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Facts
The assessee filed an appeal before the ITAT after a delay of 1206 days. The delay occurred because the assessee believed their appeal was still pending before the NFAC, when in fact it had been dismissed due to a mistaken assumption by the NFAC that the issue was settled under the VSV scheme.
Held
The Tribunal condoned the significant delay of 1206 days, noting shared responsibility between the assessee and the NFAC for the delay and dismissal. The matter was remanded back to the NFAC for fresh adjudication.
Key Issues
Whether the delay in filing the appeal is sufficient to warrant dismissal, or if a reasonable cause exists for condonation, and whether the NFAC's dismissal based on an incorrect assumption merits reconsideration.
Sections Cited
143(3), 263, 144C, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the NFAC, Delhi dated 30/04/2021 in 2021-22/1032746369(1) for the assessment year 2010-11.
First, it is noted that there is a delay of 1206 days in filing the appeal before the ITAT. The assessee has submitted a duly notarized condonation petition explaining the delay. In the petition, the assessee stated that for the year under consideration, two appeals were filed before the NFAC, as detailed below:
The assessee opted for the VSV scheme to settle the dispute related to the order passed under section 143(3) read with Section 263 of the Act. However, the NFAC mistakenly dismissed the assessee’s appeal under Section 143(3) read with Section 144C of the Act vide order dated April 30, 2021, holding that the issue had been settled under VSV scheme. As a result, the NFAC considered the appeal as infructuous. In reality, the assessee never opted for the VSV scheme for the issues arising in the order passed under section 143(3) read with section 144C of the Act. The assessee remained under the impression that the appeal was still pending before the NFAC. It was only during a routine review of pending appeals for the statutory audit that the assessee discovered that the NFAC had dismissed the appeal under the wrong assumption of facts that it was settled under the VSV scheme.
Upon realizing this mistake, the assessee immediately filed an appeal before the ITAT, which resulted in the delay of 1206 days. The assessee argued that the appeal could not be filed on time due to the . genuine belief that it was still pending before the NFAC. Therefore, the assessee’s representative requested the ITAT to condone the delay.
On the other hand, the ld. Departmental Representative (DR) argued that the assessee is a private limited company and assisted by professionals, making it unlikely that it could mistakenly believe the appeal was still pending before the NFAC. Furthermore, the ld. DR pointed out that the assessee had not provided any evidence showing that the NFAC failed to communicate the order passed under section 250 of the Act. The DR emphasized that the delay was excessive, inordinate and should not be condoned.
6. In response, the assessee’s Authorized Representative (AR) stated that the assessee was under the impression that the transfer pricing adjustment issue would be handled by the Jurisdictional ld. CIT(A) and not the NFAC. The ld. AR further argued that the transfer of the appeal from the Jurisdictional CIT(A) to the NFAC was legally incorrect. Consequently, the assessee expected to receive a notice from the Jurisdictional CIT(A), not the NFAC.
We have considered the arguments of both parties and examined the records. The delay of 1206 days is certainly significant. However, the length of the delay is not the primary concern; rather, the cause of the delay is what matters. If a reasonable cause exists, the delay can be condoned.
7.1 The Hon’ble Madras High Court, in CIT v. K.S.P. Shanmugavel Nadai and Ors (153 ITR 596), held that if a taxpayer is pursuing other . legal remedies, the time taken for those proceedings should be considered when deciding whether the delay in filing an appeal is justified. In that case, the Hon’ble Court condoned a delay of approximately 20 years, recognizing the taxpayer’s valid reasons.
7.2 The term “sufficient cause” is not explicitly defined in the Act. It generally refers to circumstances beyond a person’s control that prevented them from taking timely action. The Hon’ble Courts have repeatedly held that a liberal approach should be taken in condoning delays when justice is at stake. The Hon’ble Supreme Court, in Collector, Land Acquisition v. Mst. Katiji (167 ITR 471), established key principles for condoning delays: 1. A litigant does not benefit from filing an appeal late.
2. Denying condonation of delay may result in the rejection of a valid case without being heard on its merits.
3. Delay should not be examined with an overly rigid approach but in a practical and reasonable manner.
4. Substantial justice should take precedence over technical formalities.
5. There is no presumption that a delay is deliberate or caused by negligence.
The judiciary’s role is to prevent injustice rather than reject cases based on technical grounds.
7.3 Additionally, in Basawaraj v. Land Acquisition Officer (2013) 14 SCC 81, the Hon’ble Supreme Court ruled that sufficient cause must be an adequate and justifiable reason preventing the petitioner from . approaching the Hon’ble Court within the prescribed time. If negligence or lack of diligence is found, delay should not be condoned.
7.4 The assessee’s argument that it only discovered the NFAC’s decision after three years of statutory audits is unconvincing. Given the company’s professional support and annual audits, it should have identified the mistake much earlier. The delay of over three years is excessive, and the explanation provided is not fully satisfactory.
7.5 However, a review of the NFAC’s order indicates that it relied on the ITBA portal’s information, which incorrectly suggested that the assessee had opted for the VSV scheme. The NFAC dismissed the appeal without directly confirming this with the assessee. This was an error on the NFAC’s part.
7.6 At the same time, the assessee also failed to monitor the status of its appeal diligently. While it is surprising that the assessee did not receive formal communication from the NFAC regarding the dismissal, no evidence was presented to prove that such communication was never sent. However, the impression of the assessee that the impugned appeal shall be dealt by the jurisdictional CIT-A cannot be faulted in view of the CBDT order dated 13-08-2020 having reference to F.No. 187/3/2020- ITA-I.
7.7. However, we note that both the NFAC and the assessee bear responsibility for the dismissal of the appeal. The NFAC’s error contributed to the confusion, while the assessee’s lack of vigilance resulted in the significant delay.
7.8 Before parting, it is also necessary to note that the part of the delay in filing the appeal by the assessee is also attributable to the covid period. As such, the Hon’ble Supreme Court of India, in the case of In Re: Cognizance for Extension of Limitation (Miscellaneous Application No. 665/2021 in SMW(C) No. 3/2020), provided a blanket extension of limitation periods for all judicial, quasi-judicial, and administrative proceedings due to COVID-19. The Hon’ble Court ruled that the limitation period from March 15, 2020, to February 28, 2022, shall be excluded for all legal proceedings. Accordingly, we are of the view that the assessee should also get some benefit of the Covid Period regarding the Delay in Filing the Appeal by (it) the Assessee.
7.9 In view of the above and to ensure fairness to both parties, we are inclined to condone the delay on the condition that the assessee pays ₹50,000 to the Prime Minister’s Relief Fund. With this condition met, we proceed to adjudicate the appeal on its merits.
7.10 Since the NFAC dismissed the appeal based on the incorrect assumption of facts that the issue was resolved under the VSV scheme, justice requires that the matter be reconsidered. We, therefore, remand the case back to the NFAC for fresh adjudication, ensuring compliance with legal provisions and allowing the assessee a fair opportunity to present its case. Accordingly, the appeal of the assessee is allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.