1982 PLP 336 (PTD)

S. RANGANATHAN, J.‑The. following questions have been referred for our decision under section 256(1) of the 1.‑T. Act, 1961 "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that there was no suffi cient cause which prevented the assessee from filing the appeals within time?" (2) Whether on the facts and in the circumstances of the case, the Tribu nal is justified in not admitting the appeals and in dismissing the same as barred by time?" It is necessary to state a few facts. The assessment years are ]955‑56 and 1957‑58. On December 21, 1966, the I. A. C. passed orders under sec tion 271(l)(c) of the I. T. Act,. 1961, imposing penalties of Rs. 5,000 and Rs. 4,000, respectively, on the assessee for the above two assessment years. At the end of his order, the I.A.C. directed the I.T,O, to issue necessary demand notices and challans and collect the amount of penalty. In pursuance of the order of the I.A.C., the I.T.O. issued notices of demand on the same date and these were duly served on the assessee. Paragraph 7 of the demand notice was in the following terms: "7. If you intend to appeal against the penalty under section 271(1)(c)/ interest payable under section 216 you may present an appeal under Part A of Chapter XX of the Income‑tax Act, 1961, to the Appellate Assistant Commissioner of Income‑tax, G‑Range, within thirty days of the receipt‑of this notice in the form prescribed under section 249(1) of the said Act, duly stamped and verified as laid down in that form." It appears that when those notices of demand were received the assessee filed appeals against the orders of penalty before the A.A.C., G‑Range, within the period mentioned in the demand notices. These appeals came up for hearing on December 4, 1967, when it was pointed out that the appeal against the penalty order had to be preferred not to the A.A.C. but to the Appellate Tribunal. Thereupon, the assessee obtained the return of the memoranda of appeal filed before the A.A.C. on December 5, 1967, and presented the appeals before the Tribunal on December 5, 1967, itself with applications for condonation of delay. It was submitted that the delay in filing the appeals was due to sufficient cause and that the same should be condoned. The Tribunal, however, declined to condone the delay by its orders dated April 29, 1969. The Tribunal pointed out that the delay in filing the appeals was on account of professional incompetence and negligence. After referring to the decisions in Highton v. Treherne ((1878) 39 L T 411), Surendra .Vohan Roy Chnudhry v. Mohendra Nath Banerjee (I L R 59 Cal. 781) and Bijuboo v. Rajaballi Taya balli (A I R 1929 Bom. 393), the Tribunal held that they were not satisfied that there was sufficient cause for the inordinate delay in the preferring of the appeals against the orders of the I. A. C. They, therefore, dismissed the appeals as barred by time. At the request of the assessee, the two questions set out earlier have been referred for the decisions of this Court. Though the reference has been listed for a number of days, there is no appearance on behalf of the asses see. We have, therefore, heard Mr. M. L. Verma, learned counsel for the department, who has placed before us all the necessary' facts and also presented the case with fairness and equity. The Supreme Court recently had occasion to consider a similar position in the case of Concord of India Insurance Co. Ltd. v. Smt. Nirmala Devi ((1979) 118 I T R 507=49 Com. Cas. 463). In that case the counsel for the petitioner had made a mistake in the calculation of the period of limitation, with the result that petitioner was misled into instituting the appellate. The High Court dismissed the appeal on the ground that the lawyer's ignorance of law was no ground for condona tion of delay under section 5 of the Limitation Act, 1963. The Supreme Court held that 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. But if there is a 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, the Court pointed out, had been laid down earlier in State of Kerala v. Krishna Kurup Madhava Kurup ((7) A I R 1971 Ker. 211) in the following words (p. 510 of 118 I. T. R.) "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 devise 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 been quite clear that there was no attempt to avoid the Limitation Act but rather to follow it albeit on a wrong Leading o4 tae situation." Looking at the facts of the present case in the light of the above principle, we are of the opinion that the Tribunal erred in rejecting the appeal on the general ground of the negligence of the counsel. All the relevant facts had to be appreciated in the context of which the delay occurred :n the present case. Under the Indian I.T. Act, 1922, the penalty was imposed by the ITO and from the order of penalty there was an appeal to the AAC. Actually this explains the terms of the notice of demand, which, in the present case, appears to have been sent to the assessee without the necessary modifications consequent on the amendments of the Jaw. Though a reference to section 271(1)(c) of the I. T. Act, 1961, is made in the notice of demand, it nevertheless requires the assessee to prefer an appeal to the AAC without adverting to new provisions, which require that where the minimum penalty exceeded a particular limit the penalty order bad to be passed by the IAC and an appeal therefrom preferred to the Appellate Tribunal. Having regard to the changes in law and terms of the demand notices, it is perhaps explicable that the assessee should have filed the appeal before the AAC. There was, of course, a certain amount of inadvertence on the part of the assessee but, as pointed out by the Supreme Court, the question is : whether the mistake was bona fide or was merely a device to cover. an ulterior purpose. In the present case, the bona fides of the assessee are shown by the fact that he filed an appeal before the AAC within time and that as soon as the mistake was realised, the appeal before the Tribunal was filed without further delay. Having regard to these circumstances and the position as laid down by the Supreme Court, we are of opinion that the delay in the filing of the appeal should have been con doned by the Tribunal. We therefore, think that the answer to the questions must be in the negative and in favour of the assessee. Mr. M. L. Verma, learned counsel for the department, submitted that since in the present case, the assessee has not cared to appear and. prosecute the reference we should return the reference unanswered. There is no doubt some force in his submission. It has been held that the Court has a discretion to return the question unanswered when there is no appearance on behalf of the assessee. But this is a discretion vested in the Court. The question in this reference is a .very short one and in the interests of justice we do not think it would be correct to return the question unanswered although the assessee has not appeared before us. For the reasons mentioned above, we answer the reference as stated already. There, will be no order as to costs. D. R. KHANNA, J.‑I would only like to add that had the assessee taken care to peruse the provisions contained in section 253(1)(6) of the I. T. Act, 1961, .it should have been plain that an appeal against an order of the I.A.C. made under section 274(2) of the Act was maintainable before the Appellate Tribunal. An act is said to be done in good faith when it is done with due care and attention. In the ordinary course, therefore, the assessee did not deserve any latitude for pursuing the appeal before the AAC when the position of the law was so patent. As observed in the case of Highton v Treherne, where there has been negligence or ignorance or gross want of skill of the legal adviser, the suitor must seek his remedy against the legal adviser and, in the meanwhile, must suffer so far, as the limitation aspect is con cerned. However, where the position of law is such that even a skilled person might have made a mistake, the rights of the client should not be forfeited. The confusion that was created in the present case was by the demand notice which the ITO issued in pursuance of the penalty orders. It was mentioned in the notice that if the assessee felt aggrieved by the penalty orders made under section 271(1)(c) of the Act, he could file appeals before the AAC. The assessee was thus plainly, misled, though it could also be said that had he exercised greater diligence he could have discovered that the proper forum before which the appeal could lie was the Appellate Tribunal. Since the confusion was not entirely the making of the assessee and the blame should as well, to an extent, go to the ITO, I agree that the delay in the present case deserved to be condoned. Question answered in the negative.