suresh 13&18-ITXA-493.2015.doc IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.493 OF 2015 Vijay Vishin Meghani, Flat No.1, 1st Floor, Atur Terraces, 19, Cuffe Parade, Mumbai 400 005. .... Appellant Versus Deputy Commissioner of Income Tax Circle 23(2), C 11, Room No.108, Aaykar Bhavan, M.K. Road, Mumbai 400020. Respondent AND INCOME TAX APPEAL NO.508 OF 2015 Vijay Vishin Meghani, Flat No.1, 1st Floor, Atur Terraces, 19, Cuffe Parade, Mumbai 400 005. .... Appellant Versus Assistant Commissioner of Income Tax Circle 23(2), C 11, Room No.108, Aaykar Bhavan, M.K. Road, Mumbai 400020. .... Respondent Mr. Soli Dastur, Senior Advocate with Mr. Harsh Kothari i/by Mr. Vipul Joshi for Appellant in both Appeals. Mr. Arvind Pinto for Respondent in both Appeals. Page 1 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc CORAM: S.C. DHARMADHIKARI & PRAKASH D. NAIK, JJ. DATE : SEPTEMBER 19, 2017 ORAL ORDER ( Per Shri S.C. DHARMADHIKARI, J. : ) 1. These two appeals arise out of Tribunal's order refusing to condone delay. delay was in bringing appeals to Tribunal. delay, as far as Income Tax Appeal No.508 of 2015 is concerned, computed by Tribunal/Registry is of 2984 days. Similar is position with regard to Income Tax Appeal No.493 of 2015 for Assessment Year 1996 97 before us. 2. In prior assessment year of 1994 95, Income Tax Appeal No.5418 and for subsequent year 1996 97 Income Tax Appeal No.5419, both of 2011, were filed by individual assessee in Income Tax Appellate Tribunal, Bench at Mumbai. 3. application seeking condonation of delay in both appeals, was taken up by Tribunal together. Meaning Page 2 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc thereby, application for condonation of delay in both appeals is disposed of by this common order dated 20 8 2014. 4. After hearing both sides and perusing order of Tribunal, we find that questions, which can be termed as substantial questions of law arising out of this order, can be formulated as under: (A) Was Tribunal justified on facts and circumstances and in law in dismissing two appeals as barred by limitation? (B) Whether discretion vesting in Tribunal has been exercised by it reasonably and in accordance with settled legal principles enabling condonation of delay in filing of statutory appeals? 5. With consent of both sides, we dispose of these appeals finally by present order. 6. Mr. Dastur, learned Senior Counsel appearing on behalf of appellant, would submit that both appeals were filed by assessee against two separate orders of Commissioner of Income Tax (Appeals), dated 1 2 2000. In both Page 3 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc orders, assessee was aggrieved by decision of Commissioner in rejecting deduction claimed under Section 80 O of Income Tax Act, 1961 ( I.T. Act, 1960 for short). 7. Mr. Dastur would submit that true it is that delay of 2984 days, in that sense is enormous but capable of being condoned. If there was sufficient cause shown for condonation of delay, then, Tribunal should have applied well settled principles in consideration of application. well settled principles are: if cause shown or explanation given is true, reasonable and bona fide, then, whether delay should be condoned and liberally and even if not unconditionally but by imposing such conditions which are just and which would enable assessee to have adjudication of issue on merits. Mr. Dastur would submit that one of principles which have been carved out in numerous decisions of Hon'ble Supreme Court on point is that if litigant has acted under legal advice bona fide, and that is mistaken, ordinarily he should not be penalised. If Page 4 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc litigant approaches professional and who advices him to take course of action, as in instant case, then, bona fides of professional are not to be tested. If litigant has acted on such advice, then, because that advice was erroneous or mistaken, does not mean that either professional or litigant has any ulterior motive. This by itself is not deliberate or intentional act and for which litigant should be punished. Mr. Dastur brought to our notice several paragraphs in initial order of Tribunal which would indicate, according to him, that professional, namely, Chartered Accountant in this case, has been severely criticised and by using strong language. Tribunal has not expressed itself in manner befitting judicial body or authority. Tribunal should not have departed from principles of sobriety, restraint and reserve in criticising conduct of those who are not before Court or Tribunal. This elementary principle should have guided Tribunal throughout. It is no good that later on such harsh, strong and adverse remarks are deleted. damage is already done. 8. On other hand, Mr. Pinto, appearing for Page 5 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc Revenue, would support conclusion of Tribunal in refusing to condone delay. He would submit that eventually this is discretion vesting in Tribunal and if it is exercised fairly, reasonably and in accordance with law, then, this Court should not interfere with same merely because another view is possible. He would, therefore, submit that appeals be dismissed. 9. For properly appreciating rival contentions, first thing that we would have to do is to peruse application which was filed seeking condonation of delay. It is clear that assessee also relied upon written submissions and compilation of Judgments, setting out settled principles/reiterating them. 10. It is clear from record that assessee had filed application supported by affidavit. He stated that order of Commissioner of Income Tax (Appeals) was received for Assessment Year 1994 95 on 20 3 2003. last date for filing appeal before Tribunal was 19 5 2003. Page 6 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc However, for reasons beyond control of assessee, appeal is filed on 20 7 2011. There is delay of 2984 days in filing appeal, but for cause or reasons set out in his personal affidavit, delay be condoned. 11. In personal affidavit, it is stated by assessee that he is citizen of India, aged about 58 years and retired from service in January, 2003. He had received copy of order of Commissioner of Income Tax (Appeals) on 20 3 2003. He states that during material period he was employed with German Bank as Mumbai Representative. He was rendering his services from India to foreign employer. He, therefore, claimed deduction under Section 80 O of I.T. Act, 1961 and with respect to salary earned by him from employer. claim for deduction under Section 80 O was disallowed by Assessing Officer for Assessment Year 1993 94 and confirmed by Commissioner of Income Tax (Appeals). Against this order of Commissioner, assessee preferred appeal before Tribunal. That appeal was filed after consulting Chartered Accountant. It is stated that Page 7 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc Chartered Accountants M/s. Rajesh Rajeev & Associates were handling income tax affairs and matters from 1997 to November, 2006. They had substantially discontinued their tax practice with individuals and started to practice with only corporate clients. Thereafter, one Sunil Chaudhari took over taxation affairs of assessee. In April 2007, Mr. Chaudhari unfortunately expired in road accident and thereafter M/s. P.A. Dhanbhoora & Company were handling taxation work from May, 2007 till February, 2011. assessee specifically stated that being in full time employment with Bank and not well versed with income tax laws, he completely relied upon his Chartered Accountants for attending to his tax matters, including regular income tax assessment and appeal matters and advising him in that regard. Since Assessing Officer passed assessment order for Assessment Years 1994 95 and 1996 97 on 25 3 1997 and 25 3 1999, respectively, denying that claim, appeal was filed before Commissioner of Income Tax (Appeals) on 9 4 1997 and 29 4 1999, respectively. When these two appeals were Page 8 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc dismissed by Commissioner of Income Tax (Appeals), M/s. Rajesh Rajeev & Associates advised assessee not to file further appeals before Tribunal for both years to avoid multiplicity of litigation as issue of Section 80 O involved in assessment years in question was identical to one involved in appeal before Tribunal for Assessment Year 1993 94. It was then pending before Tribunal. assessee stated in his affidavit that he was further advised by Chartered Accountants that after adjudication of appeal for Assessment Year 1993 94 he could move rectification application before Assessing Officer to bring his assessment order in conformity with decision of Tribunal. assessee stated that on 29 6 2006, Tribunal restored matter back to file of Assessing Officer for Assessment Year 1993 94 to examine issue of allowability of deduction under Section 80 O of I.T. Act, 1961. Thereafter, Assessing Officer passed order on 19 2 2009 allowing claim under that section of I.T. Act, 1961. 12. order giving effect to Tribunal's order was Page 9 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc received by him sometime in May, 2009. That is how he first preferred rectification application to Assessing Officer to rectify his order for Assessment Year 1994 95 and Assessment Year 1996 97. This application was made on 15 7 2009. After continuous follow up with Department and also seeking information under Right to Information Act, 2005, finally, this rectification application was rejected by Assessing Officer on 14 5 2010. That is why matter was again taken up by assessee with his Chartered Accountants who advised him earlier to prefer rectification application. On 18 4 2011, assessee received written advise from his Chartered Accountant mentioning in communication in that behalf that view or approach of Assessing Officer/Income Tax Department was incorrect. They advised assessee to follow up matter with Department. Thereafter, assessee consulted another Chartered Accountant Mr. Yatin K. Desai, who, after perusing record, advised him to file appeals before Tribunal against initial orders of Commissioner of Income Tax (Appeals) dated 1 3 2000 and Page 10 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc together therewith application for condonation of delay. 13. It is in these circumstances that assessee stated on oath that he acted bona fide under advice from his Chartered Accountants and there is no negligence nor any deliberate or intentional act on his part. 14. assessee did not rest here. He supported this application with affidavit of one Chandrashekhar, son of S.A. Yogeshwar, practicing Chartered Accountant and Managing Partner of M/s. Rajesh Rajeev & Associates. affidavit of said Chandrashekhar confirmed that assessee indeed was client of this Chartered Accountancy firm from 1997 to 2006. From paragraphs 3 to 6 of affidavit dated 22 8 2013, filed by this Chartered Accountant, it is confirmed that advice as aforesaid was given and professionally to assessee. assessee acting on same did not file appeal but rectification application. It is that endorsement from assessee's then Chartered Accountants which, according to assessee, enabled him to seek condonation of delay. Every single Page 11 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc aspect of matter was highlighted, including legal principles. Tribunal, curiously, in its order, unmindful of these legal principles and which enable liberal view to be taken of lapse on part of litigant like assessee, proceeded to pass 20 page order. In that 20 page order, what we find is that there is reference made to several decisions of Hon'ble Supreme Court brought to its notice by assessee's Senior Advocate, explanations and reasons furnished by assessee on affidavit and supported by his Chartered Accountants. Tribunal, then, in para 8 of order under appeal highlighted lethargic steps adopted by Revenue in instant case. Tribunal holds that assessee has simply put responsibility for delay on Revenue. When this kind of averments are made, according to Tribunal, it is normally expected that Revenue should verify compilation/assessment record to find out veracity of such explanation. It is unfortunate that Revenue did not care to verify record to find out veracity of submissions. Importantly, Tribunal finds that Revenue Page 12 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc has not chosen to counter averments made on affidavit by assessee and his Chartered Accountant by furnishing any counter affidavit/explanation. criticism of Departmental representative's conduct is also to be found in para 8. 15. Thus, we find that Tribunal, out of sheer desperation and frustration and agitated by fact that Revenue is not opposing request for condonation of delay, turned its attention towards assessee's Chartered Accountant. It is unfortunate that thereafter paragraphs after paragraphs are devoted to how Chartered Accountant ought to conduct himself and while advising litigants in tax matters. How Chartered Accountant, as professional, should be aware that legal proceedings should be filed in time and if there are adverse orders, how proper advice should be given. It is very unfortunate that Tribunal has, apart from seeking to advice professionals, blamed not only individual Chartered Accountants but equally Institute of Chartered Accountants of India. It is unfortunate that Courts of law or Tribunals, which are last fact finding authorities in this case, adopted this course. Page 13 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc 16. In paragraph 11 of order under appeal, reference is made to decision of Allahabad High Court in case of Sri Krishna Vs. CIT {142 ITR 618 (All)}. While it is true that statements made on affidavit remaining uncontroverted must not be accepted as true and reliable, it is clear that in absence of contemporaneous record or any attempt to falsify statements on oath, Tribunal has no business to rely on principle emerging from this decision. In instant case, Tribunal found that Revenue officials, assuming that they are lax, have not opposed condonation of delay. They have not filed any counter affidavit denying any factual statements made by either assessee or Chartered Accountant. They have not denied fact that there was rectification application filed and preceding rectification application indeed some time was consumed in serving orders of Department on assessee. It is not that rectification application was not disposed of with promptitude but after assessee was compelled to move application under Right to Information Act, it is finally on 14 5 2010 Page 14 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc that application came to be disposed of. 17. In circumstances and perusal of whole order does not indicate that Tribunal terms conduct of assessee to be sole factor responsible for delay. conduct is not termed as negligent, callous and lacking in bona fides either. In para 12 of order under challenge, we find that Tribunal holds that assessee failed to show that there was sufficient cause. How that cause is not sufficient has been explained by Tribunal in earlier paragraphs. However, explanation which assessee provided was advise from his Chartered Accountant. That is why paragraphs are devoted to conduct of professional. advice given is not only termed as wrong/absurd but assessee is faulted for blindly accepting such advice. He is termed as imprudent man and who failed to verify correctness of advice given or apply his mind to it. Thus, behaviour of assessee, according to Tribunal, is beyond comprehension of human conduct and probabilities. Page 15 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc 18. We do not see how these are relevant principles. 19. Way back in year 1979, in decision reported in AIR 1979 SC 1666 {M/s. Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi and others}, Hon'ble Supreme Court has held that legal advice tendered by professional and litigant acting upon it one way or other could be sufficient cause to seek condonation of delay and coupled with other circumstances and factors for applying liberal principles and then said delay can be condoned. Eventually, overall view in larger interest of justice has to be taken. None should be deprived of adjudication on merits unless Court of law or Tribunal/Appellate Authority finds that litigant has deliberately and intentionally delayed filing of appeal, that he is careless, negligent and his conduct is lacking in bona fides. These are, therefore, some of relevant factors. Those factors should therefore necessarily go into adjudication of present nature. 20. In Nirmala Devi (supra), Hon'ble Supreme Page 16 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc Court held as under: 5. Accident Claims Tribunal pronounced its award on September, 15, 1976, after making necessary computations and deductions. appeal had to be filed on or before January 19, 1977 but was actually filed 30 days later. Counsel for petitioner is stated to have made mistake in calculation of period of limitation. He had intimated parties accordingly with result that petitioner was misled into instituting appeal late. High Court took view that lawyer's ignorance about law was no ground for condonation of delay. Reliance was placed on some decisions of Punjab High Court and there was reference also to ruling of Supreme Court in AIR 1972 SC 749. conclusion was couched in these words: "The Assistant Divisional Manager of Company appellant is not illiterate or so ignorant person who could not calculate period of limitation. Such like appeals are filed by such companies daily. facts of this case clearly show, as observed earlier, that mistake is not bona fide and appellant has failed to show sufficient cause to condone delay." 6. We are not able to agree with this reasoning. company relies on its Legal Adviser and Manager's expertise is in company management and not in law. There is no particular reason why when company or other person retains lawyer to advise it or him on legal affairs reliance should not be placed on such counsel. Of course, if there is gross delay too patent even for layman or if there is incomprehensible indifference shield of legal opinion may still be vulnerable. correct legal position has been explained with reference to Supreme Court decision in judgment of one of us in AIR 1971 Page 17 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:52 ::: suresh 13&18-ITXA-493.2015.doc Ker. 211 (at p. 215): "The law is settled that mistake of counsel may in certain circumstances be taken into account in condoning delay although there is no general proposition that mistake of counsel by itself is always sufficient ground. It is always question whether mistake was bona fide or was merely device to cover ulterior purpose such as laches on part of litigant or attempt to save limitation in underhand way. High Court unfortunately never considered matter from this angle. If it had, it would have seen quite clearly that there was no attempt to avoid Limitation Act but rather to follow it albeit on wrong reading of situation." "The High Court took view that Mr. Raizada being Advocate of 34 years' standing could not possibly make mistake in view of clear provisions on subject of appeals existing under Section 39(1) of Punjab Courts Act and therefore, his advice to file appeal before District Court would not come to rescue of appellant under Sec. 5 of Limitation Act. Supreme Court upset this approach." "I am of view that legal advice given by members of legal profession may sometimes be wrong even as pronouncement on questions of law by courts are some times wrong. amount of latitude is expected in such cases for, to err is human and lay men, as litigants are, may legitimately lean on expert counsel in legal as in other departments, without probing professional competence of advice. court must of course, see whether, in such cases there Page 18 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:53 ::: suresh 13&18-ITXA-493.2015.doc is any taint of mala fides or element of recklessness or ruse. If neither is present, legal advice honestly sought and actually given, must be treated as sufficient cause when application under Section 5 of Limitation Act is being considered. State has not acted improperly in relying on its legal advisers." 7. We have clarified legal position regarding propriety and reasonableness of companies and other persons relying upon legal opinion in matter of computation of limitation since it is problem which may arise frequently. If Legal Adviser's opinions are to be subjected by company managers to further legal scrutiny of their own, impossible situation may arise. Indeed Government, large litigant in this country, may find itself in difficulty. That is reason why we have chosen to explain at this length application of Section 5 vis vis counsel's mistake. above sums up approach of Court rendering justice according to law. 21. We find from paragraph 13 of order, but for this relevant factors and tests, everything else has been brought into adjudication by Tribunal. Tribunal though aware of these principles but possibly carried away by fact that delay of 2984 days is incapable of condonation. That is not how matter of this nature should be approached. In process Page 19 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:53 ::: suresh 13&18-ITXA-493.2015.doc Tribunal went about blaming assessee and professionals and equally Department. To our mind, therefore, Tribunal's order does not meet requirement set out in law. Tribunal has completely misdirected itself and has taken into account factors, tests and considerations which have no bearing or nexus with issue at hand. Tribunal, therefore, has erred in law and on facts in refusing to condone delay. explanation placed on affidavit was not contested nor we find that from such explanation can we arrive at conclusion that assessee was at fault, he intentionally and deliberately delayed matter and has no bona fide or reasonable explanation for delay in filing proceedings. position is quite otherwise. 22. In light of above discussion, we allow both appeals. We condone delay of 2984 days in filing appeals but on condition of payment of costs, quantified totally at Rs.50,000/ . Meaning thereby, Rs.25,000/ plus Rs.25,000/ in both appeals. costs to be paid in one set to respondents within period of eight weeks from today. On Page 20 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:53 ::: suresh 13&18-ITXA-493.2015.doc proof of payment of costs, Tribunal shall restore appeals of assessee to its file for adjudication and disposal on merits. We clarify that all contentions as far as merits of claim are kept open. We have not expressed any opinion on same. 23. appeals are allowed in aforesaid terms and accordingly stand disposed of. (PRAKASH D. NAIK, J.) (S.C. DHARMADHIKARI, J.) Page 21 of 21 ::: Uploaded on - 05/10/2017 ::: Downloaded on - 06/10/2017 15:34:53 ::: VijayVishinMeghani v. TheDeputyCommissionerofIncome-taxCircle23(2), Mumbai