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Facts
The assessee's appeal against an order for Assessment Year 2019-20 was dismissed in-limine by the CIT(A) due to a delay of 1,249 days (908 days excluding the COVID-19 pandemic period). The appeal pertained to the disallowance of interest of Rs. 15,00,000/- on an alleged non-genuine loan. The assessee cited bona fide belief, change of legal counsel, and the Managing Director's serious medical condition as reasons for the delay.
Held
The Tribunal found that the assessee had demonstrated sufficient cause for the delay, supported by an affidavit and medical evidence. The delay was condoned, and the case was remanded back to the CIT(A) for fresh adjudication on merits, with adequate opportunity of hearing to the assessee.
Key Issues
Whether the CIT(A) erred in not condoning the delay in filing the appeal; whether there was sufficient cause for the delay; and consequently, the merits of the disallowance of interest under Section 37(1).
Sections Cited
143(3), 249(2), 249(3), 37(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI OM PRAKASH KANT
This appeal by the assessee is directed against order dated 18.02.2025 passed by the Ld. Additional/Joint Commissioner of Income-tax (Appeals) – 48, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2019-20, raising following grounds:
“The appellant company prefers an appeal against the order passed by Ld. Commissioner of Income Tax (Appeal)-48 dated
18/02/2025, on following amongst other grounds, each of which are without prejudice to any other :- 1.0 On facts and circumstances of the case and in Law, Ld. CIT(A) erred in not condoning the delay in filing of the appeal by 908 days (excluding Covid-19 pandemic period), without considering the bonafide reasons and compelling circumstances beyond control of the appellant; 2.0 On facts and circumstances of the case and in Law, Ld. CIT(A) ought to have deleted the disallowance of interest paid of Rs.15,00,000/- on alleged non-genuine loan received in earlier years from M/s. Bluejay Airlines Pvt Ltd; 3.0 The Ld. CIT(A), ought to have deleted the disallowance of interest u/s.37(1) of Rs. 15,00,000/-, on considering the understated vital facts, a) The addition of entire disputed loan taken from M/s. Bluejay Airlines Pvt Ltd, in earlier years, had been deleted by Ld. CIT(A) and revenue's appeal had been dismissed by Hon'ble ITAT; b) The disputed interest has been paid in normal course of business and is supported with exhaustive documentary evidences such as ledger account, confirmation of account, bank statements, TDS certificate and other documents. The appellant craves leave to add, amend, alter, and/ or withdraw any of the grounds of appeal at the time of hearing.”
2. At the very threshold, learned counsel for the assessee submitted that the appeal filed before the ld. CIT(A) was dismissed in-limine on the ground of delay of 1,249 days. It was further contended that upon exclusion of the period covered under the COVID-19 pandemic, the effective delay stands reduced to 908 days.
2.1 The learned counsel for the assessee referred to an affidavit filed by the Director of the assessee company, Shri Rajesh Kumar Agarwal, wherein it has been deposed that the addition made in the present assessment year pertains solely to disallowance of interest on the unsecured loan, whereas the substantive addition in respect of the loan amount itself was made in A.Y. 2016–17. The assessee, having filed appeals for A.Ys. 2016–17 and 2017–18, was under the bona fide impression that if the loan was accepted as genuine in those years, the consequential interest disallowance in A.Y. 2019– 20 would automatically stand deleted. It was submitted that on the basis of this legal advice, no appeal was filed initially for the year under consideration.
2.2 It was further contended that upon receipt of the appellate orders for earlier years, and upon change of legal counsel, steps were taken to file the appeal for A.Y. 2019–20. Additionally, it was submitted that Shri Rajesh Kumar Agarwal, Managing Director of the assessee company, was suffering from a serious medical condition, namely facial paralysis, which impaired his ability to speak and communicate, thereby contributing to the delay. Medical records substantiating this fact have been placed on record.
We have heard the rival submissions and perused the material available on record. The assessment order under Section 143(3) of the Act was passed on 13.04.2021. The limitation period for filing an appeal under Section 249(2) expired on 13.05.2021. The appeal was, however, filed after a delay of 1,249 days. Before us, the assessee has filed the reasons for the delay is as under:
“The delay in filing of the 1st appeal had occurred under the bonafide reasons and compelling circumstances beyond control of the appellant, stated as under :- a) The appellant was under a belief that, in case, the addition made in assessment order for A.Y-2016-17 of unsecured loan received from M/s. Bluejay Airlines Pvt Ltd of Rs. 1,25,00,000/- is deleted, then the interest paid to such lender during the impugned year (A.Y-2019-20) of Rs.15,00,000/- would automatically stand allowed. Accordingly, though the appellant had timely filed an appeal during A.Y-2016-17 and 2017-18 to dispute the addition and interest of such loan, however inadvertently did not file the 1 appeal for the impugned year (A.Y-2019-20) to dispute the disallowance of interest; b) The appellant's regular representative gave a legal advice that if the loan received from M/s. Bluejay Airlines Pvt Ltd during A.Y- 2016-17 of Rs.1,25,000,000/- is held as non-genuine, then the interest paid on such loan during A.Y-2019-20 of Rs.15,00,000/- cannot be allowed and accordingly, the appellant could not file the 1st appeal in time; c) The appellant's director, upon receipt of Hon'ble ITAT order for A.Y-2016-17 and 2017-18, could not immediately file the 1" appeal due to change in regular consultant. The appellant had appointed a new tax consultant named M/s Maheshwari & Co, Chartered Accountants and since the relevant documents were not available with such newly appointed consultant, thus the 1st appeal could not be filed in time; d) The appellant's managing director Shri Rajesh Kumar Agarwal was suffering from serious medical illness of facial paralytic attack and was not able to speak and communicate and his non- availability had resulted in the delay in filing of the 1st appeal. The copies of his medical and hospital records from 28/02/2021 to 22/10/2024 are filed on record (page-4 to 17 of paper book no.2).”
3.1 The Section 249(3) of the Act empowers the CIT(A) to condone the delay, if sufficient cause is shown preventing the assessee from presenting the appeal within the prescribed time. The phrase "sufficient cause" has been judicially interpreted in numerous decisions. The Hon’ble Supreme Court in the seminal decision in Collector, Land Acquisition v. Mst. Katiji [(1987) 167 ITR 471 (SC)] laid down six guiding principles for condonation of delay, emphasizing that justice should prevail over technicalities and that ordinarily, a litigant does not benefit by delaying legal proceedings. These principles underscore that a pragmatic and liberal approach should be adopted while dealing with such applications. The Hon’ble Supreme Court in Concord of India Insurance Co. Ltd. v. Smt. Nirmala Devi [(1979) 118 ITR 507 (SC)] held that if the delay is not tainted with mala fides or gross negligence and is based on legal advice honestly obtained, it would constitute sufficient cause for condonation. Similarly, in Ram Nath Sao v. Gobardhan Sao [AIR 2002 SC 1201], it was held that a pedantic approach in refusing to condone delay may result in miscarriage of justice. The Hon’ble Madras High Court in Sreenivas Charitable Trust v. DCIT [(2006) 280 ITR 357 (Mad)] has also held that the term "sufficient cause" must receive a liberal and purposive construction in order to advance the cause of substantial justice. Further, in Sandhya Rani Sarkar v. Sudha Rani Debi [AIR 1978 SC 537], the Hon’ble Apex Court observed that failure of the opposing party to rebut the averments in support of condonation may justify the grant of relief. 3.2 In the present case, we find that the assessee has substantiated the delay with a duly sworn affidavit, supported by contemporaneous medical evidence. The reasons advanced are not fanciful or evasive but are rooted in bona fide belief, medical constraints, and change of legal representation — all of which are plausible and humanly understandable. 3.3 The purpose of the limitation period is to ensure expeditious disposal of appeals; however, where the delay is shown to be unintentional and caused by reasonable circumstances, it ought to be condoned in the interest of substantial justice. In the instant case, we are satisfied that the assessee has made out a case of sufficient cause warranting exercise of discretion under Section 249(3) of the Act. Accordingly, the delay in filing the appeal before the CIT(A) is hereby condoned. 4 Since the appeal was dismissed by the CIT(A) in limine without adjudication on merits, we deem it appropriate to restore the matter to the file of the CIT(A) for adjudication afresh on merits, in accordance with law, after affording adequate opportunity of hearing to the assessee. 5 Ground No. 1 relating to condonation of delay is, therefore, allowed. Other grounds raised on merits are not being adjudicated at this stage and are treated as dismissed as infructuous, with liberty to the assessee to press the same before the CIT(A).
6. In the result, the appeal is allowed for statistical purposes.
Order pronounced in the open Court on 30/06/2025.