Case Law Details
Astormueller Shoes Private Limited Vs DCIT (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT), Bangalore Bench, allowed the appeal filed by Astormueller Shoes Private Limited for statistical purposes after holding that the delay of 2 months and 21 days in filing the appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] ought to have been condoned. The assessee had filed its return for Assessment Year 2018–19 declaring total income of ₹1,09,01,480. During scrutiny assessment proceedings, five notices were issued by the Assessing Officer (AO), but no compliance was made by the assessee. Consequently, the AO completed the assessment under Section 143(3) read with Section 144B of the Income Tax Act, 1961, disallowing a reduction in profit of ₹14,19,266 claimed on account of Income Computation and Disclosure Standards (ICDS) adjustments and determining the total income at ₹1,23,20,744.
The assessee’s appeal before the CIT(A) was filed with a delay of 2 months and 21 days. In Form No. 35, the assessee attributed the delay to technical glitches on the income tax portal and stated that grievances had been raised before the relevant authorities. However, the CIT(A) dismissed the appeal in limine, observing that the explanation lacked specific evidence demonstrating the alleged technical issues and did not constitute sufficient cause for condonation of delay.
Before the Tribunal, the assessee contended that the delay occurred due to problems in filing Form No. 35 electronically and that the CIT(A) should have either condoned the delay or granted an opportunity to substantiate the explanation. The Revenue argued that the assessee had neither complied with assessment notices nor adequately explained the delay.
After considering the submissions, the Tribunal noted that the assessment notices had been issued between December 2020 and April 2021, a period during which the country was affected by the Covid-19 pandemic. It further observed that the assessee had consistently maintained that technical glitches on the income tax portal had prevented timely filing and that grievances had been lodged with the authorities. The Tribunal held that the alleged technical glitches were attributable to the income tax department and not to the assessee. It also noted that the CIT(A) had not established that no such glitches existed during the relevant period. The Tribunal concluded that the assessee had been prevented by sufficient cause from filing the appeal within time and that the delay was bona fide, observing that nothing would have been gained by filing the appeal late.
On the merits, the Tribunal examined the addition of ₹14,19,266 relating to provisions made under ICDS VI concerning changes in foreign exchange rates. Referring to the relevant provisions of ICDS, it observed that exchange differences and premiums or discounts arising from foreign exchange contracts are required to be recognised as income or expenditure in accordance with the prescribed framework. Since the assessee claimed that the provision had been made in accordance with ICDS requirements, the Tribunal held that such provision could not automatically be added back to income.
Accordingly, the Tribunal restored the matter to the file of the AO with directions to verify whether the provision had indeed been made in accordance with ICDS. It directed that if the AO found the claim to be compliant with ICDS provisions, the addition should be deleted. The appeal was allowed for statistical purposes by order pronounced on 11 June 2026.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
ITA No. 1954/Bang/2025 for assessment year 2018–19 is filed by Astromueller Shoes Private Limited against the appellate order passed by the National Faceless Appeal Centre, Delhi (the learned CIT – A) dated 3 July 2025 wherein the appeal filed by the assessee against the assessment order dated 10 May 2021 passed under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 [the Act] by the National e-Assessment Centre, Delhi [ld. AO] was dismissed in limine.
2. The assessee is aggrieved and is in appeal before us because the learned CIT – A did not condone the delay in filing of the appeal and further confirmed the disallowance of ₹ 1,419,266.
3. Briefly stated the facts of the case shows that assessee is a Private Limited Company who filed its return of income for AY 2018 – 19 on 30 November 2018 declaring total income of ₹ 10,901,480. The return of income was picked up for scrutiny and necessary notices under section 143 (2) were issued on 22 September 2019. The fact shows that the assessee is engaged in the business of manufacturing of footwear and leather goods and sale of textiles, apparel, footwear, leather goods etc. The assessee company declared gross profit of ₹ 37.03% and net profit of ₹ 3.92% on a turnover of ₹ 265,860,025. The assessee was issued several notices (5) on various dates, however there was no compliance made by the assessee and therefore the ld. AO was left with no option but to complete the assessment on the basis of material available. The ld. AO on perusal of the return of income filed found that there is a reduction in profit of ₹ 14,19,266 because of application of Income Computation and Disclosure Standards [ICDS]. As the assessee did not furnish any information, the ld. AO disallowed the above reduction in profit and computed the total income of the assessee at ₹ 12,320,744 by passing an assessment order under section 143 (3) r.w.s. 144B of the Act.
4. When the assessee preferred an appeal before the learned CIT – A, the learned CIT– A noted that there is a delay of 2 months and 21 days in filing of the appeal. In form No. 35 the assessee has stated that delay is due to website issue and the same grievances have been raised to the respective authorities. The learned CIT – A noted that assessee has failed to explain sufficient cause for filing of delay in appeal and therefore he dismissed the appeal of the assessee in the limine.
5. The ld. AR,Mr.C R Krishna, vehemently stated that delay in filing of the appeal before the learned CIT – A was on account of technical glitches in filing of form No. 35 before the office of the learned CIT – A which was mentioned in form No. 35 at paragraph No. 15 of that form. He further referred that due to the issue of website, several grievances were raised before the respective authorities but the response was not received and therefore there is a delay in filing of the appeal. He admitted that the order of the ld. AO was received by the assessee on 10 May 2021 whereas the appeal is filed on 31st of July 2021 which has caused the delay of 2 months and 21 days. He further submitted that delay is for a reasonable cause, and therefore the learned CIT – A should have condoned the delay. Even otherwise, the CIT-A should have given an opportunity to the assessee to explain the facts of the case that why there is a delay. He further referred to paragraph No. 2.3 of the appellate order stating that though assessee attributed the delay of approximately 2 months on the non-working of the income tax website, the learned CIT – A wanted that such delay should have been explained by providing specific evidence to demonstrate technical glitches. Thus the claim made by the assessee was held to be a general and non-specific reason. He submitted that when the assessee has raised the grievance, it cannot be non-specific and a general argument. Even otherwise, he submitted that the learned CIT – A should have condoned the delay and admitted the appeal of the assessee to decide it on merits of the case.
6.On the merits of the case he submitted that the provisions have been made in the books of accounts on the basis of the ICDS and therefore the disallowance of the same profit made by the ld. AO is beyond the provisions of the law.
7. The ld. DR vehemently submitted that the assessee has not complied with the any of the notices issued by the ld. AO and further did not explain the delay in filing of the appeal before the learned CIT – A and therefore no infirmity can be found in the order of the learned lower authorities.
8. We have carefully considered the rival contention and perused the orders of the learned lower authorities. Admittedly, the assessee was issued five notices by the ld. AO at respective time. However such notices were issued starting from 7th December 2020 to 7th April 2021. It is apparent that during that period the country was affected with Covid-19. Further before the learned CIT – A the assessee in form No. 35 has categorically stated that appeal is filed late because of the reason of the technical glitches and for which the grievance has also been filed. We find that the learned CIT – A should have condoned the delay in filing of the appeal, when the assessee is saying that there is a grievance raised by the assessee before the respective authorities also. Technical glitches were on part of the income tax department and not on the part of the assessee. Thus the assessee was prevented by sufficient cause in filing of the appeal. It is not the case of the learned CIT – A that he can certify that during the period in which the assessee should have filed the appeal there were no technical glitches. Therefore, the learned CIT – A is not justified in not condoning the delay in filing of the appeal of 2 months and 21 days before him. Even otherwise the delay is caused because of the bonafide reasons. Nothing would have been gained by the assessee in filing the appeal late.
9. Coming to the merits of the case, we find that the assessee has debited a sum of ₹ 14,19,266 which was made on account of the provisions of ICDS VI relating to the facts of changes in foreign exchange rates. As per paragraph No. 8 of the section, the applicability of income is that any premium or discount arising at the inception of the foreign exchange contract shall be amortised as an expense or income over the life of the contract. The exchange difference in such a contract shall be recognised as income or expense in the previous year in which the exchange rates change. Any profit or loss arising on cancellation of renewal shall be recognised as income or as expense for the previous year. Further the provision of the above sum is made in terms of the above condition of ICDS. Accordingly we find that the provision made by the assessee could not have been added to the total income of the assessee. In view of the above facts we find that the above addition should not have been made.
10. In view of the above facts, we restore the whole matter back to the file of the ld. AO with a direction to the assessee to explain the provision of ICDS, the ld. AO may verify the same, and thereafter decide the issue afresh. If the ld. AO finds that the provisions has been made in accordance with the provisions of ICDS, the addition deserves to be deleted.
11. In the result appeal filed by the assessee is allowed with above direction for statistical purposes.
Order pronounced in the open court on 11th June, 2026.
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