Thane Labour Law Practitioners Association Vs Exemption Thane (ITAT Mumbai)
Committee Changed, Appeal Delayed-ITAT Opens the Door to Justice
The Controversy
The Mumbai Tribunal condoned the delay in filing an association’s first appeal, accepting its explanation concerning managing committee elections, administrative handover and subsequent steps to pursue the appeal.
The CIT(A) had refused to condone a delay recorded as 86 days, characterised it as extraordinary and dismissed the appeal without examining the merits. The Tribunal held that the explanation required a practical, cumulative assessment rather than a mechanical demand for a separate account of every day. The appeal was restored to the CIT(A) for adjudication on merits.
The Association and Its Registration Position
The assessee was an association of advocates and labour law practitioners. Its stated objects included spreading awareness of labour and social laws through studies, discussions, writings, libraries and law reporting, and promoting reforms in the administration of justice.
It filed its return for AY 2022-23 declaring nil income. The case was selected for scrutiny concerning an exemption claim despite non-grant or cancellation of registration.
The association had obtained provisional registration on 27 October 2021 for AYs 2022-23 to 2024-25. Its subsequent application for regular registration was rejected on 31 March 2023. The Assessing Officer also recorded that the provisional registration had been cancelled.
The Tribunal noted that no subsequent order granting registration or reversing the rejection or cancellation had been furnished. It also distinguished registration as a public trust under State legislation from registration under the Income-tax Act.
Receipts Brought to Tax
The Assessing Officer denied exemption under sections 11 and 12 and assessed total income at ₹5,84,423.
This comprised membership receipts of ₹1,29,450, treated as business income, and other receipts of ₹4,54,973, assessed under “Income from Other Sources”. Corresponding expenditure was denied for want of supporting evidence.
In its appeal, the association raised several substantive contentions. It claimed that membership subscriptions were governed by mutuality and that the amount described as interest actually included ₹36,552 of locker rent collected towards use and maintenance of lockers.
It explained that ₹69,850 represented members’ contributions for COVID-19 relief. Of the other donations of ₹2,95,200, it claimed ₹2,50,000 was received with a specific corpus direction, while ₹45,200 represented life membership and entrance fees.
These claims remained unexamined because the CIT(A) dismissed the appeal at the admission stage.
Why the Appeal Was Delayed
The first appeal was filed on 20 June 2024. The association explained through Form 35 and an affidavit that it initially sought opinions on the assessment order.
Managing committee elections were announced on 28 March 2024 and held on 25 April 2024. According to the affidavit, the outgoing committee had become functus officio and could not hold meetings to decide on the appeal. After the election, the association’s affairs were handed over to the incoming committee, which pursued filing through its Chartered Accountant.
The affidavit also referred to the intervening court summer vacation. The delay was described as bona fide and unintentional.
The CIT(A), however, considered the explanation insufficient because the delay had not been substantiated with material evidence on a day-to-day basis.
The Tribunal Notices the Arithmetic Too
The Tribunal identified inconsistencies in the dates and calculation.
Form 35 mentioned service on 6 March 2024, while the affidavit referred to receipt on 26 February 2024. The CIT(A) adopted 5 April 2024 as the filing deadline but calculated the delay until 20 June 2024 as 86 days. That interval was actually 76 days.
The Tribunal expressly recorded these discrepancies. Nevertheless, it examined the explanation against the 86-day delay recorded by the CIT(A) and pleaded by the assessee, without independently verifying either service date.
Sufficient Cause Requires a Practical Approach
The Tribunal explained that section 249(3) empowers the CIT(A) to admit a delayed appeal upon sufficient cause being established. It prescribes no maximum additional period beyond which condonation becomes unavailable. Consequently, reliance on a statutory restriction applicable to a service-tax appeal did not determine the power under this provision.
Relying on Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 (SC) and N. Balakrishnan v. M. Krishnamurthy [1998] 7 SCC 123, the Tribunal examined the explanation, conduct and surrounding circumstances together.
The specific affidavit, committee transition and subsequent pursuit of the appeal reasonably explained the delay. The date discrepancies did not establish that the entire explanation was false or the delay deliberate.
The Tribunal clarified that court summer vacation did not, by itself, suspend the appeal limitation. Its conclusion rested on the cumulative explanation.
The Ruling and Author’s Comments
The Tribunal condoned the delay, set aside the CIT(A)’s dismissal and restored the appeal for a reasoned decision after a reasonable hearing. The appeal was allowed for statistical purposes.
Condonation restores the opportunity to argue; it does not establish the exemption claim. The Tribunal expressly clarified that its order neither granted section 12A/12AB registration nor recognised entitlement under sections 11 and 12. Mutuality, corpus donations, interest, locker rent and expenditure remain open.
The practical lesson is to provide a specific chronology supported by an affidavit. Institutional transitions may explain delay when the steps taken are demonstrated, but they are not an automatic excuse.
Justice requires examination of the explanation—not merely counting the days and closing the file.
Cases Discussed
1. Collector, Land Acquisition, Anantnag v. Mst. Katiji and Others — Supreme Court, (1987) 167 ITR 471; (1987) 2 SCC 107, decided on 19 February 1987. Relied upon for the practical and justice-oriented interpretation of sufficient cause and the principle that a litigant ordinarily does not benefit by filing an appeal late.
2. N. Balakrishnan v. M. Krishnamurthy — Supreme Court, (1998) 7 SCC 123. Relied upon for the proposition that acceptability of the explanation is more important than the numerical length of the delay. The decision supports a contextual examination without dispensing with the requirement to establish sufficient cause.
FULL TEXT OF THE ORIGINAL ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order dated 05.01.2026 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the learned CIT(A)”], under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”]. The impugned order arises from the assessment order dated 26.02.2024 passed under section 143(3) read with section 144B of the Act for the assessment year 2022-23. The learned CIT(A) refused to condone the delay in filing the first appeal and dismissed it in limine, without adjudicating the grounds on merits.
2. The grounds contained in the revised grounds document furnished by the assessee are reproduced below:
1. On Refusal to Condone Delay
The learned Commissioner of Income Tax (Appeals) erred in law and on facts in refusing to condone the delay of 86 days in filing the appeal, without appreciating that the delay was due to “sufficient cause” arising from bona fide institutional circumstances and not due to any deliberate inaction or negligence.
2. On Failure to Exercise Judicial Discretion
The learned CIT(A) failed to exercise the discretion vested in him judiciously and in accordance with settled legal principles, by adopting an unduly technical approach in rejecting the condonation application.
3. On Violation of Principles of Natural Justice
The learned CIT(A) erred in rejecting the condonation application without pointing out any specific deficiencies in the explanation furnished and without allowing the Appellant to clarify or supplement the same, thereby violating the principles of natural justice.
4. On Dismissal Without Adjudication on Merits
The learned CIT(A) erred in dismissing the appeal in limine without adjudicating the substantive grounds raised by the Appellant, thereby denying the Appellant an effective appellate remedy.
5. On Substantial Justice vs Technicalities
The learned CIT(A) failed to appreciate that substantial justice ought to prevail over technical considerations, particularly when the delay was moderate, duly explained by affidavit, and the case involves substantial questions on the merits.
6. On Existence of Arguable Case on Merits
The learned CIT(A) failed to appreciate that the Appellant has a strong prima facie case on merits, inter alia, in respect of:
- Corpus donation received with specific direction being capital in nature;
- Applicability of the principle of mutuality to membership receipts; and
- Taxability of interest earned on such funds;
and therefore the appeal ought to have been admitted and adjudicated on the merits.
3. Briefly stated, the assessee is an association of advocates and labour law practitioners. Its stated objects include promoting awareness of labour law and other social laws through studies, discussions, writings, maintenance of libraries and law reporting, and promoting reform in the administration of justice and law. The statement of facts reproduced in the appellate order refers to its registration as an association in October 2018 and registration as a public trust in March 2019. Such registration under the State enactment is distinct from registration under the Act.
4. The assessee filed its return of income on 27.09.2022, declaring total income at Rs. Nil/-. The return was processed under section 143(1) on 15.02.2023. The case was thereafter selected for compulsory scrutiny on the issue of a claim for exemption despite non-grant or cancellation of registration or approval by the competent authority. Notice under section 143(2) was issued on 28.06.2023, followed by notice under section 142(1) dated 02.11.2023 and subsequent communications calling for the requisite particulars.
5. On the issue of registration, the Assessing Officer recorded that the assessee had furnished a copy of the provisional registration order dated 27.10.2021, granting provisional registration for the assessment years 2022-23 to 2024-25. The assessee subsequently made an application on 17.09.2022 under section 12A(1)(ac)(iii) for regular registration. This application was rejected by the competent authority by order dated 31.03.2023. The Assessing Officer expressly recorded that the provisional registration granted on 27.10.2021 under section 12AB read with section 12A(1)(ac)(vi) had also been cancelled. The statement of facts reproduced at page 4 of the appellate order likewise acknowledges rejection of the application on 31.03.2023. Thus, the record before us does not establish subsistence of a valid registration under section 12A/12AB following the said rejection and cancellation. No subsequent order granting registration or reversing the rejection or cancellation has been furnished in the present appeal record.
6. The Assessing Officer issued a show-cause notice dated 18.01.2024 proposing to deny exemption under sections 11 and 12 and tax the receipts under the normal provisions of the Act. According to the assessment order, the assessee did not furnish the requisite explanation and supporting evidence in response to the proposed variation, despite a further opportunity. The Assessing Officer treated membership receipts of Rs.1,29,450/- as business income and declined deduction of the corresponding expenditure for want of documentary evidence establishing its genuineness.
7. The Assessing Officer further brought to tax Rs.4,54,973/- under the head “Income from Other Sources”, comprising donations in cash or kind of Rs.69,850/-, receipts described as interest income of Rs.89,923/- and other donations of Rs.2,95,200/-. The assessment was accordingly completed under section 143(3) read with section 144B at total income of Rs.5,84,423/- as against the returned income of Rs. Nil/-.
8. In the first appeal, the assessee disputed the taxability of membership subscriptions on the principle of mutuality. It explained that the amount of Rs.89,923/- comprised savings bank interest of Rs.3,013/-, fixed deposit interest of Rs.50,358/- and locker rent of Rs.36,552/-. It contended that the locker rent was collected from members and advocates towards use and maintenance of lockers. It further stated that the donations of Rs.69,850/- represented contributions from members towards COVID-19 relief. As regards other donations of Rs.2,95,200/-, the assessee contended that Rs.2,50,000/- was received on 10.05.2021 from Aadhar Mathadi and General Kamgar Sanghatana with a specific direction to form part of the corpus, and that the balance of Rs.45,200/- represented life membership and entrance fees. These are the assessee’s contentions, which have not been adjudicated by the learned CIT(A).
9. The first appeal was filed on 20.06.2024. In paragraph 5.2 of the impugned order, the learned CIT(A) recorded that Form No.35 mentioned 06.03.2024 as the date of service, that the appeal ought to have been filed by 05.04.2024 and that the delay was 86 days. The learned CIT(A) also noticed that the affidavit mentioned receipt of the assessment order on 26.02.2024 and the last date for filing the appeal as 27.03.2024. There is, therefore, an inconsistency concerning the date of receipt. Further, the interval between the due date of 05.04.2024 adopted in the impugned order and the filing date of 20.06.2024 is 76 days, rather than 86 days. We record the discrepancy expressly. For the purpose of considering condonation, we examine the explanation with reference to the delay of 86 days recorded by the learned CIT(A) and pleaded by the assessee, without treating either stated date of receipt as independently verified.
10. The explanation for the delay was furnished in Form No.35 and supported by an affidavit, the relevant portions of which are reproduced at pages 7 and 8 of the appellate order. The assessee explained that, upon receipt of the assessment order, it sought opinions regarding the order. Elections to the managing committee were announced on 28.03.2024 and held on 25.04.2024. According to the affidavit, the outgoing committee had become functus officio and could not hold meetings to take a decision regarding the appeal. Following declaration of the election results, the affairs of the association were handed over to the incoming committee. The affidavit further referred to the intervening summer vacation of the Court and stated that the committee followed up with the Chartered Accountant for filing the appeal. The delay was stated to be bona fide and unintentional.
11. The learned CIT(A) issued notices during the appellate proceedings on 20.05.2025, 03.06.2025 and 01.07.2025, and recorded that the assessee had filed submissions. Nevertheless, the learned CIT(A) held that the assessee had not substantiated the delay with material evidence on a day-to-day basis and characterised the delay of 86 days as extraordinary. He considered the explanation insufficient, declined condonation and dismissed the appeal in limine. Consequently, no findings were rendered on the taxability of the disputed receipts or the assessee’s substantive grounds.
12. Before us, the learned Authorised Representative submitted that the explanation furnished in Form No.35 and the affidavit ought to have been considered in its entirety. He submitted that the delay arose from the elections, change in the managing committee, administrative handover and the circumstances explained in the affidavit, and was not the result of deliberate inaction. He further submitted that the assessee had participated in the appellate proceedings and that the learned CIT(A) rejected the explanation without specifically calling upon the assessee to clarify the perceived deficiencies. He prayed that the delay in filing the appeal before the learned CIT(A) be condoned and the matter be restored for adjudication on merits. The learned Departmental Representative relied upon the orders of the lower authorities.
13. We have heard the rival submissions and perused the material on record. The controversy presently requiring determination is whether the explanation furnished by the assessee constitutes sufficient cause for the delay in filing the first appeal. The merits of the additions do not arise for adjudication at this stage, since the learned CIT(A) has not examined them.
14. Section 249(3) of the Act empowers the learned CIT(A) to admit an appeal after expiry of the prescribed period where sufficient cause for not presenting it within that period is established. The provision does not prescribe a maximum additional period beyond which the power to condone delay ceases. Accordingly, the observation in paragraph 5.13 of the impugned order referring to a statutory restriction on condonation in a service-tax appeal does not determine the scope of the power under section 249(3). The applicable inquiry is whether sufficient cause has been shown on the facts of the present case.
15. In Collector, Land Acquisition, Anantnag v. Mst. Katiji and Others [1987] 167 ITR 471 (SC), the Hon’ble Supreme Court observed that “Ordinarily a litigant does not stand to benefit by lodging an appeal late.” The decision requires a practical consideration of the explanation for delay. In N. Balakrishnan v. M. Krishnamurthy [1998] 7 SCC 123, the Hon’ble Supreme Court observed: that “Length of delay is no matter, acceptability of the explanation is the only criterion.” These principles do not dispense with the requirement to establish sufficient cause. The discretion must be exercised upon consideration of the explanation, the conduct of the party and the circumstances that prevented timely filing. A bona fide explanation must be distinguished from an unsupported plea or a deliberate attempt to prolong proceedings.
16. Applying the above principles, we find that the assessee furnished a specific explanation supported by an affidavit. The explanation identifies the announcement of elections, the election date, the change in the managing committee and the ensuing handover of the association’s affairs. The affidavit also records that opinions were sought upon receipt of the assessment order and that the committee thereafter pursued filing of the appeal through the Chartered Accountant. Considered together, these circumstances provide a reasonable explanation for the delay. We do not treat the Court’s summer vacation, by itself, as suspending the statutory period for filing an income-tax appeal. It is the cumulative explanation concerning the steps taken and the transition in the management that is material to our conclusion.
17. We have also taken into account the discrepancy between the dates of receipt stated in Form No.35 and the affidavit. That discrepancy warrants notice, but does not, in the circumstances of this case, establish that the entire explanation is false or that the delay was deliberate. The affidavit describes steps taken from receipt of the order through the committee transition and subsequent pursuit of the appeal. The assessee also filed submissions in the appellate proceedings, as acknowledged by the learned CIT(A). On an overall consideration, the finding of gross negligence and prolonged inaction is not warranted. The requirement to explain the delay ought not to have been applied as a mechanical demand for a separate account of every day, disregarding the explanation of the material sequence of events.
18. We are, therefore, satisfied that sufficient cause existed for not filing the appeal before the learned CIT(A) within the prescribed period. We condone the delay in filing the first appeal on 20.06.2024, including the delay of 86 days as recorded in the impugned order. The discrepancy in the computation of the number of days shall not affect admission of the appeal pursuant to this order. Having granted relief on the explanation for delay, it is unnecessary to render a separate finding on the allegation of denial of an opportunity to supplement that explanation.
19. We accordingly set aside the order dated 05.01.2026 and restore the assessee’s appeal to the file of the learned CIT(A) for adjudication of the original grounds on merits in accordance with law. The learned CIT(A) shall admit the appeal pursuant to the condonation granted herein, consider the submissions and evidence relevant to each disputed receipt and pass a reasoned order after providing the assessee a reasonable opportunity of being heard. The assessee shall cooperate in the proceedings and furnish the particulars and supporting material called for.
20. For clarity, the present restoration neither grants registration under section 12A/12AB nor recognises an entitlement to exemption under sections 11 and 12. As recorded above, the assessment order states that regular registration was refused and the earlier provisional registration was cancelled. The learned CIT(A) shall take that position into account while examining the substantive grounds under the applicable law. We express no opinion on the merits of the claims concerning mutuality, the nature of the donations, membership or entrance fees, interest, locker rent or admissible expenditure. The assessee’s substantive contentions remain open for adjudication by the learned CIT(A).
21. Grounds Nos.1 to 5 are disposed of in terms of the condonation and restoration directed above. Ground No.6 is disposed of by leaving the substantive issues open for adjudication in the restored proceedings.
22. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 01.10.2026.
