Delay of 988 days cannot be condoned on the basis of vague reason

SRK Infracon (India) Private Limited Vs ITO ( ITAT Hyderabad)

ITAT Hyderabad held that delay of 988 days in filing of the appeal cannot be condoned on the basis of vague reason.

Facts- The assessee has sought to challenge the order passed by the ld.PCIT quashing the assessment made u/s 143(3) of the Act vide order dt.20.12.2016 passed under section 263 of the Act. Importantly, there is a delay of 988 days in filing the appeal before the Tribunal and the same is requested to be condoned on the ground that staff of the assessee has not noticed the order sent by email and also that the situation prevailing from March 2021 to till date on account of Covid Pandemic and further to consider the company’s position which has no activity after April 2018.

Conclusion- In this case, on perusal of reasons given by the assessee for delay in filing of the appeal, we find that although it appears the assessee is not deriving any benefit by not filing the appeal within the due date prescribed under the Act, but, from contents of petition filed by the assessee, we could easily make out a case that the assessee has made an afterthought to file the appeal against the order of ld.PCIT. Therefore, in our considered view, for these vague reasons, such huge delay of 988 days in filing of the appeal, cannot be condoned.

In our view, the reasons given by the assessee are devoid of any merit and not sustainable in the eyes of law. If we look into the reasons, it is clear that the explanation given is that the staff of the assessee had not noticed the order sent by email to the assessee. Further, it was submitted that the Assessing Officer has also passed an ex-parte order without considering the paper book submitted before the ld.PCIT. It was submitted by the assessee that the Assessing Officer has sent a reminder in respect of payment of tax arrears and then only the assessee learnt about the non-filing of the appeal before the ld.PCIT. No such evidence / document had been filed before us.

FULL TEXT OF THE ORDER OF ITAT HYDERABAD

This appeal is filed by the assessee, feeling aggrieved by the order passed by the Learned Principal Commissioner of Income Tax – 3, Hyderabad dt. 28.02.2019 u/s 263 of the Income Tax Act, 1961 for AY 2014-15 on the following raised grounds :

“1. The order of the learned Pr. Commissioner of Income Tax is against the law, weight of evidence and probabilities of case.

2. The learned Pr. Commissioner erred in assuming that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue, on an assumption that the AO has not examined the issues properly.

3. The learned Pr. Commissioner erred in passing an order u/s 263 without bringing any material on record to show that the order is prejudicial to the interest of revenue and erroneous.

4. The learned Pr. Commissioner ought to have appreciated that the assessee received share application money in the financial year 2012-13 and the same is converted into reserves and surplus by allotting shares, therefore, erred in passing an order u/s 263 assuming that the order u/s 143(3) is erroneous and prejudicial.

5. The learned Pr. Commissioner ought to have appreciated that the Assessing Officer in the course of assessment proceedings collected all the material relating to the issues of share premium and expenses and after examining the material accepted the income returned, therefore, erred in passing an order u/s 263 assuming that the order u/s 143(3) is erroneous and prejudicial.

6. The learned Pr. Commissioner ought to have appreciated that issue of disallowance u/s 14A is not under the purview of scrutiny as the case is selected to examine the share premium and expenses claimed, therefore, erred in passing an order u/s 263 assuming that the order u/s 143(3) is erroneous and prejudicial.”

2. The brief facts of the case are that assessee is a company who filed its e-return of income of Rs.15,54,300/- on 28.11.2014. The case was taken up for scrutiny under CASS by the issue of notice u/s 143(2) of the Act. Subsequently, notice u/s 142(1) of the Act was issued from time to time calling for various details. In compliance with the above, assessee produced books of account, vouchers, copies of bank account and other details as called for. After verifying all the material furnished by the assessee, Assessing Officer completed the assessment u/s 143(3) of the Act by accepting the returned income on 20.12.2016.

3. Subsequently, assessment records for A.Y. 2014-15 were called for by the ld.PCIT and on examination, ld.PCIT had found that the Assessing Officer had not examined the issue of large share premium received during the relevant previous year and also found some discrepancies regarding valuation of shares and applicability of provisions of section 14A etc. Since the Assessing Officer had not examined the issue property, the ld.PCIT found that the assessment order dt.20.12.2016 was erroneous and prejudicial to the interest of the revenue as per provisions of section 263 of the I.T. Act and issued show cause notice dt.12.11.2018. In response to which, the authorized representative of the assessee company filed submissions. On verification, the submissions made by the assessee company were not accepted by the ld.PCIT and hence, he revised the assessment order u/s 143(3) of the Act dt.20.12.2016 for A.Y. 2014-15 as the same was erroneous and prejudicial to the interest of the revenue.

4. Feeling aggrieved with the order passed u/s 263 of the Act, assessee is now in appeal before us.

5. Before us, the assessee has sought to challenge the order passed by the ld.PCIT quashing the assessment made u/s 143(3) of the Act vide order dt.20.12.2016 passed under section 263 of the Act.

6. At the outset, ld. AR had submitted that there is a delay of 988 days in filing the appeal before the Tribunal, the same may kindly be condoned. In this regard, he filed the following written submissions made by the Director of the assessee company :

“The assessee is in the business of development of infrastructure projects. Return of income was filed u/s 139(1) admitting an income of Rs.15,54,300/- for the subject assessment year. The case was selected under CASS for verification of large share premium received during the year and large other expenses claimed in the profit and loss account. Considering the submissions made, the Assessing Officer made assessment u/s 143(3) on 20.12.2016 accepting the income returned. However, the principal CIT opined that the Assessing Officer has not examined the issues properly and also applicability of section 14A, therefore, set aside the assessment to redo. The order of the CIT appears to have been sent by email to the assessee. It is pertinent to mention here that the assessee’s activity seized to exist after April 2018 and the administrative staff is reduced to minimum as there are no day to day management of the company. Therefore, the order sent by email was not noticed by the staff or management. Subsequently, the notices sent by the Assessing Officer, inconsequential proceedings also not noticed, therefore, the assessment resulted into an ex-party order, without considering the paper book submitted before the Principal Commissioner. However, the Income Tax Officer Ward-3(1) issued a reminder in respect of payment of tax arrears, this letter was noticed by the Auditors of the assessee who have reminded the assessee in respect of receipt of order of the Principal Commissioner and also subsequent assessment order. At this stage it was realised that no appeals have been filed in respect of order of the Principal Commissioner and also in respect assessment order. Therefore, an appeal is being filed before the Hon’ble Bench with a delay of 986 days. The Hon’ble Bench is requested to consider the facts and circumstances of the case and also the situation prevailing from March 2021 to till date on account of Covid Pandemic and further to consider the company’s position which has no activity after April 2018 and prayed to condone the delay of 986 days in filing the appeal.”

7. On the other hand, ld. DR had submitted that the order of the ld.PCIT was duly served on the assessee and submitted that the ld.PCIT passed order on 28.02.2019 and thereafter, Assessing Officer had passed assessment order on 31.12.2019, thereby giving effect to the order of ld.PCIT. It was further submitted that after passing of the assessment order on 31.12.2019, the assessee preferred appeal before ld.CIT(A) on 07.07.2022 and thereafter, the present appeal was filed by the assessee before us challenging the order passed by the ld.PCIT u/s 263 of the Act on 11.01.2022. It was submitted that the delay in filing the appeal is unexplained and the same cannot be condoned. The assessee was not prevented for any reasonable cause for filing the appeal before the Tribunal and that the reasons given by the assessee in the condonation application are any devoid of merit.

8. We have heard the rival submissions and perused the material on record. We have also carefully considered the reasons given by the assessee for the delay in filing of the appeal. We find that prima facie the reasons given by the assessee, in the petition for condonation of delay of 988 days, seems to be not bona fide. We have gone through the reasons submitted by the Director of the assessee company and also examined the sequence of events and after considering necessary facts, we are of the considered view that the reasons given by the assessee in the petition are not bona fide. Therefore, we are of the considered view that there is no merit in the reasons given by the assessee in the petition for condonation of delay in filing the appeal.

9. Be that as it may, coming back to the legal position evolved by the decision of various High Courts, including the Hon’ble Supreme Court in number of cases, where it has been time and again, held that when merits and technicalities pitted against each other, then merit alone deserves to be prevailed because, if you throw out a meritorious case out of judicial scrutiny on the grounds of technicalities, then you may deprive the right of the petitioner in pursuing their case. At the same time, various Courts have held that rules of limitation are not meant to destroy the rights of parties, they are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly, within the time bound prescribed under the Act.

10. Further, in a case, where, for the reasons beyond the control of the petitioner, the appeal could not be filed, then the Courts are well equipped with power to condone the delay, if the petitioner explains the delay in filing of the appeal with a reasonable cause. However, there is no law or mandate in the Act, to condone the delay in each and every case. But, it depends upon all facts of each case and the reasons given by the parties for condonation of delay. Therefore, one has to go by the facts of its own case and the reasons given by the petitioner for condonation of delay. In this case, on perusal of reasons given by the assessee for delay in filing of the appeal, we find that although it appears the assessee is not deriving any benefit by not filing the appeal within the due date prescribed under the Act, but, from contents of petition filed by the assessee, we could easily make out a case that the assessee has made an afterthought to file the appeal against the order of ld.PCIT. Therefore, in our considered view, for these vague reasons, such huge delay of 988 days in filing of the appeal, cannot be condoned.

11. Further, the assessee’s reasons in the petition do not come under reasonable cause as prescribed under the Act, for condonation of delay. Hence, we reject the petition filed by the assessee for condonation of delay and dismiss the appeal filed by the assessee.

12. In our view, the reasons given by the assessee are devoid of any merit and not sustainable in the eyes of law. If we look into the reasons, it is clear that the explanation given is that the staff of the assessee had not noticed the order sent by email to the assessee. Further, it was submitted that the Assessing Officer has also passed an ex-parte order without considering the paper book submitted before the ld.PCIT. It was submitted by the assessee that the Assessing Officer has sent a reminder in respect of payment of tax arrears and then only the assessee learnt about the non-filing of the appeal before the ld.PCIT. No such evidence / document had been filed before us.

13. In our view, the law requires the assessee to be vigilant and careful in prosecuting its rights under the Act. In the present case, as pointed out by the ld. DR that the revisional order was passed on 28.02.2019 and thereafter, the Assessing Officer after issuing notice had issued the order giving effect u/s 143(3) r.w.s 263 of the Act on 31.12.2019. Almost 10 months have passed between passing of the revisional order and consequential order passed by the Assessing Officer, yet the assessee has chosen not to proceed against the order of ld.PCIT. Further, the assessee preferred the appeal before the ld.CIT(A) after a gap of two years i.e., on 07.01.2022 and thereafter, filed the present appeal before us on 11.01.2022. Considering the totality of the facts and circumstances of the case and the conduct of the assessee, we do not find any reason to entertain the present appeal as the same is barred by limitation. Accordingly, the appeal filed by the assessee is dismissed.

14. We may like to point out that during the course of our adjudication of condonation application, we have made specific comments on the merits of the case, however, the same may not be construed as an expression on the merits of the case.

15. In the result, the appeal of the assessee is dismissed.

Order pronounced in the Open Court on 8th February, 2023.