VCO Consultants and Services Private Limited Vs ITO (ITAT Chennai)
Summary: The Income Tax Appellate Tribunal, Chennai “A” Bench, comprising Judicial Member Shri Manu Kumar Giri and Accountant Member Shri S.R. Raghunatha, allowed the appeal of VCO Consultants and Services Private Limited for statistical purposes, condoning an extraordinary delay of 1,419 days in filing its first appeal and restoring the matter to the Commissioner of Income Tax (Appeals) for fresh adjudication. The dispute originated from a Section 143(1) intimation dated 18 December 2021, through which the Central Processing Centre, Bengaluru, disallowed the assessee’s claim of ₹32,46,412 towards employee contributions to Provident Fund and Employees’ State Insurance. The central question before the Tribunal, however, was whether the CIT(A) was justified in dismissing the first appeal solely on the ground of limitation without considering the circumstances explaining the delay.
The assessee had filed its return of income on 15 February 2021, declaring nil total income and a current-year loss of ₹8,33,200 after claiming deduction of ₹32,46,412 under Section 36(1)(va) of the Income-tax Act, 1961. The CPC disallowed this amount, citing delayed remittance of employees’ PF and ESI contributions, and raised a tax demand of ₹7,01,740. The assessee disputed the adjustment and its treatment under Sections 36(1)(va), 139(1) and 143(1), but the substantive question of deductibility was not adjudicated by the CIT(A), whose order dated 23 December 2025 dismissed the appeal as time-barred.
The company’s appeal before the CIT(A) was filed on 6 December 2025, approximately 1,419 days beyond the prescribed limitation period. The assessee explained that the impugned intimation had been issued during the COVID-19 pandemic period, when its accounts department faced restricted access to office premises. According to the assessee, those circumstances prevented the accounts personnel from noticing the intimation, and the company became aware of the demand only upon receiving a recovery notice dated 8 August 2025 from the jurisdictional Assessing Officer. The assessee requested that the delay be condoned and the matter restored to the CIT(A) for consideration on merits, undertaking to cooperate with the appellate proceedings.
The Revenue opposed condonation, pointing out that an appeal to the CIT(A) ordinarily had to be filed within 30 days of service of the impugned order. According to the Departmental Representative, the assessee had been negligent in pursuing its remedy and had not adequately justified the substantial delay. The Tribunal examined these rival submissions, the circumstances described in the application seeking condonation of delay, and the fact that the assessee had expressly raised the limitation issue in Form No. 35 filed before the CIT(A).
The Tribunal held that the assessee’s explanation was reasonable and bona fide. It observed that matters should ordinarily be decided on their merits rather than dismissed on technical grounds of limitation where sufficient cause has been shown. The exceptional conditions prevailing during the COVID-19 pandemic had been judicially recognised as relevant circumstances for condoning procedural delays. The Bench found that the CIT(A) had failed to examine the assessee’s explanation in a sufficiently liberal and justice-oriented manner. In the interest of substantial justice, it considered that the assessee deserved a meaningful opportunity to contest the assessment adjustment.
Accordingly, the Tribunal condoned the entire delay of 1,419 days, set aside the order dated 23 December 2025 and remanded the appeal to the CIT(A) for fresh adjudication in accordance with law after providing a reasonable opportunity of hearing. The assessee was directed to cooperate and furnish necessary details and submissions. Importantly, the Tribunal did not delete the PF/ESI disallowance of ₹32,46,412 or determine its substantive allowability. Its operative relief was confined to restoring the first appeal for consideration on merits. The appeal was therefore allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
The present appeal is filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals)-2, Ahmedabad (hereinafter referred to as “ld.CIT(A)”), dated 23.12.2025 passed by dismissing the appeal filed by the assessee against the intimation order dated 18.12.2021 passed u/s.143(1) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), pertaining to Assessment Year (A.Y.) 2020-21.
2. The sole ground raised by the assessee is that the CPC, Bengaluru has disallowed a sum of Rs.32,46,412/- being the belated remittance of the employee’s contribution to PF & ESI fund beyond the stipulated due dates prescribed under the respective statutes by invoking the provisions in Section 36(1)(va) of the Act and consequently erred in adding back such sum in the computation of total income without assigning proper reasons and justification that the assessee has remitted its contribution of employees after the due date prescribed u/s.139(1) of the Act for the A.Y. 2020-21.
3. Brief facts of the case emanating from the records are that the assessee is a Company and filed its return of income on 15.02.2021, admitting a total income of Rs.NIL, by declaring current year loss of Rs.8,33,200/- after claiming deduction u/s.36(1)(va) of the Act as remittance of employee’s contribution to PF & ESI to the tune of Rs.32,46,412/-. Thereafter, an intimation order dated 18.12.2021 was passed by the Central Processing Centre (hereafter referred to as “CPC”) wherein the sum claimed for deduction u/s. 36(1)(va) of the Act was disallowed on the ground that the contribution was remitted after the due date as specified u/s.139(1) of the Act and a demand of Rs.7,01,740/- was raised against the assessee.
4. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A) on 06.12.2025.
5. At the outset, we observed that the ld.CIT(A) dismissed the appeal filed by the assessee in limine, due to delay in filing an appeal by 1419 days. Aggrieved by the impugned order of the Ld.CIT(A), the assessee is in appeal before us.
6. The ld.AR submitted that the delay in filing an appeal due to circumstances beyond the control of the assessee and the intimation notice under consideration was passed during the COVID-19 pandemic and the accounts department of the assessee were restricted access to the office during COVID-19 Pandemic, resulting in not noticing the fact of passing of the intimation order and the assessee became aware only after receipt of recovery notice dated 08.08.2025 from the JAO/ITO, Corporate Ward 3(3), Chennai. In view of the above, the ld.AR prayed to set aside the order of the ld.CIT(A) and remit the issue to the file of ld.CIT(A) to adjudicate the appeal on merits. Further, ld.AR assured the bench that the ld.AR will represent on behalf of the assessee before the ld.CIT(A) to complete the appeal proceedings effectively.
7. Per contra, the ld.DR submitted that the appeal was to be filed before the ld.CIT(A) by the assessee within 30 days of service, but the assessee has filed an appeal with delay of 1419 days. The assessee has been negligent in filing an appeal within the time limit provided and hence prayed for confirming the order of the ld.CIT(A).
8. We have heard the rival submissions and perused the materials available on record and gone through the orders of the authorities below. The issue involved in the present appeal lies in a narrow compass, i.e., whether the disallowance of deduction claimed u/s.36(1)(va) of the Act by the CPC in the intimation issued u/s.143(1) of the Act, on account of delay in remittance of the employee’s contribution to PF & ESI Fund, is sustainable in the facts and circumstances of the case.
9. At the outset, it is observed that the ld. CIT(A) dismissed the appeal of the assessee in limine on account of a delay of 1419 days in filing the appeal, without adjudicating the issue on merits. The assessee has explained that the delay occurred due to circumstances beyond its control, particularly owing to the disruptions caused during the COVID-19 pandemic period, which restricted access to its office and accounts department. It is further submitted that the assessee became aware of the impugned intimation only upon receipt of a recovery notice dated 08.08.2025, after which it promptly filed the appeal.
10. On perusal of the record, we find that the assessee had raised a specific ground seeking condonation of delay in Form No. 35 filed before the ld. CIT(A). The explanation furnished by the assessee, attributing the delay to exceptional circumstances prevailing during the pandemic period, appears to be reasonable and bonafide. It is a settled legal position that matters should ordinarily be decided on merits rather than being dismissed on technical grounds of limitation, particularly when sufficient cause has been demonstrated.
11. In the present case, we note that the ld. CIT(A) has not examined the explanation of the assessee in a liberal and justice-oriented manner. Considering the extraordinary situation prevailing during the COVID-19 pandemic, which has been judicially recognized as a valid ground for condonation of delay in several cases, we are of the considered view that the assessee deserves an opportunity to contest the matter on merits.
12. Accordingly, in the interest of substantial justice, we deem it appropriate to condone the delay of 1419 days in filing the appeal before the ld. CIT(A). Consequently, the impugned order passed by the ld. CIT(A) is set aside. We hereby remit the matter back to the file of the ld. CIT(A) with a direction to adjudicate the appeal afresh on merits, in accordance with law, after providing reasonable opportunity of being heard to the assessee. The assessee is also directed to cooperate in the appellate proceedings and furnish necessary details and submissions as may be required.
13. In the result, appeal filed by the assessee is allowed for statistical purposes.
