Loading judgment…
Facts
Assessee M/s. Star Organic Foods Inc., engaged in food processing, filed its return for AY 2018-19 declaring a loss. The assessment was completed under Section 143(3) read with Section 144B, making an addition of Rs. 4,04,38,298/- under Section 69A read with Section 115BBE as unexplained money. The learned CIT(A) dismissed the assessee's appeal ex-parte for non-prosecution.
Held
The assessee filed the appeal before the Tribunal with a delay of 726 days, attributing it to financial distress, the loan becoming a Non-Performing Asset (NPA), and SARFAESI Act proceedings. The Tribunal held that financial distress, legal complications, and transitions of operations do not constitute "sufficient cause" under Section 5 of the Limitation Act to condone such a significant delay, especially given the assessee's non-cooperation in earlier proceedings. Citing Supreme Court precedents, the Tribunal dismissed the appeal in limine.
Key Issues
Whether financial distress, the declaration of a loan as NPA, and SARFAESI proceedings constitute 'sufficient cause' under Section 5 of the Limitation Act to condone a delay of 726 days in filing an appeal before the Income Tax Appellate Tribunal.
Sections Cited
143(2), 142(1), 143(3), 144B, 69A, 115BBE, 271AAC(1), 272A(1)(d), Section 5 of the Limitation Act, Section 3(1) of the Limitation Act, Sections 4 to 24 of the Limitation Act
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “A” BENCH: HYDERABAD
Before: SHRI MANJUNATHA G & SHRI RAVISH SOOD
ORDER PER MANJUNATHA G.:
This appeal has been filed by the assessee against the order dated 07.02.2023 of the learned CIT(A)- National Faceless Appeal Centre [in short “NFAC], Delhi, relating to the assessment year 2018-2019.
Brief facts of the case are that, the assessee is engaged in the business of Food Processing, filed it’s return of income for the assessment year 2018-2019, declaring a 2 ITA.No.715/Hyd./2025 loss of Rs.2,28,01,462/-. The case has been taken-up for complete scrutiny under CASS. Notice under section 143(2) dated 28.09.2019 and subsequent notice under section 142(1) of the Act on various dates has been issued and served on the assessee. In response, the assessee has filed submissions from time to time and submitted relevant details as called-for by the Assessing Officer. The assessment has been completed by the Assessing Officer u/sec.143(3) r.w.s.144B of the Act on 22.04.2021 and made addition of Rs.4,04,38,298/- u/sec.69A r.w.s.115BBE of the Act as unexplained money towards cash withdrawals from Bank and nature and source of deposits against the said cash withdrawals.
3. On being aggrieved by the assessment order passed by the Assessing Officer, the assessee carried the matter in appeal before the learned CIT(A). But, the assessee neither appeared nor filed any details. Therefore, the learned CIT(A) dismissed the appeal filed by the assessee ex-parte for non-prosecution and upheld the 3 ITA.No.715/Hyd./2025 additions made by the Assessing Officer towards cash withdrawals u/sec.69A of the Act.
Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.
CA, T Ram Prasad, Learned Counsel for the Assessee, at the outset referring to the petition filed by the assessee for condonation of delay in filing of the appeal submitted that, the appeal has been filed with delay of 726 days and the assessee has filed a petition along with affidavit and explained the reasons for delay in filing of the appeal. Learned Counsel for the Assessee, further, referring to the affidavit submitted that, the learned CIT(A) has passed the ex-parte on 07.02.2023 and in ordinary course, the appeal should have been filed before the Tribunal on 1- 5-2023, i.e. within 60 days from the data receipt of the order. However, the assessee filed the appeal before the Tribunal on 25.04.2025 with delay of 726 days. The reasons for delay in filing of the appeal are that, the assessee has availed loan facilities from Union Bank of India which [in “NPA”] became Non-Performing Asset short and 4 ITA.No.715/Hyd./2025 proceedings under the SARFAESI Act were initiated on 02.08.2018. The recovery proceeding culminated with auction sale of the property of the Firm and the same was taken over by the bid winner viz., M/s. Blue Earth Food Processing Private Limited on 20.01.2024. Due to on-going financial distress, legal complications and transitions of operations, the Firm was unable to take timely steps to file the present appeal before the Tribunal. Further, it was the submission of the assessee that, said delay is neither intentional nor for want of any undue benefit, but, purely beyond the control of the assessee. Therefore, he submitted that, the delay of 726 days in filing of the appeal may be condoned and the appeal filed by the assessee may be admitted for adjudication.
Shri Gurpreet Singh, learned Sr. AR for the Revenue, on the other hand, strongly opposed the petition filed by the assessee for condonation of delay and submitted that, the reasons given by the assessee in their affidavit does not constitute sufficient cause in terms of section 5 of the Limitation Act. Therefore, the delay in filing of the 5 ITA.No.715/Hyd./2025 appeal should not be condoned. The learned DR further submitted that, the assessee is a non-complaint to all proceedings, which is evident from the order passed by the Assessing Officer and the learned CIT(A) where the assessee had not filed any details to justify it’s case and the said lapse is even continued before the Tribunal, which is evident from the inordinate delay in filing of the appeal. Since, the reasons given by the assessee does not constitute sufficient cause for condoning the huge delay, the appeal filed by the assessee may be dismissed as un-admitted.
We have heard both the parties and considered the relevant affidavit to filed by the assessee for explaining the reasons for delay in filing of the appeal before the Tribunal. For better understanding of the issue, it is relevant to reproduce the contents of the affidavit filed by the assessee explaining the reasons for delay in filing of the appeal. “AFFIDAVIT 1, SHAIK SHARMILA, D/o MD JEELANI BASHA, aged about residing do here by solemnly affirm and state as under:-
6 ITA.No.715/Hyd./2025
I,SHAIK SHARMILA (PAN:- AYAPS3715N) am Managing Partner of M/s STAR ORGANIC FOODS INC (PAN:- ABPF56219P) having its principal place of business at S NO 787, DEVIS PET, INDUKURPET MANDAL, NELLORE-524314, ANDHRA PRADESH.
2. The Said firm was assessed to tax for Assessment Year 2018-19 and an assessment order was passed U/s 143(3) on 18.04.2021 where in an addition of Rs. 4,04,38,298/- was made on account of unexplained money U/s 69A on the Act, against which an appeal was filed before CIT(A)/NFAC, which has passed an order on 07.02.2023.
The firm has availed loan facilities from Union Bank of India which are outstanding. The firm loan account has become Non-Performing Asset (NPA) and proceedings under SARFAESI ACT were initiated on 02.08.2018. 4. The property which is subject to security for the loan was placed for auction during the financial year 2019-20. The recovery proceedings culminated with auction sale of the property of the firm offered as security and the same was taken over by the bid winner M/s Blue Earth Food Processing Private Limited (PAN:- AAKCB7896E) dated 20.01.2024. 5. The property of the firm was taken over by the company, but the firm continues to exist legally and remains liable for tax demand raised for AY2018-19. 6. Due to ongoing financial distress, legal complications and transitions of operations, the firm was unable to take timely steps to file an appeal before Hon'ble ITAT. 7. Even after the conclusion of recovery proceedings, the process of stabilizing operations, retrieving records, and obtaining professional advice took additional time, which caused further delay. 8. The penalty orders U/s 271AAC(1), 272A(1)(d) were passed and the service letter detailing the demand due was sent to the appellant on 24.12.2024. Upon receipt of this letter, the firm became aware of the status of the case. 9. The appeal is filed against the order of NFAC on 23.04.2025. The due date for filing appeal against the order of NFAC before the Hon'ble ITAT is 01.05.2023. The assessee has prepared the relevant documents for the submission of appeal online on 25.04.2025. In the process there is a delay of 726 days.
7 ITA.No.715/Hyd./2025 Year Period No. of Days of Delay 2023 01.05.2023 to 31.12.2023 245 2024 01.01.2024 to 31.12.2024 366 2025 01.01.2025 to 25.04.2025 115 Total : 726 10. The delay in filing the appeal is neither intentional nor deliberate but occurred due to genuine and bonafide reasons explained above.
11. The firm has a good prima facie case on merits and will suffer irreparable loss and injustice if the delay is not condoned and appeal is not admitted for hearing. In view of the above, we pray that the delay of 726 days in presenting in appeal be condoned.”
We have given our thoughtful consideration to the reasons given by the assessee for delay in filing the appeal and we ourselves do not fully subscribe to the reasons given by the assessee for the simple reason that, the so- called reasons i.e., the assessee was under financial distress due to classification of loan amount as NPA by the Bank and the subsequent invocation of SARFAESI Act, which culminated in sale of property and due to this reason, the assessee was unable to give attention to the income tax matters is, in our considered view, does not come under ‘sufficient cause’ for condonation of delay of 726 days in 8 ITA.No.715/Hyd./2025 filing the appeal. It is an admitted legal position of law from the decision of various Courts including the decision of Hon’ble Supreme Court in the case of Collector, Land Acquisition vs., MST. Katiji & Ors. [1987] 167 ITR 471 (SC) that, generally, the Courts have adopted a very liberal approach in construing the phrase ‘sufficient cause’ used in section 5 of the Limitation Act, in order to condone the delay, to enable the Courts to do substantial justice and apply law in a meaningful manner, which subserves the ends of justice. The Courts further noted that, in adhering the liberal approach in condoning the delay for ‘sufficient cause’ ordinary litigant does not stand benefit by lodging an appeal late and it is not necessary to explain every day’s delay in filing the appeal and since, sometimes refused to condone the delay, result in thrown out a meritorious matter. Therefore, it is, in the interest of justice that, cause of substantial justice should be allowed to prevail upon technical consideration and if the delay is not deliberate, it should be condoned. Notwithstanding the above, howsoever, liberal approach is adopted in condoning the delay,
9 ITA.No.715/Hyd./2025 existence of ‘sufficient cause’ for not filing the appeal in time, is a condition precedent for exercising the discretionary power of the Court to condone the delay. The phrases ‘liberal approach’, ‘justice-oriented approach’ and cause for the advancement of ‘substantial justice’ cannot be employed to defeat the law of limitation so as to allow stale matters or as a matter-of-fact dead matter to be revived and re-opened by taking aid of Section 5 of the Limitation Act. Therefore, it must always be borne in mind that, while construing ‘sufficient cause’ in deciding an appeal under section 5 of the Limitation Act, that on the expiry of the period of limitation prescribed for filing the appeal, substantive right in favour of the appellant accures and this right should not be lightly disturbed.
The law of limitation is founded on public policy. It is enshrined in the legal maxim "interest reipublicae ut sit finis litium" i.e., it is for the general welfare that, the period of limitation be put to litigation. The object is to, put an end to every legal remedy and to have a fixed period of life for every litigation as it is futile to keep any litigation or dispute
10 ITA.No.715/Hyd./2025 pending indefinitely. Every public policy requires that, there should be an end to the litigation, otherwise, it would be a dichotomy, if the litigant is made immortal vis-a-vis the right in parties i.e., human being were mortals. Therefore, considering the importance of limitation provide under the statutes must be understand in this context. The Income Tax Act, 1961 provided for limitation for filing appeals before various authorities including the Tribunal. Further, the Act has also provided a discretionary power to the Authorities for condoning the delay, if ‘sufficient cause’ is made out with reasonable explanation. Therefore, while condoning the delay, the Authorities must keep in mind the importance of limitation provided under various statutes and the discretionary power conferred by the said statute keeping in mind the phrase ‘sufficient and reasonable cause’.
In the present case, going by the affidavit filed by the assessee for explaining the reasons, the assessee claims that, it could not file the appeal due to on-going financial distress, legal complications and transitions of operations,
11 ITA.No.715/Hyd./2025 the Assessee-Firm was unable to take timely steps to file the appeal before the Tribunal. In our considered view, the reason given by the assessee is vague and general in nature and without any substance. The arguments of the assessee that, due to above reasons, it was unable to file appeal before the Tribunal is not acceptable going by the assessment order passed by the Assessing Officer and the return of income filed for the assessment year under consideration on 26.09.2018. The assessee appeared before the Assessing Officer on various occasions in the Financial Year 2019-2020 and from the above, it is undisputedly clear that, assessee was aware of the proceedings going before the Authorities and the assessee need to take care of Income Tax proceedings. Further, when the assessee is having a difficulty, it should be more cautious in taking care of it’s litigations, otherwise, it may result in devastating effects in the future. Since, the assessee was aware of the proceedings going before the Authorities, even during the course of proceedings in SARFAESI Act, in our considered view, the assessee should have taken steps to file appeal within the 12 ITA.No.715/Hyd./2025 time allowed under the Income Tax Act, 1961. Since, the assessee did not file the appeal within the time allowed under the Act and further, the reasons given by the assessee does not come under ‘sufficient cause’, in our considered view, the delay of 726 days in filing the appeal before the Tribunal, cannot be condoned on vague and general reasons. Further, in our considered view, the ‘sufficient cause’ for condonation of delay under section 5 of the Limitation Act is, a cause that prevents an appellant from filing the appeal or application within the prescribed time limit and is beyond their control and not due to negligent or inaction. In the present case, going by the facts available on record, it is purely on account of inaction or negligence of the assessee appeal could not be filed within the time allowed under the Act and this fact is further strengthened by the conduct of the assessee before the authorities below where the assessee did not appeared before the learned CIT(A) when the case was listed for hearing. Therefore, we are of the considered view that, the reasons given by the assessee for the delay in filling of the 13 ITA.No.715/Hyd./2025 appeal, does not come under ‘sufficient cause’ and for this reason, the delay of 726 days in filing appeal cannot be condoned.
At this stage, it is relevant to consider the Judgment of Hon’ble Supreme Court in the case of Pathapati Subbareddy (died) reptd. by his L.Rs & Ors. vs., The Special Deputy Collector-(LA) in Special Leave Petition (Civil) No.31248 of 2018 vide order dated 08.04.2024. The Hon’ble Supreme Court after considering the provisions of sec.3(1) Secs.4 to 24 of the Limitation Act has refused to condone the delay and dismissed the SLP filed by the assessee and uphold the order of the Hon’ble High Court of Andhra Pradesh in dismissing the appeal on account of delay. The Hon’ble Supreme Court while dismissing the SLP, after considering the various judicial precedents on the subject matter of condonation of delay, noted that, where a litigant could not explain the ‘sufficient cause’ which means adequate, enough reasons which prevented him to approach the Court within the period of limitation and could not properly,
14 ITA.No.715/Hyd./2025 satisfactorily and convincingly explained the delay to the Court/Tribunal, Court’s has no power to condone such delays. The Hon’ble Supreme Court further noted that, the statutory provisions under Limitation Act may cause hardship or inconvenience to a particular party, but, the Court has no choice, but, to enforce it giving full effect to the same by quoting the legal maxim dura lex sed lex which means “the law is hard but it is the law", stands attracted when there were negligence/ failure to exercise due diligence etc., and accordingly dismissed the SLP of the appellants in the aforesaid case.
In this view of the matter and considering the facts and circumstances of the present case, we are of the considered view that, the assessee has not made out a case for condoning the huge delay of 726 days in filing the appeal before the Tribunal. Thus, we are disinclined to condone the delay of 726 days in filing the appeal before the Tribunal and dismiss the appeal filed by the assessee in limine.
15 ITA.No.715/Hyd./2025
Since, we have dismissed the appeal filed by the assessee in limine, the other grounds taken by the assessee challenging the additions made by the Assessing Officer on merits, does not require specific adjudication at this point of time. Therefore, we reject the other grounds taken by the assessee.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open Court on 18.07.2025.