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Facts
The assessee filed two appeals against assessment orders for the year 2006-07, one relating to an order under section 143(3) and the other under section 153A read with section 143(3). Both appeals were filed with significant delays of 4145 days and 879 days respectively. The assessee sought condonation of these delays, citing various reasons including alleged non-service of orders and procedural issues.
Held
The Tribunal observed that the delays in filing the appeals were inordinate and not supported by sufficient cause or cogent material. The assessee's explanations were found to be lacking, and it was held that ignorance of law and procedural lapses cannot be grounds for condoning such substantial delays. The Tribunal relied on various judicial precedents regarding limitation and condonation of delay.
Key Issues
Whether the delays of 4145 days and 879 days in filing the appeals can be condoned due to the reasons provided by the assessee?
Sections Cited
143(3), 153A, 250(7), 253(3), 253(5), 5 of the Limitation Act, 1963
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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI PRAKASH CHAND YADAV
PER PRAKASH CHAND YADAV, JUDICIAL MEMBER:
Both these appeals are filed by the assessee relates to assessment year 2006-07. One assessment for the impugned year has been completed u/s 143(3) of the Act vide order dated 31.3.2006(hereinafter referred to as “first order” for the sake of convenience) and the second assessment of this impugned year has been completed u/s 153A r.w.s. 143(3) of the Act vide order dated 30.12.2008(hereinafter referred to as “second order” for the sake of convenience). In respect of the “first order”, the ld. CIT(A) has passed the assessment order on 28.3.2013. And in respect of the “second order” the ld. CIT(A) has passed the order on 2.2.2022.
The appeal in respect of the “second order” has been filed by the assessee on 4.11.2024 leading to a delay of 879 days. Similarly, the appeal in respect of the “first order” has been filed with a delay of 4145 &2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 2 of 18 days. Ld. Counsel appearing on behalf of the assessee has pointed out the short facts regarding the present delay as under.
3. The assessee is a Private Limited company engaged in the development of real estate/property and providing building maintenance services i.e. housekeeping security, etc. filed its return of income on 8.12.2006 for the impugned year declaring a loss of Rs.2,09,65,000/-. Thereafter, the case of the assessee was picked up for scrutiny and assessment u/s 143(3) of the Act has been completed vide order dated 31.03.2006. During the course of first assessment proceedings, the AO inter-alia disallowed the following amounts: a) Disallowance of financial expenses to the tune of Rs.1,08,89,867/- b) Building maintenance charges amounting to Rs.3,71,505/- c) Disallowance of property tax paid to the tune of Rs.37,913/- 3.1 After making the above disallowance, the AO computed the loss of the company at Rs.96,17,657/-. Thereafter, a search & seizure action was conducted in the case of one Shri Lakshman & Others on 2.2.2009. During the course of that search, certain incriminating documents pertaining to assessee were found. Accordingly, the case of the assessee was reopened in terms of provisions of section 153C of the Act by a notice dated 13.7.2010. In response to this, the assessee filed a letter dated 23.7.2010 and stated that the return filed earlier originally may kindly be treated as return in response to the notice u/s 153C of the Act. Thereafter, the AO computed the income of the assessee by repeating the addition made by the AO in the “first order”.
3.2 Aggrieved with the “first order of the AO, the assessee has preferred an appeal before the ld. CIT(A) on 30.1.2009. The ld. CIT(A) dismissed the appeal of the assessee by its order dated 28.3.2013 by observing that since the assessee has already filed an appeal in respect &2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 3 of 18 of notice u/s 153C/143(3) of the Act dated 30.12.2010, the appeal of the assessee in respect of “first order” u/s 143(3) of the Act become infructuous. Against this order, the assessee has never filed appeal before the ITAT till 4.11.2024.
3.3 Similarly, the assessee has preferred an appeal before the ld. CIT(A) against the “second order” issued u/s 153C r.w.s. 143(3) of the Act on 3.2.2011, wherein the assessee has challenged the order of AO passed u/s 153C r.w.s. 143(3) of the Act. This appeal of the assessee was dismissed by the ld. CIT(A) by observing that his predecessor was not correct in dismissing the appeal of the assessee on the pretext that the order issued u/s 143(3) of the Act got merged with the order issued u/s 153C of the Act. The ld. CIT(A), in the proceeding of 153C r.w.s. 143(3) of the Act, took a view that cause of action has been arisen in proceedings u/s 143(3) of the Act, and not in proceedings u/s 153C of the Act. Lastly, the ld. CIT(A) dismissed the appeal of the assessee filed against the order issued u/s 153C r.w.s. 143(3) of the Act, without dealing with the merits of the case.
3.4 Aggrieved with the order of ld. CIT(A) dated 2.2.2022, the assessee filed appeal before the Tribunal on 30.8.2024, meaning thereby, there is a delay of 879 days in appeal.
3.5 Ld. Counsel for the assessee has filed an affidavit explaining the cause of delay and the same is reproduced as under:
&2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 4 of 18 &2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 5 of 18 &2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 6 of 18 &2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 7 of 18 &2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 8 of 18 3.6 There are two types of delay, one is ordinate delay and another one is inordinate delay. From the facts of the case, it is observed that it is a case of inordinate delay. Explaining the concept of ordinate delay and inordinate delay, Hon’ble Bombay High Court in the case of Ornate Traders reported in 312 ITR 193 has held that cases, where the delay is below 365 days, would fall in the category of ordinate delay and in such cases, the courts can exercise their discretion leniently vis-à-vis &2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 9 of 18 condoning the delay. Hon’ble Bombay High Court further held that cases where there is a delay of more than 365 days such cases fall in the category of inordinate delay and in such cases, the courts must not act leniently, rather act strictly for condoning the delay. The observations of the Hon’ble High Court in the case of Ornate Traders is reproduced hereunder: -
“The very scheme of proper administration of justice pre- supposes expediency in disposal of cases and avoidance of frivolous litigation. Where the parties chose to sleep over their rights for prolonged periods without any just cause, can hardly claim equity in justice particularly faced with the statutory provisions of s. 5 of the Act. In construing enactments which provide period of limitation for institution of proceedings, the purpose is to intimate people that after lapse of certain time from a certain event, a proceeding will not be entertained where a strict grammatical construction is normally the safe guide. Law is not an exercise in linguistic discipline but the substance of legislative intention can also not be frustrated merely by uncalled for equity or sympathy. (Ref :U.N. Mitra’s Law of Limitation and Prescription, 12th Edition, 2006).
In the case of Banarasi Das vs. ITO AIR 1964 SC 1742, the Supreme Court clearly stated the principle that the provisions introduced to open up liability which had become barred by lapse of time will be subject to the rule of strict construction. This principle has prevailed may be with some variation relatable to the sufficiency of cause shown by the parties.
Even in the case of J.K. Cotton Spinning & Weaving Mills vs. CCE AIR 1998 SC 1270, it was held that a limited provision within which steps have been taken for recovery of duties not levied or not paid or short levied or short paid or erroneously refunded, is again subject to the rule of strict construction.
To law of limitation, the argument of hardship or alleged injustice has to be applied with greater care. The argument "ab inconvenienti" said Lord Moulton, "is one which requires to be used with great caution". (Ref - &2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 10 of 18 Principles of Statutory Interpretation by Justice G.P. Singh, 11th Edition, 2008).
The essence of the above enunciated principle thus reflects a simple but effective mandate that a provision must be construed on its plain and simple language. The provision of limitation should be construed strictly but at best its application could be liberalised where actual sufficient cause in its true sense is shown by an applicant who has acted bona fide and with due care and caution.
Thereafter the Hon’ble Bombay High Court has referred to the number of decisions of the Apex Court and other High Courts. And finally concluded as under:-
(para-24) In the cases where the delay is more than 400 days or above 1000 days, there has been no justification, much less a sufficient cause shown, for condonation of delay. In these cases, where inordinate delay is unexplained, explanation given either is fanciful or opposed to normal course of human conduct and official conduct coupled with element of negligence and irresponsible attitude.
Para(28) We would condone the delay in all the appeals where the delay is less than a year and which has been reasonably explained. But in the case where the delay is beyond one year and upto 1474 days, we would reject the applications for condonation of delay as there is no proper explanation and no sufficient cause shown for condonation of delay and there is apparent negligence and callousness on the part of the officers/officials of the Department to the extent that even correct statements have not been made in those cases 3.7 In the present case, it is an admitted position of the facts that there is a delay of 879 days, therefore, this case falls in the category of “inordinate delay cases”. Therefore, following the guidelines of Hon’ble Bombay High Court, we would examine this case in the light of the principle of laws laid down by Hon’ble Bombay High Court. There are other cases also wherein the concept of delay has been examined by the Apex Court. However, one thing is clear that in matters of the inordinate delays the courts have exercised the discretion with great caution.
&2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 11 of 18 3.8 The condonation of delay in a matter of inordinate delay would depend upon two things: a) Sufficient cause b) Discretion of the Court.
4. When we examined the facts of the present case we observe that the application for condonation of delay which is filed by the assessee is not containing any evidence to support the averments made in the application for condonation of delay.
At the time of hearing when the Bench has asked the counsel for the assessee as to why the Assessee Company has not pursued the matter after the filing of adjournment application on 31.01.2022 at the portal, the counsel for the assessee given a vague answer by saying that an assessee who is pursuing the matters since 2006-07 cannot be termed as negligent in pursuing the appeals. This reply of the counsel for the assessee would go against the assessee, in as much as, if that be so, then what prevent a vigilant assesse to pursue the status of an appeal for two good years, is question of big concern. This shows that there was ignorance of law which is not an excuse for condonation of delay and that too on the basis of bald submissions without the support of documentary evidence.
Now we deal with the submissions made by the assessee one by one.
a) The counsel who is handling the matters could not attend the case as he was unwell. However, neither any medical certificate of such counsel has been annexed nor any affidavit from such counsel has also been annexed. Therefore, this submission is deserved to be discarded on the face of it. Further a three judges Bench of the Hon’ble Supreme Court in a recent case Manmandir Sewa Nayas Samiti Vs CIT reported in 119 Taxman. Com &2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 12 of 18 383(SC) has affirmed the view of the Hon’ble Allahabad High Court, wherein the Hon’ble Allahabad High Court could not condone the delay, for the want of medical records and has observed as under: -
“The main excuse of delay in filing of appeal is in reference to the Manager, who said to be suffering from many ailments. There is nothing on record to show that Late Padam Prakash Singh was suffering from ailments and was such an ailment which did not permit him to take initiative for filing of appeal. It was otherwise duty of the assessee to watch the affairs of its firm and in any case, Late Padam Prakash Singh died on 22-11-2017. At leastthereupon, the assessee was expected to file appeal immediately but it was filed almost after one and halfyears. The delay in filing the appeal is not of few days or months but is of more than four and half years b) The order of CIT(A) was not uploaded on the portal of Income Tax. However, the response of the revenue is that it was uploaded on the portal in time. Therefore, allegation of the assessee stands rebutted. It is settled position of law that burden to prove a fact is on that party who alleges the existence of such fact. However, in the present case no supporting evidence has been placed on record by the counsel for assessee. It is settled position of law that burden to prove a fact is on the person who dispute the fact, in the present case a screen shot has been filed by the counsel of the assessee which does not show in any-way that the order was not uploaded on the portal in time. c) Coordinate Bench of the ITAT Mumbai in somewhat similar circumstances in the case of Prashant Products Vs ACIT in ITA Number 7167/Mum/2011 dated 04.09.2013, while making a distinction between an individual assessee and a Corporate assessee has observed as under:-
&2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 13 of 18
“An assessee who claims that it had won the case at the level of the Hon’ble Apex Court or was successful before the ITAT, cannot be treated an ignorant assessee as the appellants of the case of Ramnath Sao(supra). Besides, the assessee was aware that the CBDT has issued instruction with regard to stay of demand. Assessee, a corporate-assessee, filing returns of income of lacs of Rupees and assisted by highly qualified professionals cannot take shadow of umbrella of ignorance of the provisions of law. It is also not the case of the assessee that it was guided by the wrong advice of the professional or it took time to consult professionals. An individual of a small place and an ISO 9001-2000-company cannot be equated, while considering the condonation of delay” d) Similarly, in the case at hand it has been pleaded by the assessee that when some agency was conducting due diligence for preparing some report then the assessee has come to know about the adverse order of the CIT(A). This averment of the assessee is also of no help and goes against the assessee, in a way that an assessee who is well off and knows that due diligence is to be done in respect of some legal matters then such an assessee cannot plead that it was not aware of the order of CIT(A). e) It is pertinent to note that in the case of assessee itself an ITA number 1931 of 2017 for AY 2009-10 was also pending before the coordinate Bench of the ITAT, as per order sheet available at Public Domain, this ITA was first listed on 30.11.2021 and thereafter on 1.02.2022 and so on and finally decided on 25.10.2023(copy of the ITAT order in ITA Number 1931 is available in the assessee in Paper Book). Therefore, it is not conceivable to us as to why the assessee was not aware of the proceedings of the present year before the CIT(A). Otherwise no prudent person, who is facing matters before the ITAT, would plead that (he or it), as the case may be, was not aware of the fate of the orders of authorities below in respect of other years and that too an assessee who is pursuing the tax matters from AY 2006-07.
&2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 14 of 18 7. Be that as it may be, when we examined the application for condonation of delay filed by assessee, in the light of the principles of law laid down by the Hon’ble Bombay High Court (Exclusively dealing with inordinate delay cases) we are not convinced with the arguments of the counsel for the assessee that there existed some bona-fide reasons for not filing the appeal against the order of CIT-(A). In the cases of inordinate delays each day delay is to be explained with cogent material, which is lacking in the present case. We are conscious of the fact that in many of cases the courts have condoned the delays of years, wherever there are convincing reasons for condoning the delay. However, the facts of the present case would show that the assessee failed to convince the Bench vis-à-vis inordinate delay.
A further reference can be made to one more recent decision, of coordinate bench, in case of liberal Association for movement of people Vs CIT(E) reported in 164 taxman.com 83(Kol) dated 12.06.2024, wherein the Coordinate Bench has not condoned the delay of 291 days, the Coordinate Bench observed as under: - A perusal of the affidavit (supra) gives an impression that the management of the said Society were engrossed in carrying out activities of the said Society and thus, could not find the time to file the appeal on time. It is difficult to understand that an aggrieved appellant has casually allowed the matter of filing appeal in time to transpire in such a manner that the said substantial delay has occurred. While a judicial forum like the ITAT is also bound by the time tested principle of not allowing technical matters to interfere with the issue of deciding matters on the basis of the principle of "substantive justice", but discretionary powers for allowing condonation of delay are not designed in a manner whereby every delay, whatever may be the reason, deserves to be condoned on the ground that the concern of "substantive justice" would perforce override the issue of a technical matter like delayed filing of appeal.
The Hon'ble Apex Court in catena of decisions has held that the law of limitation being substantive, the power of discretion to condone the delay is to be exercised judiciously and cannot be exercised in a routine manner. The parties are expected to approach the Court in adherence to this general principle. Thus, filing an appeal is the rule and condoning the delay is the exception, wherein the Courts have to exercise their discretionary power judiciously and by recording reasons. Excessive delay, as in this case, cannot be simply missed away by casually mentioning that the Principal Officer was hard pressed for time. Such casually explained delay is to be construed as &2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 15 of 18 an uncondonable delay. Once there is a delay, the person who is filing the condonation petition is expected to furnish the reason which must be acceptable to this Bench. 3.1. Hon'ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji 1987 taxmann.com1072/28 ELT 185, has observed that it is for the assessee to explain each and every day of delay in filing of appeal. Before us in the present case, no such petition/prayer/application for condonation of delay is filed much less a sufficient and satisfactory explanation to prove that there is a reasonable cause for the said delay.
In this case, it is evident that the appellant has conveniently decided not to justify the delay in filing byinforming this Bench on the detailed reasons, even on day-to-day basis, for which the appeal could not befiled in time. 4.1. At this juncture, it is necessary to delve into the genesis of limitation and how a judicial forum needs todeal with matters pertaining to condonation of delay. 4.2. Almost all the tax laws, whether they relate to direct taxes or Indirect taxes, contain provisions forcondonation of delay in filing appeals, if the appellant (whether it is the taxpayer or the revenue) proves to thesatisfaction of the appellate authority that he had sufficient cause for not filing the appeal within time. Thegenesis for such provisions can be traced to section 5 of the Limitation Act, 1963, which reads as follows: "Extension of prescribed period in certain cases. — Any appeal or any application, other than anapplication under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908),may be admitted after the prescribed period if the appellant or the applicant satisfies the Court that he hassufficient cause for not preferring the appeal or making the application within such period. Explanation: The fact that the appellant or the applicant was misled by any order, practice or judgment ofthe High Court in ascertaining or computing the prescribed period may be sufficient cause within themeaning of this section." 4.3. The two essential ingredients for condoning delays are: (i) the existence of 'sufficient cause', and (ii) thesatisfaction of the competent authority that such sufficient cause was proved as existing. Thus, the first issueabout the existence of sufficient cause covers the factual matrix in respect of which the onus to prove issquarely on the litigant, while the second issue about 'satisfaction' covers the discretionary area in which thecompetent authority, this Bench, is expected to act. It is by now well settled that the expression 'sufficientcause' has to be understood to mean a cause beyond the control of the appellant or one which the appellant,even with the exercise of due care and attention, could not avoid. The expression is required to be interpretedliberally so as to advance substantial justice when no negligence nor inaction nor want of bona fides isimputable to the appellant. Further, it is a general principle of law that whenever a Court is vested with adiscretionary power, such a discretion must be exercised not in an arbitrary, vague or fanciful manner but onjudicial principles. The fundamental principle, which has been universally recognised as the true rule ofguidance for the exercise of discretion to condone delays is to see whether the party claiming indulgence hasbeen reasonably diligent in prosecuting his appeal. In the case of State of Gujarat v. Sayed Mohd. Baquir E1Edross AIR 1981 SC 1921, the Supreme Court laid down the following principles that should govern theexercise of powers of condonation under section 5:
&2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 16 of 18
The party seeking relief has to satisfy the Court that he had sufficient cause for not preferring the appeal,etc., within the prescribed time. The explanation has to cover the entire period of delay. A litigant should not be permitted to take away a right which has accrued to his adversary by lapse of time. The proof of sufficient cause is a condition precedent for the exercise of the discretionary jurisdiction vested in the Court under section 5. After sufficient cause is shown, the Court is to inquire whether in its discretion it should condone the delay. The discretion conferred on the Court is a judicial discretion and must be exercised to advance substantial justice. No liberal view should be taken merely because the defaulting party is a Government. Even if there was a strong case for acceptance of the appeal on merits that could not be a ground for condonation of delay.
When there is remiss on the part of the advocate, the question that comes up for consideration is whether the mistake was bona fide or was merely a device to cover the ulterior purpose such as latches on the partof the litigant or an attempt to save limitation in an underhand way. 4.4. It was also held in an earlier decision in the case of Ramlal Motilal v. Rewa Coalfields AIR 1962 SC 361,that 'every day's delay must be explained'. Another important requirement is that the 'cause' for the delay must have arisen before the expiry of the limitation period, and, as held by the Supreme Court in the case of Ajit Singh Thakur Singh v. State of Gujarat AIR 1981 SC 733, "no event or circumstance arising after the expiry of limitation period can constitute sufficient cause".
5. Considering the detailed discussion above, it is our considered opinion that the appellant has not been able to demonstrate any reasonable cause to allow condonation of delay in the matter. Accordingly, this appeal is dismissed on the point of limitation, without any decision on the merits of the case.
The coordinate Bench of the ITAT in the above recent judgment has referred to the principles of law as has been laid down by the Apex Court in various other cases. These cases are also referred to by the Hon’ble Bombay High Court in the case of Ornate(Supra).
&2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 17 of 18 10. In the case at hand the main contention of the assessee is that the counsel who was handling the matter before the CIT(A) in respect of proceedings of 153C order was not well. However, no medical record has been annexed to prove this fact.
Considering the above factual and legal position we hereby dismiss the appeal of assessee in ITA Number 1670/Bang/ 2024.
ITA No- 2089/Bang/2024
This is the appeal of the assessee in respect of the “First order” and the same has been filed by the assessee after a delay of 4145 days, main contention is that assessee was of the bona-fide belief that ITA number 1670/Bang/2024 would be sufficient for deciding the issues on merit. However moot question is when the department has passed separate orders then why assessee has not filed separate appeals by way of abundant caution.
13. The condonation application dated 30.10.2024 filed by the assessee is not as per the rules of the ITAT in as much as it not supported by duly sworn affidavit. The affidavit which is annexed with the petition is only confirming the fact that there is no Managing Director in the company at present. Be that as it may be is also worthy to note that the assessee has admitted in this application in very first para that it has received the order of the CIT(A) at its registered premises on 13.04.2013. Therefore, it is case where there is no allegation of service of the order rather the assessee is submitting (Para-19) that the appellant truly and genuinely believed that the merits of the case arising in the assessment order originally passed would be pursued in appellate proceedings of 153C read with 143(3) of the Act, however that appeal itself is late by 879 days and the same is dismissed on account of delay &2089/Bang/2024 M/s. MFAR Holdings Pvt. Ltd., Bangalore Page 18 of 18 and laches. The assessee cannot plead ignorance of law as a ground for condonation of delay.
14. This appeal is also dismissed for the reasons given in respect of ITA Number 1670/Bang/2024 which reasons would apply mutatis mutandis here also.
Order pronounced in the open court on 11th Dec, 2024