Brajesh Kumar Yadav Vs ITO (ITAT Agra)
CIT(A) Cannot Decide Merits After Rejecting Delay Condonation: ITAT Agra
Brief Summary: The Income Tax Appellate Tribunal (ITAT), Agra, held that the CIT(A) cannot adjudicate an appeal on merits after refusing to condone the delay in filing it. Unless the delay is condoned, the appellate authority lacks jurisdiction to decide the time-barred appeal on merits.
The Tribunal condoned a delay of approximately 2,404 days in filing the assessee’s first appeal concerning a leave encashment exemption of ₹4,74,373 under Section 10(10AA). It set aside the CIT(A)’s order and restored the matter for fresh adjudication on merits.
Facts of the Case
The assessee’s claim for exemption of ₹4,74,373 towards leave encashment on retirement under Section 10(10AA) of the Income-tax Act, 1961, was disallowed through an intimation dated September 1, 2019, issued under Section 143(1).
The assessee filed an appeal before the CIT(A) on May 1, 2026, involving a delay of approximately 2,404 days. The CIT(A), by an order dated August 20, 2026, rejected the request for condonation of delay and also dismissed the appeal on merits.
Aggrieved, the assessee approached the Tribunal.
Assessee’s Explanation for the Delay
The assessee relied on CBDT Notification No. 31/2023 dated May 24, 2023, which enhanced the leave encashment exemption limit from ₹3 lakh to ₹25 lakh. He contended that the enhanced limit had retrospective application and referred to Tribunal decisions supporting that position.
According to the assessee, he became aware of the favourable judicial position only recently after coming across appellate orders in similar cases. He submitted that the delay was neither intentional nor deliberate and that he approached the appellate forum upon acquiring such knowledge.
He accordingly sought condonation in the interest of substantial justice.
ITAT’s Observations on Condonation of Delay
The Tribunal noted that Section 249(2) prescribes a period of 30 days for filing an appeal before the CIT(A). However, Section 249(3) permits admission of a delayed appeal where the appellate authority is satisfied that sufficient cause prevented timely filing.
The Tribunal also took judicial notice that the period of delay overlapped with the COVID-19 pandemic. Referring to the Supreme Court’s order dated January 10, 2022, in the proceedings concerning extension of limitation, it observed that the period from March 15, 2020, to February 28, 2022, was to be excluded for limitation purposes.
For the remaining delay, the Tribunal found the assessee’s explanation sufficient. Emphasising the importance of an opportunity to participate in the justice process, it condoned the delay in filing the first appeal.
Merits Cannot Be Decided Without Condoning Delay
The Tribunal found fault with the CIT(A)’s decision to examine the merits after rejecting the condonation application.
It explained that the question of condonation must be decided first. If delay is condoned, the appellate authority may proceed to decide the merits, including on the same day. However, if condonation is refused, the proceedings fail at that stage.
The Tribunal referred to the Supreme Court’s decision in Union of India & Anr. Vs. Jahangir Byramji Jeejeebhoy (D), 2024 SCC OnLine SC 489. It noted that limitation is founded on public policy and equity, that the length of delay is relevant, and that consideration of a condonation application should not begin with the merits of the underlying dispute.
It also relied on the Allahabad High Court’s order dated July 25, 2025, in Dinanath Singh & Anr. Vs. State of U.P. & Ors., Writ-C No. 22221 of 2025, for the proposition that an appeal does not legally come into existence unless the delay is condoned.
Accordingly, the Tribunal held that the CIT(A) had committed a patent illegality by deciding the merits after refusing condonation of delay.
Decision
The Tribunal set aside the CIT(A)’s order dated August 20, 2026, condoned the delay, and restored the matter to the CIT(A) for a fresh decision on merits in accordance with law.
The CIT(A) was directed to consider the binding precedents placed on record and observe the principles of natural justice. The assessee was also directed to cooperate and participate diligently in the proceedings.
The appeal was allowed for statistical purposes. The Tribunal did not decide the assessee’s entitlement to the leave encashment exemption or the retrospective applicability of the enhanced ₹25 lakh limit; those issues remained for consideration in the restored proceedings.
Cases Discussed
- Union of India & Anr. Vs Jahangir Byramji Jeejeebhoy (D) (Supreme Court); 2024 SCC OnLine SC 489: Considered on limitation, public policy, equity, length of delay and the need to decide condonation before merits.
- Dinanath Singh & Anr. Vs State of U.P. & Ors. (Allahabad High Court); Writ-C No. 22221 of 2025; 25/07/2025: Relied upon for the proposition that a delayed appeal cannot legally proceed on merits unless delay is condoned.
- In Re: Cognizance for Extension of Limitation (Supreme Court); Suo Motu W.P.(C) No. 3/2020; order dated 10/01/2022: The Tribunal applied the exclusion of 15/03/2020 through 28/02/2022 while examining limitation.
FULL TEXT OF THE ORDER OF ITAT AGRA
This appeal is directed against the impugned order dated 20.08.2026 passed in appeal No ADDL/JCIT (A) INDORE/10029/ 2018-19 by the ld. Commissioner of Income Tax, APPEAL/ ADDL/JCIT (A) INDORE [(hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2019-20, wherein ld CIT(A) has dismissed assessee’s appeal as time barred and on merits as well against the intimation order dated 01.09.2019 whereby assessee’s claim of exemption of Rs. 4,74,373/- u/s 10(10AA) of the Act as leave encashment on retirement, was disallowed.
2. Aggrieved, assessee preferred an appeal before ld CIT(A), who dismissed assessee’s appeal as time barred and on merit as well.
3. This second appeal has been preferred by the assessee on the ground in addition to many others that ld CIT(A) has erred in dismissing assessee’s appeal upon rejection of assessee’s prayer for condonation of delay, contrary to law and CBDT direction.
4. We have heard both the parties and perused the material available on record.
5. At the very outset, it is noticed that the first appeal was filed on 01.05.2026 against the intimation u/s 143(1) of the Act, dated 01.09.2019 by a delay of about 2404 days. The reasons for delay have been stated in paras 4.3 & 4.4 of the impugned order as under:
“4.3. The appellant has submitted that the Subsequent issuance of CBDT Notification No.31/2023 dt.24th May, 2023 is having RETROSPECTIVE EFFECT for Exemption u/s 10(10AA) of the I.T. Act, whereby the limit is enhanced to Rs.25,00,000/- (Old Limit Rs.3,00,000/-). It is further submitted by the appellant that multiple ITAT decisions have held the same (the amendment) to be retrospective. It has been stated that the appellant became aware of the said judicial position only recently and after coming across appellate orders passed in similar cases.
4.4. The appellant has further relied upon judicial principles laid down in cases advocating liberal interpretation of condonation provisions and has pleaded that the delay was neither intentional nor deliberate. It has been contended that the appellant acted bona fide and approached the appellate forum immediately upon becoming aware of the favourable legal position. The appellant has therefore prayed that the delay may be condoned in the interest of substantial justice and the appeal may be admitted for adjudication on merits.”
6. The limitation period for filing appeal before ld CIT(A) u/s 249(2) of the Act is 30 days, however, section 249(3) of the Act empowers the first appellate authority to condone the delay if satisfied that the appellant had sufficient cause for not presenting it within the prescribed period. Ld CIT(A), however did not find any sufficient cause to condone the said delay and dismissed assessee’s appeal in limine.
7. We take judicial notice of the fact that the duration of delay caused in filing appeal before the first appellate authority overlaps the period of spread of global pandemic COVID-19. This fact has also been taken care of, by Hon’ble Supreme Court in Misc. app. No. 21/2022 in Misc. app No. 665/2021 in suo-moto W.P(c) No. 3/2020 in civil original jurisdiction and in re-cognizance of extension of limitation with miscellaneous application No. 29/2022, in miscellaneous application No. 655/2021 in suo-moto petition(c) no. 03/2020 and vide para 5(1) of its order dated 10.01.2022, the Apex Court directed that its order dated 23.03.2020 is restored and in continuation of the subsequent order dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purpose of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings after exclusion of the aforesaid duration. So the period from 15.03.2020 till 28.02.2022 was to be excluded accordingly.
8. It is well established principle of law that the substantial justice cannot be denied on technical aberrations. In an adversial justice system like ours, no party should ordinarily be denied the opportunity of participating in the process of justice dispensation. Justice is the goal of jurisprudence. Any interpretation which eludes or frustrates the recipient of justice can not to be followed. The cause shown on behalf of the assessee appears to us to be sufficient to condone the remaining delay also. We, accordingly condone the said delay in filing the first appeal before the first appellate authority.
9. We are further surprised to note that after refuting assessee’s prayer for condonation of delay, learned CIT(Appeals) proceeded to decide the appeal on merit, which is contrary to the law. The law on the subject is well settled that unless the delay is condoned, the appeal does not come into existence legally, and in such absence, the court is wholly without jurisdiction to hear or decide the same on merit.
10. Hon’ble Supreme Court in Union of India & Anr. v. Jahangir Byramji Jeejeebhoy (D), 2024 SCC online SC 489, has observed that the question of limitation is not merely a technical consideration. The rules of limitation are based on the principles of sound public policy and principles of equity, that the length of delay is a relevant matter, which the court must take into consideration while considering whether the delay should be condoned or not. The Hon’ble Apex Court has been pleased to hold that while considering the plea for condonation of delay, the court must not start with merits of the main matter. However, the courts are required to condone delay on the bedrock of the principle that adjudication of a lis on merits is seminal to justice dispensation system.
11. Thus, the issue of condonation of delay in the proceedings has to be decided at the first instance before delving into the merits of the case. However, if the delay is condoned, there is no bar on the courts to proceed with the case and decide the same on merits on the very day. In the same manner, if the prayer for condonation of delay is rejected, the proceedings will automatically fail. It is, thus, settled that without condoning the delay in filing the appeal, the appellate authority lacks jurisdiction to entertain such time barred appeals.
12. Hon’ble Allahabad High Court, vide order dated 25.07.2025 passed in Writ-C No.22221 of 2025, Dinanath Singh & Anr. V. State of U.P. & Ors., held that unless delay is condoned, the appeal does not come into existence legally, and in such absence, the court is wholly without jurisdiction to hear or decide the same on merits. Ld. CIT(Appeals), thus, has committed patent illegality in deciding the matter on merits after rejection of assessee’s prayer for the condonation of delay caused in filing the first appeal.
13. Since we have condoned the delay caused in filing first appeal before ld CIT(A), the matter is restored to the file of ld. CIT(Appeals), who shall pass order on merit a fresh in accordance with law after considering the authoritative binding precedents brought on record by ld AR. We further direct the assessee to be diligent and co-operative in attending the proceedings and making submissions before ld. CIT(Appeals) for expeditious and effective disposal of appeal. Needless to say that learned CIT(A) shall ensure the observance of the principles of natural justice.
14. In the result, assessee’s appeal is allowed for statistical purposes. The impugned order dated 20.08.2026 is set aside.
Order pronounced in the Open Court on- 28.10.2026
