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Facts
The assessee's return for AY 2016-17 was assessed, leading to a disallowance of Rs. 19.79 lakhs for depreciation. A rectification application was rejected, and the assessee filed an appeal before the CIT(A) with a 1504-day delay. The CIT(A) condoned a major part of the delay but dismissed the appeal for the remaining 164 days, citing a lack of sufficient cause, without addressing the merits of the depreciation disallowance which arose from an inadvertent omission of asset additions.
Held
The ITAT condoned the remaining 164-day delay, relying on the Supreme Court's precedent for condonation of delay. The tribunal remitted the matter of depreciation disallowance back to the Assessing Officer for fresh consideration, directing to provide the assessee a reasonable opportunity of hearing and for the assessee to produce all necessary documents.
Key Issues
Whether the CIT(A) was justified in not condoning the entire delay in filing the appeal; and the validity of the depreciation disallowance by the AO due to non-reporting of asset additions.
Sections Cited
143(1), 154, 250, 143
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI. LAXMI PRASAD SAHU & SHRI. KESHAV DUBEY
Per Laxmi Prasad Sahu, Accountant Member:
This is an appeal filed by the assessee against Order passed by the CIT(A) vide DIN and Order No.ITBA/APL/S/250/2024-25/1073779488(1) dated 27.02.2025.
Briefly stated the facts of the case are that the assessee filed its return of income on 16.10.2016 declaring gross total income of Rs.47,81,638/-. The return was processed under section 143(1) of the Act and case was selected for scrutiny under limited scrutiny through CASS and subsequently, other statutory notices were issued to the assessee. During the course of scrutiny proceedings, the AO observed that there is difference in opening and closing WDV. Accordingly, the AO Page 2 of 5 disallowed Rs.19,79,062/- and completed the assessment on 09.12.2019. Thereafter, the assessee filed rectification application under section 154 of the Act and the AO passed Order on 08.09.2022 and rectification application filed by the assessee was rejected. The assessee filed appeal on 20.02.2023 with a delay of 1504 days. During the appellate proceedings, the learned CIT(A) condoned the delay from the date of Assessment Order to the passing of rectification order i.e., 08.09.2022. He did not condone the delay of 164 days from 09.09.2020 to 20.02.2023 and dismissed the appeal of the assessee without going into the merits of the case.
Aggrieved from the above Order, assessee filed appeal before us. The learned Counsel referred to the affidavit dated 15.04.2025 and submitted that during the course of internal audit, it was brought to the notice by the auditors regarding rejection of rectification application filed by the assessee under section 154 of the Act. Thereafter, he came to know that the appeal was to be filed immediately. He proceeded to file the appeal and requested that the assessee had sufficient cause for not filing the appeal within the due date before the First Appellate Authority and the reason for delay has been explained in the affidavit.
The learned DR relied on the Order of the lower authorities and submitted that the assessee had to file appeal within the due date immediately after rectification Order passed by the AO under section 154 of the Act.
Considering the rival submissions and perusing the entire material available on record and Orders of the authorities below, we notedfrom the affidavit that there is substantial delay to file appeal before the CIT(A). However the learned CIT(A) has appreciated the major delay of 1304 days but has not condoned 164 days. The affidavit filed by the assessee is as under:
Page 3 of 5 The present appeal has been filed challenging the appellate order dated 27.02.2025 passed by the CIT(A) under section 250 of the Income-tax Act, 1961. The CIT(A) has not admitted the appeal and has dismissed the same without condoning the delay of 1504 days in filing the appeal. Consequently the CIT(A) has upheld the additions made in the assessment order dated 09.12.2018 passed by the ACIT, Circle 4(2)(1), Bengaluru under section 143 of the Act. It is submitted that the CIT(A) has failed to appreciate that major portion of the delay i.e. 1304 days was due to the reason that rectification application under section 154 of the Act was filed on 10.12.2018 against the assessment order and the same was pending adjudication before the AO. It is further submitted that after receiving the rectification order dated 08.09.2022, the accountant responsible for filing the appeal had missed to file the same. I came to know about the non-filing of appeal only when it was bought to my attention by the auditor at the time of interim audit pursuant to which I took necessary steps to file the appeal before CIT(A), which was filed on 20.02.2023 with a delay of 1504 days. I therefore submit that the delay of 164 days in filing the appeal after receipt of the rectification order was neither deliberate nor intentional but was solely for the reason of the accountant's oversight and hence, the CIT(A) ought to have taken a liberal stand and should have condoned the delay in filing the appeal. The CIT(A) having rejected the appeal has confirmed the addition of Rs.19,79,062/- made by the AO towards depreciation. It is submitted that, for the Financial Year ("FY") commencing 01.04.2014, the building block under the fixed asset schedule had an opening balance of Rs.1,37,45,894.10/-. It is further submitted that during the year addition of Rs.80,33,251/- was made to the asset before September 2014 on which depreciation was claimed and further additions of Rs.1,97,90,613/- were made after September 2014 on which the Appellant did not claim any depreciation. The Appellant has claimed depreciation at Rs.21,77,914.51/- for the FY 2014-15 (AY 2015-16). Accordingly, for the year ending 31.03.2015, the Appellant had closing balance of building i.e., written down value ("WDV") of Rs.3,93,91,843.59/-. It is submitted that while filing the return of income for the AY 2015-16, the Appellant inadvertently missed to mention / include the addition to asset of Rs.1,97,90,613/- which was made after September 2014. During the course of assessment and in the assessment order, the AO has observed that there was difference in the written down value as of31.03.2015 and 01.04.2015 due to which the AO has come to a conclusion that the Page 4 of 5 Appellant has claimed excess depreciation to the extent of Rs.19,79,062/- which has been disallowed and added back to the business income of the Appellant. It is reiterated that the difference in the written down value is due to mistake in reporting the addition to the asset made after September 2014. It is pertinent to note that the Appellant has not claimed any depreciation on the additions made after September 2014 which were missed to be reported. While the above error was pointed out to the AO and a claim was made to allow the correct depreciation after considering the addition made to the assets after September 2014, the AO has not considered the said submissions of the Appellant and has not entertained the additional claim. It is therefore submitted that prejudice is caused to the Appellant as it is saddled with the tax demand arising on account of erroneous addition made by the AO. It is therefore prayed that the delay of 1504 days in filing the appeal before the CIT(A) may be condoned and the matter may be considered on its merits in the interest of equity and justice. No prejudice will be caused to the Respondent if the delay is condoned.
Considering the above affidavit wherein the assessee has explained the reason for condoning the delay of 164 days by relying on the judgment of the Hon’ble Supreme Court in the case of Collector, Land Acquisition Vs. Mst. Katiji (1987) 167 ITR 471 (SC), the delay is hereby condoned. Since the issue raised by the AO requires verification at the level of AO, therefore, in the interest of justice, we are remitting this issue back to the file of AO for fresh consideration and AO is directed to give reasonable opportunity of being heard to the assessee and decide the issue as per law. The assessee is directed to produce necessary documents to substantiate its case and not to seek unnecessary adjournments, for early disposal of the case. In case of failure, no second leniency shall be granted to the assessee.
Pronounced in the court on the date mentioned on the caption page.