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 Income Tax Addition Made Towards Unsubstantiated Share Capital Is Eligible For Section 80-IC Deduction: Delhi High Court

M/s. Kinzo Exports Pvt. Ltd., B-57, Vishwakarma Colony PUI, Paraladpur, Mehrauli Badarpur Road, New Delhi vs. The DCIT, Central Circle, Noida.
May, 02nd 2019

Subject: Meenu and Yadav Singh Group, where certain incriminating documents were found

Referred Sections:
Section 132 of the I.T. Act, 1961,
Section 153C of the Act
Section 142A(1) of the I.T. Act
Section 5 of the Limitation Act, 1963,

Referred Cases / Judgments
Jagdeep Singh, Panipat vs. ITO,
Maruti Estates (India) Pvt. Ltd., Bhubaneswar vs. ACIT, Circle-2(1), Bhubaneswar in ITA.No.321/CTK/2017, Dated 17.04.2018.
CIT vs. Taggas Industries Development Ltd. [2002] 80 ITD 21

          IN THE INCOME TAX APPELLATE TRIBUNAL
               DELHI BENCHES "SMC" : DELHI

     BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER

              ITA.Nos.6554 & 6553/Del./2018
         Assessment Years 2010-2011 & 2011-2012

M/s. Kinzo Exports Pvt.
                                    The DCIT,
Ltd., B-57, Vishwakarma
Colony PUI, Paraladpur,
                                vs. Central Circle,
Mehrauli Badarpur Road,
                                    Noida.
New Delhi.PAN AADCK2063K
         (Appellant)                       (Respondent)

                              Shri B.L. Gupta,
               For Assessee :
                              Income Tax Practitioner.
                For Revenue : Shri S.L. Anuragi, Sr. D.R.

              Date of Hearing : 29.04.2019
      Date of Pronouncement : 02.05.2019

                           ORDER


           Both the appeals by the same assessee are

directed against the common Order of the Ld. CIT(A)-IV,

Kanpur, Dated 24.09.2018, for the A.Ys. 2010-2011 and

2011-2012.


2.         Briefly the facts of the case are that a search and

seizure operation under section 132 of the I.T. Act, 1961,

was conducted on 27.11.2014 in the case of Maconns,
                             2
                                 ITA.Nos.6553 & 6554/Del./2018 Kinzo
                                            Exports P. Ltd., New Delhi.


Meenu and Yadav Singh Group, where certain incriminating

documents were found and seized relating to the assessee

company. Accordingly, notices under section 153C of the

Act were issued on 27.06.2016, for both the assessment

years. In response, assessee filed its return showing income

of Rs.(-)23,088/- for A.Y. 2010-2011 and (Rs.(-)1,57,180/-

for A.Y. 2011-2012. Later on, statutory notices were issued

for completion of the assessment and the A.O. completed

the assessment by making additions of Rs.9,75,374/- and

Rs.12,07,441/- on account of unexplained/unaccounted

investments for A.Y.    2010-2011 and A.Y. 2011-2012

respectively. The A.O. passed the assessment orders dated

31.12.2016.


3.        The assessee filed appeals before Ld. CIT(A) on

26.06.2017. The Ld. CIT(A) observed that these appeals are

filed belatedly by 175 days. The assessee filed application

for condonation of delay stating therein that assessee had

given instruction for filing of the appeals, but, due to

inadvertence at the level of Counsel for the Assessee, the

appeals could not be filed within the stipulated period. The
                             3
                                 ITA.Nos.6553 & 6554/Del./2018 Kinzo
                                            Exports P. Ltd., New Delhi.


Ld. CIT(A) found the explanation of assessee to be

inadequate and unconvincing. The Ld. CIT(A) also observed

that inspite of clear cut instructions from assessee, the

Counsel for Assessee who has vast experience of profession

in his field, has not cared to file the appeal on time. The

explanation of assessee was not accepted. The Ld. CIT(A),

accordingly, dismissed both the appeals as time barred.


4.         Learned Counsel for the Assessee reiterated the

submissions made before the Ld. CIT(A) and submitted that

application for condonation of delay was supported by

affidavit of Shri Rajesh Sharma, C.A. He has submitted that

the Ld. CIT(A) should have taken a pragmatic view while

condoning the delay in the matter and on technical matter

the appeals should not be dismissed being time barred,

when assessee has a merited case. In support of the above

submissions, Learned Counsel for the Assessee relied upon

the following Orders of various Benches of the Tribunal.


     (i)   ITAT, Cochin Bench in the case of M/s. Midas
           Polymer Compounds       Pvt.    Ltd.,    Kottayam in
           ITA.No.288/Coch/2017 Dated 25.06.2018.
                                4
                                    ITA.Nos.6553 & 6554/Del./2018 Kinzo
                                               Exports P. Ltd., New Delhi.


     (ii)    Order of ITAT, Delhi, SMC Bench in the case of
             Jagdeep Singh, Panipat vs. ITO, Ward-3, Panipat
             in ITA.No.1462/Del./2017, Dated 18.01.2019.

     (iii)   Order of ITAT, Cuttack Bench in the case of
             Maruti Estates (India) Pvt. Ltd., Bhubaneswar vs.
             ACIT, Circle-2(1), Bhubaneswar in ITA.No.321/
             CTK/2017, Dated 17.04.2018.


5.           On the other hand, Ld. D.R. relied upon the

impugned      Orders and    submitted that          explanation of

assessee would not disclosed any sufficient cause for not

presenting the appeals within the period of limitation.

Therefore, the Ld. CIT(A) correctly dismissed the appeals of

assessee holding them to be time barred.


6.           I have considered the rival submissions and

perused the material on record. In A.Y. 2011-2012, the A.O.

asked for the details of expenses incurred by assessee on

construction of the property. However, no details have been

filed. The A.O, therefore, in order to arrive at actual cost of

construction made, a statutory reference under section

142A(1) of the I.T. Act for determination of the fair market

value of the property. The A.O. accordingly made the
                               5
                                   ITA.Nos.6553 & 6554/Del./2018 Kinzo
                                              Exports P. Ltd., New Delhi.


addition because assessee failed to explain the issue before

him. Similar is the position for A.Y. 2010-2011 in which the

assessee similarly did not file any details of the expenses.

Therefore, statutory reference was made for valuation of fair

market of the cost of construction and addition was

accordingly made. It is, therefore, clear that before the A.O.

assessee did not lead any evidence in support of the

contention raised before A.O. It would, therefore, make it

clear that when nothing was adduced before A.O. and

addition was made on the basis of difference in valuation as

per statutory valuation obtained by A.O. under section

142A(1) of the I.T. Act, perhaps the assessee never wanted

to challenge the additions before the Ld. CIT(A). It, therefore,

appears that whatever explanation have been made by the

assessee before the Ld. CIT(A) for condonation of delay was

clearly an afterthought as assessee has no merit in his

appeals. It may also be noted here that in the application for

condonation of delay (copy of which is filed at page-21 of the

PB) the assessee explained that assessee has instructed

their Counsel Sharma Kapoor Associates for filing of the
                             6
                                 ITA.Nos.6553 & 6554/Del./2018 Kinzo
                                            Exports P. Ltd., New Delhi.


appeals in January, 2017. The assessee further explained

that to his surprise, the above Counsels could not file the

appeals due to misplace of the papers. The assessee also

explained that their Counsels has committed a blunder

mistake in not filing the appeals. The assessee also filed

affidavit of Shri Rakesh Sharma, C.A. at Page-17 of the PB

in which he has mentioned in para-3 that "I could not file

the appeals intime inadvertently since it escaped my

attention." There is, thus, contradiction in the explanation

of assessee as mentioned in the application for condonation

of delay and in the affidavit of Shri Rakesh Sharma, C.A.

The averments contained in the application for condonation

of delay and affidavit are contradictory and as such both

cannot be relied upon in support of the explanation of

assessee. The assessee, thus, has failed to disclose any

sufficient cause for not presenting the appeals within the

period of limitation. According to Learned Counsel for the

Assessee, when their earlier Counsels have committed a

blunder mistake, but, what steps have been taken by the

assessee against them has also not been explained during
                              7
                                  ITA.Nos.6553 & 6554/Del./2018 Kinzo
                                             Exports P. Ltd., New Delhi.


the course of arguments. The assessee, thus, failed to

explain any bonafide reason on their part for seeking

condonation of delay in the matter. Thus, the assessee acted

negligently and never acted bonafidely in the matter. It

would be appropriate to refer to some of the judicial

pronouncements on the issue of delay in filing the appeals.


6.1.      In the case of Hind Development Corpn. v. ITO

[1979] 118 ITR 873, the Calcutta H i g h Court held that a

Tribunal can condone the delay if there was sufficient cause

for the delay i n t h e submission of the appeal. In the case

of Vedabai alias Vijayanatabai Baburao Patil v. Shantaram

Baburao Patil [2002] 253 ITR 798 (SC), where it was held

that while exercising discretion under section 5 of the

Limitation Act, 1963, to condone delay for sufficient cause

in not filing the appeal within the period prescribed, Courts

should adopt a pragmatic approach. A distinction must be

made between a case where the delay is inordinate and a

case where the delay is of a few days. The Court observed

that whereas in the former consideration of prejudice to the

other side will be a relevant factor and calls for a more
                                  8
                                       ITA.Nos.6553 & 6554/Del./2018 Kinzo
                                                  Exports P. Ltd., New Delhi.


cautious approach. In the latter case no such consideration

may arise and such a case deserves a liberal approach. Now

in the present case, the delay is not of a few days but of

175    days.    Besides,     there      is    absolutely       no     valid

explanation/reason for the delay. In the case of CIT v. Ram

Mohan Kabra [2002] 257 ITR 773, the Hon'ble Punjab &

Haryana      High   Court   has       observed        that   where      the

Legislature spells out a period of limitation and provides for

power to condone the delay as well, such delay can only be

condoned only for sufficient and good reasons supported by

cogent and proper evidence. It is a settled principle of law

that provisions relating to the specified period of limitation

must be applied with their rigor and effective consequences.

In this case, delay for filing the appeal late for only a few

days was not condoned. In the case of Asstt. CIT vs. Taggas

Industries     Development      Ltd.         [2002]     80      ITD      21

(Cal.),Tribunal, Calcutta Bench, Calcutta, did not condone

the delay for filing the appeal late by 13 days because the

delay was not due to sufficient cause.
                               9
                                   ITA.Nos.6553 & 6554/Del./2018 Kinzo
                                              Exports P. Ltd., New Delhi.


6.2.        Thus, relying on the above judgments, I hold that

assessee failed to explain that delay in filing the appeals was

due to sufficient cause. Considering the above discussion, I

am of the view that Ld. CIT(A) correctly dismissed the appeal

of assessee by holding them to be time barred. No

interference is required in the matter. Appeals of assessee

are dismissed.


7.          In the result, appeals of Assessee are dismissed.


            Order pronounced in the open Court.

                                          Sd/-
                                         (BHAVNESH SAINI)
                                        JUDICIAL MEMBER
Delhi, Dated 02nd May, 2019
VBP/-
Copy to
1.     The appellant
2.     The respondent
3.     CIT(A) concerned
4.     CIT concerned
5.     D.R. ITAT `SMC' Bench, Delhi
6.     Guard File.

                      // BY Order //



           Assistant Registrar : ITAT Delhi Benches :
                           Delhi.

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