appellant's claims and directed the Tribunal to reconsider the matters, taking into account the appellant's bona fide actions and diligent pursuit of the case before the appropriate forum.

In conclusion, the High Court's judgment addressed the issues of delay in filing appeals, justifiability of deductions under Section 40(b), and entitlement to claim deductions in remand assessment proceedings, emphasizing the importance of due process, statutory compliance, and fair consideration of the appellant's claims.