M/S.centre For Individual& Corporate Action (Cica)T v. The Asst. Commissioner Of Income Taxbusiness Circle – Xiiichennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR. JUSTICE R.SUDHAKARANDTHE HONOURABLE MR. JUSTICE G.M.AKBAR ALI T.C.A. NOS. 283 TO 288 OF 2014ANDM.P. NOS. 1 OF 2014 M/s.Centre for Individual& Corporate Action (CICA)T-73, Anna NagarChennai 600 040. ...Appellant in all the appeals - Vs - The Asst. Commissioner of Income TaxBusiness Circle – XIIIChennai....Respondent in all the appeals Appeals filed against the order dated 23.7.2012 passed by theIncome Tax Appellate Tribunal, 'C' Bench, Chennai, in ITA Nos.880 to885/Mds/2012 for the assessment years 1995-1996 to 2000-2001preferred against common order of the CIT (Appeal) - XII dated29.08.2006 in ITA No.115 to 120/05-06 pertaining to Asst. years 1995-96 to 2000-2001 respectively preferred against common order of theIncome Tax Appellate Tribunal 'A' Bench, Chennai in ITA Nos.393 to396/Mds/2003 and C.O.Nos. 22 to 25/Mds/2003. These appeals are preferred by the assessee against the orderdated 23.7.2012 passed by the Income Tax Appellate Tribunal, 'C'Bench, Chennai, in ITA Nos.880 to 885/Mds/2012 for the assessmentyears 1995-1996 to 2000-2001. 2. The following substantial questions of law have been framedfor consideration in these appeals :- https://hcservices.ecourts.gov.in/hcservices/ “a) Whether on the facts and circumstances of thecase, the Income Tax Appellate Tribunal was right inlaw in dismissing the appeals filed by the assesseeas time barred? b) Whether on the facts and in the circumstances ofthe case, the Income Tax Appellate Tribunal was rightin law in holding that the deduction claimed by theappellant u/s 40 (b) of the Income Tax Act, 1961 isnot justifiable? c) Whether on the facts and in the circumstances ofthe case, the Income Tax Appellate Tribunal was rightin law in holding that the appellant is not entitledto make a claim for deduction in the remandassessment proceedings even if the appellant isstatutorily entitled to such claim to arrive at acorrect assessable income?” 3. The appellant/assessee is engaged in supply and training ofmanpower for corporate sector. The appellant received professionalcharges for various technical services rendered by it for theassessment years 1995-1996 to 2000-2001, in all six assessment years.The assessment was completed under Section 143 (3) r/w 147 of theIncome Tax Act by the Assessing Officer and the claim of expenditureat 98% of the service charges was rejected and expenditure to theextent of 20% was allowed. Aggrieved against the said order, theassessee preferred appeal to the Commissioner of Income Tax(Appeals), who estimated the assessee's net profit at 25% of theservice charges received. On further appeal to the Tribunal in ITANos.2164 and 2165/Mds/2003, 393 to 396/Mds/2003, the Tribunal setaside the order of the Commissioner of Income Tax (Appeals) anddirected the Assessing Officer to assume the net profit at 40% of thegross professional receipts and not on all the credit entriesappearing in the bank statement. 4. On remand, in the course of assessment proceedings underSection 143 (3) r/w 256, the appellant claimed deduction ofexpenditure towards remuneration to partners and interest on capitalaccounts. The Assessing Officer completed the assessment vide orderdated 31.01.2006 and arrived at the net taxable income by treating40% of total consulting charges as net profit of the appellant andallowed interest on capital account of the partners. However, theAssessing Officer disallowed the assessee's claim for expendituretowards payment of remuneration to partners under Section 40 (b). 5. Aggrieved against the above order, the assessee preferred anappeal to the Commissioner of Income Tax (Appeals) against all theorders disallowing the assessee's claim for expenditure towardspayment of remuneration to the partners under Section 40 (b).However, the Commissioner of Income Tax (Appeals) dismissed the 5. Aggrieved against the above order, the assessee preferred anappeal to the Commissioner of Income Tax (Appeals) against all theorders disallowing the assessee's claim for expenditure towardspayment of remuneration to the partners under Section 40 (b).However, the Commissioner of Income Tax (Appeals) dismissed the appeals by order dated 29.08.2006, confirming the order of theAssessing Officer. 6. Aggrieved by the said order of the Commissioner of Income Tax(Appeals), the assessee filed six appeals before the Tribunal with adelay of 2053 days and the Tribunal, vide common order dated 23.7.12,framed the following two questions for consideration :- “i) Whether condonation of 2053 days in filing the appeals before the Tribunal is justified? ii) Whether the appellant is entitled to claimdeduction under Section 40(b) as claimed?” 7. The Tribunal took up all the matters together and aftersetting out the details of the claim and the reasons as submitted bythe assessee for condonation of delay, rejected the same holding thatthe explanation submitted by the assessee is not satisfactory andthere are no sufficient particulars. The Tribunal while holding thatthere is no ground for condonation of delay, further proceeded todispose of the appeals on merits and dismissed the same. Havingdismissed the appeals of the assessee on the question of condonationof delay, the further order of the Tribunal dismissing the appeals ofthe assessee on merits is now challenged before this Courts by theassessee by taking similar grounds as stated above. 8. Heard Mr.Senthil Kumar, learned counsel appearing for theappellant/assessee and Mr.Narayanasamy, learned standing counselappearing for the respondent/Department. 9. The net taxable income differs for each assessment year andthis Court is not concerned with the said aspect. Though threequestions of law have been raised for consideration in these appeals,in view of the order that is to be passed in this appeals, this Courtis not going into any of the question of law at the present time. 10. Even at the very outset we find that the procedure adopted bythe Tribunal is highly prejudicial to the interest of theappellant/assessee inasmuch as the Tribunal having decided not toproceed with the matter on the ground of condonation of delay, cannotunilaterally decide the appeals on merits, more so when theappellant/assessee was not given proper opportunity to contest thematter in the main appeals on merits. The order of the Tribunal isalso not in consonance with Section 253 (5) of the Income Tax Act.Section 253 (5) of the Income Tax Act mandates that an appeal shouldbe admitted before ever an order is passed on merits. Once theappeal itself is not entertained, the question of going into themerits of the matter does not arise. We, therefore, find that theorder of the Tribunal deciding the appeals of the assessee on merits,after dismissing the appeal itself on the question of delay, is anerror apparent on the face of the record and that the order passed is https://hcservices.ecourts.gov.in/hcservices/ without jurisdiction since, when there is no appeal, there is noquestion of deciding the issue raised in the appeal on merits. 11. The above view of ours is fortified by the decision of theGauhati High Court in the case of Williamson Financial Services Ltd.- Vs – Commissioner of Income Tax & Anr. (2003 (262) ITR 595). https://hcservices.ecourts.gov.in/hcservices/ without jurisdiction since, when there is no appeal, there is noquestion of deciding the issue raised in the appeal on merits. 11. The above view of ours is fortified by the decision of theGauhati High Court in the case of Williamson Financial Services Ltd.- Vs – Commissioner of Income Tax & Anr. (2003 (262) ITR 595). 12. In view of the reasons above mentioned, we set aside theorder of the Tribunal and remand the matters back to the Tribunal forreconsideration. Accordingly, the matters are allowed by way ofremand to the Tribunal. Consequently, connected miscellaneouspetitions are closed. It is needless to add that while dealing withthe condonation of delay issue, the Tribunal shall keep in mind theproceedings which the assessee first went through even before thisorder, which goes to show that the assessee has been acting bona fideand diligently pursuing the matter before the appropriate forum. Sd/- Assistant Registrar(LA) //True Copy// GLN Sub Assistant Registrar To 1. The Income Tax Appellate Tribunal 'C' Bench, Chennai. 2. The Asst. Commissioner of Income Tax Business Circle – XIII Chennai. 3. The Commissioner of Income Tax (Appeals) - XII, Chennai. Chennai. 4. The Income Tax Appellate Tribunal, 'A' Bench, Chennai. 'A' Bench, Chennai. 1 CC to Mr.Philip George, Advocate SR.No. 46058 1 CC to Mr.J.Narayanan, Advocate SR.No. 46261 CNR (CO)PSI(08.12.2014)