DARODI UTKARSH SAHAKARI PATHPEDI LTD,SHIVAJI NAGAR, GOVANDI vs. INCOME TAX OFFICER, WARD 27(1)(1), VASHI

The brief facts of the case are that the assessee is a co-operative credit society which filed its return of income for the Assessment Year 2019-20 claiming deduction under section 80P of the Income-tax Act, 1961 (“the Act”).

Being aggrieved by the intimation issued under section 143(1) of the Act, the assessee preferred an appeal before the Commissioner (Appeals). However, instead of filing the appeal within the statutory period of thirty days prescribed under section 249(2) of the Act, the appeal came to be filed only on 30.05.2025, resulting in an extraordinary delay of 1,825 days. Along with Form No. 35, the assessee filed an application seeking condonation of delay along-with an affidavit explaining the circumstances which, according to the assessee, prevented filing of return of income within time.

The assessee attributed the delay to several reasons. The assessee submitted that although the intimation under section 143(1) of the Act had been electronically sent to the registered e-mail address of the society, due to administrative and operational lapses the communication could not be identified in time. The assessee further submitted that the functioning of the society was severely affected by the COVID-19 pandemic, resulting in disruption of its financial and administrative affairs and consequently the tax-related matters could not be attended to within time. The assessee also contended that there had been changes in the management and turnover of staff responsible for taxation matters, due to which important tax records, including the intimation issued under section 143(1) of the Act , were misplaced. According to the assessee, the issue came to light only after consulting tax professionals, whereafter the appeal was immediately filed.

During the appellate proceedings, the Commissioner (Appeals) first examined the issue of limitation as the maintainability of the appeal depended upon whether sufficient cause existed for condonation of the delay under section 249(3) of the Act. The Commissioner (Appeals) observed that throughout the period during which the assessee claimed to have remained unaware of the intimation, it had regularly accessed the e-filing portal for statutory compliances. The records showed that the assessee had successfully uploaded its audit reports under section 44AB and filed its income-tax returns for Assessment Years 2020-21, 2021-22, 2022-23, 2023-24 and 2024-25 on 15.01.2021, 05.01.2022, 30.09.2022, 18.09.2023 and 28.09.2024 respectively. These continuous statutory filings demonstrated that the assessee had uninterrupted access to the e-filing portal and was regularly interacting with the Income-tax Department's electronic system throughout the relevant period.

The Commissioner (Appeals) also rejected the explanation relating to change in management and staff turnover. The CIT(Appeals) observed that the assessee had remained in continuous contact with its tax auditor for preparation and filing of audit reports and income-tax returns for the subsequent assessment years. Therefore, even if there had been changes in personnel, such changes did not prevent the assessee from carrying out all other statutory compliances. Consequently, the plea that tax records had been misplaced due to change in management or staff was held to be unsupported by the surrounding facts. The CIT(Appeals) held that ignorance of law or misunderstanding of the legal provisions could not constitute sufficient cause for condoning an inordinate delay, particularly when the assessee was continuously assisted by professional tax auditors for complying with the provisions of the Income-tax Act.

The Commissioner (Appeals) observed that although courts have consistently advocated a liberal approach while considering applications involving short delays, a stricter standard is required where the delay is inordinate. In support of this proposition, reliance was placed upon the judgment of the Hon'ble Supreme Court in Oriental Aroma Chemical Industries Ltd. v. Gujarat Industrial Development Corporation [(2010) 5 SCC 459], wherein it was held that while a liberal approach may be justified in cases of short delay, prolonged and unexplained delay requires strict scrutiny. Reliance was also placed on the decision of the Hon'ble Supreme Court in Jagdish Lal v. State of Haryana [(1996) 6 SCC 267], wherein it was observed that a litigant who sleeps over his rights for a prolonged period cannot seek condonation merely on equitable considerations.

Applying the above legal principles to the facts of the case, the Commissioner (Appeals) held that the assessee had failed to establish that it had acted with due diligence or that circumstances beyond its control prevented the assessee to file return of income in a timely manner.

In view of these findings, the Commissioner (Appeals) refused to condone the delay of 1,825 days and held that the appeal itself was not maintainable. Since the appeal was dismissed on the ground of limitation, the Commissioner (Appeals) did not enter into the merits of the adjustment made by the CPC under section 143(1) of the Act. Accordingly, the appeal was dismissed in limine without adjudicating the substantive grounds raised by the assessee against the denial of deduction under section 80P of the Act.

The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.

We have heard the rival contentions and perused the material available on record. The only issue arising for our consideration is whether the learned Commissioner (Appeals) was justified in refusing to condone the delay of 1,825 days and dismissing the appeal in limine without examining the issues raised by the assessee on merits. 12. It is an undisputed fact that the appeal before the learned CIT(Appeals) was filed with a delay of 1,825 days. The learned CIT(Appeals), after examining the explanation furnished by the assessee, declined to condone the delay primarily on the ground that the assessee had regularly accessed the Income-tax e-filing portal for filing its audit reports under section 44AB and returns of income for the subsequent assessment years. According to the learned CIT(Appeals), these facts disproved the assessee's explanation that it could not notice the intimation issued under section 143(1) of the Act on account of administrative lapses, COVID-19 disruptions and change in management. Consequently, the learned CIT(Appeals) held that the assessee had failed to establish "sufficient cause" within the meaning of section 249(3) of the Act and dismissed the appeal as not maintainable without adjudicating the grounds on merits.

Having considered the rival submissions and the material placed before us, we are of the considered view that, in the peculiar facts of the present case, the delay deserves to be condoned. The expression "sufficient cause" occurring in section 249(3) of the Act is required to receive a liberal construction where refusal to condone the delay would result in denial of adjudication on merits, particularly when no corresponding prejudice is likely to be caused to the Revenue.

In the present case, although the delay is undoubtedly substantial, we find merit in the contention of the learned counsel that the surrounding facts do not indicate any deliberate or intentional disregard of the statutory provisions. On the contrary, the very facts relied upon by the learned CIT(Appeals) show that throughout the relevant period the assessee had been regularly filing its audit reports under section 44AB and returns of income for the subsequent assessment years. These compliances made by the assessee establish that the assessee cannot be regarded as a habitual or non-compliant taxpayer. Rather, they indicate that the assessee has been regularly discharging its statutory obligations under the Income-tax Act. In our considered opinion, these facts equally support the inference that the present case is one of a genuine omission or oversight in not challenging the intimation under section 143(1) of the Act within the prescribed period and not a case where the assessee consciously chose to abandon its statutory remedy.

We also find considerable force in the submission of the learned counsel that the assessee had nothing to gain by delaying the filing of the appeal. No material has been brought on record by the Revenue to demonstrate that the delay was motivated by any collateral advantage or that the assessee derived any benefit by allowing the limitation period to expire. It is a settled principle that where no mala fide can be attributed to the conduct of the litigant and no prejudice would be caused to the opposite party, the matter should ordinarily be decided on merits rather than being rejected on technical grounds.

Before us, the Counsel for the assessee submitted that for Assessment Years 2012-13, 2013-14, 2014-15 and 2015-16, the assessee's claim for deduction under section 80P of the Act had already been accepted by Department. The learned counsel has also pointed out that the assessee is a co- operative credit society engaged exclusively in providing credit facilities to its members and has consistently claimed deduction under section 80P of the Act in the earlier years. Without expressing any opinion on the merits of the claim, these facts clearly demonstrate that the assessee has raised arguable and substantial issues requiring examination by the first appellate authority. Dismissing the appeal solely on the ground of limitation, without examining these issues, would deprive the assessee of an opportunity to have its substantive claim adjudicated in accordance with law.

The Hon'ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji& Others [(1987) 167 ITR 471 (SC)] has held that a liberal approach should ordinarily be adopted while considering applications for condonation of delay so that substantial justice prevails over technical considerations. The Hon'ble Supreme Court has further observed that ordinarily a litigant does not stand to benefit by lodging an appeal belatedly and that refusal to condone delay may result in a meritorious matter being thrown out at the threshold. These principles, in our considered opinion, are fully attracted to the facts of the present case.

We are conscious that the learned CIT(Appeals) has relied upon various judicial precedents emphasizing that inordinate delay should not be condoned mechanically. We are in respectful agreement with the legal proposition laid down therein. However, every application for condonation of delay has to be examined in the backdrop of its own facts and circumstances. In the present case, considering the overall conduct of the assessee, its regular statutory compliances, the absence of any material suggesting mala fide intention or deliberate negligence, the fact that the assessee had nothing to gain by delaying the appeal, and the existence of substantial grounds requiring adjudication on merits, we are of the considered view that the ends of justice would be better served by affording the assessee one effective opportunity to prosecute its appeal on merits rather than dismissing it on the technical ground of limitation. Accordingly, in the interest of substantial justice, we set aside the order of the learned CIT(Appeals). The delay in filing the appeal before the learned CIT(Appeals) is condoned and the matter is restored to the file of the learned CIT(Appeals) for fresh adjudication on merits in accordance with law. The learned CIT(Appeals) shall examine all the grounds raised by the assessee, including the eligibility of deduction under section 80P of the Act, the validity of the adjustment made under section 143(1)(a) of the Act, and all other consequential issues, after providing adequate opportunity of being heard to the assessee. We make it clear that we have not expressed any opinion on the merits of the additions or the claim of deduction and all issues are left open for adjudication by the learned CIT(Appeals).

In the result, the appeal of the assessee is allowed for statistical purposes.