DIPS BIOSCIENCE PRIVATE LIMITED,DOMBIVLI WEST vs. COMMISSIONER OF INCOME-TAX (APPEALS), KALYAN

IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI “D” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No. 1179 & 1180/MUM/2026 (AY:2014-15)

Dips Bioscience Private vs. DCIT circle (1), MOHAN PLAZA, CIRCLE 1, Limited, Kalyan-Dombivali-421301. Govind Smruti, Behind Tondwalkar School, Kalyan- Dombivali-421202. PAN/GIR No: AACCD6520D (Appellant) (Respondent)

Assessee by Shri Rajesh Rai Kundaliya Revenue by Shri Umashankar Prasad (CIT DR) & Shri Annavaram Kosuri, SR AR Date of Hearing 19.05.2026 Date of Pronouncement 29.05.2026

O R D E R PER BIJYANANDA PRUSETH, AM:

These appeals filed by the assessee emanate from the order passed under

section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the Commissioner of

Income-Tax (Appeals), National Faceless Appeal Centre [in short, ‘CIT(A)’],

dated 04.12.2025 for the assessment year (AY) 2014-15. Since facts are similar,

with consent of both parties, the appeal were clubbed and heard together and a

common order is passed for the sake of convenience and brevity. ITA

No.1180/Mum/2025 (AY 2014-15) is taken as the “lead case.”

. 2. The grounds of appeal raised by the assessee in ITA No.1179/Mum/2026

are as under:

1) We have filed the appeal with the commissioner of Income Tax appeal on 21/04/2025 having Appeal no NFAC/2013-14/10480740 and submitted the details but since due to the medical emergency the commissioner appeal was not filed within due date so the assessing officer has rejected our appeal without giving an opportunity of being heard. While filing the appeal, we had already filed the condonation but the officer has not condone our application and rejected our appeal and this resulted in denying the appellant a fair opportunity of being heard i.e. order made without adjudicating the matter on merits, Also, there are no finding by the authorities that the delay was intentional, deliberate, or mala fide, which is a prerequisite for rejecting a condonation application. Condonation of delay would not have caused any prejudice to the Revenue, whereas rejection causes disproportionate hardship to the appellant. The delay deserved to be condoned and the appeal needs to be heard on merits in the interest of justice, equity, and fair play

2) Withdrawl of Penalty u/s 271 (1) (c) 2.23,188/-

At the time of the Assessment, we have provided the information that M.Vat Set off is the amount which we have not getting refund from the M.Vat Department and so claimed as the expenses in Profit and Loss A/c. the specific para from Asssessment order where we have given the reply are as follow,

In response to show-cause notice, the assessee filed the reply on 25-02- 2022 as under

"The said expenses is for the Mvat paid on Purchases and not routed through Profit and loss account. But shown as receivable from MVAT department in audited balance sheet. On Mvat assessment the said expenses credit not given by Department since the seller has not shown the said amount in their MVAT return (J-1, J-2 Annexure) on which we don't have control. The said fact and Mvat assessment order for prior period shown and given to Income tax assessing officer while Income tax assessment and the same was accepted by Assessing officer. We appeal your honour please allow the same expenses and pass the order according. We also request not to levy penalty u/s 271(1(c) of Income tax Act, 1961 Since we have filed Income tax Return for AY 2014-15 and also filed revised return please drop the penalty proceeding u/s 271 F for nor filing of ITR.”

3) Again, we have given online response for the demand as follow- 2 In response to show-cause notice for penalty, the assessee complied vide its letter dated 22/08/2022 which is re-produced as under- "Regular assessment completed and allowed the expenses claimed for MVAT credit not given by the state tax authority. The credit of mvat has not given by state tax authority because the vendor has not filed their returns. We have purchased the goods, received the delivery and after the delivery we paid to the vendors by crossed cheques. So we request your honor to allow the said expenses and rectify the demand order and order and drop the penalty under section 271(1)(c).”

4) Since the Assessee has clarified that this amount claimed as expenses since no refund is eligible and assessee realised that only after M.Vat Assessment and so since we have received the less refund and crystalised in that year only so claimed as expense in that year only. Since the assessee has not hidden any particulars of income or not given any inaccurate particulars of income penalty u/s 271(1)(c) should not be levied. 5) Since, in our case no income has been concealed but the department has disallowed the vat expenditure due to which tax liability demand was raised and since we have already filed the appeal for tax demand on 21/04/2025 having ack no appeal is still pending with the department. 940000260210425 and 6) As the non-compliance was neither intentional nor wilful but provided the details which are available with us, we have never hidden or given any wrong information and so penalty u/s 271(1)(c) should not be levied.

7) Your appellant craves to add, alter or delete any of the Grounds of Appeal.”

are as under:

1) We have filed the appeal with the commissioner of Income Tax appeal on 21/04/2025 having Appeal no NFAC/2013-14/10480740 and submitted the details but since due to the medical emergency the commissioner appeal was not filed within due date so the assessing officer has rejected our appeal without giving an opportunity of being heard. While filing the appeal, we had already filed the condonation but the officer has not condone our application and rejected our appeal and this resulted in denying the appellant a fair opportunity of being heard i.e. order made without adjudicating the matter on merits, Also, there are no finding by the authorities that the delay was intentional, deliberate, or mala fide,

. which is a prerequisite for rejecting a condonation application. Condonation of delay would not have caused any prejudice to the Revenue, whereas rejection causes disproportionate hardship to the appellant. The delay deserved to be condoned and the appeal needs to be heard on merits in the interest of justice, equity, and fair play

2) Withdrawl of Income added of Rs. 7,22,296/ On the facts and circumstances of the case and in law, the learned Assessing Officer has erred in adding the income of Rs 7,22,296/ (ie. Disallowance of vat expenditure) without considering the facts that they have been crystalized during the relevant accounting period so the value of the addition is bad in law and on facts and needs to be deleted

3) Allowability of expenditure in year of crystallization -

Prior period expense are generally those expenses which are relating to the current year in the sense they are crystalised during the year, though relating to activities of an earlier year. For accounting purposes, these are generally known as prior period items and required to be shown separately.

Normally where mercantile system of accounting is followed, expenses relating to relevant year are accounted for in that year. However, prior period expenses had to be allowed in subsequent years because the expenses were crystallized only in that year.

A liability though pertaining to earlier year, is said to accrue when it actually crystallises, is ascertainable and legally enforceable.

4) Case laws of Tribunal in relation to allowability of prior period expenses debited In profit and loss a/c.

Case laws summary

(A) In Bearingpoint Property Services (P) Ltd. v.Dy. CIT 2014 TaxPub (DT) 4064 (Bang 'B' -Trib): (2014) 35 ITR (Trib) 177 (Bang 'B'-Trib), It was held that in the light of the admitted position that the expenditure in question was wholly and exclusively for the purpose of business and that the same was genuine, the fact that the expenditure relates to an earlier period could not be a ground to deny the deduction, especially when factually crystalisation of liability during the previous year had not been disputed. Therefore, the expenses claimed by the assessee were directed to be allowed, as such these expenses were allowed though related to prior period. 4 (B) M/s. FIH India Private Limited (formerly Foxconn India Private Limited) v. The DCIT, Company Circle 2(1), Chennai.

There is no dispute with regard to the fact that the assessee has written off input Service Tax during the impugned financial year relevant to assessment year 2010-11. But, the dispute is with regard to deductibility of input service tax. The AO has disputed deduction claimed by the assessee on three grounds. The first and foremost objection of the AO was that input service tax written off was not an item of expenditure deductible u/s.37(1) of the Act, because the assessee has not rooted said expenditure through profit & loss account. The second observation of the Id.AO is even it is to be treated as profit & loss account item, it was never treated as income at any point in time. The third observation of the AO was that said expenditure relatable to previous financial year and hence, partakes the nature of prior period item which is not eligible to be claimed as an expenditure for the current financial year

We have gone through the reasons given by the AO for denying the deduction claimed towards Service Tax written off account and find that none of the reasons given by the AO is in accordance with law, because service tax paid on input services is an item of expenditure deductible u/s 37(1) of the Act. But, if assessee claims input tax credit on said Service Tax, then the same cannot be claimed as deduction in the profit & loss account once again.

In this case, the AO has not disputed the fact that the assessee has not debited Service Tax component paid on input services into the profit & loss account. Therefore, we are of the considered view that there is no merit in the observation of the AO that it is not an item of profit & loss account.

In so far as second observation of the AO that the assessee has never treated said service tax as an item of income, we find that the assessee has paid service tax on input services and hence the question of treating said service taxes as an item of income does not arise because any taxes paid on purchase of goods or services is part of cost of goods or services which can be either debited to profit & loss account when the assessee has not availed input tax credit or if assessee avails input tax credit then the Service Tax component is taken out from the profit & loss account and treated as current assets pending adjustment against output taxes payable on goods or services.

In this case, the assessee has accounted input services exclusive of service tax and treated service tax component as input tax credit pending 5

. adjustment. Further, when the application filed by the assessee for refund was rejected by the Department, the assessee has written off said input tax credit and debited in to profit & loss account. Therefore, the second observation of the AO would also fails. Coming to the third observation of the AO, the AO observed that even if it is deductible as expenditure but said expenditure is relatable to earlier financial year and partakes the nature of prior period item which cannot be allowed as deduction. We do not find any merit in the observation of the AO for the reason that although part of input tax credit pertains to earlier financial year but the same has been carried forward to subsequent financial year as per the provisions of law. Further, the same has been claimed as refund with respective department during the current financial year. Therefore, when the input service tax credit is carried forward from earlier financial year to the current financial year, it partakes the nature of taxes paid for the current ence financial year and hence deductible as and when the assesse has debited into the profit Loss account. Therefore, on this count also the observation made by the AO fails.

In this view of matter and considering facts and circumstances of this case and also by following the ratios laid down by various Courts and Tribunals, we are of the considered view that input service tax credit is deductible u/s 37(1) of the Act when such input tax credit is written off in the books of account. But, facts with regard to refund claim made by the assessee and rejection of such refund claim by the concerned authorities for the impugned assessment year was not on record. Therefore, to ascertain the fact with regard to the claim of the assessee with regard to rejection of refund claimed, we set aside the issue to the file of the AO for the limited purpose of verification of claim of the assessee regarding rejection of refund claim. In case, the assessee is able to substantiate its claim with necessary evidence before the AO, then the AO is directed to delete addition made towards disallowance of Service Tax written off account.

In the result, appeal filed by the assessee is treated as allowed for statistical purpose.

From the above Judgement's it can be seen that such prior period expenses are allowable if they are crystalized during the relevant accounting period. In our case also, since we got the certainty of not receiving vat refund in financial year 2013-14 so we had debited the vat receivable of Rs 7,19,614/- (Rs 4,20,527/- pertains to financial year 2007-08, Rs 2,97,478/- pertains to financial year 2009-10 and Rs 1,609/-pertains to financial year 2013-14) which was shown in current assets and the said Vat ITC was related to purchases which was routed through duties and taxes and such Vat ITC expenses were never debited in profit and loss account as the same 6

. was shown as receivable in earlier years as we were expecting to adjust the vat refund against vat liability in subsequent year and when we concluded the said vat refund is not adjustable against liability so we had debited the same in profit and loss account of financial year 2013-14. Also, on payment basis, we have debited Rs 2,682/-in profit and loss a/c as vat liability of financial year 2008-09 paid in the financial year 2013-14 So, we request you to allow us the vat expenditure written off Rs 7,19,614 and vat paid Rs 2,682 which has been debited in profit and loss account and delete the tax payable as shown in order.

5) We request you to accept our appeal as we have not received the opportunity of being heard as the appeal with commissioner of income tax (Appeal) has been rejected due to delay in filing of the appeal with commissioner of income tax (Appeal) due to medical emergency and and provide us the justice by abolishing the demand of Rs 7,40,062/- which has been raised after considering all the facts and information provided by us.

6) Your appellant craves to add, alter or delete any of the Grounds of Appeal.”

for the AY 2014-15 on 28.11.2014 declaring total income at Rs.44,28,120/-. The

original assessment order was passed u/s 143(3) on 09.12.2016 determining total

of Rs.51,09,330/-. The case was subsequently reopened u/s147 and notice u/s

148 of the Act was issued on 31.03.2021. The order u/s 147 r.w.s. 144B was passed

on 23.03.2007 by disallowing VMAT setup expenses of Rs.7,22,296/-.

on 21.04.2025, after a delay of 1095 days from the due date of 22.04.2022. The

assessee, in the condonation application, submitted that the assessee was not

checking the mail regularly and was under the belief that there were no pending

proceedings. Hence, there was delay in filing the appeal, which it requested to

. condone. The CIT(A) referred to section 5 of the Limitation Act and discussed

various decisions of Hon’ble Supreme Court and Delhi High Court, namely, (i) N.

Balakrishnan V. M. Krishnamurthy, AIR 1998 SC 3222; (ii) Baswaraj and Ors Vs. the

Spl Land Acquisition officer AIR 2014 SC 746; (iii) State of West Bengal vs.

Administrator, Howrah Municipality, AIR 1972 SC 749; (iv) Collector, Land

Acquisition v Mst. Katiji And Others-167 ITR 471 (SC) and (v) Sudhir Kumar Anand

V. Dr. Vijay Kumar Anand and others AIR 2012 Delhi 97. Thereafter, the CIT(A) did

not condoned the delay in filing the appeal and dismissed it by observing as

under:

“6. Thus, it is trite in law that the appellant must show that he was diligent in taking proper steps and the delay was caused notwithstanding his due diligence. It is for the appellant to explain the reason for the delay and it is not the function of authorities to find the cause for delay. The Appellate authority has to examine whether the sufficient cause has been shown by the appellant for condoning the delay and whether such cause is acceptable or not. Even though substantial justice should not be defeated by technicalities but that does not mean that any plea without any possible or acceptable basis and even without bearing, semblance or rationality has to be accepted and delay has to be accepted and condoned which shall be against the very spirit of law. The time prescribed for filing the appeal will become meaningless in such an event. Merely because substantial justice is to be done law of limitation cannot be ignored and that also when there is no sufficient and reasonable cause for such inordinate delay.

6.1 The appellant, in the present situation, appears to be guilty of negligence and does not take appropriate steps to peruse the remedy till about 1095 days and thus does not take appropriate action in filing the appeal within the prescribed time. In the light of the above discussion and considering the facts and position of the law on this issue, I find that there is no sufficient cause for condoning the delay in the institution of appeal by the appellant and thus condonation of delay is hereby rejected.”

. 6. Aggrieved by the order of CIT(A), the assessee filed appeal before the

Tribunal. The Ld. AR of the assessee has filed an application for condonation of

delay and submitted as under:

“c) During the reassessment proceedings, the assessee had duly responded to notices issued by the department and explained that the Short VAT refund received of Rs 4,20,527/- for financial year 2007-08, Rs. 2,97,478/- for financial year 2009-10 and Rs 1,609/- for financial year 2013-14 and amount paid Rs 2,682/- for financial year 2013-14 had been crystallized during the relevant financial year and accordingly the amount was claimed as expenditure in the year under consideration. d) However, the Learned Assessing Officer did not accept the explanation and passed the reassessment order on 23/03/2022. e) Thereafter, based on professional advice received from the then consultant, the assessee was made to understand that online objection/reply filed on 13/12/2023 against the online demandshowing and reassessment additions constituted sufficient compliance and that no further immediate action was required. f) The director of the assessee company is a senior citizen aged above 65 years and is not actively involved in day-to-day tax and technical compliance matters. The day-to-day business operations are primarily handled by his son and staff members. g) Due to advanced age, limited familiarity with online income tax portal procedures, non-regular access to emails and lack of proper understanding regarding appellate timelines, the assessee remained under bona fide belief that the matter was being appropriately handled by the consultant. h) The assessee had no intention whatsoever to delay the appellate proceedings or derive any undue advantage from such delay. In fact, the assessee has regularly complied with statutory obligations including payment of GST, TDS, advance tax and filing of returns within prescribed timelines. i) That only upon initiation of recovery proceedings by the department, the Appellant came to understand that an appeal was required to be filed against the assessment order. Immediately thereafter, the Appellant consulted a new professional advisor and promptly filed the appeal before the Learned Commissioner of Income Tax (Appeals) on 21/04/2025 without any further delay and the Appellant deposited approximately 20% of the disputed demand.

of the CIT(A). He submitted that there was inordinate delay of 1095 days in filing

the appeal before the CIT(A). The explanation of the assessee is of general nature.

The assessee has not given any explanation that there was “sufficient cause” for

not presenting the appeal within 30 days from the date of service of demand

notice of the assessment order u/s 147 of the Act dated 23.03.2022. Hence, the

CIT(A) has rightly refused to condone the delay in filing of the appeal.

. 8. We have heard both parties on this preliminary issue of condonation of

delay. We have also deliberated on the decisions relied upon by both sides. The

re-assessment order u/s 147 was passed on 23.03.2022, but the appeal before

the CIT(A) was instituted on 21.04.2025. Hence, there was a delay of 1095 days in

filing appeal before the CIT(A). The Ld. AR submitted that the delay was not

intentional and it has a strong case on merit. The appellant has filed an application

for condonation of the delay, which has been reproduced above. The reason given

before the Tribunal is substantially different from the reasons given before the

CIT(A). The CIT(A) has given elaborate reason which are supported by the

decisions of the Hon’ble Supreme Court and Delhi High Court. The simple

assertion that the delay was due to bona fide misunderstanding, lack of proper

appreciation of legal and professional requirements, and that the assessee has a

strong case on merit, etc., could not be treated as a “sufficient cause” in terms of

provisions of section 249(3) of the Act for the inordinate delay of 1095 days. We

find that the Hon’ble Supreme Court in a number of decisions, namely, (i) P. K.

Ramachandran vs State of Kerala & Anr. (1997) 7 SCC 556, (ii) Pundik Jalam Patil

vs. Executive Engineers, Jalgaon Medium Project, (2008) 17 SCC 448 and (iii)

Basawaraj and Anr vs. Special Land Acquisition Officer, (2013) 14 SCC 81, (iv)

Pathapati Subba Reddy (dies) By L. Rs. & Ors. Vs The Special Deputy Collector (LA),

SLP(C) No.31248 of 2018 (SC), dated 08.04.2024 held that condonation of delay

. should not be granted only on the ground that ordinarily a litigant does not stand

to benefit by lodging an appeal late.

the law on the subject issue by stating that where a case has been presented in

the Court beyond limitation of time, the applicant has to explain as to what was

the “sufficient cause” which means an adequate and enough reason, which

prevented him to approach the Court within the limitation. In case a party is found

to be negligent, or for want of bonafide on his part in the facts and circumstances

of the case, or found to have not acted diligently or remained inactive, there

cannot be a justified ground to condone the delay.

the case of Pathapati Subba Reddy (dies) & Ors. vs. The Special Deputy Collector

(LA), in SLP (Civil) No. 31248 of 2018 (SC), the Hon'ble Supreme Court referred to

and discussed various decisions of Hon'ble Supreme Court and held as under:

“7. The law of limitation is founded on public policy. It is enshrined in the legal maxim “interest reipublicae ut sit finis litium” i.e. it is for the general welfare that a period of limitation be put to litigation. The object is to put an end to every legal remedy and to have a fixed period of life for every litigation as it is futile to keep any litigation or dispute pending indefinitely. Even public policy requires that there should be an end to the litigation otherwise it would be a dichotomy if the litigation is made immortal vis-a-vis the litigating parties i.e. human beings, who are mortals.”

Ors. vs. A. Krishnaiah Since Deceased by LRS., in Civil Appeal No. 317 of 2025,

. dated 08.01.2025, has set aside the order of Hon’ble High Court of Karnataka in

WP No.7220 of 2014 wherein the Hon’ble High Court allowed the Writ Petition by

condoning the delay. The Hon’ble Supreme Court at para 13 observed as under:

‘13. We are at our wits end to understand why the High Court overlooked all the aforesaid aspects. What was the good reason for the High Court to ignore all this? Time and again, the Supreme Court has reminded the District judiciary as well the High courts that the concepts such as “liberal approach”, “Justice oriented approach”, “substantial justice” should not be employed to frustrate or jettison the substantial law of limitation.’

Ltd. vs. PCIT, (2025) 178 taxmann.com 257 (SC) dismissed the SLP against the

order of High Court that where the assessee contented that the delay was due to

negligence of the counsel to file appeal. The Madhya Pradesh High Court had

dismissed the appeal of the assessee. It was otherwise the duty of the assessee

to watch its affairs and there was gross negligence in the attitude to the assessee

in filing appeal and the assessee has not exercised any care to enquire about the

status of second appeal and tried to shift the responsibility towards his counsel.

In view of the facts of the case discussed above and respectfully following the

authoritative precedents cited supra, we find no reason to interfere with the

order of CIT(A), who did not condone the inordinate delay of 1095 days in filing

appeal before the CIT(A) in absence of any “sufficient cause”. The appeal of the

assessee was rightly dismissed by CIT(A), which we confirm. Accordingly, the

grounds of appeal are dismissed.

. 13. In the result, the appeal of the assessee is dismissed.

ITA No.1179/Mum/2025

condoned the delay of 965 days in filing the appeal against the order passed u/s

271(1)(c) of the Act dated 26.09.2022. The reasons and the precedents given by

the CIT(A) are similar to those in ITA No.1180/Mum/2026 (supra) decided above.

Hence, following the reasons given in ITA No.1180/Mum/2026 (supra), this appeal

is also dismissed.

Order is pronounced on 29.05.2026.

Sd/- Sd/-

(SANDEEP GOSAIN) (BIJYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER

*Aniket Chand; Sr. PS MUMBAI Date: 29.05.2026 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File

By Order

Assistant Registrar ITAT, MUMBAI