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Income Tax Appellate Tribunal, CIRCUIT BENCH, VARANASI
Before: SHRI.VIJAY PAL RAO & SHRI RAMIT KOCHAR
PER VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 06.10.2022 of CIT(A) (National Faceless Appeal Centre, Delhi) for the assessment year 2014-15 arising from the processing of return of income under section 143(1) vide order dated 27.03.2017 of CPC whereby the claim of exemption under section 11 and 12 of the Income Tax Act was denied and the entire gross receipts of the assessee was assessed as total income of the assessee. 2. The assessee has raised the following grounds:- “
1. Because the Ld. National Faceless Appeal Centre, Delhi has erred and acted illegally in discarding application of the assessee for condonation of delay.
2. Because it was fully explained that it was a period of Corona Pandemic-19 (COVID-19) continued for a long time and it has disturbed the whole world not only the Individual but also for School even the cognizance have been taken by the Hon'ble Supreme Court who has suo motto allowed the extension of time for submitting the appeal, revision, reference all things. The Ld. National Faceless Appeal Centre, Delhi has erred and acted illegally in not taking into account this aspect of fact.
3. Because the Computation of Income made by the CPC Bangalore without taking into the account the expenditure to achieve the object is illegal and against the principle of Income Tax. The Ld. National Faceless Appeal Centre, Delhi has erred and acted illegally in not taking into account this aspect of Fact.
Because the Computation of Income is bad both in facts and in law and not maintainable.”
Ground no. 1 and 2 are regarding declining of condonation of delay in filing the appeal before the CIT(A) and consequently the same was dismissed as barred by limitation in limine. The assessee is a trust running educational institutions namely Saraswati Devi Mahavidyala at Kushinagar and Saraswati Mahila Vidyalaya at Maharajganj. The assessee trust was granted provisional registration under section 12AA of the Act vide order dated 22.06.2022 from assessment year 2023-24 to 2025-26. The assessee trust filed its return of income on 31st March, 2016 declaring nil income after claiming exemption under section 11 and 12 of the Income Tax Act. The return of income was processed under section 143(1)(a) on 27.03.2017 by the CPC, Bangalore whereby an adjustment of Rs. 1,05,62,239/- was made by taking the gross receipts as total income of the assessee. Since, the assessee was not granted registration for the year under consideration therefore, CPC while processing the return of income under section 143(1) disallowed the claim of exemption and assessed the total receipts as total income of the assessee. The assessee filed appeal before the CIT(A) on 27.7.2022 against the order under section 143(1) of the Act dated 27.03.2017 of CPC. Therefore, there was a delay of 1950 days’ in filing the appeal before the CIT(A). The assessee filed the application for condonation of delay before the CIT(A) and explained the cause of delay of 1950 days’ that after receiving the intimation under section 143(1)(a), the assessee was required to 2 submit the application under section 154 upto 30th March, 2020 but due to covid pandemic, the college was closed, the staff were directed not to attend office as well as students were directed not to attend classes as some virtual classes were continued and the examination has been conducted in the month of June and July, 2022. The assessee further explained that it was a question of carrier of students who are the back bone of the nation and therefore, its teacher, management and staff were with full dedication to continue the classes as well as to prepare students for exemption. Thus, in these circumstances, the management has to pursue the matter before the tax authority could not take steps within the period of limitation. The assessee also relied upon the judgment of Hon’ble Supreme Court in the case of Suo Moto cognizance for extension of limitation reported in 441 ITR 722 (SC). Thus, it was prayed that in view of the circumstances, the appeal may kindly be considered and delay in filing about 65 month may be condoned. The CIT(A) was not impressed with the explanation of the assessee for delay of 1950 days’ in filing the appeal. The CIT(A) has held that the assessee failed to exercise its right to file appeal within the period of limitation provided under section 249(2) and it is a clear case of laches on the part of the assessee and is directly the result of deliberate inaction on the part of the assessee.
4. Before the Tribunal, the learned AR of the assessee has reiterated the explanation as explained before the CIT(A) for delay in filing the appeal. He has further submitted that since the CPC has assessed the entire gross receipt as income of the assessee without allowing the expenditure therefore, the impugned order under section 143(1) is illegal and highly arbitrary also suffering an apparent mistake from record for not assessing the correct income of the assessee. The learned AR has contended that initially the assessee was advised to file the rectification petition under section 154 of the Income Tax Act and time limit for filing the petition was upto March, 2020 however, in the meantime, there was a Covid-19 pandemic outbreak and a complete lockdown from 22nd March, 2020 which led to the delay in filing the application before CIT(A). He has referred to the decision of Hon’ble Supreme Court whereby the limitation was extended from 15th march, 2020 to 28th February, 2022 and thereafter a further time was allowed for filing the petition, suit, appeals etc., upto 30th May, 2022. The learned AR has thus submitted that there is a gross injustice done by the CPC while processing return of income under section 143(1) as the entire gross receipts was assessed to tax without considering the expenditure. He has pointed out that at least income of the assessee should have been assessed by treating the assessee as business entity after disallowing the claim of exemption under section 11 and 12 of the Income Tax Act but the CPC has not reduced the corresponding expenditure from the gross receipts while computing the total income assessed to tax. In support of his contention, he has relied upon the decision dated 30.04.2015 of Coordinate Bench of this Tribunal in the case of Bharat Lok Shiksha Parishad vs. DCIT, Varanasi in ITA No. 129/Alld/2013. Thus, the learned AR has pleaded that the delay in filing the appeal before the CIT(A) may be condoned and the matter may be remanded to the record of the AO for assessing correct income of the assessee.
On the other hand, the learned DR has submitted that the assessee has not explained a reasonable cause for inordinate delay of 1950 days’ in filing the appeal before the CIT(A). The CIT(A) has passed a speaking a order and examined all the legal aspects of the issue. The CIT(A) has given a finding that the assessee has not explained cogent and reasonable cause of delay but it was a deliberate negligence on the part of the assessee for not filing the appeal within the period of limitation. The learned DR has submitted that the benefit of Hon’ble Supreme Court extending the period of limitation is not available to the assessee as the limitation for filing the appeal was expired on 27.04.2017 itself much before the advent of Covid-19 pandemic. He has relied upon the impugned order of the CIT(A).
We have considered the rival submissions as well as relevant material on record. There is no dispute that the assessee filed the appeal before the CIT(A) belatedly and there was a delay of about 1950 days in filing the appeal before the CIT(A). The assessee has explained the cause of delay as initially assessee wanted to file rectification petition under section 154 of the Income Tax Act but could not file till outbreak of Covid-19 pandemic. The assessee took the plea that after the outbreak of Covid-19 pandemic, the school and college of the assessee were closed and staffs were directed not to come, the classes were also discontinued and only some virtual classes were conducted. Thus the assessee has explained that in these circumstances, the assessee could not take the steps for filing the appeal before the CIT(A) within the period of limitation. The CIT(A) after considering the plea for condonation of delay has given its finding in para 4 to 4.2.2 as under:- “4. Findings and Decision: 4.1 In the instant appeal, the date of order u/s 143(1) of the I.T. Act was 27.03.2017 and appeal has been filed on 27.07.2022. The appellant while filing Form No.35 has mentioned the grounds for condonation of delay. although there was delay in filing appeal of approximately 1950 days. However, during the course of appellate proceedings, the appellant has submitted a petition dated 27.07.2022 along with Form No.35 for condonation of delay in filing of this appeal. The relevant extract of the grounds for condonation of delay as submitted by the appellant is reproduced as under:- "That later on the assessee has received an intimation u/s 143(1)(a) of the I.T. Act, 1961 dated 27.03.2017 wherein the gross receipts has been treated as taxable without allowing any kind of expenditure and the assessee has been taxed to the tune of Rs.35,90,105/- and after including the interest, the tax is Rs. 56,35,820/-. That the order u/s 143(1)(a) has been passed on 27.03.2017 and the assessee was required to submit application u/s 154 latest by 30.03.2020 5 but due to Corona Pandemic the colleges were closed, the staff were directed not to attend the office as well as the students were directed not to attend classes, anyhow some virtual classes were continued. After February 2022, the physical classes were continued and the examinations has been conducted in month of June and July 2022. That it was question of career of the students who are the backbone of the Nation and therefore the teachers, management and staff all were with full dedication to continue the classes as well as to prepare the students for examination. That in all circumstances setforth above, the management to pursue the matter before your honour or before the authority of department of income tax. These all circumstances have been suo motto considered by the Hon'ble Supreme Court of India in case of Cognizance for Extension of Limitation, In re [2022] 441 ITR 722 (SC), The ratio of the case is reproduced is as under:- The Hon'ble Supreme Court has directed that all the dates of compliances would be ME TAX DEPAR extended upto 28.02.2022. The relevant portion is quoted hereunder:- in cases where the limitation would have expired during the period between March 15, 2020 till February 28, 2022 notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from March 1, 2022. (Appellant) Prayer It is therefore prayed that in view of these circumstances, the appeal may kindly be taken for consideration and delay in furnishing the appeal about 65 months may kindly be condoned." 4.2 As per section 249(2), the due date for filing of appeal against the order is 30 days from the date of the order/service of demand. However, the appellant did not prefer any appeal within 30 days and has filed the appeal on 27.07.2022 only, after a period approximately 1950 days of delay.” 4.3. The intimation u/s.143(1) of the I.T. Act dated 27.03.2017 has been sent from CPC by Registered email id. The intimation u/s 143(1) was served upon the appellant on 27.03.2017. The appellant was supposed to file an appeal against this order on or before 27.04.2017. The claim of the appellant that it was waiting for the rectification application is untenable and unacceptable. Rectification is only possible on a mistake apparent from record. The mistake apparent from record must be an obvious and patent mistake and not something which can be established by a long-drawn process of reasoning of points on which there may conceivably be two opinions. Thus the ground of the appellant that it did not file appeal as it was waiting for the outcome of its rectification application is misplaced and lacks merit. The appellant has also mentioned the reasons of COVID outbreak during the period because of which it could not file the appeal in time. However, it is pertinent to note that the COVID outbreak and the lock down started only in the month of March, 2020, whereas the appellant was supposed to file the appeal on or before 27.04.2017. Therefore, the reasons stated by the appellant for not filing the appeal within the prescribed time is found to be bereft of any merits. 4.4. This is a case where an appeal is sought to be initiated after an inordinate delay of 1950 days beyond the prescribed time limit as per sub section (2) of section 249 of the Income Tax Act, 1961, which reads as under:- "(2) The appeal shall be presented within thirty days of the following date, that is to say,- (a) where the appeal is under section 248, the date of payment of the tax, or (b) where the appeal relates to any assessment or penalty, the date of service of the notice of demand relating to the assessment or penalty: Provided that, where an application has been made under section 146 for reopening an assessment, the period from the date on which the application is made to the date on which the order passed on the application is served on the assessee shall be excluded: Provided further that where an application has been made under sub- section (1) of section 270AA, the period beginning from the date on which the application is made, to the date on which the order rejecting the application is served on the assessee, shall be excluded, or (c) in any other case, the date on which intimation of the order sought to be appealed against is served. (2A) Notwithstanding anything contained in sub-section (2), where an order has been made under section 201 on or after the 1st day of October, 1998 but before the 1st day of June, 2000 and the assessee in default has not presented any appeal within the time specified in that sub-section, he may present such appeal before the 1st day of July, 2000. (3) The Commissioner (Appeals) may admit an appeal after the expiration of the said period if he is satisfied that the appellant had sufficient cause for not presenting it within that period."
4.5. It is pertinent to note that the delay may be condoned and the appeal may be admitted u/s. 249(3) only the appellant could successfully demonstrate that it had sufficient cause for not presenting the appeal within the period of 30 days. 4.6. The exercise of discretion in condonation of delay in matters of limitation, such as in the present case u/s.249(3) of the Income Tax Act, 1961 has to be carried out within the meaning of "Sufficient Cause" as envisaged in Section 5 of Limitation Act. Hence, the general rule of law of limitation is that an extension shall not be granted under Section 5 if there is no sufficient cause or cogent ground for the condonation of delay, the onus of proving which lies on the appellant/applicant as clearly laid down in the judicial pronouncements by the Highest Courts of Law. 4.7. In the case of Perumon Bhagvathy Devaswom, Perinadu Village v. Bhargavi Amma (Dead) by LRS, (2008)8 SCC 321, the Hon'ble SC had enunciated certain principles in which are applicable while considering applications for condonation of delay under Section 5 which may be summarized as follows: • The words "sufficient cause", as appearing in Section 5 of Limitation Act, should receive a liberal construction when the delay is not on account of any dilatory tactics, want of bona fides, deliberate inaction or negligence on the part of the applicant/appellant, in order to advance substantial justice. The words "sufficient cause for not making the application within the period of limitation should be understood and applied in a reasonable, pragmatic, practical and liberal manner. depending upon the facts and circumstances of the case. The decisive factor in condonation of delay is not the length of delay but sufficiency of a satisfactory explanation. The degree of leniency to be shown by a court depends on the nature of application and facts and circumstances of the case. For example, courts view delays in making applications in a pending appeal more leniently than delays in the institution of an appeal. The courts view applications relating to lawyer's lapses more leniently than applications relating to litigant's lapses. 8 . Want of diligence or inaction can be attributed to an applicant/appellant only when something, required to be done by him, is not done. When nothing is required to be done, courts do not expect the applicant/appellant to be diligent. Where an appeal is admitted by the High Court and is not expected to be listed for final hearing for a few years, an appellant is not expected to visit the court regularly to ascertain the current position but await information from his counsel about the listing of the appeal. 4.8 To quote their lordships' decision verbatim in the case cited supra- “13.... The words "sufficient cause for not making the application within the period of limitation should be understood and applied in a reasonable, pragmatic, practical and liberal manner, depending upon the facts and circumstances of the case, and the type of case. The words "sufficient cause in Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice. when the delay is not on account of any dilatory tactics, want of bona fides, deliberate inaction or negligence on the part of the appellant (emphasis supplied)". 4.9 The aforesaid view was reiterated in the case of Balwant Singh (Dead) v. Jagdish Singh, (2010) 8 SCC 685, where in the Court held that: “25. We may state that even if the term "sufficient cause" has to receive liberal construction, it must squarely fall within the concept of reasonable time and proper conduct of the party concerned. The purpose of introducing liberal construction normally is to introduce the concept of "reasonableness" as it is understood in its general connotation.
The law of limitation is a substantive law and has definite consequences on the right and obligation of a party to arise. These principles should be adhered to and applied appropriately depending on the facts and circumstances of a given case. Once a valuable right has accrued in favour of one party as a result of the failure of the other party to explain the delay by showing sufficient 9 cause and its own conduct, it will be unreasonable to take away that right on the mere asking of the applicant, particularly when the delay is directly a result of negligence, default or inaction of that party. Justice must be done to both parties equally. Then alone the ends of justice can be achieved. If a party has been thoroughly negligent in implementing its rights and remedies, it will be equally unfair to deprive the other party of a valuable right that has accrued to it in law as a result of his acting vigilantly." 4.10 The Courts in the abovementioned cases, highlighted upon the importance introducing the concept of "reasonableness" while giving the clause "sufficient cause" a liberal interpretation. In furtherance of the same, the Courts has cautioned regarding the necessity of distinguishing cases where delay is of few days, as against the cases where the delay is inordinate as it might accrue to the prejudice of the rights of the other party. In such cases, where there exists inordinate delay and the same is attributable to the party's Inaction and negligence, the Courts have to take a strict approach so as to protect the substantial rights of the parties. 4.11 The Division bench of the Hon'ble Bombay HC in Ornate Traders Private Limited v. The Income Tax Officer, Mumbai emphasized the need for reasonableness and hence, the actions which can be condoned by the court should fall within the scope of normal human conduct or normal conduct of a litigant. The Bombay HC further observed that while Section 5 of the Limitation Act is being interpreted liberally, it cannot be so liberally that it is without any justification, since condonation of delay in a mechanical or routine manner will jeopardize the legislative intent behind Section 5. 4.12. The Hon'ble SC in the case of Shiv Dass v. Union of India (UOI) and Ors,, AIR 2007 SC 1330 held that the High Courts, while exercising their discretionary powers under Article 226, should consider delay or lapses and, refuse to invoke its extraordinary powers if it is found that the applicant had neglected/omitted to assert its rights in a timely manner; however, this discretion has to be exercised judicially and reasonably.
4.13 In a recent judgment in the case of University of Delhi Vs Union of India & Ors. in Civil Appeal No. 9488 of 2019 vide Order dated 17/12/2019, the Hon'ble Supreme Court has refused to condone delay by holding that, "the entire explanation as noted above, depicts the casual approach unmindful of the law of limitation despite being aware of the position of law. That apart when there is such a long delay and there is no proper explanation, laches would also come into play while noticing as to the manner in which a party has proceeded before filing an appeal.
In the matter of condonation of delay and laches, the well accepted position is also that the accrued right of the opposite party cannot be lightly dealt with." 4.14. While disposing appeal in the case of Vedabhai, the Hon'ble Apex Court itself has concluded that a distinction has to be made between inordinate delay and a case where the delay is of few days and the court has to exercise the discretion the facts of each case. Reproducing on hereunder the relevant portion of the order in the case of Vedabai alias Vaijayanatabai Baburao Patil v Shantaram Baburao Patil Smt. Vedabai [2002] 122 Taxman 114 (SC) "In exercising discretion u/s 5 of the Limitation Act, 1963, to condone delay for sufficient cause in not preferring an appeal or other application 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. Whereas in the former consideration of prejudice to the other side will be a relevant factor and calls for a more cautious approach, in the later case no such consideration may arise and such a case deserves a liberal approach. No hard and fast rule can be laid down In this regard. The court has to exercise its discretion on the facts of each case keeping in mind that in construing the expression "sufficient cause" the principle of advancing substantial justice is of prime importance. The expression "sufficient cause" should receive a liberal construction."
4.15 From the above decisions it becomes clear that in the case of condonation of delay where the appeal was filed beyond the limitation of period, the courts are empowered to condone the delay, provided that the Appellant can prove his claim of inability to file appeal within the prescribed period. Litigant must be able to demonstrate that there was "sufficient cause" which obstructed his action to file Appeal beyond the prescribed time limit.. 4.16. The law of limitation is found upon the maxims "Interest Reipublicae Ut Sit Finis Litium" that litigation must come to an end in the interest of society as a whole, and "vigilantibus non dormientibus Jura subveniunt" that the law assists those that are vigilant with their rights, and not those that sleep thereupon. The law of limitation in India identifies the need for limiting litigation by striking a balance between the interests of the state and the litigant. 4.17 The Single Judge bench of the Hon'ble Madras HC, while exercising writ jurisdiction in Kathiravan Pipes Pvt. Ltd., v. CESTAT, 2007 [5] STR 9 (Mad.) has observed that the period of limitation prescribed is not for destruction of a statutory right but only to give finality without protracting the matter endlessly. 4.18 in the present case, the appellant has not ade adduced any reasonable cause which prevented it from filing the appeal within the 30 days' time limit which ended on 27.04.2017. It has filed appeal after an inordinate delay of approximately 1950 days. Unless and until it is demonstrated that there was sufficient cause that prevented the appellant from exercising its legal remedy of filing appeal within that prescribed period of 30 days, the delay thereafter cannot be condoned without there being compelling grounds as advocated by the Hon'ble Courts. 4.19 From the facts of the case, it is clear that the statutory right to appeal which was vested with the appellant was not exercised within the stipulated time u/s.249(2). Thus, this clearly is a case of lapses and is directly the result of deliberate inaction on the part of the appellant. 4.20 This is not a case of change in law which is beneficial to the appellant and hence the delay in seeking such remedy may be condoned in the furtherance of substantial justice. Therefore, there is no denial or destruction of a statutory right in this case, by adhering to the prescribed period of 12 limitation as otherwise it will only lead to protract the matter endlessly and will undoubtedly render the legislative scheme and Intention behind the concerned provision otiose as held by the Hon'ble Supreme Court in the case of Assistant Commissioner (CT) LTU, Kakinada & Ors. v. M/s Glaxo Smith Kline Consumer Health Care Limited 2020[36] G.S.T.L. 305. 4.21 For these reasons, the delay of approximately 1950 days in filing of appeal in this case is not condoned as no "sufficient cause" has been shown u/s.249(3) of the Income Tax Act, 1961 for the appellant's failure to file the appeal within the prescribed period of limitation u/s.249(2) of the Income Tax Act, 1961 r.w.s. 5 of Limitation Act and hence the appeal sought to be instituted belatedly is hereby rejected. 4.22 In the result, as delay in filing of appeal is not condoned, the appeal is not admitted and is rejected accordingly.”
There is no dispute that the order under section 143(1) passed by CPC is highly unreasonable and very harsh for the assessee as the total gross receipts of the assessee was assessed to tax being a total income of the assessee without allowing the deduction of various expenditures which were part of the return of income. Thus, there is an apparent mistake from the order of CPC passed under section 143(1) however, the illegality or a mistake in the order of tax authorities itself cannot be a ground to be considered as reasonable cause for delay of 1950 days’ in filing the appeal. The CPC issued intimation under section 143(1) on 27.3.2017 which was also communicated to the assessee on the same date and therefore, the limitation reckons from the said date to file the appeal before the CIT(A). The outbreak of Covid-19 pandemic was only after three years from the date of the impugned order passed under section 143(1) therefore, the assessee cannot take the plea that due to Covid-19 pandemic assessee could not take steps. It is apparent from the record that the assessee did not take any steps against the order passed under section 143(1) for three years prior to the advent of Covid-19 pandemic. Though, the Hon’ble Supreme Court extended the period of limitation due to outbreak of Covid-19 pandemic in March, 2020 however, the assessee is 13 required to explain the reasonable cause of delay at least upto March, 2020 for filing the appeal before the CIT(A). The submissions of the assessee are completely silent in explaining the delay of about three years from 27th March, 2017 to March, 2020 except the plea that initially the assessee wanted to file the rectification petition under section 154 of the Income Tax Act. However, the assessee has not brought on record anything or any material to show that the assessee has finally filed a rectification petition under section 154 of the Act or if such petition is filed, the details of filing of such petition and the outcome of the said petition. In the absence of any detail or facts regarding filing of the petition under section 154 of the Income Tax Act we are unable to accept this argument and explanation of the assessee. There is no quarrel on the point if the assessee has chosen a wrong remedy then the time consumed in pursuing the wrong or improper remedy has to be excluded for the purpose of limitation in seeking the proper remedy by way of filing the appeal. But in the absence of filing any petition under section 154, no benefit can be allowed to the assessee merely because the assessee was thinking so. It is always a question whether the explanation and reasons for delay was bonafide or was merely a device to cover an ulterior purpose such as laches on the part of litigant or an attempt to some limitation in underhand way. In the case in hand, the assessee is completely silent about the cause of delay from 27th April, 2017 till March, 2020 when there was an outbreak of Covid-19 pandemic. Though the delay from March, 2020 to February, 2022 is covered by the decision of Hon’ble Supreme Court in re [2022] 441 ITR 722 (SC), however the benefit of judgment of Hon’ble Supreme Court would be available only when the assessee has explained the cause of delay upto 15th March, 2020. In the absence of any explanation by the assessee for non-filing of the appeal before the CIT(A) or any petition under section 154 of the Income Tax Act the assessee was not able to explain the reasonable cause for inordinate delay in filing the appeal before the CIT(A). The CIT(A) has passed a speaking order and 14 came to the conclusion that the assessee has failed to explain the reasonable cause for the delay of 1950 days’ in filing the appeal. The fact remains same before us as the assessee is not able to explain a reasonable cause for delay at least from April, 2017 to March, 2020 for not taking any steps for filing the appeal before the CIT(A). Accordingly, in the facts and circumstances of the case, we do not find any reason to interfere with impugned order of the CIT(A) and the same is upheld. Since the CIT(A) has dismissed the appeal of the assessee in limine on the maintainability of the appeal being barred by limitation and not decided the merits of the assessment therefore, in view of our finding upholding the order of the CIT(A) on condonation of delay, the other grounds raised
by the assessee become infructuous.
8. In the result, appeal of the assessee is dismissed.
Order pronounced on 24.02.2023 at Allahabad, U.P. in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963.