No addition was made to the issues raised in the Section 263 proceedings, hence ITAT quashes the Section 263 order
Facts and Issue of the case
On perusal of the record, the appeal of the assessee is barred by 686 days. In this regard, ld. AR filed an application along with affidavit for condonation of delay, wherein it has been submitted that the delay occurred in filing the present appeal is neither intentional nor deliberate but due to unfortunate and unavoidable circumstances beyondthe control of the assessee as the forced shutdown & lockdown along with travel restrictions in continuance of havoc of Covid-19 pandemic, it was not possible to have consultation and preparation of appeal to be filed with the entrusted authorised legal consultant resulting in the delay which may kindly be condoned as we neither acted deliberately nor in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of our obligation. Ld. AR of the assessee has also relied on the decision of the Hon’ble Supreme Court in Suo Moto Writ (Civil) No.3 of 2020, wherein the Hon’ble Apex Court has held that in continuation of the order dated 8th March 2021, the period(s) of limitation, as prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings, whether condonable or not, shall stand extended till further orders. Ld. AR also drew our attention to Section 253(5) of the Act and submitted that the Tribunal can condone the delay if it is satisfied with sufficient cause for delay. In view of the above, ld. AR submitted that the delay in filing the present appeal may kindly be condoned and appeal may kindly be admitted for hearing.
Apart from the above, ld. CIT-DR also submitted that the assessee in his letter for condonation of delay has mentioned that the delay was on account of failure on the part of authorised representative. It was the submission that the affidavit of the authorised representative has not been brought out. Ld. CIT-DR was then informed that the assessee has filed an additional letter dated 05.10.2021 wherein it has been mentioned that there is a delay of 686 days and the delay was neither international nor deliberate but to due unfortunate and unavoidable circumstances beyond the control as the forced shutdown & lockdown along with travel restrictions in continuance of havoc of Covid-19 pandemic. It was the submission that a reasonable cause has not been explained and, therefore, the delay is not liable to be condoned. He relied upon the decision of Hon’ble Tata Yodogawa Ltd. 1988 (38) Excise Law Times 739 (SC). He also placed reliance upon the decision of the Hon’ble Punjab & Haryana High Court in the case of Indian Roadlines Vs. CIT  323 ITR 362 (Punjab & Haryana), wherein the Hon’ble High Court has held in respect of provisions of Section 260A of the Act that where no such provisions as condonation of delay in filing appeal under section 260A has been made, then no application under section 5 of the Limitation Act could be filed. It was also the submission that there is no provision in the Act for condonation of delay and consequently cannot be condoned on this ground also.
Observation by the court
The court had heard to the parties, the court found that the assessee in its application has given the reason for delay. It is also well-known fact that if the technicality is pitted against substantial justice, the technicality must step back and substantial justice should prevail, though the court do feel that the reasons given should have been more elaborate but considering the fact that the substantial problems were going on during Covid-19 period, we feel that the delay in filing of the appeal by the assessee is liable to be condoned and the court do so.
Coming to the powers of the ITAT in respect of condonation of delay, a perusal of the provisions of Section 253(5) of the Act, there is a specific provision that the Tribunal can admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if it is satisfied that there was sufficient cause for not presenting it within that period. As mentioned earlier, the view of the court are that the assessee was prevented by substantial cause in not filing the appeal within the prescribed time. Consequently, the delay in filing the appeal stands condoned and the appeal is admitted for hearing.
The court shall proceed to decide the appeal of the assessee challenging the order passed u/s.263 of the Act.It was submitted by the ld. AR that the Pr.CIT has invoked his powers u/s.263 of the Act in respect of the assessment order passed u/s.143(3) of the Act. It was the submission that the return filed by the assessee had been accepted in the scrutiny assessment u/s.143(3) of the Act. The Pr.CIT had issued a show cause notice u/s.263 of the Act . It was the submission that the assessee had filed his reply to the said show cause notice .
It was the submission that the submission of the assessee had not been considered and the ld. Pr.CIT had set aside the assessment order dated 05.04.2016 for the limited purpose of conducting enquiry/verification in respect of the five issues and thereafter frame a fresh and reasoned assessment order in accordance with law. When the assessee was asked as to what happened to the consequential order, it was submitted by the ld. AR that in respect of the first issue representing the creditors for expenses & others furnished by the assessee to the extent of Rs.2,60,21,286/- no addition specifically has been made in respect of said amount but in fact the said amount has been accepted by the AO and though the payment was made to Maa Trading Company and not to Veeline Media Ltd.. The AO further proceeded to make adjustments in respect of purchases and made addition under the head of “bogus purchases” to an extent of Rs.4,90,66,446/-.
In respect of the second issue regarding the statement of Bank of Baroda, Kolkata during the year no addition had been made.In respect of issue of the low net profit, it was the submission that no addition had been made in respect of debit of a huge expenditure of Rs.2,26,06,601/- under the head “transporting and discounting charges paid”. Though the AO had been directed to examine the genuineness of the expenses claimed by the assessee, however, the AO estimated the income from transportation business @5% of the total transportation receipt on account of failure for verification of all the vouchers and bills.In respect of the last issue representing the depreciation in respect of the shopping mall, no addition had been made. It was, thus, submission that though all the issues had been brought to the attention of the ld. Pr.CIT, the Pr.CIT had not done any verification but had passed on the issue of verification back to the AO. It was the submission that the order of the Pr.CIT is liable to quashed.
It was also submitted that the ld. Pr.CIT was very much in his right and he had the powers to invoke the provisions of Section 263 of the Act, insofar as there was no verification/non-examination by the AO when completing the original assessment order u/s.143(3) of the Act. It was further submitted that even when the show cause notice was issued to the assessee, the assessee replied during the last minute being on 26.03.2019 thereby precluding the ld. CIT(A) from doing any further verification. It was also submitted that in fact the issue of creditors for expenses & others, representing Rs.2,60,21,286/- when examined brought out the addition of Rs.4,90,66,446/-. It was further submitted that the addition itself leads to increase in the net profit rates. It was also submitted that the estimation of income from transportation business @5% of the total transportation receipt done by the AO showed that there was doubt on the genuineness of the expenses claimed by the assessee in respect of transporting and discounting charges. It was the submission that the AO having not done the enquiry that he was supposed to do, the ld. Pr.CIT was right in directing proper enquiry to be done. Accordingly, ld. CIT-DR submitted that the order passed u/s.263 of the Act by the Pr.CIT is sustainable and should be upheld.
A perusal of the order of the ld. Pr.CIT shows that the show cause notice issued u/s.263 of the Act has been issues only on 1st March, 2019. Admittedly, the assessee has responded to the show cause notice though on 26.03.2019. In the said reply, the assessee has stated that he would submit the details of the bills on 29.03.2019, which is evident from the extract as made by the Pr.CIT. What happened to that bills is not coming out of the order of the Pr.CIT. The reply filed by the assessee has also admittedly not been looked into nor considered by the ld. Pr.CIT.A perusal of the consequential order clearly shows that the additions which have been proposed by the Pr.CIT, more so the issues that have been raised by the Pr.CIT have not resulted into any of the addition in the assessment. Obviously, if the Pr.CIT had done cursory verification of the details that has been produced by the assessee in the course of proceedings u/s.263 of the Act, maybe, the Pr.CIT himself would have dropped the proceedings. However, having invoking the powers u/s.263 of the Act, no addition on the said issues has been made. The additions have been made on other issues; clearly shows that the issues raised in the proceedings u/s.263 of the Act are unsustainable and liable to be quashed. The court are not going into merits of the additions made in the consequential order. Only on the ground that no specific addition has been made in respect of specific issues which have been raised in the proceedings u/s.263 of the Act, therefore, the order passed u/s.263 of the Act is hereby quashed.
The appeal of the assessee is allowed by the court.Ravi-Metallics-Limited-Vs-PCIT-ITAT-Cuttack