Loading judgment…
Facts
The assessee filed an appeal against an order for AY 2020-21, but the appeal was delayed by 542 days. The assessee attributed the delay to seeking advice from different consultants and not being aware of legal provisions.
Held
The Tribunal held that the assessee failed to establish a 'sufficient cause' for the inordinate delay. Relying on previous judgments, the Tribunal emphasized that ignorance of law or change of professional advice do not constitute reasonable grounds for condoning delay.
Key Issues
Whether the delay of 542 days in filing the appeal can be condoned due to the assessee's reliance on professional advice and ignorance of law.
Sections Cited
36(1)(va), 43B, 143(1), 253(5)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI OM PRAKASH KANT
ORDER PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 30.05.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short „the Ld. CIT(A)‟] for assessment year 2020-21, raising following grounds:
1. On the facts and circumstances of the case and in law, the learned CIT(A), NFAC, Delhi (in short, ['the Id. CIT(A) '] erred in not appreciating that the CPC, Bengaluru was not justified in making the disallowance of Rs. 17,14,276/- towards deposit of employees' contributions in EPF and ESIC u/s 36(1)(va) of Income Tax Act, as the issue was disputed and moreover, the jurisdictional high court of Bombay had held that employees' contributions could be paid till the due date of filing of the return of income in view section 43B of Income Tax Act.
2. On the facts and circumstances of the case and in law, the Id. CIT(A) erred in dismissing appellant's appeal, without disposing of the appellant's contention of financial hardships, particularly when the appellant had received delayed payments from Navi Mumbai Municipal Corporation (in short, 'NMMC') in pursuance of contract with NMMC for rodent control services in Zone-I and Zone-II, Navi Mumbai.
3. On the facts and circumstances of the case and in law, the Id CIT(A) erred in sustaining the disallowance of employees' contributions to EPF and ESIC u/s 36(1)(va) of Income Tax Act to the extent of Rs. 16,58,532/-, as these contributions related exclusively to the workers employed towards contract with the NMMC for rodent control services and delay in deposit of Rs. 15,33,499/- towards EPF and deposit of Rs. 1,25,033/-towards ESIC, aggregating to Rs.16,58,532/-, was due to delayed payments from 'NMMC'.
4. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in not appreciating that in view of the peculiar facts of the instant case, due date for payment of employees' contribution to EPF and ESIC in relation to workers employed exclusively under contract with NMMC for rodent control services would be with reference to the month during which the payments towards employee's salary are received from NMMC by the appellant and not with reference to the month to which the employees' salaries relate.
5. On the facts and circumstances of the case and in law, the Id. CIT(A) erred in sustaining the disallowance for delay in deposit of Rs. 13,208/- towards EPF and deposit of Rs. 1,930/-towards ESIC, aggregating to Rs. 15,138/- without considering extension of due dates.
6. On the facts and circumstances of the case and in law, the CIT(A) erred in not appreciating that there was no violation whatsoever of the objectives behind the introduction of section 36(1)(va) r.w.s.2(24(x), which are as under: a. penalize employers who misutilize contributions to provident fund or other funds for the welfare of the employees (Circular No. 495 dated 22.09.1987), b. penalize employers who by late deposit of employee contribution 'get unjustly enriched by keeping the money belonging to the employees' *. (Memorandum to Finance Act 2021) c. avoid the mischief of employers retaining amounts for longer periods (Supreme Court in para 52 in Checkmate Services Private Ltd v. CIT).
Without prejudice, on the facts and circumstances of the case and in law, the disallowance of employees' contributions to EPF and ESIC is unjustified in view of the country-wide lockdown due to Covid-19 pandemic and a lenient view of the delay needs to be taken, as held by the honorable ITAT Mumbai "E" Bench in Khandelwal Laboratories Pvt Ltd. v. Additional CIT, CPC in dated 30.05.2024. The appellant seeks permission to add, delete, modify or amend any ground of appeal
2. At the very threshold, it is pertinent to note that the present appeal is accompanied by an application for condonation of delay of 542 days in filing the same before the Tribunal.
2.1 The assessee, in support of the application, filed an affidavit narrating that the impugned order of the Ld. CIT(A) was passed on 30.05.2023 and that the appeal before the Tribunal was due by 30.07.2023. However, the appeal came to be lodged only on 21.01.2025. The explanation tendered is that the assessee, acting on the advice of his then consultant, was dissuaded from filing an appeal in light of the judgment of Hon‟ble Supreme Court in Checkmate Services Pvt. Ltd. v. CIT (dated 12.10.2022). It is further averred that only upon subsequently obtaining advice from another consultant in January 2025 did the assessee take steps to file the appeal, albeit belatedly. The relevant contentions of the assessee reproduced in the affidavit are extracted as under:
That my Return of Income for AY 2020-21 was filed on 15.01.2021, declaring total income of Rs. 27,29,260/-
That my return of income was processed 29.11.2021 by Centralized Processing Center (CPC), wherein a sum of Rs.17,14,276/- was disallowed due to delayed deposit of PF/ESIC.
That appeal filed by me against the Intimation u/s 143(1) dated 29.11.2021 issued by the CPC, Bengaluru for Assessment Year 2020-21 dismissed by hon'ble CIT(A), NFAC, Delhi vide the appellate order dated 30.05.2023. was 4. That the time limit for filing appeal before the Hon'ble Income Tax Appellate Tribunal (ITAT) expired on 30.07.2023. 5. That I did not file the appeal before the Hon'ble ITAT as my previous tax consultants were not in favor of filing further appeal in view of the judgment of the hon'ble Apex Court in Checkmate Services Pvt. Ltd. v. CIT dated 12.10.2022. 6. That the delay in filing appeal before hon'ble ITAT resulted from my not knowing the legal provisions and intricacies of Income Tax Act and lack of proper advice. 7. That the said addition to my income by CPC have resulted into huge demand of tax and interest thereon, and my peace of mind was totally disturbed. 8. I say that I always had a feeling that the addition made in my case is not justified and the facts of my case have not been properly presented and also not been properly appreciated by the first appellate authority CIT(A). 9. I say that through some known source I approached M/s UDS and Associates, Chartered Accountants and sought their opinion in the matter of additions made by the CPC in my case. After discussions, opinion of M/s UDS and Associates dated 14.01.2025 was received on 15.01.2025, advising me to prefer an appeal before hon'ble ITAT for getting relief. 10. That on the basis of opinion and advice of M/s UDS and Associates, I have filed appeal before the hon'ble ITAT on 21.01.2025. As the appeal had become barred by time limitation, the appeal was filed before this hon'ble ITAT on 21.01.2025, accompanied by an application for condonation of delay. 11. I say that the appeal filed before hon'ble ITAT is delayed by 542 days for which an application for condonation of delay was already filed along with appeal documents.
I say that the delay in filing appeal before hon'ble ITAT has happened due to not having proper advice from my previous consultants and my being ignorant of the intricacies of relevant provisions of the Income Tax Act.
I say that the delay in filing appeal is due to bonafide reasons and unintentional.
That I had no intention to jeopardize the interest of revenue by delaying the appeal. 15. That the reasons submitted as above are genuine and true in every sense. 16. That I humbly submit that delay in filing appeal was due to circumstances beyond my control and the condonation of delay of about 542 days in filing the appeal deserves sympathetic consideration and I pray for condonation in the interest of justice.” 3. The assessee pleaded that the delay was occasioned by ignorance of law, reliance upon erroneous advice, and disturbance of peace of mind owing to the tax demand, and that such delay is bona fide, unintentional, and deserves sympathetic consideration in the interest of justice.
3.1 The Departmental Representative, however, opposed the condonation, contending that the assessee remained supine for over 500 days without any diligence. It was urged that mere change of opinion by another consultant cannot constitute sufficient cause for condoning such inordinate delay, particularly when the assessee, as a prudent litigant, could have sought timely independent advice. The Ld. DR submitted that there is no bonafide explanation on the part of the assessee for the delay.
Having heard learned counsel for the parties and perused the record, we are of the considered view that the application for condonation of delay is wholly devoid of merit. It is well settled that while dealing with an application under Section 253(5) of the Income-tax Act, 1961 ( in short the Act) , what is required to be demonstrated is “sufficient cause” within the meaning of law. The expression “sufficient cause” has been judicially interpreted to connote a cause which is beyond the control of the party and which falls within the realm of reasonable human conduct. In Ornate Traders Pvt. Ltd. v. ITO (2008) 312 ITR 193 (Bom), the Hon‟ble Bombay High Court held that the test of sufficient cause is to be judged with reference to reasonableness and the conduct expected of a litigant acting with ordinary prudence. Likewise, in P.K. Ramachandran v. State of Kerala (1997) 7 SCC 556, Hon‟ble Supreme Court cautioned that the law of limitation has to be applied with all its rigour, and that courts cannot extend limitation on mere equitable considerations. The relevant observation of Hon‟ble Supreme Court (supra) is reproduced as under:
“ That apart, we find that in the application filed by the respondent seeking condonation of delay, the thrust in explaining the delay after 12.5.1995, si: "at that time the Advocate General's office was fed up with so many arbitration matters equally important to this case were pending for consideration as per the directions of the Advocate General on 2.9.1995."
This can hardly be said to be a reasonable, satisfactory or even a proper explanation for seeking condonation of delay. In the reply filed to the application seeking condonation of delay by the appellant in the High Court, it is asserted that after the judgment and decree was pronounced by the learned Sub Judge, Kollam on 30.10.1993, the scope for filing of the appeal was examined by the District Government Pleader, Special Law Officer, Law Secretary and the Advocate General and in accordance with their opinion, it was decided that there was no scope for filing the appeal but lateron, despite the opinion referred to above, the appeal was filed as late as on 8.1.1996 without disclosing why it was being filed. The High Court does not appear to have examined the reply filed by the appellant as reference to the same is conspicuous by its absence from the order. We are not satisfied that in the facts and circumstances of this case, any explanation, much less a reasonable or satisfactory one had been offered by the respondent State for condonation of the inordinate delay of 565 days. Law of limitation may harshly effect a particular party but it has to be applied with all its rigour when the statute so prescribe and the Courts have no power to extend the period of limitation on equitable grounds. The discretion exercised by the High Court was, thus, neither proper nor judicious. The order condoning the delay cannot be sustained. This appeal, therefore, succeeds and the impugned order is set aside. Consequently, the application for condonation of delay filed in the High Court would stand rejected and the Miscellaneous First Appeal shall stand dismissed as barred by time. No costs.” 4.1 Tested on these touchstones, the explanation offered by the assessee, that he relied upon the advice of one consultant for more than one and a half years and only thereafter sought opinion of another consultant, cannot be held to constitute sufficient cause. The change of professional advice, or a belated realization of legal remedy, is neither a circumstance beyond the assessee‟s control nor one which could be treated as reasonable. On the contrary, it exhibits gross negligence and lack of due diligence on the part of the assessee.
4.2 It is trite law that length of delay is immaterial if sufficient cause is made out; equally, even a short delay cannot be condoned in the absence of satisfactory explanation. In the present case, the delay of 542 days is inordinate and remains unexplained in law.
4.3 We are thus of the clear opinion that the assessee has failed to establish any sufficient cause warranting condonation of delay. The reasons set out in the affidavit amount only to a change of opinion and misplaced reliance on professional advice, which cannot be a ground to defeat the mandatory scheme of limitation.
4.4 Accordingly, the application for condonation of delay is rejected. Consequently, the appeal is barred by limitation and is dismissed in-limine.
In the result, the appeal of the assessee is not admitted.
Order pronounced in the open Court on 21/08/2025.