ORDER
N. Barathvaja Sankar, Accountant Member
1. As these two appeals are by the assessee, Shri Y. Hayagriva Rao, Bangalore, against the separate appellate orders dated 22-2-2005 of CIT(A)-V, Kochi, arising out of order passed under Section 143(3) and 154 by the Assessing officer for the same assessment year, namely 1992-93, the same were clubbed together, heard together and are being disposed of by this common and consolidated order, for the sake of brevity and convenience.
2. Let me first take up the appeal in ITA No. 503/Coch/2005 emanating from the order passed under Section 143(3) of the Act, by the assessing officer. This is an appeal against the appellate order dated 22-2-2005 of CIT(A)-V, Kochi. The brief facts pertaining to this appeal are that the assessee filed his return of income for A.Y.I992-93 declaring total income of Rs. 21,354/-. The assessee was a co-owner for 6/20 share in “Pathan’s Cafe”” property, mortgaged to State Bank of India for a sum of Rs. 20 lakhs in 1979. In 1989, when the bank dues exceeded Rs. 50 lakns, the bank obtained a decree for auction sale of Pathan’s property. To avert this situation, one Shri Janardhana Rao – one among the co-owners approached all other co-owners and secretly obtained individual consent letters to dispose each one’s share in the property. The assesses also gave consent letter to transfer his share for a consideration of Rs. 2 lakhs, without mutually knowing about the consent letter. As nothing happened for a long period of 21 months, the co-owners were forced to effect a total partition of the property among them fixing the value of the property at Rs. 3 lakhs and were forced to transfer their share of properties in favour of the solvent co-owner Shri Janardhana Rao. The matter of consent letter was kept as a secrete without disclosing it among the co-owners. The partition was registered and the payment was made then and there in the presence of the Sub Registrar, before signing the document. The assessee received only a sum of Rs. 90,000A as his 6/20 share in the property. Afterwards, during the course of a search in the residence of Shri Janardhana Rao, the consent letters were seized by the Income-tax Department. Assuming that the payment according to the consent letter was received by the assessee, a notice under Section 143(2) was issued to the appellant-assessee and the assessee denied to have received Rs. 2 lakhs as mentioned in the consent letter. However, the AO obtained statements from Shri Janardhan Rao and based on this sworn statement of Shri Janardhana Rao, completed the assessment under Section 143(3) computing capital gain in respect of the assessee for the 6/20 share in the joint property and the total tax payable worked out as Nil. As there was no tax liability, as per the assessment order, the assessee did not file any appeal against the assessment order. However, later on the AO rectified the order passed under Section 143(3) dated 18-2-2002, by an order dated 9-3-2004 and the assessee found that his tax liability including interest was worked out to Rs. 72,161/-, In the rectification order, the AO withdrew the cost indexation allowed to the assessee for the reason that the same was not allowable for the assessment year 1992-93. After the passing of the order under Section 154, it was necessitated for the assessee to file an appeal against the assessment order passed under Section 143(3) also challenging the computation of the capital gains. Thus, the assessee filed an appeal against the order passed under Section 143(3) for the assessment year 1992-93 with a delay of 751 days. It was pleaded before the first appellate authority that the delay was beyond the control of the assessee as it occurred due to the facts explained as above. The assessee had also taken grounds of merit on addition of Rs. 2 lakhs in the hands of the assessee while computing the capital gains in the order passed under Section 143(3) of the Act, by the AO. The learned CIT (A), however, dismissed the appeal as not maintainable because of the in-ordinate delay in filing the appeal. While dismissing the appeal of not condoning the delay, the CIT (A) has observed as under:
Here, it is important to note that since there was no tax demand in the original order passed Under Section 143(3) on 18-2-2002, the appellant did not bother to file appeal against the impugned order. There after, since the assessing officer passed order under Section 154 on 9-3-2004 rectifying the mistake apparent from record crept in the original order raising a demand of Rs. 72,161/-, the appellant has filed this particular appeal after delay of 751 days against the original order passed Under Section 143(3). Here, it is important to mention that in the original order passed Under Section 143(3) on 18-2-2002, the AO computed the capital gain on sale of property after inclusion of Rs. 2 lakhs in the sale proceeds and giving cost of indexation Under Section 48(2) at Rs. 1,88,055/- Later on, the assessing officer found that the cost of indexation Under Section 48(2) was wrongly allowed while computing the capital gain as the provisions of cost inflation index Under Section 48(2) was brought on the Statute only from the assessment year 1993-94, which is not applicable for the instant asst. year i.e. 1992-93.
In view of that the cost of indexation was disallowed by the AO in the order passed under Section 154 date 9-3-2004. This is the factual background of the case under which the appellant has chosen to file a belated appeal after delay of 751 days. N Now, the question arises whether the delay of 751 days is to be condonable or not. It is also relevant to see as to whether the delay of filing the belated appeal after laps of 751 days can be considered as bonafide or not. Before deciding the condonation of delay, it may be relevant to analyse the fat s of the case in more detail Here, the fact remains that initially it appears that the appellant has accepted the finding of the. assessing officer in the order passed Under Section 143(3) 18-2-2002. This is implicit from the facts of the case as there was nil demand in the original order and the appellant may not have any grievance from the net result of the order. But the facts remain that there was misapplication of law in the computation of capital gain with regard to allowance of cost of indexation Under Section 48(2). Perhaps, the appellant may be knowing the mistake regarding the misapplication of law and remained silent even to the extent of not filing the appeal Here, it is pertinent to note that there was adverse finding in the order passed Under Section 143(30 ON 18-2-2002 by the assessing officer with reference to inclusion of Rs. 2 lakhs in the sale proceeds of land and building. Not filing the appeal against the order means the acceptance of adverse finding by the appellant. Subsequently, when the order Under Section 154 was passed, the appellant got up from slumber and filed appeal against the original order also simultaneously against the order passed Under Section 154. This is the detailed factual matrix under which the petition for condonation of delay is to be decided. From the close analysis of the facts and also looking to the facts and circumstances of the case in tandem, I find that the action of the appellant cannot be considered as bonafide in totality. There does certainly appear some kind of mala fide in the entire state of affairs. It may be a case of strategy for the appellant for not filing the appeal due to obvious fact that there was no demand originally but the fact remains that the appellant deliberately kept silent on the order passed Under Section 143(3) which gave adverse finding against him. The appellant cannot be said to have prevented from reasonable cause from filing of appeal. In the case of Shri P.K. Ramachandran v. State of Kerala wherein it was pointed out that law on merits cannot be disregarded on equitable grounds. Following the line of reasoning in the latter case the High Court in CIT v. Ram Mohan Kabra dismissed the appeal by the I.T. Department against the Tribunal refusing the condonation of delay of five days in departmental appeal. In view of the foregoing discussion, I hold that the inordinate delay in this particular case cannot be condoned. Hence, as a result, the maintainability of the appeal is not allowed.
Thus the first appellate authority dismissed the appeal for the delayed filing and did not deal with the merits of the case though raised by the assessee in the grounds of appeal. Aggrieved by this order of the CIT(A), the assessee is on second appeal before the Tribunal.
3. With regard to the refusal to condone the delay of 751 days by the CIT(A), the following grounds are raised:
1. The CIT(A) ought to have condoned the delay of 751 days occurred in filing the appeal before him, in the circumstances of the case.
2. The order passed by the appellate authority is illegal and unsustainable.
3. The first appellate authority failed to note that in the assessment order passed Under Section 143(30 by the assessing officer on 18-2-2002 there was no actual tax liability accrued to the appellant.
4. The appellate authority ought not to have expected! the appellant who was more than 67 years of age at the time of assessment, to challenge the assessment for academic interest or to explore the legal-implications of the finding of the assessing officer.
5. The first appellate authority ought to have condoned the delay accepting the genuine reasons stated by the appellant in the petition for condonation.
6. The first appellate authority ought to have found that the impugned order merged with the order passed by the assessing officer Under Section 154 on 9-3-2004 and that the appellant filed the appeal within the time from the date of the said order.
4. At the time of hearing the learned Counsel for the assessee apart from reiterating the grounds of appeal as his submissions, pleaded! that the assessee is an individual and not a corporate assessee, who could have enough resources to fight for academic interest on any issue. | As the assessee was not having any tax effect by the order passed by the AO under Section 143(3) originally, the assessee did not take up the matter in appeal and when the AO rectified the order under Section 154 by creating a tax liability on the assessee to the extent of Rs. 72,161/-, the assessee was compelled by the circumstances to file an appeal and challenge the addition made in the original order itself passed under Section 143(3) of the Act. There was no malafide intention as presumed by the first appellate! Authority in not filing an appeal against the original order passed under Section 143(3) of the Act. The observation of the learned CIT(A) that the appellant may be knowing the mistake regarding the mis-application of law and !remained silent even to the extent of not filing the appeal and certainly there appear some kind of malafide in the entire state of affairs and that it may be the case of strategy for the appellant for not filing the appeal due to obvious facts that there was no demand originally but the fact remains that the appellant deliberately kept silent on the order passed Under Section 143(3) which gave adverse finding against him, are baseless and purely on conjunctures.
5. On the other hand, the learned DR strongly relied on the order of the first appellate authority and reiterated the contents of the same as his submissions. He also relied on the decision of the Punjab & Haryana High Court in the case of CIT v. Ram Mohan Kabra reported in 257 ITR 773 and the decision of the Bombay High Court by filing an extract from “taxindiaonline” (kept on record) wherein it was held that “Commissioner of Central Excise had no jurisdiction to condone the delay beyond 60 days in filing the appeal.
6. I have heard the rival submissions and considered the facts and materials on record. The decisions relied upon by the learned DR, in my opinion, are not applicable to the facts of the present case on hand. In the case on hand when the original order under Section 143(3) was passed, there was no tax liability on the assessee and hence the assessee did not file any , appeal. When the same was rectified under Section 154, the tax burden of Rs. 72,161/- was put on the assessee and hence the assessee was forced to file an appeal not only against the order passed under Section 154 but also to challenge the original order passed under Section 1143(3) wherein ah adverse finding on the assessee was given while adding Rs. 2 lakhs to the sale proceeds. The observation of the first appellate authority that there was some malafide intention on the part of the assessee by keeping silent against the original order is not borne out of any materials on record, Perhaps it was an assumption of the first appellate authority that the assessee deliberately kept silent, as a strategy. Even assuming that the assessee kept silent deliberately without filing an appeal against the original order passed under Section 143(3) which did not create any tax liability on the assessee, I do not find any bona fide intention in such silence. As rightly argued by the learned Counsel for the assessee, one cannot expect that an individual will fight for academic interest when there was no tax liability against him by any order. Once the tax liability has been imposed on the assessee by the rectification order by circumstances, the assessee was forced to challenge the original order wherein an adverse finding was given. As such I do not find any deliberate silence on the part of the assessee and even if it was deliberate nothing was wrong in keeping silent when there was no tax liability.
7. The Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji had pointed out that there can be no presumption of deliberateness or negligence or mala fides in case of delay; because litigants run a serious risk without any benefit by the delay. It was also pointed out that judiciary is respected not for legalizing injustice on technical grounds but for removing injustice. Further, the Income-tax law prescribes time limits in respect of various obligations imposed upon the tax payers, but in most cases permits condonation, if sufficient cause is shown. The expression “sufficient cause” and “reasonable cause” appear in many statutory provisions with the result that the interpretation as to their meaning has been the same. In most matters, it is the perception of the court or the Tribunal in the facts of the case, which decides the issue. In view of this discussion I am of the view that the first appellate authority was wrong in presuming deliberate negligence or malafide in the delay in filing the appeal against the original order passed under Section 143(3) by the assessee. Thus, I am of the view that there were bonafide reasons on the part of the assessee for not filing the appeal in time, as the assessee was not having tax liability originally and only on rectification the tax burden was put on the assessee, at which point of time, the assessee had filed the appeal against the original order. According to me there was bonafide reasons for the assessee for the delay in filing the appeal and as such the CIT(A) ought to have condoned the delay and decided the case on merits. Hence, I direct the CIT (A) to condone the delay and admit the appeal to decide the issues on merits, after giving effective opportunity of hearing to the assessee. The assessee is also directed to cooperate with the first appellate authority without seeking adjournment on flimsy grounds/reasons. Thus this appeal of the assessee is partly allowed for statistical purposes.
8. Now let me turn to the appeal in ITA No. 504/Coch/2005. The effective grounds of appeal of the assessee read as under:
2. The order passed by the CIT(A) is opposed to law, facts and circumstances of the case and hence unsustainable.
3. The CIT(A) ought to have found that the assessment made under Section 143(3) merged with the order passed under Section 154 and that the entire grounds raised by the appellant regarding the computation of capital gain were in order.
4. The CIT(A) failed to note that the rectification carried out by the assessing officer was beyond the scope of Section 154 of the Income-tax Act 1961 and hence illegal and unsustainable.
5. The question regarding the applicability of cost indexation for assessment year 92-93 is debatable issue and hence out side the purview of Section 154 of the Income-tax Act.
6. The authorities below erred in rejecting the method of cost indexation for fixing the cost of acquisition while computing the capital gain.
7. The assessing authority erred in working out the capital gain based an alleged statements gain by third parties, without affording the appellant an opportunity to cross examine such third parties.
8. The CIT(A) ought to have found that the decision rendered by the Hon’ble High Court of Kerala in CIT v. VKC Agnes is applicable in this case and deleted the capital gain worked out by the assessing officer.
Since I have already restored the appeal against the order passed under Section 143(3) of the I.T. Act to the file of the CIT(A), I feel it fit and proper to restore this appeal also to the CIT(A), to deal afresh, after disposing of the appeal against 143(3) order, if there be any need. Accordingly, this appeal is allowed for statistical purposes.
9. In the result, ITA No. 503/Copch/05 is partly allowed for statistical purposes whereas ITA No. 504/Coch/05 is allowed for statistical purposes.