Subhash Malik vs Commissioner of Income Tax

This appeal is admitted on the following two substantial questions of law framed in the memo of appeal:

Whether on the facts and circumstances of the case the ITAT Delhi Bench "G" New Delhi was correct to reject the application u/s 5 of the Limitation Act by refusing to condone the delay of 279 days?

Whether the order of the Tribunal rejecting the application u/s 5 of the Limitation Act is sustainable in view of the decisions of Collector, Land Acquisition, Anantnag and Another Vs. Mst. Katiji and Others, Auto Centre Vs. State of Uttar Pradesh and Others, and IT Appeal No. 25 of 2004, Bharat Auto Centre Lanka Ghazipur v. CIT dated 8-7-2005.

With the consent of learned Counsel for the parties this appeal is being heard and finally decided.

Present appeal u/s 260A of the Income Tax Act, 1961 (hereinafter referred to as the "Act") is directed against the order of the Tribunal dated 8-7-2005 for the assessment year 2001 -02, whereby the Tribunal has rejected the appeal of the appellant as barred by limitation arising out of the order of the Commissioner of Income Tax (Appeals) dated 25-9-2002.

The question for consideration is whether the Tribunal was justified in refusing to condone the delay and rejecting the delay as barred by limitation.

Assessment order u/s 144 of the Act was passed by the Income Tax Officer, Ward 2(3), Meerut by order dated 5-3-2002. Aggrieved by the order dated 5-3-2002, appellant filed an appeal on 8-4-2002 before the Commissioner of Income Tax (Appeals). The said appeal was dismissed by the CIT (Appeals) by order dated 25-9-2002 and the said order was served upon the appellant on 18-11-2002. An application u/s 154 of the Act for the rectification of the order dated 25-9-2002 was filed on 23-12-2002 but the same was rejected by CIT (Appeals) by order dated 20-10-2003. The said order dated 20-10-2003 was served on the appellant on 25-11-2003. Where after appellant filed an appeal on 28-11-2003 by a delay of 279 days before the Tribunal against the order dated 25-9-2002 passed by the CIT (Appeals). The said appeal was dismissed by the Tribunal by order dated 8-7-2005 as barred by limitation. Hence the present appeal u/s 260A of the Act.

Learned Counsel for the appellant has submitted that the appeal u/s 246A of the Income Tax Act was dismissed on 25-9-2002 by CIT (Appeals) Meerut, as such the appellant decided to file an appeal before the Tribunal. The appellant entrusted the matter to M/s. Malik & Co., Advocates, Meerut and had also deposited statutory fees and miscellaneous expenses on 21-12-2002 in the office of the counsel. The counsel however advised that there are mistakes in the appellate order and accordingly he took a decision to first take up the matter before CIT (Appeals) to get the order rectified u/s 154 of the Act. It was further submitted by the counsel for the appellant that the appellant was dependent upon the advise and action taken by the counsel in the matter. The appellant had every hope of securing the necessary relief u/s 154 of the Act. However, the said application u/s 154 of the Act was rejected on 20-10-2003 and the said order was served on the appellant on 25-11-2003. Immediately thereafter the appellant filed an appeal against the order dated 25-9-2002 before the Tribunal. It was submitted by the learned Counsel for the appellant that the proceeding u/s 154 took a long time which resulted the delay in filing the appeals. The delay was not caused intentionally or negligently and was caused on the bona fide belief formed on the advice and action taken by the counsel in the matter. Learned Counsel for the appellant has placed reliance on various decisions of this Court as well as of the Apex Court in support of his contention, which will be dealt with in the latter part of the judgment.

On the other hand, learned standing counsel appearing on behalf of the department has supported the impugned order passed by the Tribunal and has submitted that the appellant has not acted with reasonable diligence in the prosecuting the appeal and no sufficient cause has been shown by the appellant for condoning the delay, therefore, no interference in the matter is warranted. He has further submitted that there was no justification for the appellant to have waited for such a long time to avail the remedy of filing an appeal before the Tribunal.

Heard the learned Counsel for the parties and perused the record.

Before proceeding to examine the rival contentions of the parties in the matter it would be useful to reproduce paragraph Nos. 2, 3 and 4 of the affidavit dated 16-10-2004 filed in support of the delay condonation application which reads as under:

(2) That being aggrieved by the order of the Ld. CIT(A), I decided to file an appeal before the Income Tax Appellate Tribunal and for that purpose I entrusted the matter to M/s. Malik & Co., Advocates, Meerut.

(3) That I deposited Rs. 11,500 towards statutory filing fee and other Misc. Expenses on 21-12-2002 in the office of the counsel.

(4) That I was informed by the counsel that there are apparent mistakes in the Appellate order and accordingly the counsel decided to first taken up the matter before the ld. CIT (Appeals). The sequence of events in the matter are as under:

____________________________________________________________________________ (i) Ld. CIT (Appeals) order dated 25-9-2002 received on 18-11 -2002 ____________________________________________________________________________ (ii) Petition u/s 154 filed in office of CIT(A) 23-12-2002 on ____________________________________________________________________________ (iii) Petition fixed for hearing, represented and 17-1-2003 heard by ld. CIT(A) on ____________________________________________________________________________ (iv) After concluding the hearing the ld. CIT(A) did 26-9-2003 not deliver the judgment after pursuing the matter was refixed on ____________________________________________________________________________ (v) Ld. CIT(A) decided the matter u/s 154 20-10-2003 which was heard on 17-1-2003 by order dated ____________________________________________________________________________ (vi) Appellate order served on 25-11-2003 ____________________________________________________________________________ (vii) 2nd appeal before ITAT filed on 28-11-2003 ____________________________________________________________________________

Bare perusal of the order passed by the Tribunal shows that the Tribunal has rejected the appeal of the appellant as time-barred by limitation merely on the grounds that the service of the order was mentioned dated 25-11 -2003 in place of 18-11 -2002 in the memo of appeal, the delay condonation application was not filed along with the memo of appeal and the affidavit of the local counsel of the appellant was not filed to justify the delay in filing the appeal.

According to the appellant the order u/s 154 was served upon him on 25-11-2003, therefore, inadvertently 25-11-2003 was mentioned by his counsel in place of 18-11-2002. It was a bona fide mistake. However, the said defect was subsequently removed by the appellant by filing an application u/s 5 of the Limitation Act supported by an affidavit wherein it was categorically mentioned that the order dated 25-9-2002 was served on the appellant on 18-11-2002. The record of the case shows that the appellant deposited the amount of Rs. 11,550 towards statutory fees and miscellaneous expenses on 21-12-2002 in the office of the counsel and the receipt bearing No. 2325, dated 21-12-2002 was also filed before the Tribunal. A copy of the account as appearing in the ledger of M/s. Malik & Co. showing the receiving of the amount was also filed before the Tribunal and this fact has not been disputed by the department. Therefore, in view of the aforesaid facts the filing of any affidavit of the local counsel was not required.

It is also noteworthy that an application u/s 154 of the Act was filed against the order dated 25-9-2002 well within lime. There is no reason to disbelieve the contention of the appellant, that he was advised by his counsel to file an application u/s 154 of the Act for the rectification of the order dated 25-9-2002 and the pendency of the said application had caused the delay in filing the appeal before the Tribunal. The Apex Court in the case of The State of West Bengal Vs. The Administrator, Howrah Municipality and Others, has held that if a party had acted in a particular manner on a wrong advice given by his local advisor he cannot be held guilty of negligence so as to disentitle the party to plead sufficient cause u/s 5 of the Limitation Act. It is also be held in the said case that the words ''sufficient cause'' should receive a liberal construction so as to advance substantial justice and no negligence or inaction for want of bona fide is imputable to a party.

It is noteworthy that the order u/s 154 of the Act was served on the appellant on 25-11-2003 and immediately thereafter without any loss of time the appeal against the order dated 25-9-2002 was filed on 28-11-2003, which clearly shows that the appellant was exercising due diligence and was not lethargic in filing the appeal against the order dated 25-9-2002. Record of the case further shows that the proceedings u/s 154 of the Act took a long time which resulted the delay in filing the appeal.

The Hon''ble Supreme Court in Collector, Land Acquisition, Anantnag and Another Vs. Mst. Katiji and Others, observed that when substantial justice and technical consideration are pitted against each other, cause of substantial justice deserves to be preferred for the reason that other side cannot claim to have vested right in injustice being done because of non-deliberate delay.

The law of limitation is enshrined in the maxim interest reipublicae up sit finis litium (it is for the general welfare that a period be put to litigation). Rules of limitation are not meant to destroy the rights of the parties, rather the idea is that every legal remedy must be kept alive for a legislatively fixed period of time.

In N. Balakrishnan Vs. M. Krishnamurthy, the Apex Court explained the scope of limitation and condonation of delay, observing as under:

The primary function of a Court is to adjudicate the dispute between the parties and to advance substantial justice. The time limit fixed for approaching the Court in different situations is not because on the expiry of such time a bad cause would transform into a good cause. Rules of limitation are not meant to destory the rights of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life span for such legal remedy for the redress of the legal injury so suffered. The law of limitation is thus founded on public policy. (p. 3224)

In Smt. Prabha v. Ram Parkash Kalra 1987 (Supp.) SCC 339, the Supreme Court took the view that the Court should not adopt an injustice-oriented approach in rejecting the application for condonation of delay.

The Apex Court in State of Nagaland v. Lipok AO 2005 3 SCC 752 has observed in para 9 of the judgment as follows:

The proof by sufficient cause is a condition precedent for exercise of the extraordinary restriction (sic discretion) vested in the court. What counts is not the length of the delay but the sufficiency of the cause, and shortness of the delay is one of the circumstances to be taken into account in using the discretion. In N. Balakrishnan Vs. M. Krishnamurthy, it was held by this Court that Section 5 is to be construed liberally so as to do substantial justice to the parties. The provision contemplates that the court has to go in the position of the person concerned and to find out if the delay can be said to have resulted from the cause which he had adduced and whether the cause can be recorded in the peculiar circumstances of the case as sufficient. Although no special indulgence can be shown to the Government which, in similar circumstances, is not shown to an individual suitor, one cannot but take a practical view of the working of the Government without being unduly indulgent to the slow motion of its wheels.

What constitutes sufficient cause cannot be laid down by hard-and-fast rules. In New India Insurance Co. Ltd. Vs. Smt. Shanti Misra, Adult, this Court held that discretion given by Section 5 should not be defined or crystallized so as to convert a discretionary matter into a rigid rule of law. The expression "sufficient cause" should receive a liberal construction. In Brij Indar Singh v. Kanshi Ram AIR 1917 PC 156 it was observed that true guide for a court to exercise the discretion u/s 5 is whether the appellant acted with reasonable diligence in prosecuting the appeal. In Shakuntala Devi Jain Vs. Kuntal Kumari and Others, a Bench of three Judges had held that unless want of bona fides of such inaction or negligence as would deprive a party of the protection of Section 5 is proved, the application must not be thrown out or any delay cannot be refused to be condoned. (p. 757)

The Apex Court in G. Ramegowda, Major and Ors Vs. Special Land Acquisition Officer, Bangalore, condoned the delay in filing the appeal and in this context observed as follows:

it is true, no general principle saving the party from all mistakes of its counsel, if there is negligence, deliberate or gross inaction or lack of bona fides on the part of the party or its counsel, if there is no reason why the opposite side should be exposed to a time barred appeal. Each case will have to be considered on the particularities of its own special facts. However, the expression ''sufficient cause'' in Section 5 must receive a liberal construction so as to advance substantial justice and generally delays in preferring appeals are required to be condoned in the interest of justice where no gross negligence or deliberate inaction or lack of bona fides is imputable to the party seeking condonation of the delay. (p. 897)

This Court recently in the case of Bharat Auto Centre v. CIT [2005] 149 Taxman 228 (All.) while dealing with the similar situation wherein the delay in filing the appeal before the Commissioner of Income Tax (Appeals) was caused due to the pendency of the application u/s 154 of the Act has observed as follows:

Having heard the learned Counsel for the parties, we are of the opinion that the Commissioner of Income Tax (Appeals) as well as the Tribunal has taken pedantic view while considering the application for condonation of delay. It has been consistently held by the Apex Court that in the matter of condonation of delay a liberal and pragmatic view should be taken. The reasons given by the appellant for the delay appears to be sufficient cause and accordingly, the delay is liable to be condoned.

It has been consistently held by the Apex Court that in matter of condonation of delay a liberal and pragmatic view should be taken. The Apex Court in Ramji Dass v. Mohan Singh 1978 ARC 496 has held that as far as possible Court''s discretion should be exercised in favour of the hearing and not to shut out hearing.

Thus, while deciding such an application justice oriented approach is required to be adopted.

The appellant has shown just and sufficient cause for the delay in filing the appeal, it cannot be said that the delay is mala fide or intentional.

In the result the appeal is allowed, the order of the Tribunal dated 8-7-2005 is set aside. The matter is remanded to the Tribunal to decide the appeal on merit of the case after giving an opportunity of hearing to the appellant in accordance with law.