PATHARE-PRABHU CHS,MUMBAI vs. ITO 22(2)(1), MUMBAI

The factual matrix, as borne out from the record, reveals that the assessee is a co-operative housing society engaged in the maintenance of common facilities for its members and is not carrying on any business activity in the commercial sense. The return of income was filed declaring a total income of Rs. 3,09,980 after claiming deduction under section 80P. During the course of assessment proceedings, the learned Assessing Officer observed that the assessee had earned interest income from co-operative banks and, taking a restrictive view of the provisions of section 80P(2)(d), held that such income was not eligible for deduction, thereby disallowing the entire claim amounting to Rs. 56,71,060. Aggrieved by the said disallowance, the assessee preferred an appeal before the learned CIT(A), albeit with a delay of 197 days, which came to be dismissed at the threshold without examination of merits.

The explanation for the delay, as articulated before the authorities below and reiterated before us, discloses a chain of circumstances which, when viewed holistically, reflects not a case of indifference or inaction, but one of bona fide misunderstanding compounded by structural limitations inherent in the functioning of the assessee-society. It has been submitted that the assessee does not have any full-time accountant or technically qualified staff conversant with the intricacies of tax laws, and all matters relating to taxation are handled through external auditors and consultants. The office bearers of the society, who function in an honorary capacity, are not equipped with the technical acumen required to independently navigate the procedural rigours of tax litigation.

It has further been brought on record that the assessee was under a bona fide impression, founded upon past experience, that the issue relating to deduction under section 80P(2)(d) could be resolved or rectified without resorting to appellate proceedings. This impression stemmed from earlier appellate orders and intimations wherein similar deductions had been allowed, thereby creating a legitimate expectation in the mind of the assessee that the matter did not necessitate immediate appellate recourse. It was only during the course of year-end deliberations with the auditors, when the tax

The explanation, therefore, is not one of mere casualness or routine neglect, but is rooted in a bona fide belief and subsequent corrective action taken upon professional advice. It is also of significance that the assessee is not a business entity driven by commercial considerations, but a co-operative housing society engaged solely in maintenance of common amenities, and the denial of condonation would entail a substantial financial burden in the form of tax demand of Rs. 23,17,718, thereby causing undue hardship. The delay, thus, has to be examined in the backdrop of these peculiar facts and the practical realities in which such societies operate.

On the other hand, the learned Departmental Representative has placed reliance upon the order of the learned CIT(A) and contended that the delay being substantial, the assessee ought to have exercised due diligence and the explanation furnished does not meet the threshold of “sufficient cause”.

In the present case, when the explanation furnished by the assessee is appreciated in its entirety, what emerges is a consistent and plausible narrative explaining the delay. The assessee’s belief that the issue could be rectified, the absence of technical staff, the reliance on external consultants, and the eventual realization upon professional advice collectively constitute a chain of events which cannot be said to be either implausible or lacking in bona fides. The delay, though not insignificant in terms of days, stands sufficiently explained in terms of cause, and it would be unjust to attribute any element of deliberate or contumacious conduct to the assessee.

In this conspectus of facts and the settled legal position, we are persuaded to hold that the assessee has demonstrated sufficient and reasonable cause for the delay in filing the appeal before the learned CIT(A). Accordingly, the delay of 197 days is condoned. Consequentially, the delay, if any, in filing the present appeal before the Tribunal also stands condoned in the interest of justice.

Since the learned CIT(A) has not adjudicated the grounds on merits and has dismissed the appeal at the threshold, we deem it appropriate to set aside the impugned order and restore the matter to the file of the learned CIT(A) for fresh adjudication. The learned CIT(A) shall examine the issue on merits, including the claim of deduction under section 80P(2)(d) in accordance with law, after affording

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