Case Law Details
Mallelil Industries Pvt. Ltd. Vs PCIT (Kerala High Court)
Core Issue. Whether a delay of 676 days in filing an appeal before the ITAT could be condoned when the assessee attributed the delay to lapses on the part of its former auditors and a bona fide belief that the appeal had been filed.
Facts. The assessee received the order of the Commissioner (Appeals) on 24.08.2022 but the appeal before the ITAT was filed with a delay of 676 days. In the condonation application, the assessee explained that it was relying upon its tax auditors and professional advisors and bona fide believed that the appeal had been filed. Subsequently, it came to know that no appeal had been filed. The assessee further stated that its earlier auditors had withdrawn from the assignment, necessitating engagement of a new audit firm. Specific details regarding the earlier and new audit firms were provided in the affidavit supporting the condonation petition.
The ITAT refused to condone the delay, holding that the explanation lacked corroborative evidence and was not bona fide.
High Court Findings. The High Court observed that although the assessee had not produced documentary evidence to substantiate the explanation, the averments were not vague or general. The affidavit contained specific particulars regarding the previous auditors, their withdrawal, the appointment of a new audit firm and the circumstances leading to the delay.
The Court held that the Tribunal was justified in noting the absence of corroborative evidence, but it was not justified in concluding that the explanation lacked bona fides. The specific facts narrated by the assessee sufficiently probabilised its case and indicated that the delay was not deliberate.
The Court also emphasized that the appeal before the ITAT was the assessee’s first statutory appeal before a judicial forum, warranting a liberal approach where a plausible and bona fide explanation existed.
Held
The delay of 676 days was condoned. The order of the ITAT refusing condonation was set aside and the Tribunal was directed to hear and decide the appeal on merits after affording opportunity to both sides.
Case Relied Upon
Guruswamy H. v. A. Krishnaiah Since Deceased by LRs 2025 (1) TMI 1524 (SC)-The Supreme Court cautioned courts against adopting a casual approach in condoning substantial delays and emphasized that sufficient cause must be properly established. However, each case must be decided on its own facts, and where the explanation is bona fide and reasonably probable, delay may be condoned in the interests of justice.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The appellant challenges the impugned order of the learned Income Tax Appellate Tribunal (ITAT), Cochin Bench, because it has refused to accede to their request for condonation of delay of 676 days, in filing ITA No. 787/COCH/2024; and has consequently dismissed the said appeal.
2. Smt. Rini Anna Kurian – appearing for the appellant, argued that the findings of the learned Tribunal – that the explanation of the delay is not correct or bona fide – are not tenable because her client has specifically averred the reasons for such in the affidavit in support of the application. She pointed out that her client was relying upon professional Auditing Firms, as also counsel; but had not been kept informed about the non-filing of appeal against the order of the Commissioner of Appeals, even though it was received as early as on 24.08.2022. She showed us, as has also been reproduced by the learned Tribunal in paragraph 4 of the impugned order, that the specific averments in the application are also to the effect that, as soon as the appellant came to be aware that the appeal had not been filed, it took necessary steps to do so, through a new tax consultant. She argued that these statements could not have been disbelieved because, it has also been further averred that the earlier tax auditors withdrew from the audit assignment, which also forced her client to engage a new firm of auditors for the financial year 2017-18.
3. Sri. Jose Joseph – learned standing counsel for the Department of Taxes, submitted that the averments of the appellant are so incredulous and it cannot be believed at all; and hence that the learned Tribunal cannot be blamed in having issued the impugned order. He prayed that this appeal be, therefore, dismissed.
4. We notice from the impugned order that the learned Tribunal has relied upon the judgment of the Hon’ble Supreme Court in Guruswamy H. v. A. Krishnaiah Since Deceased By Lrs. [2025 SCC OnLine SC 54].We are fully aware that, in the said judgment, the Hon’ble Court has cautioned all Courts, including High Courts, from dealing with applications for condonation of delay in a casual manner, particularly when it involves large amounts of time.
5. That said, when an application seeking delay is considered, the reasons stated in explanation will have to be scrutinized and insistently assessed.
6. The explanation offered by the appellant is that their earlier auditors had withdrawn from their assignment and that another Firm had to be engaged. The averments are not vague, but with specifics regarding the names of the Firms, as also the nature of the problem that they faced. Further, they have come out clean, saying that they received the order of the Commissioner on 24.08.2022 and that they bona fide believed that their earlier Auditors would have filed appeal against it; but subsequently, to be aware that it was not done.
7. Undoubtedly, the explanation above cannot be substantiated with documentary materials and the appellant relies solely upon their averments in corroboration.
8. The learned Tribunal cannot be found in error, in having not accepted the explanation for the reason that it has not been corroborated; but the finding that they are not bona fide does not fully appeal to us since, as said above, the appellant has provided specific details of their former and present Auditors, thus probabalising their case.
9. In such perspective, we are of the opinion that, even within the rigour of the declarations in Guruswamy H. (supra), this Court will be justified in finding in favour of the appellant, particularly since the statutory appeal they filed before the learned ITAT is one at the first instance before a judicial forum.
10. In such circumstances, we allow this appeal and set aside Annexure H order; and consequently, allow the plea for condonation of delay preferred by the appellant.
Resultantly, the learned ITAT will proceed to consider ITA No. 787/COCH/2024 on its merits, after affording necessary opportunity to both sides, as expeditiously as is possible.
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