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Facts
The assessee filed an appeal against an ex-parte assessment order and subsequent appellate order, with a significant delay of 2227 days. The delay was attributed to the company's cessation of business activities, employees leaving, and potential technical glitches in the e-filing portal, leading to a lack of awareness about the orders.
Held
The Tribunal condoned the delay of 2227 days, considering that the assessee had a reasonable cause and that refusing to condone would lead to substantial injustice. The Tribunal found that the assessee's reply during assessment proceedings was not duly considered.
Key Issues
Whether the delay in filing the appeal can be condoned due to sufficient cause, and whether the assessment order was passed without considering the assessee's submissions.
Sections Cited
144, 40(a)(ia)
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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Shri T.R. Senthil Kumar & Shri Makarand Vasant Mahadeokar
ITA No: 1189/Ahd/2024 Assessment Year: 2012-13 CAT Cosmetics And The ITO, Healthcare Pvt. Ltd. Ward-1(1)(3), B/505, Infinity Tower, Vs Ahmedabad Corporate Road, Opp. Prahladnagar Garden, Satellite, Ahmedabad-380015 (Respondent) Gujarat PAN: AACCC5955D (Appellant) Assessee Represented: Shri Sunil Talati, CA Revenue Represented: Shri Prateek Sharma, Sr. D.R. Date of hearing : 01-05-2025 Date of pronouncement : 21-05-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee as against the appellate order dated 28.02.2018 passed by the Commissioner of Income Tax (Appeals)-1, Ahmedabad arising out of the exparte assessment order passed under section 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2012-13.
A.Y. 2012-13 Page No 2 CAT Cosmetics And Healthcare Pvt. Ltd. vs. ITO
The Grounds of Appeal raised by the assessee reads as under:
Your appellant being aggrieved by the order of Ld. Commissioner of Income-tax (Appeals)- 1, Ahmedabad presents this appeal against the same on the following amongst other grounds:
1. 1. The Ld. CIT(A) has erred in upholding the assessment order passed u/s 144 of the IT Act without appreciating and considering the replies filed. Such order passed and additions made are prayed to be deleted as principles of natural justice are violated.
2. The Ld. CIT(A) has erred in upholding the assessment order passed by AO in which the AO has erred in law and on facts by disallowing the amount of Rs. 1,26,48,540/- as unexplained debit and credit notes. The genuineness of the said debit and credit notes have been already substantiated vide letter dated 20/03/2015. In view of the same, such addition made is prayed to be deleted.
3. The Ld. CIT(A) has erred in upholding the order passed by the AO in which the AO has disallowed an amount of Rs. 1,80,000/- u/s 40(a)(ia) towards payment of legal and professional fees on account of payments made to different professionals for different assignments and there was no requirement of deduction of TDS. In view of the same, such disallowance is prayed to be deleted.
4. The Ld. CIT(A) has erred in law and on facts by disallowing the brought forward loss of Rs. 5,35,488/-. It is submitted that the appeal in the appellant company's case for AY 2011-12 has not yet been decided and is pending before the Ld. CIT(A). It is prayed that such loss be allowed as per the decision in such appeal.
5. The order passed by the learned CIT (Appeals) is bad in law and contrary to the provisions of law and facts. It is submitted that the same be held so now 6. Your appellant craves leave to add, alter and/or to amend all or any of the grounds before the final hearing.
3. The registry has noted that there is a delay of 2227 days in filing the above appeal. The assessee explained the delay as follows:
A.Y. 2012-13 Page No 3 CAT Cosmetics And Healthcare Pvt. Ltd. vs. ITO
AFFIDAVIT FOR CONDONATION OF DEALY 1. Amit Kumar Sundesha, son of Dharma Ram, aged about 39 Years, residing at E-106. Sangath-1, Near Muktidham Society, Opp. Motera Stadium, Motera, Ahmedabad-380005, hereby solemnly state and affirm as under: That I am the Director of M/s. CAT Cosmetics and Healthcare Pvt. Ltd. (hereinafter referred as 'Company') bearing PAN: AACCC5955D. That the appellate orders in the case of M/s. CAT Cosmetics and Healthcare Pvt. Ltd. was passed by the Commissioner of Income Tax (Appeals) - 1. Ahmedabad, Gujarat for A.Y. 2012-13 dated 28th February 2018 and for AY 2013-14 dated 19th November 2019. With surprise, the orders so passed was not known to us. We are not aware that orders has been passed and the same is not received in physical form. That we received demand recovery notice via e-mail in the month of May, 2024 dated 03/05/2024 in which the outstanding demand payable for AY 2012-13 and AY 2013-14 was mentioned and determined. After that on visiting the "outstanding demand" section of the e-filing portal we came to know that the said demand was outstanding and the first Appeal filed by the earlier professional for AY 2012-13 and 2013-14 was disposed by the Ld. CIT(A) and the disputed additions made during the course of the assessment proceedings were sustained. The said orders passed by the Ld. CIT (A) 1 for the two years were available for download from the ITBA e-filing portal and were downloaded from there. The said email received was forwarded to Talati and Talati LLP Chartered Accountants. Thereafter appeal before the Hon'ble ITAT was e-filed on 03/06/2024. That the orders for AY 2012-13 and AY 2013-14 were passed during such a period of time where there were no business activities in our company at all. After September, 2017 there is no business activity carried out by our company. All employees had left and the office was completely shut down after the financial year. That the past director of the Company, Mr. Prajesh Shah informed us that the person responsible for Finance and Accounts seldomly checked the e-filing portal and came to know about the said orders passed by the Ld. CIT(A)- 1, Ahmedabad after many days were passed which might be due to some technical glitch which is occurring even in recent times where the orders which are already passed by the officer gets reflected on the portal after many days. After that, in June 2021 the new e-filing portal was launched by the Government of India which had a bumpy start and consisted of many glitches which are being continuously resolved till date. There is a high probability that the orders passed by the Ld. CIT (A)-1, Ahmedabad remained to be uploaded at the relevant time A.Y. 2012-13 Page No 4 CAT Cosmetics And Healthcare Pvt. Ltd. vs. ITO or even that the orders uploaded on the e-filing website was not getting reflected due to some technical glitch at that point of time. This affidavit is therefore filed to allow the Hon'ble Income Tax Appellate Tribunal (ITAT) to please appreciate that it was beyond our control and it was due to absolutely genuine and reasonable cause that the appeal could not be filed for A.Y. 2012-13 and AY 2013-14 within time. In the interest of natural justice and to see that no impugned addition is made and that too for no fault of ours, we should not be penalized and an opportunity to represent our case on law and on merits may please be given. Under the circumstances, on behalf of M/s. CAT Cosmetics and Healthcare Pvt. Ltd., I kindly request your honor to condone the delay in fling of appeal before Hon'ble ITAT and oblige.”
Ld. Counsel Shri Sunil Talati appearing for the Assessee in support of the above Notarized Affidavit submitted since there was no business activities, the assessee was not aware of the appellate orders passed by Ld. CIT(A). After the recovery proceedings initiated by the Department in May 2024, the assessee came to know both the dismissal order and immediate thereafter filed the appeals with the substantial delay of 2227 days which is neither willful nor wanton. However on merits, the assessee has a good case, therefore requested to condone the delay and set aside the matter back to the file of Jurisdictional Assessing Officer.
Per contra, Ld. Sr. D.R. appearing for the Revenue strongly opposed the delay and requested to confirm the order passed by the Lower Authorities especially when the assessment order itself is an exparte order.
We have given our thoughtful consideration and perused the materials available on record. During the assessment proceedings, assessee filed its reply letter dated 20-03-2015 along with relevant Annexures which is available at Page Nos. 7 to 28 of the Paper A.Y. 2012-13 Page No 5 CAT Cosmetics And Healthcare Pvt. Ltd. vs. ITO Book. The assessee also produced copy of the Nandan Courier Services Pvt. Ltd. acknowledging the delivery of the letter to the Income Tax Officer on 25-03-2015. Thus we are of the considered view the submissions filed by the assessee was not considered by the Assessing Officer and made addition of debit/credit entry of Rs.1,26,48,540/- and passed the assessment order on 20-03-2015 as an exparte order, without considering the reply letter filed by the assessee.
6.1. During appellate proceedings, the Ld. CIT(A) called for a Remand Report from the Assessing Officer but again stated that he has not received reply from the assessee during the assessment proceedings. Based on the Remand Report of the Assessing Officer, the Ld. CIT(A) confirmed the addition.
We have heard the rival submissions, there is a delay of 2227 days in filing the appeal by the assessee before us. Certainly, the delay is huge. But length of the delay becomes insignificant, if there was sufficient cause for such delay which prevented the assessee in filing the appeal. As such we need to consider the cause for the delay and not the length of the delay. Accordingly in our considered view when there was a reasonable cause, the period of delay may not be relevant factor. The Hon’ble Madras High Court in the case of CIT v. K.S.P. Shanmugavel Nadar and Ors reported in 153 ITR 596 held as under: “Since in this case the assessee had been prosecuting other remedies, the time taken by those proceedings should naturally be taken while determining the question whether the assessee had sufficient cause for not presenting the appeal in time. Therefore, the revenue was not right in submitting that the appeal filed under section 17 was an appeal against the original order of assessment under the Act, which was passed about 20 years ago, as it was evident that the appeal was against an order of rejection of relief by the A.Y. 2012-13 Page No 6 CAT Cosmetics And Healthcare Pvt. Ltd. vs. ITO
assessing authority. Thus, though the Tribunal's view that there was no question of limitation in such cases, was not correct yet the AAC was right in condoning the delay and entertaining the appeal.”
7.1 From the above we note that the Hon’ble Madras High Court was pleased to condone the delay for 20 years approximately by holding that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Thus, the delay in the instant case is just of 2227 number of days which cannot be considered to be inordinate or excessive in comparison to the delay of 20 years.
7.2 The next controversy arises what is the sufficient cause, it has not been defined anywhere under the Act, but refers to an occasion which is beyond the control of a normal person. What is beyond the control of a person, the test of reasonable approach under normal circumstances should be applied. As such no hard and fast rule can be applied to figure out the weather there was sufficient cause for the delay. It depends upon case-to-case basis. However, the Hon’ble Courts in the series of judgements have held that while condoning the delay the expression of ‘sufficient cause’ should be construed for advancing substantial justice to the party concerned. For evaluating ‘sufficiency of cause’ and then, for deciding condonation of delay, following principles laid down by Hon'ble Apex Court in the case of Mst. Katiji (167 ITR 471) should be kept in mind: (i) Ordinarily, a litigant does not stand to benefit by lodging an appeal late. (ii) Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties.
A.Y. 2012-13 Page No 7 CAT Cosmetics And Healthcare Pvt. Ltd. vs. ITO
(iii) "Every day's delay must be explained" does not mean that a pedantic approach should be taken. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common-sense pragmatic manner. (iv) When substantial justice and technical considerations are pitted against each other, 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 non- deliberate delay. (v) 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. (vi) It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
7.3 From the above judgment of the Hon’ble Apex Court, we note that the substantial justice deserves to be preferred rather than deciding the matter on the basis of technical defect.
7.4. It is trite law that where a case has been presented in the Court beyond limitation, the petitioner has to explain the Court as to what was the "sufficient cause" which means an adequate and enough reason which prevented him to approach the Court within limitation as held by Hon’ble Supreme Court in the following cases:
(a) Basawaraj v. Land Acquisition Officer, (2013) 14 SCC 81: "9. Sufficient cause is the cause for which the defendant could not be blamed for his absence. The meaning of the word "sufficient" is "adequate" or "enough", inasmuch as may be necessary to answer the purpose intended. Therefore, the word "sufficient" embraces no more than that which provides a platitude, which when the act done suffices to accomplish the purpose intended in the facts and circumstances existing in a case, duly examined from the viewpoint of a reasonable standard of a cautious man. In this context, "sufficient cause" means that the party should not have acted in a negligent manner or there was a want of bona fide on its part in view of the facts and circumstances of a case or it cannot be alleged that the party has "not acted diligently" or "remained inactive". However, the facts and circumstances of each case must afford sufficient ground to enable the court concerned to exercise discretion for the reason that whenever the court exercises discretion, it has to be exercised judiciously. The applicant must satisfy the court that he was prevented by any "sufficient cause"
A.Y. 2012-13 Page No 8 CAT Cosmetics And Healthcare Pvt. Ltd. vs. ITO from prosecuting his case, and unless a satisfactory explanation is furnished, the court should not allow the application for condonation of delay. The court has to examine whether the mistake is bona fide or was merely a device to cover an ulterior purpose. (See Manindra Land and Building Corpn. Ltd. v. Bhutnath Banerjee (AIR 1964 SC 1336 Mata Din v. A. Narayanan [(1969) 2 SCC 770), Parimal v. Veena [(2011) 3 SCC 545] and Moniben Devraj Shah v. Municipal Corpn. of Brihan Mumbai (2012) 5- SCC 157].)”
(b) Ajay Dabre v. Pyare Ram 2023 SCC Online SC 92: ‘13. This Court in the case of Basawaraj v. Special Land Acquisition Officer while rejecting an application for condonation of delay for lack of sufficient cause has concluded in Paragraph 15 as follows: "15. The law on the issue can be summarised to the effect that where a case has been presented in the court beyond limitation, the applicant has to explain the court as to what was the "sufficient cause" which means an adequate and enough reason which prevented him to approach the court within limitation. In case a party is found to be negligent, or for want of bona fide on his part in the facts and circumstances of the case, or found to have not acted diligently or remained inactive, there cannot be a justified ground to condone the delay. No court could be justified in condoning such an inordinate delay by imposing any condition whatsoever. The application is to be decided only within the parameters laid down by this Court in regard to the condonation of delay. In case there was no sufficient cause to prevent a litigant to approach the court on time condoning the delay without any justification, putting any condition whatsoever, amounts to passing an order in violation of the statutory provisions and it tantamounts to showing utter disregard to the legislature."
Therefore, we are of the considered opinion that the High Court did not commit any mistake in dismissing the delay condonation application of the present appellant.
7.5. Thus, it is crystal clear from the above legal proposition that the discretion to condone the delay has to be exercised judiciously based on facts and circumstances of each case.
7.6 We also note that the Hon’ble Gujarat High Court in the case of Vareli textile industry versus CIT reported in 154 Taxman 33 has held as under: It is equally well-settled that where a cause is consciously abandoned (as in the present case) the party seeking condonation has to show by cogent evidence sufficient cause in support of its claim of condonation. The onus is greater. One of the propositions of settled legal position is to ensure that a meritorious case is not A.Y. 2012-13 Page No 9 CAT Cosmetics And Healthcare Pvt. Ltd. vs. ITO thrown out on the ground of limitation. Therefore, it is necessary to examine, at least prima facie, whether the assessee has or has not a case on merits.
7.7 From the above, it is transpired that a meritorious case of the assessee should not be thrown away due to negligence or on account of technical lapses.
In the light of the above stated discussion, we proceed to evaluate whether the delay in the present case needs to be condoned in the given facts and circumstances. The assessee states that there is no business activities carried out by the assessee company since September 2017 and the employees had left and the office was completely shut down, which is not disputed by the Assessing Officer. Further the Assessing Officer without considering the reply filed by the assessee made the addition of Rs.1,26,48,540/-. In view of the above, we are of the considered opinion that it is a fit case to condone the delay of 2227 days by imposing a cost of Rs. 5,000/- payable by the assessee to the Income Tax Department within two weeks receipt of copy of this order. We also find that if we reject the application of the assessee for condoning the delay then it would amount to legalise injustice on technical ground whereas the Tribunal is capable of removing injustice and to do justice. Thus, we condone the delay of 2227 days in filing the appeal. However on merits, the reply filed by the assessee was not duly considered, we deem it fit to set-aside the matter back to the file of Jurisdictional Assessing Officer to consider afresh and pass order in accordance with law by giving proper opportunity of hearing to the assessee.
A.Y. 2012-13 Page No 10 CAT Cosmetics And Healthcare Pvt. Ltd. vs. ITO
In the result, the appeal filed by the Assessee is allowed for statistical purpose.