National Pharmaceuticals , Thane vs Assessee

The present appeal has been preferred by the assessee against the order dated 08.11.2012 of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as the CIT(A)] in relation to levy of penalty under section 271(1)(c) of the Income Tax Act.

2. The assessee has filed written submissions vide letter dated 21.05.2015 and it has been requested that the matter be disposed of after considering the written submissions of the assessee. Hence, we proceed to dispose of the matter after hearing the Ld. D.R. and going through the written submissions of the assessee.

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3. The Ld. CIT(A), vide impugned order, has declined the request of the assessee to condone the delay of eight months and five days in preferring the appeal by the assessee before him. In its written submissions, the assessee has pleaded that it has filed an appeal in the quantum proceedings before the ITAT. In the penalty proceedings, it was requested to the Assessing Officer (hereinafter referred to as the AO) that the penalty proceedings be kept in abeyance till the disposal of the quantum appeal of the assessee before the ITAT. Thereafter, the assessee did not receive any notice from the AO in the penalty appeal. The assessee was under bonafide belief that the penalty proceedings have been kept in abeyance. However, later on it was revealed that the penalty order was passed by the AO which was also sent on the address of the assessee. The assessee has pleaded that the assessee is a small pharmaceutical unit and do not have much administrative staff. The assessee came to the knowledge of passing of the penalty order when the Department started pressing for the recovery of the penalty amount. It has been submitted that the penalty order might have been received by some casual worker of the assessee firm. The person who might have received the penalty order would have left the employment of the assessee firm that is why the assessee could not get the knowledge of the service of the penalty order upon the assessee. It has been submitted that delay in filing the appeal before the Ld. CIT(A) was because of the reason that the assessee was not aware of the passing of the penalty order. There was no intentional delay on the part of the assessee in filing the appeal before the Ld. CIT(A).

4. The Ld. CIT(A), however, has not believed the version of the assessee on the ground that the assessee has not disclosed the name of the specific employee who had received the penalty order and also that the assessee has not disclosed the exact date of leaving of the job by the said employee.

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5. After considering the written submissions of the assessee and hearing the Ld. D.R., we find that the assessee has submitted that it was not aware of the service of penalty order. It is the belief of the assessee that it might have been received by some casual worker of the assessee. When the assessee itself was not aware that who actually had received the notice, then the Ld. CIT(A) should not have expected from the assessee the name of the employee who actually received penalty order. Had the assessee been in knowledge as to who had received the notice, then in that case the assessee might have been aware of the receipt of the penalty order. Hence, the rejection of the application of the assessee on this ground cannot be justified. Moreover, we find that present is a penalty appeal and not a quantum appeal. The levy of penalty in comparison to the levy of tax is different as the former has some characteristic of penal consequence as the very name of it suggests. Under such circumstances, without hearing the assessee on merits, the consequences of levy of penalty can be said to be harsh. The Hon'ble Supreme Court in the case of "G. Ramegowda, Major and others v. Special Land Acquisition Officer, Bangalore" (1988) 2 SCC 142, while relying upon various other decisions of the Hon'ble Supreme Court itself viz. Ramlal, Motilal and Chhotelal v. Rewa Coalfield Ltd. (1962) 2 SCR 762; Shakuntala Devi Jain v. Kuntal Kumari(1969) 1 SCR 1006 ; Concord of India Insurance Co. Ltd. V. Nirmala Devi(1979) 3 SCR 694; Lala Mata Din v. A. Narayanan(1970) 2 SCR 90 ; Collector, Land Acquisition v. Katiji etc. (1987) 2 SCC 107, has held that "There is, 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 fide on the part of the party or its counsel 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 4 ITA No.1649/M/2013 M/s. National Pharmaceuticals

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."

In State of Nagaland v. Lipok AO and others (2005) 3 SCC 752, the Ho'ble Supreme Court, after referring to New India Insurance Co. Ltd. V. Shanti Misra(1975) 2 SCC 840, N. Balakrishnan v. M. Krishnamurthy AIR 1998 SC 3222, State of Haryana v. Chandra Mani(1996) 3 SCC 132 and Special Tehsildar, Land Acquisition v. K.V. Ayisumma (1996) 10 SCC 634, came to hold that adoption of strict standard of proof sometimes fails to protect public justice and it may result in public mischief. In Improvement Trust, Ludhiana v. Ujagar Singh and others(2010) 6 SCC 786, it has been held that while considering an application for condonation of delay no straitjacket formula is prescribed to come to the conclusion if sufficient and good grounds have been made out or not. It has been further stated therein that each case has to be weighed from its facts and the circumstances in which the party acts and behaves.

6. In view of above law, we are of the view that the reasons for delay in filing the appeal by the assessee constitute sufficient cause for condonation of delay. The delay in filing the appeal is therefore condoned and the impugned order of the Ld. CIT(A) is accordingly set aside and the matter is restored to the file of the Ld. CIT(A) to decide the appeal of the assessee on merits after giving proper opportunity of hearing to the assessee.

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7. In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 08.07.2015.

Sd/- Sd/- (G.S. Pannu) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 08.07.2015. * Kishore, Sr. P.S.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.