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Facts
Mfar Constructions Private Limited filed an appeal against the CIT(A)'s order for AY 2021-22, which had dismissed its appeal without admitting it due to alleged non-payment of appeal fees. The original assessment by the AO involved an addition of Rs. 49,32,553 for disallowance of purchases due to non-submission of supplier ITR acknowledgements and GST returns. The assessee delayed filing the appeal to ITAT by 583 days, attributing it to a bona fide belief that its appeal against the assessment order was still pending with the CIT(A) due to two simultaneous appeals for the same AY.
Held
The Tribunal condoned the 583-day delay in filing the appeal, finding it to be due to an honest and bona fide belief and not intentional. It remitted the entire matter, including the merits of the disallowance of purchases, back to the CIT(A)/NFAC for fresh adjudication in accordance with law, directing the assessee to provide all necessary documents and appeal fee challans.
Key Issues
Condonation of 583-day delay in filing appeal before ITAT; Remitting the disallowance of purchases to CIT(A) for fresh adjudication.
Sections Cited
Section 250, Section 249(1), Section 143(1), Section 143(3), Section 270A, Section 253
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Income Tax Appellate Tribunal, B BENCH: BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of ld. CIT (A)/NFAC dated 20.07.2023 vide DIN and Order No. ITBA/NFAC/S/250/2023-24/1054481659(1) passed under section 250 of the Income Tax Act, 1961 (in short “the Act”) for the Assessment Year 2021-22.
The assessee has raised the following grounds of appeal:
Brief facts of the case are that the assessee is a private limited company incorporated under the Companies Act, 1956. The assessee is engaged in the business of execution of works contract i.e. construction of residential, commercial and other buildings. The assessee company filed its return of income for the Asst. year 2021- 22 on 08-03-2022 vide acknowledgement no.303592590080322 by declaring the total Income of Rs. 11,44,26,260/-. The said return of income was selected for complete scrutiny and accordingly notices u/s 143(2) as well as 142(1) of the Act along with the show cause notice were issued. During the course of scrutiny proceedings, the AO asked to provide the details and documentary evidences in respect of purchases made during the assessment year 2021-2022, as under:
a) Confirmation letters and confirmed copy of ledger accounts of the supplier b) Email ID and copy of the Ledger accounts of the parties c) Copy of ITR and acknowledgement as well as GST Return of the suppliers d) Copies of Invoices & other documentary evidence in support of transactions 3.1 The assessee company submitted all the relevant documents which were maintained by the assessee in the normal course of business along with the sample invoices. However the assessee could not submit the copy of the ITR and acknowledgments, GST Returns & Balance confirmations from third parties. The AO on 09- 12-2022 issued a show cause notice proposing addition of income by disallowing purchases on account of absence of documentary evidences amounting to Rs.7,77,47,055/- and disallowance of payments made u/s 194J of Rs. 3,78,82,321/-. In response to the said show cause notice, the assessee company had filed detailed Mfar Constructions Private Limited, Bengaluru Page 4 of 17 reply and objections to the proposed addition on 15-12-2022 and also submitted once again all the documents/details as under- a) Copies of All Bills, Vouchers b) Copies of Ledger Accounts c) Copies of Bank Statements marking payments to parties d) Details of PAN & GSTIN e) Details of TDS deducted made on all the payments which attracts TDS f) Details of Suppliers like Name, PAN, GST, Address, Email g) Complete Purchase Registers h) All Suppliers Ledger Accounts i) Details of Balance confirmation received from third parties (whichever received) & Emails Sent for requesting Balance Confirmations, Ledgers, ITR Copies and GST Returns 3.2 The assessee was not able to submit ITR copies of suppliers, GST Returns of the suppliers and third-party confirmations since these documents were not in the possession of the assessee. Further, these documents were required to be provided by third parties and some of the suppliers were not having continuing relationship with the assessee. Many of the suppliers had even refused/did not co-operate to provide such documents by stating that the ITR/GSTR documents are their confidential documents and cannot be disclosed to a third party. Further, the assessee had also been provided personal hearing through video conferencing. During the personal hearing, the assessee had submitted additional information as under for consideration and objected for proposed additions- Mfar Constructions Private Limited, Bengaluru Page 5 of 17 a) GSTR2A Report downloaded from GST Department Portal b) GSTR2B Report downloaded from GST Department Portal c) GSTR3B Returns filed 3.3 Further, the assessee submitted that GSTR 2A Report and GSTR 2B Reports are generated from the GST Department based on the suppliers return filing in GSTR-1, (i.e., All the entries reported in GSTR-2A & GSTR-2B were uploaded by the suppliers and the service providers) and accordingly claimed that these transactions were Genuine. The GSTR-2A Report and GSTR-2B reports are third party evidence and the same can be verified with the GST Department. The AO, however, concluded the Scrutiny assessment by making addition of income of Rs.49,32,553/- by disallowing the claim of the excess purchases of following suppliers:-
3.4 Further, while passing the assessment order under section 143(3) of the Act, the AO also reduced the refund of Rs.12,41,424/-.
Aggrieved by the order of AO passed u/s 143(3) of the Act dated 23/12/2022, the assessee preferred an appeal before the ld. CIT(A)/NFAC.
“4. Held: In view of facts and circumstances of the case, the appellant failed to remove the deficiency issued in the appeal filed. Sufficient opportunities were also afforded to the appellant through notices as mentioned above. As the appellant failed to remove the deficiency, the appeal filed by the appellant cannot be admitted in view of the provisions of Section 249(1) of Income Tax Act, 1961 and the same is not maintainable. For statistical purposes, the appeal is treated as dismissed.
In the result, the appeal is dismissed.”
5. Again, aggrieved by the order of ld. CIT(A)/NFAC dated 20/07/2023, the assessee has filed the present appeal before this Tribunal with a delay of 571 days as noted by the Registry.
Before us, the ld. AR of the assessee drew our attention to a petition for condonation of delay in filing appeal dated 18/04/2025 along with an affidavit in original sworn before the Advocate & Notary Public on the same day which are reproduced below for ease of reference & convenience- Mfar Constructions Private Limited, Bengaluru Page 13 of 17 7. On going through the above, we take note of the fact that the main cause cited for the delay in filing the appeal for 583 days is due to the fact that for the same assessment year 2021-22, the assessee had preferred two appeals before the ld. CIT(A)/NFAC, i.e. one against the intimation passed u/s 143(1) of the Act and another against assessment order passed u/s 143(3) of the Act. The assessee during the course of appellate proceedings inadvertently submitted the appeal filing fee paid challan and the replies to the hearing notices dated 13.6.2023 and 23.6.2023 as a response to hearing notice dated 7.6.2023, 14.6.2023 & 4.10.2024. Since no reply was filed in the e- filing portal as a response to notices dated 13.6.2023 & 23.6.2023, the ld. CIT(A)/NFAC dismissed the appeal without admitting the appeal. After the communication of the order of ld. CIT(A)/NFAC dated 20.7.2023, the assessee again checked the income tax portal and honestly believed that the appeal filed against the assessment order was still pending and the ld. CIT(A)/NFAC order dated 20.7.2023 was pertaining to intimation u/s 143(1) of the Act for the very same year. Due to this Bonafide belief, the assessee did not file any appeal against the order of ld. CIT(A)/NFAC dated 20.7.2023. Subsequently, after dismissal of appeal by the ld. CIT(A)/NFAC, a show cause notice u/s 270A of the Act was issued along with the reminder letter in which the assessee also inadvertently submitted that the appeal filed against the assessment order is still pending with the ld. CIT(A)/NFAC and accordingly requested that penalty proceedings may be kept in abeyance till the disposal of the said appeal. After the passing of the penalty order u/s 270A of the Act on 25.3.2025, the assessee again did a thorough check of the e-filing portal and found that all the replies to the hearing notices issued by the ld. CIT(A)/NFAC handling the appeal filed against the assessment order u/s 143(3) of the Act was filed as a response to hearing notice issued by ld. CIT(A)/NFAC handling the appeal filed against intimation u/s 143(1) of the Act. Thereafter, the assessee Mfar Constructions Private Limited, Bengaluru Page 14 of 17 immediately took legal assistance and proceeded to file the appeal before us with a delay of 583 days.
7.1 In the present case, there is no dispute that the order of ld. CIT(A)/NFAC was communicated to the assessee on 20.7.2023 i.e. on the date of the order. It is also undisputed fact that the assessee also after the service of the order of ld. CIT(A)/NFAC, checked the income tax portal wherein it was found that the first appellate proceedings for assessment year 2021-22 was still pending. The reason for filing the appeal belatedly before us was mainly due to the fact that assessee on an honest and Bonafide belief that the appeal filed against the assessment order is still pending and the ld. CIT(A)/NFAC order dated 20.7.2023 was pertaining to the intimation u/s 143(1) of the Act for the same year. We are of the considered opinion that this honest and Bonafide belief of the assessee also manifest from the fact that in reply to the penalty notice u/s 270A of the Act, the assessee had also requested to keep the penalty proceedings in abeyance on the belief that the appeal filed against the assessment order is still pending with ld. CIT(A)/NFAC. Therefore, we are of the considered opinion that it cannot be said that assessee is very callous in its approach in filing the appeal before us. It is perceived that the explanation offered in the condonation application as well as in affidavit is plausible and sufficient cause being shown by the assessee which prevented them from filing the appeal within the specified period u/s 253 of the Act. Further, when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of non-deliberate delay. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue. Therefore, we are bound to remove the injustice by condoning the delay on technicality. If the delay is not condoned, it would amount to legalizing an illegal Mfar Constructions Private Limited, Bengaluru Page 15 of 17 order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto. Under the scheme of Constitution, the Government cannot retain even a single pie of the individual citizen as tax, when it is not authorized by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalize an illegal and unconstitutional order passed by the lower authority.
7.2 Further, in the case of People Education & Economic Development Society Vs/ ITO reported in 100 ITD 87 (TM) (Chen), wherein held that “when substantial justice and technical consultation are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of non-deliberate delay”.
7.3 The next question may arise whether delay was excessive or inordinate. There is no question of any excessive or inordinate when the reason stated by the assessee was a sufficient cause for not filing the appeal. We have to see the cause for the delay. When there was a sufficient cause, the period of delay may not be relevant factor. In fact, the Madras High Court in the case of CIT vs. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596) considered the condonation of delay and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Accordingly, the Madras High Court condoned nearly 21 years of delay in filing the appeal. When compared to 21 years, 583 days cannot be considered to be inordinate or excessive. Furthermore, the Chennai Tribunal by majority opinion in the case of People Education and Economic Development Society (PEEDS) v. ITO (100 ITD 87) (Chennai) (TM) condoned more than six hundred days delay. Therefore, in our opinion, by preferring the substantial justice, the Mfar Constructions Private Limited, Bengaluru Page 16 of 17 delay of 583 days has to be condoned and accordingly we condone the delay and admit the appeal for adjudication.
Now having condoned the delay in filing this appeal, we also take a note of the fact that the ld. CIT(A)/NFAC dismissed the appeal of the assessee as not maintainable since the assessee failed to remove the deficiency issued. This being so, in the interest of justice and fair play and as submitted by the assessee in its condonation petition that the assessee inadvertently submitted the appeal filing fee paid challan and the replies to hearing notice dated 13.6.2023 & 23.6.2023 as a response to hearing notices dated 7.6.2023, 14.6.2023 & 4.10.2024, we deemed it fit & proper to remit the entire issues in dispute to the file of ld. CIT(A)/NFAC to decide afresh in accordance with law. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. The assessee is also directed to produce the copy of appeal fees challan before the ld. CIT(A)/NFAC and also submit all the necessary documents/reconciliation/confirmation/statements as may be required for the proper adjudication of the case. It is ordered accordingly.
In the result, appeal filed by the assessee is partly allowed for statistical purposes.