Bangalore ITAT Condones 125-Day Delay and Remands ₹3.95 Crore Additions to AO

By CA Vijayakumar Shetty Income Tax Judiciary August 26, 2026

Case Name: Kempegowda Credit Co-operative Society Limited Vs ITO (ITAT Bangalore)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2016-17
Courts: All ITAT, ITAT Bangalore

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Kempegowda Credit Co-operative Society Limited Vs ITO (ITAT Bangalore)

Summary: The assessee, Kempegowda Credit Co-operative Society Limited, filed its appeal before the Tribunal with a delay of 125 days. It explained that its Chief Executive Officer had been dismissed for mismanagement and that the appointment of a new CEO was delayed, resulting in the belated filing. The Revenue opposed condonation, alleging a callous approach on the part of the society. The Bangalore ITAT accepted the explanation and found that the delay was neither deliberate nor mala fide. Referring to the Supreme Court’s decision in Collector, Land Acquisition v. Mst. Katiji, the Tribunal reiterated that when substantial justice and technical considerations are in conflict, substantial justice must prevail. It observed that a litigant ordinarily gains nothing by filing an appeal late and that refusing condonation could result in a meritorious matter being rejected without examination. The Tribunal further held that the length of delay is not decisive when a reasonable and sufficient cause is established. A delay of 125 days could not be regarded as excessive or inordinate in the facts of the case. Accordingly, the delay was condoned and the appeal was admitted for adjudication. On merits, the Tribunal noticed that the AO had passed an ex parte reassessment order under Sections 147 read with 144, making additions aggregating to ₹3.95 crore. The CIT(A) had also sustained the additions because the assessee failed to respond despite being given five opportunities. Considering the society’s explanation regarding internal mismanagement and its inability to represent the case properly, the Tribunal restored the entire matter to the AO for fresh adjudication in accordance with law. The AO was directed to provide the assessee a reasonable opportunity of being heard, while the assessee was required to furnish all relevant documents and cooperate with the proceedings. The Tribunal cautioned that no further leniency would be available in the event of another default.

Mismanagement and Change of CEO Constitute Sufficient Cause: Bangalore ITAT Condones 125-Day Delay and Restores ₹3.95 Crore Addition to AO

The assessee, Kempegowda Credit Co-operative Society Limited, filed its appeal before the Tribunal with a delay of 125 days. It explained that its Chief Executive Officer had been dismissed for mismanagement and that the appointment of a new CEO was delayed, resulting in the belated filing. The Revenue opposed condonation, alleging a callous approach on the part of the society.

The Bangalore ITAT accepted the explanation and found that the delay was neither deliberate nor mala fide. Referring to the Supreme Court’s decision in Collector, Land Acquisition v. Mst. Katiji, the Tribunal reiterated that when substantial justice and technical considerations are in conflict, substantial justice must prevail. It observed that a litigant ordinarily gains nothing by filing an appeal late and that refusing condonation could result in a meritorious matter being rejected without examination.

The Tribunal further held that the length of delay is not decisive when a reasonable and sufficient cause is established. A delay of 125 days could not be regarded as excessive or inordinate in the facts of the case. Accordingly, the delay was condoned and the appeal was admitted for adjudication.

On merits, the Tribunal noticed that the AO had passed an ex parte reassessment order under Sections 147 read with 144, making additions aggregating to ₹3.95 crore. The CIT(A) had also sustained the additions because the assessee failed to respond despite being given five opportunities. Considering the society’s explanation regarding internal mismanagement and its inability to represent the case properly, the Tribunal restored the entire matter to the AO for fresh adjudication in accordance with law.

The AO was directed to provide the assessee a reasonable opportunity of being heard, while the assessee was required to furnish all relevant documents and cooperate with the proceedings. The Tribunal cautioned that no further leniency would be available in the event of another default.

List of Cases Discussed / Relied Upon

Collector, Land Acquisition Vs. MST. Katiji & Ors.,167 ITR 471 (SC) — relied upon for the principles governing condonation of delay and preference for substantial justice over technical considerations.
People Education and Economic Development Society (PEEDS) v. ITO,100 ITD 87 (Chennai) (TM) — relied upon regarding condonation of delay where substantial justice is preferred over technical considerations.
CIT v. K.S.P. Shanmugavel Nadai and Ors.,153 ITR 596 — relied upon regarding sufficient and reasonable cause for condonation of delay, including the consideration that the period of delay may not be decisive where reasonable cause exists.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 28.07.2025 vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1078971276(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2016-17.

2. The assessee has raised the following grounds of appeal:-

1. The learned Commissioner of Income-tax (Appeals), NFAC, has erred in law and on facts in dismissing the appeal ex-parte without adjudicating the issues on merits, merely on the ground of alleged non-prosecution, which is contrary to the principles of natural justice and settled law that an appeal should be decided on merits irrespective of appearance.

2. The learned CIT(A) has failed to appreciate that sufficient cause existed for the non-appearance and non-submission during the appellate proceedings and ought to have provided a final effective opportunity before deciding the appeal ex-parte, especially when substantial additions involving large tax demand were under dispute.

3. The learned CIT(A) has erred in confirming the reopening of assessment under section 147 read with section 148A without properly appreciating that the reassessment proceedings were initiated.

4. The learned CIT(A) has erred in confirming the reopening of assessment under section 147 read with section 148A without properly appreciating that the reassessment proceedings were initiated mechanically and without valid assumption of jurisdiction, rendering the reassessment order void ab initio.

3. The learned CIT(A) has erred in confirming the reopening of assessment under section 147 read with section 148A without properly appreciating that the reassessment proceedings were initiated mechanically and without valid assumption of jurisdiction, rendering the reassessment order void ab initio.

4. The learned CIT(A) has erred in confirming the addition of Rs. 2,79,13,610/- made under section 69A towards cash deposits in bank accounts, without appreciating that the appellant is a registered co-operative credit society and that the cash deposits represented amounts received from members towards loan repayments and deposits, which were duly recorded in the books of account.

5. The learned CIT(A) has failed to appreciate that the appellant had maintained complete member-wise records for the cash received and that mere non-submission of such details during assessment proceedings cannot automatically lead to the conclusion that the cash deposits were unexplained within the meaning of section 69A.

6. The learned CIT(A) has erred in law in upholding the addition under section 69A without disproving the nature and source of cash receipts and without establishing that the amounts represented income of the appellant from undisclosed sources.

7. The learned CIT(A) has erred in confirming the addition of Rs. 1,15,50,000/- under section 69 towards purchase of immovable property, without appreciating that the property was purchased out of duly accounted building fund, through banking channels, and the transaction was properly recorded in the books of account and approved by the Board of Directors.

8. The learned CIT(A) has failed to appreciate that no adverse material was brought on record by the Assessing Officer to prove that the investment in immovable property was made from unexplained sources, and therefore the addition under section 69 is unsustainable.

9. The learned CIT(A) has erred in confirming the addition of ₹70,283/- being interest earned on deposits with a co-operative bank as “income from other sources”, ignoring the fact that such interest income is eligible for deduction under section 80P(2)(d) of the Income-tax Act, 1961.

10. The learned CIT(A) has failed to consider binding judicial precedents holding that interest income earned by a co-operative society from deposits with co-operative banks qualifies for deduction under section 80P(2)(d).

11. The learned CIT(A) has erred in law in not granting deduction under section 80P to the appellant, despite the appellant being a registered co-operative credit society engaged in providing credit facilities to its members.

12. The learned CIT(A) has mechanically upheld the assessment order without independently examining the facts, evidence on record, and legal submissions, thereby failing to discharge the statutory duty cast upon an appellate authority under section 250 of the Act.

13 .The order of the learned CIT(A) is bad in law, contrary to facts, based on surmises and conjectures, and liable to be set aside.

14. The appellant craves leave to add, alter, amend or delete any of the above grounds at the time of hearing of the appeal.

3. At the outset, the ld. A.R. of the assessee submitted that there is a delay of 125 days in filing the appeal before this Tribunal. The ld. A.R. of the assessee also drew our attention to the application for condonation of delay dated 27.01.2026 filed along with an affidavit in original sworn before the notary public, which are reproduced below for ease of reference and record:

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE

Kempegowda Credit Co-operative Society Ltd
NO 11 9TH Cross 1st Phase, J P Nagar Indira
Gandhi Circle, J P Nagar S.O, Bangalore – 560078.

… Appellant

Vs.

Income Tax Officer, WARD 4(3)(3), BANGALORE

… Respondent

APPLICATION FOR CONDONATION OF DELAY IN FILING APPEAL

FOR A.Y. 2016-17

TO,
THE HONOURABLE MEMBERS,
INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH

The appellant respectfully submits as under:

1. This application seeks condonation of delay in filing the appeal against the order passed by the Ld. CIT(A), u/s 250 of the Income-tax Act, 1961, bearing DIN IBA/ NFAC/S/250/2025-26/10799742871 dated 25/08/2025 for A.Y. 2016-17. The appellant received the said order on 25/08/2025, and therefore the appeal is filed with a delay of 97 days, which is prayed to be condoned.

2. During this period, the Chief Executive Officer (CEO) of the appellant society was dismissed due to mismanagement and new CEO appointment was delayed hence there is a delay in filing the appeal.

3. Further, The authorized tax consultant accessed the Income-tax portal for routine verification. Immediately thereafter, the consultant advised the appellant to file a second appeal before the Hon’ble Tribunal.

without delay. Accordingly, the appeal in Form-36 was filed on 28/01/2026.

4. The delay of 97 days is therefore unintentional and was caused due to:

- - Temporary unavailability of the CEO due to above said facts.
  - There was no negligence or deliberate inaction on the part of the appellant.

5. PRAYER

In view of the above facts, the appellant humbly prays that this Hon’ble Tribunal may kindly:

a) Condone the delay of 97 days in filing the appeal against the CIT(A)’s order dated 25/08/2025;

FOR THIS ACT OF KINDNESS, THE APPELLANT SHALL EVER PRAY.

Place: Bengaluru
Date: 27/01/2026

NAGARAJ …
Chief Executive Officer
KEMPEGOWDA CREDIT CO OPERATIVE SOCIETY LTD

4. Before us, the ld. AR of the assessee reiterated the same as stated above & vehemently submitted that the assessee could not file the appeal within prescribed period for the reason that the Chief Executive Officer (CEO) of the assessee society was dismissed due to mismanagement and new CEO appointment was delayed and hence there is a delay in filing the appeal. The ld. A.R. also submitted that the delay is unintentional and no benefit can be attributed to the assessee in filing the appeal belatedly. He thus prayed to condone the delay and requested to consider the issues raised by the assessee on merits.

5. On the contrary the ld. D.R. vehemently objected for granting the condonation of delay and submitted that the assessee is very callous in its approach in filing the appeal before this Tribunal. 6. We have perused the details filed by the assessee to justify the delay and we are satisfied that there is no malafide intention on the part of the assessee in filing the appeal belatedly before us. In our considered opinion, the assessee has demonstrated the sufficient cause in filing the appeal belatedly before us. It is to be noted that u/s 253(5) of the Act the Tribunal may admit the appeal filed beyond the period of limitation where it has established that there exists a sufficient cause on the part of the assessee for not presenting the appeal within the prescribed time. The explanation therefore, becomes relevant to determine whether the same reflect sufficient and reasonable cause on the part of the assessee in not filing the appeal within the prescribed time. We have gone through the reasons explained by the assessee in which we find that the Chief Executive Officer (CEO) of the assessee society was dismissed due to mismanagement and new CEO appointment was delayed and hence there is a delay in filing the appeal.

6.1 While considering a similar issue the Apex Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) laid down six principles. For the purpose of convenience, the principles laid down by the Apex Court are reproduced hereunder:

(1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late.

(2) Refusing to condone delay can result in a meritorious matter being thrown 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.

(3) ‘Every day’s delay must be explained’ does not mean that a pedantic approach should be made. Why not every hour’s delay, every second’s delay? The doctrine must be applied in a rational, commonsense and pragmatic manner.

(4) 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 in injustice being done because of a nondeliberate delay.

(5) 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.

(6) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so.

6.2 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 nondeliberate delay. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue. As observed by Apex Court, if the application of the assessee for condoning the delay is rejected, it would amount to legalize injustice on technical ground when the Tribunal is capable of removing injustice and to do justice. Therefore, this Tribunal is bound to remove the injustice by condoning the delay on technicalities. If the delay is not condoned, it would amount to legalizing an illegal 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.

6.3 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”.

6.4 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 reasonable cause for not filing the appeal. We have to see the cause for the delay. When there was a reasonable 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, 125 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 delay of 125 days has to be condoned and accordingly we condone the delay and admit the appeal for adjudication.

7. Now having condoned the delay, before us both the parties fairly conceded that the assessee could not represent its case before both the authorities below. On perusal of the order of the AO, we observed that the assessment order is passed ex-parte on 30.12.2023 u/s 147 r.w.s. 144 of the Act by making total addition of Rs.3,95,33,893/-. Further, on perusal of the order of ld. CIT(A)/NFAC, we also observed that the ld. CIT(A)/NFAC despite providing five number of opportunities of being heard, the assessee did not response to any of the notices and accordingly the ld. CIT(A)/NFAC held that law assist those who are vigilant and not those who sleep over their rights. Thus, in the absence of any reasonable, cogent and valid arguments/contentions advanced by the assessee to counter the AO’s decision, the addition/disallowances made by the AO was sustained. Before us, the ld. A.R. of the assessee vehemently submitted that there was mismanagement in the case of the society and accordingly complaint was filed and for this reason, the assessee could not represent its case before both the authorities below and accordingly prayed that the case may be remitted to the file of AO to decide a fresh in the interest of justice and fair play.

7.1 This being so, in the interest of justice, equity and fair play and as requested by the ld. A.R. of the assessee, we deem it fit and proper to remit the entire issues in dispute to the file of AO 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/submit all the relevant documents/records/ information to substantiate its claim or as may be required by the AO for the completion of the assessment. We make it clear that in case of further default, the assessee shall not be entitled to any leniency. It is ordered accordingly.

8. In the result, appeal filed by the assessee is partly allowed for statistical purposes.

Order pronounced in the open court on 24th Aug, 2026