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Income Tax Appellate Tribunal, A BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
1. This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 20.09.2024 vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1068898454(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2016-17.
2. The assessee has raised the following grounds of appeal:
The order of the Hon’ble National Faceless Appeal Centre (NFAC), Delhi is opposed to law and facts of the case.
The impugned appellate order is passed in violation of the principles of natural justice.
3. The Hon’ble NFAC ought to have held that the disallowance of interest of Rs.12,49,409/- is bad in law. 4. The Hon’ble NFAC ought to have held that the provisions of Section 40(a)(ia) are not applicable in the facts of the present case.
5. The disallowance of interest in a sum of Rs.12,49,409/- and Rs.35,724/- are bad in law.
6. The Hon’ble NFAC failed to appreciate that the subject interest is disallowed under different provisions of the I.T. Act more than once.
7. The applicant craves for leave to add to, delete from or amend the grounds of appeal.
At the outset, the ld. A.R. of the assessee submitted that there is a delay of 10 days in filing the appeal before this Tribunal. The ld. A.R. of the assessee also drew our attention to an affidavit dated 21.1.2025 sworn before the notary public along with the application for the condonation of delay which are reproduced below for ease of reference and record:
On going through the Affidavit & application for condonation as above, we take a note of the fact that the assessee could not file the appeal in time for the reason that the assessee’s Tax Consultant /CA Shri Rajeev Naik was not keeping good health and was hospitalized and also needed complete rest. After his recovery, he M/s. Hussain Multispeciality Hospital, Bijapur Page 7 of 11 forwarded the documents to M/s. K.R. Prasad Advocates with an instruction to prepare appeal memo. On receipt the appeal was uploaded online, which caused a short delay of 10 days in filing the said appeal. Accordingly, the ld. A.R. submitted that the delay is unintentional and no benefit can be attributed to the assessee in filing the appeal belatedly. He thus prayed to condone this short delay and requested to consider the issues raised by the assessee on merits.
On the contrary the ld. D.R. although objected for condoning the delay but could not controvert the submission as made by the assessee.
We have perused the details filed by the assessee to justify the delay and we are satisfied that there is no malafide intention on the part of the assessee in filing the appeal belatedly before us. It is to be noted that u/s 253(5) of the Act, the Tribunal may admit the appeal filed beyond the period of limitation where it has established that there exists a sufficient cause on the part of the assessee for not presenting the appeals within the prescribed time. The explanation therefore, becomes relevant to determine whether the same reflect sufficient and reasonable cause on the part of the assessee in not filing these appeals within the prescribed time.
6.1 While considering a similar issue the Apex Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) laid down six principles. For the purpose of convenience, the principles laid down by the Apex Court are reproduced hereunder:
(1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
(2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay M/s. Hussain Multispeciality Hospital, Bijapur Page 8 of 11 is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. (3) 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner.
(4) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a nondeliberate delay. (5) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. (6) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
6.2 When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of non deliberate delay. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue. As observed by Apex Court, if the application of the assessee for condoning the delay is rejected, it would amount to legalize injustice on technical ground when the Tribunal is capable of removing injustice and to do justice. Therefore, this Tribunal is bound to remove the injustice by condoning the delay on technicalities. If the delay is not condoned, it would amount to legalizing an illegal order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto. Under the scheme of Constitution, the Government cannot retain even a single pie of the individual citizen as tax, when it is not authorized by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalize an illegal and unconstitutional order passed by the lower authority.
M/s. Hussain Multispeciality Hospital, Bijapur Page 9 of 11 6.3 Further, in the case of People Education & Economic Development Society Vs/ ITO reported in 100 ITD 87 (TM) (Chen), wherein held that “when substantial justice and technical consultation are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of non-deliberate delay”.
6.4 The next question may arise whether delay was excessive or inordinate. There is no question of any excessive or inordinate when the reason stated by the assessee was a reasonable cause for not filing the appeal. We have to see the cause for the delay. When there was a reasonable cause, the period of delay may not be relevant factor. In fact, the Madras High Court in the case of CIT vs. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596) considered the condonation of delay and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Accordingly, the Madras High Court condoned nearly 21 years of delay in filing the appeal. When compared to 21 years, 10 days cannot be considered to be inordinate or excessive. Furthermore, the Chennai Tribunal by majority opinion in the case of People Education and Economic Development Society (PEEDS) v. ITO (100 ITD 87) (Chennai) (TM) condoned more than six hundred days delay. Therefore, in our opinion, by preferring the substantial justice, the short delay of 10 days has to be condoned and accordingly we condone the delay and admit the appeal for adjudication.
Brief facts of the case are that the assessee is a Partnership Firm and has filed its return of income for the AY 2016-17 declaring total income at Rs.34,75,810/- on 16.10.2016. Subsequently, the case was selected for scrutiny and the assessment was completed u/s 143(3) of the Act on 30.11.2018 by M/s. Hussain Multispeciality Hospital, Bijapur Page 10 of 11 accepting the returned income. Subsequently, the assessment order passed on 30.11.2018 was held to be erroneous and prejudicial to the interest of revenue and accordingly the assessment was set aside on the following issues-
1. Non- disallowance of interest paid and claimed as revenue expenditure.
2. Disallowance as per provisions of section 40(a)(ia).
Thereafter, the assessment u/s 143(3) r.w.s. 263 of the Act was completed on 15.3.2022 by assessing the total income at Rs.47,60,943/- by making disallowances as per provisions of section 40(a)(ia) of the Act amounting to Rs.35,724/- and addition of Rs.12,49,409/- (Interest amounting to Rs.13,15,160 for 11 Months treated as Capital expenditure (-) Depreciation of Rs.65,758/-).
Aggrieved by the order of AO, the assessee preferred appeal before the ld. CIT(A)/NFAC. The ld. CIT(A)/NFAC dismissed the appeal of the assessee on merits as well as on non-compliance.
Aggrieved by the order of ld. CIT(A)/NFAC, assessee filed the present appeal before this Tribunal.
Before us, the ld. A.R. for the assessee submitted that the assessee could not represent its case before ld. CIT(A)/NFAC due to the brain hemorrhage of its CA Shri Rajeev Naik. Further, before us, the ld. AR of the assessee undertook to make necessary compliances before the ld. CIT(A)/NFAC and shall not take unnecessary adjournments of the matter is remitted to the file of ld. CIT(A)/NFAC. Being so, in the interest of justice and fair play and as requested by the ld. A.R. of the assessee, we remit the entire issue in dispute to the file of ld. CIT(A)/NFAC to decide the M/s. Hussain Multispeciality Hospital, Bijapur Page 11 of 11 issue afresh in accordance with law. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. The assessee is also directed to cooperate with the proceedings and should not take unnecessary adjournments. It is ordered accordingly.
In the result, appeal of the assessee is partly allowed for statistical purposes.