MD’s absence & holidays: ITAT Cochin Orders CIT(A) to Condone Delay

Kerala State Drugs and Pharmaceuticals Ltd Vs ACIT (ITAT Cochin)

The case centers on an appeal by Kerala State Drugs and Pharmaceuticals Ltd., a Kerala government undertaking, against an order by the National Faceless Appeal Centre (NFAC). The dispute originated from an assessment year 2012-13 income tax filing. Initially, the Assessing Officer (AO) accepted the company’s declared nil income. Subsequently, the AO issued a notice under section 148 of the Income Tax Act, alleging that the company failed to disclose income under section 115JB, pertaining to Minimum Alternate Tax (MAT). This led to a reassessment, resulting in a book profit assessment of Rs. 98,40,521. The company then filed an appeal with the Commissioner of Income Tax (Appeals) [CIT(A)], which was delayed by four days. The CIT(A) rejected the appeal, refusing to condone the delay, stating insufficient cause was presented.

The primary issue before the Income Tax Appellate Tribunal (ITAT) Cochin was whether the CIT(A) erred in not condoning the four-day delay. The company attributed the delay to the pre-occupation of its authorized representative with time-barred assessments, the Managing Director’s absence, and intervening Christmas holidays. The ITAT examined the company’s petition for condonation of delay and found no reason to disbelieve the stated causes. The tribunal concluded that the CIT(A) should have condoned the delay and adjudicated the appeal on its merits. Consequently, the ITAT remanded the matter back to the CIT(A), directing the condonation of the four-day delay and a subsequent hearing on the appeal’s substantive issues, ensuring the company has an opportunity to present its case. The ITAT emphasized procedural fairness, ordering the CIT(A) to allow the appeal to be heard on its merit, after condoning the delay. This decision highlights the importance of considering genuine reasons for procedural delays in tax appeals.

FULL TEXT OF THE ORDER OF ITAT Cochin

This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 27.08.2024 for Assessment Year (AY) 2012-13.

2. Brief facts of the case are that the appellant is a company incorporated under the provisions of the Companies Act. It is an undertaking of the Government of Kerala, engaged in the business of drugs and pharmaceuticals. The return of income for AY 2012-13 was filed on 09.2012 declaring nil income. Against the said return of income, the assessment was completed by the ACIT, Alappuzha (hereinafter called “the AO”) vide order dated 29.12.2014 passed u/s. 143(3) of the Income Tax Act, 1961 (the Act) accepting the returned income. Subsequently the AO formed an opinion that income escaped assessment to tax, as the appellant had failed to disclose income of Rs. 18,75,111/- u/s. 115JB of the Act. Accordingly, a notice u/s. 148 of the Act was issued on 29.03.2019 after obtaining necessary approvals from the Chief Commissioner of Income Tax (CCIT). In response to the notice u/s. 148 of the Act the appellant filed return of income declaring Nil income. Against the said return of income, the assessment was completed by the AO u/s. 115JB of the Act at a book profit of Rs. 98,40,521/-.

3. Being aggrieved, an appeal was filed before the CIT(A) with a delay of 4 days. The CIT(A) refused to condone the delay of 4 days by holding that it is an inordinate delay and the appellant had failed to make out sufficient cause for the delay.

4. Being aggrieved, the appellant is in appeal before us in the present appeal.

5. We have heard the rival contentions of both the parties and perused the material available on record. The solitary issue that arises in the present appeal is whether the CIT(A) was justified in refusing to condone the delay of 4 days in filing the appeal. The appellant filed a petition seeking condonation of delay stating that the delay has occurred as the authorised representative of the appellant company was pre-occupied in time barring assessments and when the appeal was prepared and ready for filing, the Managing Director of the appellant company was out of station and it is further submitted that just before the day of filing the appeal it was preceded by public holidays on account of Christmas. Thus it was submitted before the CIT(A) that the delay in filing the appeal occurred on account of reasons which are beyond the control of the assessee.

6. In our considered opinion, there is nothing on record to disbelieve the averments made in the petition seeking condonation of delay. The CIT(A) ought to have condoned the delay and admitted the appeal for adjudication on merits. Therefore, we remand the matter back to the file of the CIT(A) with a direction of condone the delay of 4 days and decide the issues in the appeal on merits after affording opportunity of being heard to the appellant.

7. In the result, the appeal stands partly

Order pronounced in the open court on 19^th February, 2025.