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Vijay Vishin Meghani vs. DCIT (Bombay High Court)
October, 11th 2017

Strictures by ITAT against ICAI deprecated: It is very unfortunate that the Tribunal, out of sheer desperation and frustration and agitated by the fact that the Revenue is not opposing the request for condonation of delay blamed the assessee's Chartered Accountant and the ICAI on how they should conduct themselves. The Tribunal completely misdirected itself by taking irrelevant factors into account. Delay of 2984 days in filing the appeal caused by wrong advice of a professional is capable of condonation. However, even if the assessee has acted bona fide, he can be held liable for payment of costs to balance rights and equities

The assessee filed an appeal against the order of the Tribunal in Vijay V Meghani vs. DCIT (ITAT Mumbai) where delay of 2984 days in filing an appeal due to wrong advice given by the Chartered Accountant was refused to be condoned. In addition, severe strictures were passed against the Chartered Accountant and the Institute of Chartered Accountants of India (ICAI). (See also the MA order in the case).

HELD by the High Court allowing the appeal:

(i) Thus, we find that the Tribunal, out of sheer desperation and frustration and agitated by the fact that the Revenue is not opposing the request for condonation of delay, turned its attention towards the assessee’s Chartered Accountant. It is unfortunate that thereafter paragraphs after paragraphs are devoted to how a Chartered Accountant ought to conduct himself and while advising litigants in tax matters. How a Chartered Accountant, as a 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 the Tribunal has, apart from seeking to advice professionals, blamed not only individual Chartered Accountants but equally the Institute of Chartered Accountants of India. It is unfortunate that Courts of law or Tribunals, which are the last fact finding authorities in this case, adopted this course.

(ii) In paragraph 11 of the order under appeal, a reference is made to a decision of the Allahabad High Court in the 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 the absence of contemporaneous record or any attempt to falsify the statements on oath, the Tribunal has no business to rely on the principle emerging from this decision. In the instant case, the Tribunal found that the Revenue officials, assuming that they are lax, have not opposed the condonation of delay. They have not filed any counter affidavit denying any factual statements made by either the assessee or the Chartered Accountant. They have not denied the fact that there was a rectification application filed and preceding the rectification application indeed some time was consumed in serving the orders of the Department on the assessee. It is not that the rectification application was not disposed of with promptitude but after the assessee was compelled to move an application under the Right to Information Act, it is finally on 1452010 that the application came to be disposed of.

(iii) In the circumstances and a perusal of the whole order does not indicate that the Tribunal terms the conduct of the assessee to be the sole factor responsible for the delay. The conduct is not termed as negligent, callous and lacking in bona fides either. In para 12 of the order under challenge, we find that the Tribunal holds that the assessee failed to show that there was sufficient cause. How that cause is not sufficient has been explained by the Tribunal in the earlier paragraphs. However, the explanation which the assessee provided was an advise from his Chartered Accountant. That is why the paragraphs are devoted to the conduct of the professional. The advice given is not only termed as wrong/absurd but the assessee is faulted for blindly accepting such an advice. He is termed as an imprudent man and who failed to verify the correctness of the advice given or apply his mind to it. Thus, the behaviour of the assessee, according to the Tribunal, is beyond the comprehension of human conduct and probabilities.

(iv) We do not see how these are relevant principles.

(v) Way back in the year 1979, in a decision reported in AIR 1979 SC 1666 {M/s. Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi and others}, the Hon’ble Supreme Court has held that a legal advice tendered by a professional and the litigant acting upon it one way or the other could be a sufficient cause to seek condonation of delay and coupled with the other circumstances and factors for applying liberal principles and then said delay can be condoned. Eventually, an overall view in the larger interest of justice has to be taken. None should be deprived of an adjudication on merits unless the Court of law or the Tribunal/Appellate Authority finds that the litigant has deliberately and intentionally delayed filing of the appeal, that he is careless, negligent and his conduct is lacking in bona fides. These are, therefore, some of the relevant factors. Those factors should therefore necessarily go into an adjudication of the present nature.

(vi) In Nirmala Devi (supra), the Hon’ble Supreme Court held as under:

“5. The Accident Claims Tribunal pronounced its award on September, 15, 1976, after making the necessary computations and deductions. The appeal had to be filed on or before January 19, 1977 but was actually filed 30 days later. Counsel for the petitioner is stated to have made the mistake in the calculation of the period of limitation. He had intimated the parties accordingly with the result that the petitioner was misled into instituting appeal late. The High Court took the view that the lawyer’s ignorance about the law was no ground for condonation of delay. Reliance was placed on some decisions of the Punjab High Court and there was reference also to a ruling of the Supreme Court in AIR 1972 SC 749. The conclusion was couched in these words:

“The Assistant Divisional Manager of the Company appellant is not an illiterate or so ignorant person who could not calculate the period of limitation. Such like appeals are filed by such companies daily. The facts of this case clearly show, as observed earlier, that the mistake is not bona fide and the appellant has failed to show sufficient cause to condone the delay.”

6. We are not able to agree with this reasoning. A company relies on its Legal Adviser and the Manager’s expertise is in company management and not in law. There is no particular reason why when a company or other person retains a 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 the shield of legal opinion may still be vulnerable. The correct legal position has been explained with reference to the Supreme Court decision in a judgment of one of us in AIR 1971 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 a sufficient ground. It is always a question whether the mistake was bona fide or was merely a device to cover an ulterior purpose such as laches on the part of the litigant or an attempt to save limitation in an underhand way. The High Court unfortunately never considered the matter from this angle. If it had, it would have seen quite clearly that there was no attempt to avoid the Limitation Act but rather to follow it albeit on a wrong reading of the situation.”

“The High Court took the view that Mr. Raizada being an Advocate of 34 years’ standing could not possibly make the mistake in view of the clear provisions on the subject of appeals existing under Section 39(1) of the Punjab Courts Act and therefore, his advice to file the appeal before the District Court would not come to the rescue of the appellant under Sec. 5 of the Limitation Act. The Supreme Court upset this approach.”

“I am of the view that legal advice given by the members of the legal profession may sometimes be wrong even as pronouncement on questions of law by courts are some times wrong. An 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 the professional competence of the advice. The court must of course, see whether, in such cases there 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 an application under Section 5 of the Limitation Act is being considered. The State has not acted improperly in relying on its legal advisers.”

(vii) We have clarified the legal position regarding the propriety and reasonableness of companies and other persons relying upon legal opinion in the matter of computation of limitation since it is a problem which may arise frequently. If Legal Adviser’s opinions are to be subjected by company managers to further legal scrutiny of their own, an impossible situation may arise. Indeed Government, a large litigant in this country, may find itself in difficulty. That is the reason why we have chosen to explain at this length the application of Section 5 visavis counsel’s mistake.”

The above sums up the approach of a Court rendering justice according to law.

(viii) We find from paragraph 13 of the order, but for this relevant factors and tests, everything else has been brought into the adjudication by the Tribunal. The Tribunal though aware of these principles but possibly carried away by the fact that the delay of 2984 days is incapable of condonation. That is not how a matter of this nature should be approached. In the process the Tribunal went about blaming the assessee and the professionals and equally the Department. To our mind, therefore, the Tribunal’s order does not meet the requirement set out in law. The Tribunal has completely misdirected itself and has taken into account factors, tests and considerations which have no bearing or nexus with the issue at hand. The Tribunal, therefore, has erred in law and on facts in refusing to condone the delay. The explanation placed on affidavit was not contested nor we find that from such explanation can we arrive at the conclusion that the assessee was at fault, he intentionally and deliberately delayed the matter and has no bona fide or reasonable explanation for the delay in filing the proceedings. The position is quite otherwise.

(ix) In the light of the above discussion, we allow both the appeals. We condone the delay of 2984 days in filing the appeals but on the condition of payment of costs, quantified totally at Rs.50,000/. Meaning thereby, Rs.25,000/plus Rs.25,000/in both appeals. The costs to be paid in one set to the respondents within a period of eight weeks from today. On proof of payment of costs, the Tribunal shall restore the appeals of the assessee to its file for adjudication and disposal on merits. We clarify that all contentions as far as merits of the claim are kept open. We have not expressed any opinion on the same.

Vide another order dated 22.09.2017 pursuant to the assessee’s request to waive the costs:

We have imposed the costs not because the appellant was not acting bona fide but finding that even after the legal advice was obtained, the matter was decided in favour of the assessee, there was time which was consumed and in all this delay of 2984 days occurred. While condoning such delay, it is permissible for Court, in its discretion, to impose costs. Eventually, the rights and equities have to be balanced. To render substantial justice and not to enrich the Revenue that the costs have been imposed. It is not, therefore, a case where the State has been allowed to retain any benefit or has been benefited by any directions. It is the Court which in its discretion has imposed this condition. We do not find any basis to alter it. The request in that behalf is refused.

 
 
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