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Facts
The assessee, a non-resident residing in Australia, filed an appeal against an assessment order that was passed ex-parte. The assessee claimed delay in filing the appeal due to various reasons including communication issues with their representative and the complexities of tax laws.
Held
The Tribunal condoned the significant delay in filing the appeal, finding sufficient cause for the delay and the assessee's bonafides. The Tribunal held that the CIT(Appeals) wrongly dismissed the appeal for want of prosecution without adjudicating on merits.
Key Issues
Whether the delay in filing the appeal is for sufficient cause and should be condoned, and whether the CIT(A) erred in dismissing the appeal without considering the merits.
Sections Cited
144, 90, 54, 250, 251, 119(2)(b), 234B, 234C, VIA
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Income Tax Appellate Tribunal, “SMC - C” BENCH: BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.
Per Prashant Maharishi, Vice President
This appeal is filed by Vikram Shetty (the assessee/appellant) for the assessment year 2013-14 against the appellate order passed by the CIT(Appeals)-5, Bengaluru [ld. CIT(A)] dated 28.2.2018 wherein the e-filed appeal on 24.4.2016 against the assessment order dated 30.3.2016 passed u/s. 144 of the Income-tax Act, 1961 [the Act]
determining total income at Rs.44,35,107 was dismissed applying the decision of the coordinate Bench in the case of CIT v. Multiplan India Ltd., 38 ITD 320.
The assessee is aggrieved with the same and has preferred this appeal, raising twenty grounds of appeal as under: -
“The Appellant humbly submits that:
1. 1. The learned Assessing Officer has erred in passing the above said Order that is had in law conflicting the principles of natural justice and is liable to be quashed.
2. The learned Commissioner of Income Tax (Appeals) - 5 has erred in passing the above said Order that is bad in law conflicting the principles of natural justice.
3. The learned Assessing Officer has erred in disallowing the relief U/s 90 of the Income Tax Act. 1961 amounting to Rs. 7,04,594/-.
4. The learned Assessing Officer has erred in mentioning the claim of relief U/s 54 of the Income Tax Act. 1961 that was not claimed by the Appellant at all.
5. The learned Assessing Officer has erred in disallowing the deductions claimed under Chapter VIA of the Income Tax Act, 1961 amounting to Rs. 1,10,977/-. The addition as made being erroneous is to be deleted.
6. In any case, the learned assessing officer has erred in concluding the assessment u/s 144 of the Act holding that none of the notices issued were complied by the appellant. On the facts and circumstances of the case, and the law applicable, none of the notices were served on the appellant, the action of assessing officer in concluding the assessment exparte being erroneous is to be negated.
7. After submitting the reply in January 2016 with the learned Assessing Officer, the Appellant did not receive any further notices from the Income Tax Department at the address mentioned in Appellants reply (1947, RPC Layout, Bangalore), which was updated with the Department on 11th January 2016.
8. The Department's failure to use Appellant's updated address resulted in their notices being sent to Appellants old address, eliciting no response. This lapse cannot be attributed to Appellant, since Appellant had duly informed the Department of Appellant's address change.
The Appellant's then Authorised Representative CA Chikkerur filed an Appeal on 22nd April 2016 with the Honorable Commissioner of Income Tax (Appeals) - 5, Bangalore against the Impugned Order of Assessment dated 30th March 2016 passed U/s 144 of the IT Act, 1961 for the Assessment Year 2013-14.
10. On 22nd December 2017, at 4:30 P.M., the Commissioner of Income Tax (Appeals) - 5 scheduled a hearing to receive the Appellant's explanation regarding the notice for the outstanding amount of Rs. 10,44,102/- specifically addressing why the said amount should not be levied.
11. As the aforesaid scheduled hearing date was incorrectly notified and had expired, CA Chikkerur, requested the Commissioner of Income Tax (Appeals) – 5, via email to schedule a new hearing date since the Appellant was residing in Australia.
12. Pursuant to the previous request, the Commissioner of Income Tax (Appeals) - 5 fixed a new hearing date for 25th January 2018, at 12:30 P.M. But, owing to the Karnataka Bandh on that day on the issue of Mahadayi Project, the Appellant's representative, CA Chikkerur, emailed all the necessary documents before 2 days of hearing date and humbly requested the Commissioner of Income Tax (Appeals) - 5 to consider the Appellant's submissions for the appeals, if the further hearing date could not be accommodated.
13. After the email, CA Chikkerur informed Appellant that a new hearing date might be scheduled or that the submitted documents would be considered.
14. Further. later the Appellant was informed that Commissioner of Income Tax (Appeals) – 5 passed an order dated 28th February 2018 dismissing the Appeal, erroneously recording that the Appellant remained unrepresented at the hearing scheduled on 25th January 2018, which assertion is factually incorrect.
15. On 2" March 2018, CA Chikkerur submitted an online grievance through e-filing portal, requesting a meeting with the concerned officer and seeking an opportunity to submit the supporting documents. Thereafter, on 31st March 2018, the Appellant was informed that response is received directing to approach Commissioner of Income Tax (Appeals) – 5 for rectification of the error, a corrective and revised order would be issued by the Commissioner of Income Tax (Appeals) - 5.
On 19th June 2018, another grievance was submitted. stating that CA Chikkerur, had approached the Commissioner of Income Tax (Appeals) - 5 but was not permitted to submit hard copies of supporting documents. Consequently, he emailed all relevant documents to the Commissioner of Income Tax (Appeals) – 5 based on the response received from Jurisdictional Assessing Officer. 17. On 26th September 2022, CA Chikkerur. submitted another grievance, highlighting that an order under Section 250 of the Income Tax Act. 1961, was passed without affording the Appellant a reasonable opportunity of being heard and the Appellant had consistently maintained that he was not guilty of any wrongdoing and had not availed of any incorrect sections, thereby disputing liability for demand and penalties. 18. On 17th May 2023, the response was given for the aforesaid date stating that the Jurisdiction falls under Income Tax Officer. Ward - 2(1), International Taxation, Bangalore since the Appellant was a Non-Resident. 19. The Appellant denies the liability to pay interest u/s 234B and 234C of the Act. The interest having been levied erroneously is to be deleted.
20. In view of the above and other grounds to be adduced at the time of hearing it is requested that the impugned orders be quashed. remand the case back to the learned Assessing Officer and the interest levied be also deleted.” 3. In this case, the CIT(Appeals) passed an order on 28.2.2018 which was received by the assessee on 28.2.2018, however, the appeal was filed on 14.11.2024 which has resulted in the delay in filing of appeal by 2390 days. Assessee submitted an application for condonation of delay supported with an Affidavit.
The brief facts of the case show that the assessee is an individual, deriving salary income with ANZ Operations & Technology Pvt. Ltd., Bangalore, filed his return of income on 31.7.2013 at a total income of Rs.43,24,130. The return was picked up for scrutiny, notices were issued to the assessee, however, there was no response, therefore assessment was completed ex parte. Ld. AO noted that case of the assessee was selected for verification of large deduction claimed u/s. 54 of the Act [ in fact it is tax credit claimed by the assessee u/s 90 of the Act] of Rs.7,04,594 in the return of income. Same was disallowed. The assessee has also claimed deduction under Chapter VIA of Rs.1,10,977 which was also disallowed and assessment order u/s. 144 of the Act was passed on 30.3.2016 determining total income of assessee at Rs.44,35,107.
Aggrieved with the assessment order, assessee preferred appeal before the ld. CIT(Appeals) wherein 2 notices were issued for hearing on 22.12.2017 & 25.1.2018 which were not responded and therefore the ld. CIT(A) applying the decision of CIT v. Multiplan India Ltd., 38 ITD 320 dismissed the appeal for want of prosecution. The appellate order was passed on 28.2.2018.
Against this appellate order, the appeal was filed on 14.11.2024. Assessee filed an affidavit explaining the reasons for the delay in filing of appeal as under: -
The ld. AR reiterated the facts stated in the application for condonation of delay and the affidavit and submitted that the delay despite the length is because of sufficient cause deserves to be condoned. He submits that in this case there is sufficient cause for delay in filing of appeal, therefore it should be condoned.
The ld. DR, Mr. Ganesh R. Gale, Standing Counsel, vehemently opposed the same stating that the delay is :-
(i) huge, (ii) not supported by enough evidence to show that there is sufficient cause, and (iii) could not have been condoned. 9. He relied on the decision of the Hon’ble Supreme Court in 2024 4 SCR 241 (2024) INSC 286 in the case of Pathapati Subba Reddy by L.Rs. & Ors. v. The Special Deputy Collector (LA) MANU/SC/0285/2024 (08.04.2024 - SC) : MANU/SC/0285/2024 and according to him, delay should not be condoned as it is devoid of any sufficient cause.
We have carefully considered the rival contentions and perused the orders of the ld. lower authorities as well as the delay involved in the appeal. In this case the order of the ld. CIT(A) was passed and received by the assessee on the same day on 28.2.2018 and no doubt, the appeal is filed on 14.11.224 causing delay of 2390 days. The facts clearly show that at the time of filing of return of income for that year, assessee has claimed relief u/s. 90 of Rs.7,04,594 and deduction under Chapter VIA of Rs.1,10,977 in the return of income filed on 31.7.2013 declaring total income of Rs.43,24,130. Assessee is working in Australia sine 29.5.2014. Therefore the return of income which was picked for scrutiny resulted into an ex parte assessment order u/s. 144 of the Act as assessee could not participate in assessment proceedings. However, the claim of the assessee is that he did not receive any notices. It is also his claim that being a non-resident, unfamiliar with Indian tax laws, assessee has authorised his CA to respond to the income tax department. However as the ex parte assessment order was received, the CA filed appeal before the ld. CIT(A). The notice of hearing on 22.12.2017 was received by the assessee on 3.1.2018, therefore could not be responded to. On the same date, another notice was issued fixing the date of hearing for 25.1.2018. But due to Karnataka Bandh, assessee requested reschedulement of the date as per the email dated 23.1.2018, but suddenly on 28.2.2018 the appellate order was passed. Surprisingly the appellate order did not consider the submissions already made by the assessee. Therefore on 2.3.2018 assessee submitted to the CIT(Appeals) that as the submissions were not considered, the same order may be passed after giving consideration to the submissions already made. This was the grievance application. In response to the grievance application, the assessee was asked to approach the CIT(Appeals) for rectification of the order on 31.3.2018. The assessee approached the CIT(Appeals) on 22.5.2018 and also on 13.6.2018 by making a written communication for rectification of the order. On 19.6.2018 the assessee also made another
grievance stating the above fact and all the documents were submitted on 18.7.2018. This communication was not responded to till 29.6.2022 by the various authorities. On 26.9.2022 another grievance was raised, response was received on 17.5.2023, the assessee was advised to approach the ITO, Ward 2(1), Bangalore because of his non-resident status of the assessee. Meanwhile for some reasons, the ld. AR of the assessee ceased the communication with the assessee. Therefore, when the assessee returned to India, he consulted another CA on 6.2.2024, who advised him to file an application u/s. 119(2) (b) of the Act. On 23.7.2024 this application was rejected as the delay exceeded 6 years. The reason for rejection of the application was revision of return of income where the assessee sought rectification of the mistake in appellate order. Thereafter on 14.11.2024, the assessee engaged another AR, who advised him to file an appeal before the ITAT and consequently the appeal was filed on 14.11.2024. These sequence of events shows how it has caused the delay in filing of the above appeal.
No doubt, while condoning the delay, we must look into the fact whether the assessee was exercising his right or remedy is not availed for a considerable long time, then the delay could not have been condoned. For the delay, the assessee is duty bound to show that there is a sufficient cause. This is a condition precedent to condone the delay. In fact wherever there is a request for condonation of delay, the assessee has to explain as to what was the sufficient cause which means
an adequate and enough reason which prevented him to approach the court within the period of limitation. Even after showing the sufficient cause it is the discretion of the ITAT to allow or dismiss the application for condonation of delay. This decision is required to be based on the bonafides of the assessee. The discretion will also not be exercised when the delay is caused by negligence, inaction or lack of bonafides. In such cases, even if harshly the facts cause inconvenience to the assessee, it has to be applied with all its rigours. Even equity has no place in condoning the delay. Further the concept of liberal approach or justice oriented approach of substantial justice cannot be employed to overwrite the substantial law of limitation. The discretion has to be exercised in an enough manner to allow the application for condonation. Even the merits of the case are irrelevant. Thus, the Tribunal is empowered to exercise the discretion to condone if and only if the delay is for sufficient cause and not because of negligence or want of due diligence. Therefore in deciding above condonation of delay petition, it is required to be seen whether there exists a sufficient cause and the assessee was diligent about his right or not. Honourable Supreme Court in above decision has laid down following principles for condonation of delay :-
“26. On a harmonious consideration of the provisions of the law, as aforesaid, and the law laid down by this Court, it is evident that:
(i) Law of limitation is based upon public policy that there should be an end to litigation by forfeiting the right to remedy rather than the right itself;
(ii) A right or the remedy that has not been exercised or availed of for a long time must come to an end or cease to exist after a fixed period of time;
(iii) The provisions of the Limitation Act have to be construed differently, such as Section 3 has to be construed in a strict sense whereas Section 5 has to be construed liberally;
(iv) In order to advance substantial justice, though liberal approach, justice-oriented approach or cause of substantial justice may be kept in mind but the same cannot be used to defeat the substantial law of limitation contained in Section 3 of the Limitation Act;
(v) Courts are empowered to exercise discretion to condone the delay if sufficient cause had been explained, but that exercise of power is discretionary in nature and may not be exercised even if sufficient cause is established for various factors such as, where there is inordinate delay, negligence and want of due diligence;
(vi) Merely some persons obtained relief in similar matter, it does not mean that others are also entitled to the same benefit if the court is not satisfied with the cause shown for the delay in filing the appeal;
(vii) Merits of the case are not required to be considered in condoning the delay; and (viii) Delay condonation application has to be decided on the parameters laid down for condoning the delay and condoning the delay for the reason that the conditions have been imposed, tantamount to disregarding the statutory provision.
[Patha Pati Subba Reddy (Died) by L.Rs. and Ors. vs. The Special Deputy Collector (LA) (08.04.2024 - SC): MANU/SC/0285/2024]
It is in the light of the above legal position that now we have to test whether the inordinate delay in filing the proposed appeal ought to be condoned or not in this case. The order of the ld. CIT(Appeals) was passed on 28.2.2018. Upto 18.7.2018 the assessee approached the CIT(Appeals) as well as the grievance was also made. When the grievance petition and rectification application was made, nothing more the assessee could have done, as both of these petitions were not rejected. Subsequently when the assessee was approached for demand, another grievance was raised which was responded to on 17.5.2023. Thereafter there was a change in the consultant and assessee approached by filing an application u/s. 119(2b) of the Act which was rejected on 23.7.2024. The assessee approached the CA, who advised
him to file an appeal and based on his advise, the appeal came to be filed before the ITAT.
It has to be noted that the assessee is a non-resident, residing in Australia. Naturally he was not aware and was solely dependent on the consultant, who in fact took several decisions by knocking the doors of various authorities such as the CIT(Appeals), grievance application, the AO, may be the door is wrong, but the efforts of the assessee cannot be said to be lacking in his bonafides. It is also startling that despite knocking so many doors by the assessee of several income tax authorities, none of them advised him to file an appeal before ITAT, but everybody gave his own reason to not address the grievance of the assessee. Even the CIT(Appeals), the AO, who were considered to be well-versed with the law at least should have given one line in their response asking a non-resident to immediately file an appeal before the Tribunal. It has not happened. Thus, looking at the full compass of facts and situation of the assessee, we are of the view that the delay caused in filing of the appeal by the assessee is for sufficient reason and hence condoned.
The assessee has also submitted a copy of the decision in wherein the delay caused of around 6 years in filing of appeal before the Tribunal was condoned. As the Hon’ble Supreme Court in 4 SCR 241 (supra) has categorically held that because merely some persons obtained relief of similar nature, it does not mean that others are also entitled to the same benefit, if the court is not satisfied with the cause shown for the delay in filing of appeal. Thus, no precedent can be cited or is required to be considered in condoning the delay which has to be only because of sufficient cause shown by the assessee.
The ld. DR has vehemently relied upon the decision of the Hon’ble Supreme Court as stated above. The Hon’ble Supreme Court did not interfere in the decision of the Hon’ble High Court in not condoning the delay of 5659 days for the reason that the claimants were negligent in pursuing the reference and then in delay in filing. Further most of the claimants have accepted the decision of the reference court Thus the Hon’ble Supreme Court found that there is apparently no due diligence on the part of the petitioner in pursuing the matter. The ld. DR could not show us how the assessee was negligent when he constantly approached the various authorities and did not accept their decision. Therefore, the facts of the case before the Hon’ble Supreme Court compared to the case before us are quite distinct.
On the merits of the case, we find that the ld. CIT(Appeals) has dismissed the appeal of the assessee not on the merits of the case, but holding that the assessee is not willing to prosecute the appeal and applied the decision of the CIT v. Multiplan India Ltd., 38 ITD 320. On carefully looking at the provisions of section 250(6), the CIT(Appeals) has to decide the appeal on its own merits. According to section 251 in an appeal against the order of assessment, he has to confirm, reduce, enhance or annul the assessment by giving the detailed reason. He cannot short-circuit the appeal of the assessee and dismiss it for want of prosecution. Even this allegation of the ld. CIT(A) also does not hold water for the reason that all the notices issued by him were responded to by the assessee. Thus dismissing appeal of the assessee by the ld. CIT (A) is not in accordance with the law.
Before the ld. AO, the assessment took place in absence of the assessee. The notices might have been issued to the assessee at his Bangalore address, but it is apparent that by that time assessee for employment purpose shifted to Australia. Looking at the Statement of Facts before the CIT(Appeals) as part of Annexure to Form 35, it is apparent that assessee got an email on 1.4.2016 containing the assessment order passed u/s. 144 of the Act. It is also contended that assessee has not received any other email about the notice of hearing. Further assessee has also not claimed any deduction u/s. 54, therefore the reason for selection of scrutiny is also incorrect. In view of the above facts, the only grievance of the assessee is the grant of foreign tax credit u/s. 90 of the Act of Rs.7,04,594, which was disallowed by the AO stating that it is a deduction u/s. 54 of the Act and further disallowance of deduction claimed under Chapter VIA of Rs.1,10,977.
No reasons were provided by the ld. AO that why assessee is not entitled to tax credit u/s 90 of the Act.
Before us, the assessee has furnished various details of such foreign tax credit and the deduction claimed. Naturally same have not been verified. Thus, it needs verification by the lower authorities. As the assessee is based in Australia, the ld. AR was directed to submit the requisite detail before the ld. AO for verification.
In view of the above facts, we restore the whole appeal back to the file of the ld. AO with a direction to the assessee to submit the necessary details within 90 days from the date of receipt of this order to the concerned jurisdictional Assessing Officer, who after verification and granting opportunity of hearing, may decide the issue of claim of foreign tax credit in the return of income as well as deduction under Chapter VIA of the Act claimed by the assessee.
In the result, all the grounds of appeal are restored back to the ld. AO and the appeal of the assessee is allowed for statistical purposes.