Vineet Seth Vs DCIT (ITAT Bangalore)
Rectification First, Appeal Later—ITAT Condones 308-Day Covid Delay &; Revives Challenge to CPC Adjustments u/s 143(1)
Summary:
The controversy
The assessee, Mr. Vineet Seth, was engaged in the business of providing security services. For AY 2018-19, he filed a return declaring total income of ₹42,57,010.
CPC processed the return u/s 143(1) and determined the total income at ₹78,56,890. The increase arose principally from a disallowance of ₹20,15,145 relating to PF/ESI contributions and an addition of ₹15,84,732 concerning income received on withdrawal of provident fund.
The assessee challenged the intimation before the Addl./JCIT(A). However, the appeal was filed with a delay of 308 days. The appellate authority refused to condone the delay, holding that the assessee had not demonstrated a genuine reason, and dismissed the appeal without examining the adjustments on merits.
The assessee therefore approached the Bangalore ITAT.
Rectification chosen on professional advice
The intimation dated 3 February 2020 was served by e-mail on the same date. The appeal ought to have been filed by 5 March 2020.
Soon after receiving the intimation, the assessee was advised to seek rectification u/s 154 instead of immediately filing an appeal. Acting upon that advice, a rectification application was filed on 30 August 2020.
The assessee again received the same intimation on 22 December 2020 and forwarded it to his Chartered Accountant for further guidance. After examining the matter, the counsel advised that an appeal should be filed immediately along with an application seeking condonation. The assessee acted upon that advice.
It was submitted that the delay was neither deliberate nor designed to secure any advantage. The assessee had been pursuing a statutory remedy, though ultimately advised to invoke the appellate jurisdiction.
Covid pressure on an essential service provider
The assessee further explained that he was engaged in providing security services, an essential activity during the Covid-19 pandemic.
The nationwide lockdown created substantial operational pressure, including difficulties in arranging and retaining manpower. These extraordinary business conditions, coupled with the initial pursuit of rectification proceedings on professional advice, prevented the assessee from filing the appeal within the prescribed period.
The Revenue opposed condonation and characterised the delay as arising from negligence.
The ITAT, however, found the explanation credible. Considering the nationwide Covid lockdown, the operational difficulties faced by the assessee & the fact that he had pursued rectification, the Tribunal held that sufficient cause had been established.
Substantial justice defeats technical closure
The ITAT relied upon the principles laid down by the Supreme Court in Collector, Land Acquisition v. Mst. Katiji, 167 ITR 471.
A litigant ordinarily gains nothing by filing an appeal late. Rejection of condonation may result in a meritorious dispute being discarded at the threshold, while condonation merely enables both parties to contest the matter on merits.
The requirement to explain every day’s delay must be applied in a rational, commonsense & pragmatic manner. There is no automatic presumption that delay is deliberate, mala fide or attributable to culpable negligence.
When substantial justice and technical considerations conflict, the former deserves preference because the Revenue possesses no vested right to retain tax that is not lawfully due.
The Tribunal also referred to cases where delays substantially longer than 308 days had been condoned. Once a reasonable cause was shown, the length of the delay was not, by itself, decisive.
Accordingly, the ITAT condoned the delay and admitted the first appeal.
Merits of CPC adjustments left open
The assessee had raised several substantial challenges to the intimation.
The disallowance of ₹20,15,145 u/s 36(1)(va) allegedly included employer’s contribution of ₹10,65,472, which the assessee claimed was allowable u/s 43B since it had been paid within the applicable statutory period or before the return-filing due date.
The disallowance also allegedly included PF administrative charges of ₹72,281, which, according to the assessee, constituted allowable expenditure u/s 37(1).
The assessee further argued that the tax audit report merely disclosed payment details and did not report any disallowance. Therefore, the adjustment was allegedly beyond the permissible scope of s.143(1)(a)(v).
Another argument was that the due date for employees’ contributions should be computed with reference to the month following the actual disbursement of salary, and not mechanically by treating the fifteenth day of each calendar month as the due date.
Regarding ₹15,84,732 received upon PF withdrawal, the assessee claimed that the amount had already been disclosed in the return and corresponding TDS of ₹1,58,473 had been claimed. Adding the same amount again through the intimation allegedly resulted in double taxation.
The ITAT did not express any opinion on these issues.
Matter restored to first appellate authority
Since the Addl./JCIT(A) had dismissed the appeal solely on limitation and had not examined the merits at all, the Tribunal restored the entire dispute to the appellate authority.
The Addl./JCIT(A) was directed to adjudicate every ground afresh in accordance with law after granting the assessee a reasonable opportunity of hearing.
The appeal was partly allowed for statistical purposes.
Author’s comments
The ruling reinforces that pursuing rectification u/s 154 does not automatically extend the limitation for appeal. Prudence therefore demands filing an appeal within time—or at least simultaneously—where the issue is debatable or requires examination beyond an apparent mistake.
Nevertheless, bona fide pursuit of rectification is a material consideration for condonation, particularly when combined with the extraordinary disruption caused by Covid.
Importantly, the Tribunal has not deleted the PF/ESI disallowance or the alleged double addition. It has merely restored the assessee’s right to have those questions decided on merits.
The substantive issues remain significant: whether CPC could infer a disallowance not expressly reported in the tax audit report, whether employer’s contribution and administrative charges were wrongly included, and whether already disclosed PF withdrawal income was taxed twice. The first appellate authority must now answer each issue through a speaking order—not a limitation shortcut.
Vineet Seth v. DCIT, ITA No.2556/Bang/2025, AY 2018-19, order dated 7 September 2026, Bangalore ITAT.
Cases Discussed
- Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471)
- People Education & Economic Development Society Vs/ ITO, 100 ITD 87 (TM) (Chen)
- CIT vs. K.S.P. Shanmugavel Nadai and Ors., 153 ITR 596 (Madras)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, BANGALORE
This appeal at the instance of the assessee is directed against the order of the ld. Addl/JCIT(A)-1, Chennai dated 15.10.2025 vide DIN & Order No. ITBA/APL/S/250/2025-26/1081765197(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2018-19.
2. The assessee has raised the following grounds of appeal:-
1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The learned Addl/Joint Commissioner of Income tax [Appeals] – 1, CHENNAI is not justified in refusing to condone the delay in filing the appeal without appreciating that the delay in filing the appeal was due to sufficient cause under the facts and in the circumstances of the appellant’s case.
3. The learned Addl/Joint Commissioner of Income-tax [Appeals]-l, Chennai is not justified in upholding the determination of total income of appellant in the Intimation u/s. 143[1] of the Act, at Rs. 78,56,890/- as against the returned income of Rs. 42,57,010/- and thereby making a disallowance of Rs. 20,15,145/- u/s. 36[1][va] of the Act, relying upon the erroneous details in the Audit Report of the Chartered Accountant and making an addition of Rs. 15,84,732/- as “Income chargeable to tax at special rate u/s 155BBE”, under the facts and in the circumstances of the appellant’s case.
4. The learned Addl/Joint Commissioner of Incometax[Appeals] — I , Chennai ought to have appreciated that there was no disallowance u/s 36(1)(va) of the Act indicated in the Tax Audit Report as mere details of the payments made were set-out and therefore, the impugned addition made u/s. 143[1] of the Act is outside the scope of the adjustments capable of being made u/s 143(1)(a)(v) of the Act and therefore, the same deserves to be deleted.
5. The learned Addl/Joint Commissioner of Income tax [Appeals] — 1, Chennai failed to appreciate that the due date for making payment of the employee’s contribution, would fall in the month, following the actual disbursal of the salary and the due date as per the Provident fund Act, was not the 15thday, of each calendar month as indicated in the audit report and therefore, the addition made was misconceived, under the facts and in the circumstances of the case.
6. The learned Addl/Joint Commissioner of Income tax [Appeals] — 1, Chennai failed to appreciate that the intimation issued by the learned Assessing Officer under section 143[1] of the Act was bad in law, since the adjustment made was beyond the scope of the act, under the facts and in the circumstances of the case.
7. The learned Addl/Joint Commissioner of Income tax [Appeals] — 1, Chennai ought to have appreciated that the disallowance of Rs. 20,15,145/- made u/s.36(1)(va) of the Act comprised of the reported belated payment of the Employer’s share of PF and ESI to the extent of Rs. 10,65,472/-, which was allowable in terms of section 43B of the Act since the same has been paid before the of the financial year or before the due date for filing the return of income and hence, the disallowance to the extent of Rs. 10,65,472/- deserves to be deleted.
8. The learned Addl/Joint Commissioner of Income tax [Appeals] — 1, Chennai ought to have appreciated that the aforesaid disallowance of Rs. 20,15,145/- comprised of the reported administrative charges paid to PF authorities to the extent of Rs. 72,281/-, which was allowable in terms of section 37[1] of the Act and hence, the disallowance to the extent of Rs 72,281/- deserves to be deleted.
9. The learned Addl/Joint Commissioner of Income tax [Appeals] — 1, Chennai ought to have appreciated that the appellant had already declared income received on PF withdrawal of Rs. 15,84,732/- and tax of Rs. 1,58,473/- also been deducted on the same. The appellant had accordingly disclosed the same in his return and claimed the tax credits. Thus, the double addition of Rs.15,84,732/- made to the income of the appellant in the intimation u/s 143(1) is unwarranted and deserves to be deleted.
10. Without prejudice to the right to seek waiver with the Hon’ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s. 234B and 234C of the Act, as computed in the intimation u/s. 143[1] of the Act, which under the facts and in the circumstances of the appellant’s case deserves to be cancelled.
11. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.
12. At the outset, the ld. AR of the assessee Sri V. Narendra Sharma, Advocate drew our attention to the order of the ld. Addl/JCIT(A) dated 15/10/2025 and vehemently submitted that the ld. Addl/JCIT(A) dismissed the appeal of the assessee solely by not condoning the delay of 308 days in filing the appeal by stating that the assessee had not taken care to demonstrate the genuine reason.
3.1 Before us, the ld. AR of the assessee submitted that the intimation passed u/s 143(1) of the Act dated 3.2.2020 was served on the assessee through e-mail on 3.2.2020 and the appeal against the said intimation ought to have been filed on or before 5.3.2020. Further, it is submitted that soon after the receipt of the intimation u/s 143(1) of the Act, the assessee was advised to file a rectification petition u/s 154 of the Act and accordingly, the same was filed on 30.08.2020. The assessee again on 22.12.2020 received another intimation u/s 143(1) of the Act dated 03.02.2020 and thereafter the assessee immediately forwarded it to his counsel M/s. S. Venkatesan & Co., CA for further instructions in the matter. The assessee’s counsel after going through the above intimation u/s 143(1) of the Act advised the assessee to file an appeal immediately by seeking condonation of delay in filing the appeal since the period of 30 days had already expired. Thereafter, the appeal was filed immediately before the ld. Addl/JCIT(A). Hence, the ld. A.R. of the assessee contended that the delay was not intentional or deliberate and arose due to the aforementioned circumstances and accordingly prayed to condone the delay & admit the appeal for adjudication on merits.
3.2 The ld. D.R. on the other hand, vehemently submitted that the reason cited for condonation of delay is not at all a sufficient cause as rightly held by the ld. Addl/JCIT(A). Further, the ld. DR submitted that the delay of 308 days was only for the utter negligence on the part of the assessee & accordingly prayed that the delay before the ld. Addl/JCIT(A) may not be condoned.
4. We have heard the rival submissions and perused the materials available on record on condonation of delay. The contention of the AR of the assessee is that the assessee was engaged in the business of providing security services, which is an essential service during the Covid-19 pandemic as a result of which, he had to face a lot of pressure and challenges in securing manpower etc., for running his business. Further, it is submitted that soon after the receipt of the intimation u/s 143(1) of the Act, the assessee was advised to file a rectification petition u/s 154 of the Act and accordingly, the same was filed on 30.08.2020. The assessee again on 22.12.2020 received another intimation u/s 143(1) of the Act dated 03.02.2020 and thereafter the assessee immediately forwarded it to his counsel M/s. S. Venkatesan & Co., CA for further instructions in the matter. The assessee’s counsel after going through the above intimation u/s 143(1) of the Act advised the assessee to file an appeal immediately by seeking condonation of delay in filing the appeal since the period of 30 days had already expired. Thereafter, the appeal was filed immediately before the ld. Addl/JCIT(A). Therefore, in our opinion, considering the covid-19 pandemic lockdown through the country as well as explanation offered, the assessee has demonstrated the sufficient cause for filing the appeal belatedly by 308 days before the ld. Addl/JCIT(A).
4.1 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.
4.2 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 non deliberate 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.
4.3 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”.
4.4 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, 308 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 308 days for the AY 2018-19 has to be condoned and accordingly we condone the delay in filing the appeal before the ld. Addl/JCIT(A) and admit the appeal for adjudication for the year under consideration.
5. Now having condoned the delay, we are of the considered opinion that as the ld. Addl/JCIT(A) did not consider on merits of the case at all & dismissed as barred by limitation, we deem it fit & proper to remit the entire issue in dispute to the file of ld. Addl/JCIT(A) to decide a fresh on the merits of the case in accordance with law. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. It is ordered accordingly.
6. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 7th Sept, 2026
