INSTITUTE OF NEPHROUROLOGY,BANGALORE vs. THE DEPUTY COMMISSIONER OF INCOME TAX, EXEMPTION CIRCLE 1, UNITY BUILDING

The learned Commissioner of Income Tax (Appeals) erred by confirming the denial of depreciation amounting to Rs.1,87,07,785 made by the learned Assessing Officer on the facts and circumstances of the case.

As the appeals has been decided by the CIT(A) by not condoning the delay, therefore we are mandated to look into whether there was sufficient cause for delay in filing of appeals by the assessee before the ld. CIT(A).

The ld. AO passed the assessment order wherein he assessed the income of the trust at Rs.4,14,22,381. The assessment order does not speak a word about reasons for assessing this income against the returned income of assessee at Nil. The assessment order u/s. 143(3) of the Act was passed on 15.12.2016.

The assessee preferred appeal before the ld. CIT(A) on 7.2.2022 and admittedly same is filed late by 5 years 19 days. The assessee filed an application for condonation of delay before the ld. CIT(A). The reason for the delay explained by the assessee is that assessee trust is managed by the Govt. functionaries and further the operation of the trust managed by persons who are not well- versed with the provisions of law and dependent on the professional. The assessee was assisted by a professional during the course of assessment proceedings. He was the person on whom the persons managing day to day affairs were dependent upon, who did not advise initially to file the appeal. Therefore initially the appeal was not filed. Thereafter COVID-19 shattered the functioning of the trust as it was in the forefront of fighting COVID-19 as one of the major centre. Subsequently as a huge demand of approximately Rs. 167 lakhs was outstanding and being pressed for payment, the assessee was advised by the present counsel for filing of appeal as it has a meritorious case. Based on this, the appeal was filed which is late by 5 years 19 days. The assessee requested for condonation of delay stating that delay is on account of bonafide reason and assessee would be put to great hardship and irreparable injury. Assessee relied on several judicial precedents also and requested for condonation of delay.

The ld. CIT(A) held that the reason given by the assessee of COVID-19 which was there since March, 2020. The assessee has failed to explain the delay between the date of passing of the order in 2016 till March, 2020 and therefore assessee has failed to show a sufficient cause, delay cannot be condoned. He held that there was no due diligence on the part of the appellant which shows lackadaisical attitude. Such casual, indifferent and lackadaisical approach towards filing of the appeal cannot constitute sufficient cause. Accordingly the delay of 5 years 19 days in filing appeal was not condoned and appeal of the assessee was dismissed.

The ld. counsel aggrieved by the order of the ld. CIT(A) submitted that the ld. CIT(A) has failed to consider the reason that assessment proceedings were entrusted to another professional, who did not advise the assessee for filing of appeal and therefore appeal was originally not filed. Subsequently on the outbreak of COVID-19, the assessee hospital and the whole managing committee was busy for the safety of civilians and therefore could not look into this aspect. Subsequently when the demand was pressed which was more than Rs.1.68 crores in this case, the assessee consulted the other professional, who advised that assessee has a good case and demand is not required to be paid, but needs to be contested as it is most likely to have a favourable decision which are mentioned in the grounds of appeal before the ld. CIT(A). Therefore appeal was filed which is no doubt belated.

The ld. DR vehemently supported the order of the ld. CIT(A) stating that delay of 5 years 19 days is a huge delay for which the assessee failed to explain the sufficient cause and therefore the ld. CIT(A) relying upon several judicial precedents of Hon’ble Supreme Court as found that delay is not for sufficient cause and therefore did not condone the delay. He further referred to the condonation petition filed by the assessee before the ld. CIT(A) which is at page 2 to 5 of the appellate order clearly shows that there is no sufficient cause when the assessment order is passed in 2016 till March, 2020 i.e., outbreak of COVID-19. Thus, there is no infirmity in the order of the ld. CIT(A) in not condoning the delay.

We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. The facts show that the assessee trust is registered u/s. 12A of the Act providing healthcare services in the field of Nephrourology, which also maintains a hospital and a college. The source of the fund is by the Govt. of Karnataka. The Governing Council is also headed by the Hon’ble Chief Minister of Karnataka, other Ministers, various Secretaries and the Director of the Institute.

In this case, assessment order was passed on 15.12.2016 at a total income of Rs.4,14,22,381 against the returned income of Rs.Nil filed on 30.9.2024. Admittedly the order is unreasoned, does not give any statutory as well as factual findings with respect to the determination of total income. Strangely there is not even a word in the assessment order that how the total income of the assessee is determined at Rs.4.14 crores where the returned income is at Rs. Nil. Against this order, the assessee preferred appeal before the ld. CIT(A) wherein at sl.No.14 the assessee admitted the delay in filing of appeal and at sl.No.15 of Form 35 it was stated that petition for condonation of delay is attached. The condonation petition is clearly extracted by the ld. CIT(A) at pages 2 to 5 of his appellate order. At page 5 in para 3, he has noted that hearing of the case took place on 8 occasions. The merits of the case were discussed and submission made by the assessee on its merits are extracted at page 7 in para 5 upto page 19 in the appellate order and then suddenly in para 6, the ld. CIT(A) gave a reason that delay in filing of appeal of 5 years 19 days is not for sufficient cause, and dismissed the appeal. If the ld. CIT(A) is not convinced about the delay in filing of appeal, he should not have gone to the hearing of the case on its merits. Only after the condonation of delay, he could have discussed the merits of the case. Therefore it is apparent on reading of the appellate order and looking at the facts of the case that hearing of the case took place for 8 different times and lengthy submissions of the assessee

According to the facts of the present case, no doubt the delay is 5 years 19 days, length of delay always is not material aspect of the case to decide whether the delay is for sufficient cause or not. In this case, the assessment proceedings were handled by a different professional who on the completion of the assessment proceedings did not advise the assessee for filing of the appeal. Naturally looking at the Governing Council of the assessee trust, it is fair if they have believed his advise. Further thereafter there is onset of COVID-19 which cannot be denied by anybody. Further the assessee’s hospital and the whole of the Governing Council was busy saving human lives and therefore could not look into the aspect of filing of appeal. Subsequently when the demand was passed, assessee was advised by the counsel, who was not there in the assessment proceedings, stating that assessee has a good and meritorious case, which should be contested and appeal needs to be filed. The Governing Council thought that the funds are of the Govt. and with due diligence the appeal needs to be filed. Therefore they filed the appeal before the ld. CIT(A). The condonation of delay was also requested by filing a petition. The ld. CIT(A) dismissed the same for the reason that according to him, the delay from the date of the order till the date of onset of COVID-19, the assessee has failed to show sufficient cause. He ignored the fact that assessee was advised by the erstwhile professional who appeared in the assessment proceedings. We fail to understand that why the ld. CIT(A) did not consider the delay on account of sufficient cause in filing of appeal caused on account of advise of counsel which was considered by the governing council at that time and subsequently when demand was pressed , they filed the appeal on the advise of another counsel.

No doubt in condoning the delay, the settled principle of law is that delay cannot be condoned without sufficient cause. Further the Hon’ble Supreme Court in the case of Inder Singh v. State of Madhya Pradesh in 2025 LiveLaw SC 339 has categorically held that a liberal approach should be taken in condoning the delay when the limitation ground undermines the merits of the case and obstructs substantial justice.

The Hon’ble Supreme Court in Ramchandra Shankar Deodhar v State of Maharashtra, (1974) 1 SCC 317, where the delay of more than 10 or 12 years was involved, it has been stated that there is no lower limit as there is no upper limit in condonation of delay.

Further in the case of A B Govardhan v P Ragothaman, (2024) 10 SCC 613 in para 4, the concept of liberal approach subserving the cause of justice was employed to condone the delay.

Further, the Hon’ble Supreme Court in para 28 in UOI v. Jahangir Behramjee Jeejeebhoy 2024 INSC 262 has held that the Court owes a duty to first ascertain the bonafides of the explanation offered by the party seeking condonation and then if sufficient cause is assigned, then the delay must be condoned.

In the present case, there is no doubt about the bonafides of the assessee in showing a sufficient cause.

The Hon’ble Supreme Court in the case of Isha Bhattacharjee [2013] 12 SCC 649 has categorically held that an application for condonation of delay should not be dealt with in a routine manner on the basis of individual philosophy which is basically subjective. Further no precise formula can be laid down, but has to be decided on the basis of sufficient cause shown in each case.

In the present case, it is a subjective opinion of the ld. CIT(A) about the lackadaisical, casual and negligent approach of the assessee, which is in fact not and is not substantiated. These statement in appellate order when the Governing council consists of the highest elected representative and also assisted by the highest level of the bureaucrats and funded by public money are really unwarranted. In this case the advise of the professional

Accordingly the order of the ld. CIT(A) in not admitting the appeal of the assessee is quashed as he is not correct in holding that there is no sufficient cause in filing of appeal late before him for 5 years and 19 days. Therefore, as we have already decided the issue of admission of appeal by condoning the delay, now the appeal is restored to the file of the ld. CIT(A) with a direction to decide the appeal on its own merits.

The appeal of the assessee for AY 2016-17 is also on identical grounds and on similar facts where the ld. CIT(A) did not condone the delay of 1115 days.

For this assessment year, the assessee filed return of income on 1.8.2016 at Rs.Nil which was assessed at a total income of Rs.99,94,543 by assessment order dated 19.12.2018 passed u/s. 143(3) of the Act.

Against this, the assessee filed the appeal before the ld. CIT(A) on 7.2.2012 which caused delay of 1115 days. Such delay was not condoned by the ld. CIT(A) for identical reasons as given in the AY 2014-15 in his appellate order and dismissed the appeal of the assessee.

As the facts and circumstances are identical, following our own order for AY 2014-15 wherein we have quashed the order of the ld. CIT(A), for similar reasons we also quash the appellate order of the ld. CIT(A) in not condoning the delay and restore the matter back to the file of the ld. CIT(A) to decide it on merits of the case.

Accordingly appeal in for AY 2016-17 is also allowed as indicated above.

Accordingly both the appeals of the assessee are allowed and restored to the file of the ld. CIT(A) to decide on the merits of the case.