Wp/1379/2012 Of Bajaj Bhavan Owners Premises Co-Opsociety Ltd v. The Income Tax Appellate Tribunal

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1379 OF 2012 Bajaj Bhavan Owners Premises Co-op. Society Ltd.....PetitionerV/s.The Income Tax Appellate Tribunal, Mumbai & Ors....Respondents Mr.J.D. Mistri, Senior Counsel with Mr.Atul K. Jasani for the Petitioner. Mr.P.C. Chhotaray for the Respondents. CORAM : S.J. VAZIFDAR AND M.S. SANKLECHA, JJ.DATE : 10TH SEPTEMBER, 2012. P.C. :- 1.Respondent Nos.2 and 3 are the Income Tax Officer and the Union of India. 2(A).The petitioner has challenged three orders dated 23.7.2009, 14.5.2010 and 17.4.2012 passed in respect of the proceedings pertaining to the assessment years 2004-2005. (B).By the first impugned order dated 23.7.2009, the Income Tax Appellate Tribunal rejected the petitioner's appeal against the order of the Commissioner of Income Tax (Appeals), essentially on the ground that there was a delay of forty five days in filing the same. wp1379-12 Moreover, the Tribunal did not permit the petitioner's advocate to appear on that day on that ground that he did not have a power of attorney. This was despite the fact that on the same day, three other appeals for other assessment years in which the advocate had a power of attorney were adjourned to the next date to enable the advocate to set right certain technical defects. The petitioner succeeded in these three appeals before the Tribunal and also before this Court. The petitioner's fourth appeal, which is the subject matter of this writ petition however, has not been heard on merits on account of the dismissal thereof, as aforesaid. The second impugned order dated 14.5.2010 dismissed for default the petitioner's Miscellaneous Application for setting aside the first impugned order dated 23.7.2009 and for restoration of the appeal for default. The third impugned order dated 17.4.2012 rejected a further Miscellaneous Application to set aside the second impugned order inter-alia on the ground that the petitioner had not received the notice of the hearing in respect thereof on account of its peon having lost his bag. (C).We have come to the conclusion that in the facts and circumstances of this case, the petitioner must be afforded an opportunity of having its appeal heard on merits ; that the petitioner ought not be denied this opportunity on account of the alleged delay and negligence on its part ; that the petitioner was not responsible and in any event not entirely responsible for a delay of forty five days in filing the appeal and that the petitioner had in fact prosecuted all its cases duly and diligently and in respect of three out of four appeals, it had even succeeded before the Tribunal as well as before this Court.3.On 29.10.2004, the petitioner filed its return of income which was processed under section 143(1), declaring a total income of Rs.7,71,120/- after claiming a deduction under section 80P. The case was reopened under section 147 on the ground that the petitioner had collected an amount of Rs.22,67,600/- from non-members as contribution towards transfer fees. It was contended that the same having been received by the society from the incoming members was taxable in the hands of the petitioner. It was further contended that the petitioner had collected non-occupancy charges in excess of 10% and was therefore, taxable. The amounts shown by the petitioner as income from house property, was treated as income from other sources. Accordingly, proceedings under section 147 were initiated. 4(A).The assessment was completed under section 143(3) on 31.10.2006 determining the total income of Rs.42,38,329/- by making additions on the above basis. wp1379-12 (B).On 26.12.2006, the petitioner filed an appeal before the Commissioner of Income Tax (Appeals), who by an order dated 12.10.2007 confirmed the additions. 4(A).The assessment was completed under section 143(3) on 31.10.2006 determining the total income of Rs.42,38,329/- by making additions on the above basis. wp1379-12 (B).On 26.12.2006, the petitioner filed an appeal before the Commissioner of Income Tax (Appeals), who by an order dated 12.10.2007 confirmed the additions. 5.The orders impugned in this writ petition pertain to the alleged lapses and negligence on the petitioner's part in prosecuting the challenge to the order of the CIT (A) dated 12.10.2007. We are of the view that in the facts and circumstances of the case, the petitioner ought to be granted a reasonable opportunity of having its appeal decided on merits. The petitioner ought not to suffer on account of the alleged negligence. The following facts establish the same. 6.On 7.11.2007, the petitioner's Chartered Accountants (CA) M/s.Bengali & Co. collected the order dated 12.10.2007 and forwarded the same to the petitioner on 21.11.2007. 7.The last date for filing an appeal before the ITAT was 5.1.2008. It is of vital importance to note that the petitioner had by its letter dated 14.12.2007 i.e. before the time for filing an appeal had expired, instructed its CA in writing to file an appeal before the Tribunal. On 14.1.2008, the petitioner's Manager resigned. On 25.1.2008 the petitioner received through its CA the papers and proceedings in respect of the appeal to be filed. The appeal fees were paid on 31.1.2008. On 10.2.2008 the appeal papers were signed by the office bearers of the society. On 21.2.2008 the appeal was received by the Tribunal by post. 8.There was thus a delay of about forty five days in filing the appeal. Neither the extent, nor the nature of the delay warrants the drastic consequences of denying the petitioner an opportunity of defending its case on merits. It is not as if there was no explanation for this delay. As we noted earlier, the petitioner's Manager had resigned on 14.1.2008. Indeed by that date, there was a delay of about nine days. We however, cannot rule out the possibility of the same having occurred on account of the impending resignation. The delay is not of such a nature as to invite such drastic consequences upon an assessee. There is nothing unusual or unreasonable about the petitioner's members and its office bearers having relied upon its staff, especially its Manager in taking all steps necessary for filing the appeal. It must be remembered that the order of the CITA (A) was received by the petitioner from its Chartered Accountant on 21.11.2007 and within less than a month, the petitioner instructed its Chartered Accountant to file an appeal. This was before the last date for filing the appeal viz. 5.1.2008. We see no reason why the petitioner ought to suffer on account of the resignation of its Manager and on account of its having received the papers only on 25.1.2008. Indeed despite the same, the petitioner paid the appeal fees within a week i.e. on 31.1.2008 and completed the remaining formalities on 10.2.2008. 9.On 23.7.2009, four appeals filed by the petitioner were placed before the Tribunal in respect of the different assessment years. Three of them were adjourned to the following date i.e. 24.7.2009 to correct technical errors. The Tribunal however held the appeal pertaining to the assessment year in question viz. 2004-2005, to be barred by limitation. The Tribunal observed that a defect memo had been issued which required the petitioner to rectify the defects within ten days, which it had failed to do. The Tribunal therefore, dismissed the appeal “as unadmitted” being barred by limitation. week i.e. on 31.1.2008 and completed the remaining formalities on 10.2.2008. 9.On 23.7.2009, four appeals filed by the petitioner were placed before the Tribunal in respect of the different assessment years. Three of them were adjourned to the following date i.e. 24.7.2009 to correct technical errors. The Tribunal however held the appeal pertaining to the assessment year in question viz. 2004-2005, to be barred by limitation. The Tribunal observed that a defect memo had been issued which required the petitioner to rectify the defects within ten days, which it had failed to do. The Tribunal therefore, dismissed the appeal “as unadmitted” being barred by limitation. 10.It is pertinent to note that an advocate had appeared on behalf of the petitioner in all four appeals. Three of these appeals were adjourned to enable him to rectify certain defects in the power of attorney entitling him to represent the petitioner before the Tribunal. It appears that for some reason, the petitioner had failed to furnish a power of attorney for the assessment year in question - 2004-2005. The Tribunal therefore, rejected an application to have the matter adjourned even by a day and therefore, detagged this appeal from the other three appeals, did not permit the advocate to appear and dismissed the same for default. The order records that no explanation was tendered by the assessee. The fact however, is that the advocate was not permitted to appear on the ground that he did not have an authority in respect of this one out of four appeals. We are clearly of the view that the Tribunal ought to have, in these circumstances, permitted the advocate time to obtain a power of attorney. This was a mere formality. He had already been issued a power of attorney in respect of the appeals for the other three assessment years. We see no justification in the appeal having been dismissed for this reason. The petitioner cannot even be held entirely responsible for the delay. It had engaged a firm of Chartered Accountants to represent it. It had prosecuted the appeals for the other three years duly and diligently and in fact successfully. It instructed the CA to file the said appeal prior to the last date for filing the same. Even if there was any delay, it was not on account and certainly not entirely on account of the petitioner. That the petitioner's Manager had resigned at a crucial stage is another factor in its favour. 11.The order dated 23.7.2009, which is the first of the impugned orders, is therefore, liable to be set-aside. 12.On 4.11.2011, the Tribunal passed the orders in the other three appeals, pertaining to the assessment years 2001-2002, 2002-2003 and 2003-2004. It was held that the non-occupancy and transfer fees / betterment charges collected by the petitioner from its wp1379-12 members were not taxable and that the rent received by the petitioner for erection of a tower on the terrace was to be assessed as income from house property. In other words, the petitioner's appeals in respect of the other three assessment years succeeded. The same questions also fall for consideration in the fourth appeal for the assessment year in question viz. 2004-2005. Mr.Chhotaray stated that these orders are totally irrelevant. We do not agree. It would be a travesty of justice to deny the petitioner reliefs it is otherwise entitled to on account of the alleged delay and negligence. The same result ought to follow in respect of the assessment year 2004-2005 if the issues indeed are the same. In the facts and circumstances of this case, there is no warrant for denying the petitioner such relief due to the alleged negligence. Mr.Chhotaray stated that these orders are totally irrelevant. We do not agree. It would be a travesty of justice to deny the petitioner reliefs it is otherwise entitled to on account of the alleged delay and negligence. The same result ought to follow in respect of the assessment year 2004-2005 if the issues indeed are the same. In the facts and circumstances of this case, there is no warrant for denying the petitioner such relief due to the alleged negligence. 13.On 24.3.2010, the petitioner filed a Miscellaneous Application before the Tribunal for setting aside the order dated 23.7.2009 and for restoration of the appeal. The same was dismissed by an order of the Tribunal dated 14.5.2010 for default. The petitioner remained unrepresented. The order however, was passed on merits. The Tribunal recorded that it had perused the record. 14.For the reasons already stated, we are unable to agree. wp1379-12 The Miscellaneous Application sets out the facts which in our view constitute sufficient grounds for recalling the order dated 23.7.2009. Even assuming that this order correctly held that allowing the Miscellaneous Application would amount to a review, this Court is not precluded from exercising its writ jurisdiction to consider the same. 15.In the circumstances, the second impugned order dated 14.5.2010 is liable to be set-aside. 16.On 23.3.2011, the petitioner filed a further Miscellaneous Application explaining the reasons for not having appeared on 14.5.2010 when the second impugned order was passed. It was stated that the petitioner had not received the notice. The petitioner's peon filed an affidavit stating that in April, 2010, he had received the notice from the Tribunal just before closing hours of the office and that he therefore, carried the same to his residence. Unfortunately, he left his bag behind in the local train and lost his belongings as well as the said notice. 17.By orders dated 30.6.2011 and 16.8.2011, this Court dismissed the respondent's appeals against the said orders of the Tribunal dated 4.11.2009 allowing the petitioner's appeal in respect of the three other assessment years. 18.Despite the above facts, the Tribunal by the third impugned order dated 17.4.2012 dismissed the further Miscellaneous Application. 19.The appellant has indeed filed an appeal challenging the order dated 23.7.2009 being ITA (Lodging) No.919 of 2012 along with a notice of motion for condonation of delay. It was contended that in view thereof, this writ petition is not maintainable. We do not agree. This writ petition is comprehensive and challenges all the impugned orders. It is doubtful whether the appeal is maintainable against the orders in the Miscellaneous Applications. In order to obtain complete relief the petitioner cannot be faulted for having filed this writ petition. The petitioner has been put to considerable expenses and effort merely to obtain a hearing on merits. The petitioner can, by no stretch of imagination be said to have waived its rights. This is clear from the fact that the petitioner has duly and diligently prosecuted the appeals in respect of the three other assessment years. But for the unfortunate circumstances which we have referred to above, this appeal would also have been heard on merits in the normal course. The petitioner is not entirely at fault for the delay and negligence in prosecuting the fourth appeal. At the cost of repetition, we see no justification in denying the petitioner an opportunity of having its appeal considered on merits. Even assuming that there is some negligence on its part, the same has caused the respondent no prejudice whatsoever. wp1379-12 wp1379-12 20.For the aforesaid reasons, we see no reason to dismiss the writ petition on account of the appeal having been filed. We see no justification for dismissing the writ petition on the ground that it is averred therein that the petitioner has not filed any other petition which it indeed has not. It has filed an appeal. Moreover the writ petition was filed on 3.7.2012 i.e. almost within a week of the appeal having been filed. 21.In the circumstances, rule is made absolute by setting aside the impugned orders. The Tribunal is directed to hear the petitioner's appeal on merits. The petitioner shall comply with the directions of the Tribunal, if any, within four weeks of the service of a notice in that regard by the Tribunal upon the petitioner. No order as to costs. (M.S. SANKLECHA, J.) (S.J. VAZIFDAR, J.)