1995-VIL-203-ITAT-DEL

Equivalent Citation: ITD 056, 014,

Income Tax Appellate Tribunal DELHI

Date: 15.09.1995

ENCON FURNACES PRIVATE LTD.

Vs

ASSISTANT COMMISSIONER.

BENCH

Member(s)  : VIMAL GANDHI., MOKSH MAHAJAN.

JUDGMENT

Per Miss Moksh Mahajan, Accountant Member --- The sole contention raised in this appeal filed by the assessee is that the learned Commissioner of Income-tax (Appeals) has erred in rejecting the appeal in limine. According to the learned AR Shri Rakesh Gupta, the discretion as vested in the Proviso to section 249(4) of the Act has not been exercised judicially. It is submitted that the assessee filed its return of income for assessment year 1988-89 declaring an income of Rs. 89,637. As per the return prepared by its Chartered Accountant the income-tax due on the aforesaid income was shown at Rs. 47,061. This was duly paid by the assessee. The assessment for the concerned assessment year, i.e., 1988-89 was finalised at an income of Rs. 2,82,210 raising a demand of Rs. 1,40,149. As per the assessment order which is dated26-9-1989 the penalty proceedings under sections 273 and 271(1)(c) of the Act were also directed to be initiated. The assessee filed an appeal in the office of the learned CIT(A) in Form No. 35 on30-11-1989. Vide letter dated6-11-1990 the CIT(A) required the assessee to furnish the details regarding the tax as paid by the assessee. It was at that time that the assessee discovered that the payment of tax on the returned income had not been made in full. It so happened that mistake occurred at the end of the Chartered Accountant who calculated the tax at the rate of 50 per cent applicable to the company in which the public are substantially interested. The assessee on the other hand, being a domestic company, tax was chargeable at a higher rate. Since the tax was calculated by the tax expert, it never occurred to the assessee that there could be a mistake in the calculation. The tax was thus paid as shown in the statement of income. This mistake persisted even at the end of the Assessing Officer who never initiated any action for non-payment of full tax. These facts clearly show that the mistake was a bona fide one and as such was covered under the proviso to section 249(4) of the Act. In any case by the time the appeal was taken up for hearing the assessee had further paid Rs. 45,000 and as such if there being any delay in filing the appeal, the same should have been condoned and appeal not dismissed in limine. At best there was a technical breach for which the assessee should not have been deprived of his right of appeal. As held in the case of CIT v. Ashoka Engg.Co. [1922] 194 ITR 645 (SC), the provision conferring right of appeal should be construed in a reasonable, practical and liberal manner. In case the assessee satisfies that there was a sufficient cause preventing the assessee from complying with the provisions under which the right of appeal is allowed, it should be admitted and decided on merit. To similar effect are the other decisions which include the case of Concord of India Insurance Co. Ltd. v. Smt. Nirmala Devi [1979] 118 ITR 507 (SC) and Manoj Ahuja v. IAC [1984] 150 ITR 696 (Punj. & Har.). Furthermore in similar circumstances, the various Benches of the Income-tax Appellate Tribunal have decided the issue in favour of the assessee. These are as under :---

(1)SkipperTowers(P.) Ltd. v. ITO [1986] Taxation 82 (4)-133 ;

(2) J.K.K. Natarajah v. ITO [1981] Tax 62 (6A)-5 ;

(3) P.K. Patnaik v. ITO 1978 TTJ 5 ; and

(4) Kanhaiyalal Goswami v. IT0 1978 TTJ 510.

As to the delay in filing the appeal as construed from the date of paying the taxes, there being sufficient reasons for the delay, it should be condoned on the same set of facts and circumstances as available for non-payment of full tax.

2. The learned DR on the other hand submitted that the provisions of section 249(4) are substantive provisions. There is a mandatory requirement that the taxes be paid in full before the appeal could be admitted. The amount of Rs. 45,000 was paid subsequent to the filing of appeal and, hence, could not be taken into consideration for its admission. In case the assessee's stand is to be accepted there occurred an inordinate delay in filing the appeal which could not have been condoned as held by the learned CIT(A). The decisions of various High Courts as cited by the learned AR related to delay in filing the appeal and not to non-payment of tax as required under section 249(4) of the Act. On the other hand, in the case of Skipper Towers (P.) Ltd. there were financial difficulties because of which it was held that there was sufficient cause for admission of appeal. Similar were the facts in the case of J.K.K Natarajah where there also existed financial constraints. It was argued that once a provision is brought on the statute with some objective, the same should be construed strictly. In the circumstances, the appeal was rightly rejected in limine by the learned CIT(A).

3. We have given anxious consideration to the submissions made on both sides. The provisions of section 249(4) of the Act as they were there at the relevant period of time read as under :---

" No appeal under this Chapter shall be admitted unless at the time of filing of the appeal :

(a) where a return has been filed by the assessee, the assessee has paid the tax due on the income returned by him ; or

(b) where no return has been filed by the assessee, the assessee has paid an amount equal to the amount of advance tax which was payable by him ;

Provided that, on an application made by the appellant in this behalf, the Appellate Assistant Commissioner [or as the case may be, the Commissioner (Appeals)] may, for any good and sufficient reason to be recorded in writing, exempt him from the operation of the provisions of this sub-sections."

Thus as per the above provisions which are substantive in nature, the requirements for admission of appeal has been prescribed. As per the General Rule the tax due on the returned income is to be paid before the appeal can be admitted for the decision to be rendered on merit. This however is subject to the proviso whereby for any good and sufficient reasons, the appellate authority can exempt the assessee from the operation of the sub-section (4) of section 249 of the Act. The reasons have to be both good and sufficient in contradistinction to only sufficient reason for condonation of delay in filing the appeal as required in sub-section (3) of the same section. Does the use of additional word 'good' mean that more vigorous test is to be applied while admitting appeal under section 249(4) than under section 249(3) of the Act. This would turn on the meaning of what is 'sufficient' or what is 'good' reason. The expressions though used frequently have not been defined. Therefore, these have to be understood in the ordinary or popular sense. As aptly put in the words of Justice Frankfurt ER " After all legislation when expressed not in technical terms is addressed to common run of men and is therefore to be understood according to sense of the things as the ordinary man has a right to rely on ordinary words addressed." (Principle of Statutory Interpretation by Justice G.P. Singh, p. 62).

4. " Sufficient cause is evidently something more than legally sufficient or sufficient according to the rules laid down in the section ". This is as held by the Madras High Court in the case of Kichchppa v. Ramanujam [1902] 25 ITR 166 (170,171) (DB) (sic). As commonly understood, it would mean which is beyond the control of the party invoking the provision of the section. The test to be applied is that of a reasonable man in normal circumstances. Sufficiency of reason would he in the test whether the same could have been avoided by exercise of due care and attention. Simply putting it there should be no negligence, no inaction or want of bona fides which could be imputable to the party. The good reason on the other hand is something which is akin to what is proper or right or sound. It is near synonymous to the sufficient reason. There could be no good reason which is not sufficient or conversely sufficient reason which is not a good one. Use of both the words would suggest that while considering the discretion by the appellate authorities, the object with which the provisions have been brought on the statute is to be kept in mind which in the case of the aforesaid provision is timely collection of the tax as per assessee's own returned income. The discretion is still with the authorities to admit or refuse to admit the appeal. The general principle of law is that the discretion is to be exercised not in any arbitrary, vague or fanciful manner but on judicial principles. The discretion so exercised is to advance substantial justice. Each case has to be examined as to its own circumstances to see whether it falls within or without the terms of general rules or not. The common test whether a cause is sufficient or not is to say whether it could have been avoided by the party by the exercise of due care and attention. Examining the assessee's case is the aforesaid background we find that the mistake occurred at the end of the Chartered Accountant. The evidence furnished before us in the form of computation sheet whereby the tax was worked out at Rs. 47,061 was not controverted by the learned DR. The calculation of tax payable on the returned income having been done by the expert could have led to a bona fide belief on the part of the assessee that the same was correct and needed no second look. Thus the submissions of the learned AR that the shortfall in the payment of tax was on account of bona fide belief on the part of the assessee cannot be faulted. This is evident from the fact that even Assessing Officer took no action for shortfall in payment of tax. In case the assessee intentionally wanted to withhold the tax, it would have been major part of it and not as was the case. We are therefore unable to understand as to how this does not constitute a good and sufficient reason for the exercise of discretion by the learned CIT(A). In the circumstances, we are of the considered view that there existed sufficient and good reason for admission of appeal which should have been decided on merit.

5. The same reasons would also apply for admission of appeal if it is considered as a belated one following the ratio of the Hon'ble Supreme Court in the case of CIT v. Filmistan Ltd.[1961] 42 ITR 163. In the aforesaid case it was held by their Lordships that in case if the tax is paid after the period of limitation has expired, it will be taken to have been filed on the day when the tax is paid even though the memorandum of appeal was presented earlier and within the period of limitation. Their Lordships further held that the question then have to be decided whether there was sufficient case for condonation of delay or not. Even for this, the principle of sufficient reason has to be applied before the appeal could be admitted for its decision on merit. On the same set of facts whatever has been held to be good and sufficient reason for admission of appeal under proviso to section 249(4) of the Act, would also constitute sufficient reason for admission of appeal under section 249(3) of the Act. Thus, on both counts, we are of the considered view that the appeal should have been admitted and decided on merit. Therefore, we would direct the learned CIT(A) to admit the appeal and decide the issues on merit.

6. In the result, the appeal is allowed

 

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