Sufficient reasons for delay in Appeal filing: Kerala HC condones delay

Thirunalloor Service Co-Operative Bank Ltd. Vs ITO (Kerala High Court)

In the case of Thirunalloor Service Co-Operative Bank Ltd. vs. Income Tax Officer (ITO), the Kerala High Court addressed the issue of condonation of delay in filing an appeal under the Income Tax Act, 1961. Here’s a detailed summary of the case and its implications:

Case Background

Thirunalloor Service Co-Operative Bank Ltd. (referred to as the petitioner) filed an appeal (Ext.P3) against an assessment order (Ext.P1) issued by the Income Tax Officer (ITO) under Section 143(3) of the Income Tax Act. Along with the appeal, the petitioner also submitted an application (Ext.P4) seeking condonation of a delay of 18 days in filing the appeal.

Proceedings in the High Court

1. Order of the Second Respondent (ITO): The ITO, acting as the second respondent, dismissed the application (Ext.P4) for condonation of delay. The grounds for dismissal were that the petitioner had failed to demonstrate sufficient cause for the delay. The ITO held that the delay was inexcusable as proper explanation and reasons were not provided, nor was there sufficient evidence supporting the delay.
2. Petitioner’s Arguments: In response, the petitioner argued that the delay occurred because they needed time to gather necessary information and consult with their legal counsel. They contended that the delay was beyond their control, not willful, and that they had a strong case to succeed in the appeal.
3. High Court’s Analysis: Upon reviewing the case, the High Court found that the reasons provided by the petitioner in Ext.P4 were sufficient to justify the delay. The court noted that the petitioner had to gather detailed financial information and seek clarifications before proceeding with the appeal, which reasonably caused the delay.
4. Judgment: The High Court concluded that the ITO had taken a technical view by dismissing the appeal solely on the grounds of delay. The court set aside the ITO’s order (Ext.P5) and directed the ITO to consider the appeal (Ext.P3) on its merits. The court emphasized that dismissing the appeal based solely on procedural grounds was inappropriate, especially when the delay was adequately explained and not attributable to willful negligence.
5. Directions: The High Court directed the ITO to expedite the consideration of the appeal within three months from the date of the court’s judgment. Until a decision was made on the appeal, the court instructed that no recovery steps should be taken against the petitioner based on the original assessment order (Ext.P1).

Legal Principles Invoked

• Sufficient Cause: Under the Income Tax Act and general principles of law, condonation of delay requires the petitioner to show sufficient cause for the delay. This involves providing a reasonable explanation for the delay that is beyond the petitioner’s control and is not due to willful negligence.
• Judicial Discretion: Courts have the discretion to condone delay if they are satisfied with the reasons provided by the petitioner. The focus is on substantial justice rather than strict procedural adherence.
• Technical Approach: The High Court criticized the ITO for adopting a technical approach in dismissing the appeal solely due to delay. It emphasized that procedural rules should not override the fundamental right of the petitioner to have their appeal considered on its merits.

Conclusion

The case of Thirunalloor Service Co-Operative Bank Ltd. vs. ITO illustrates the balance courts must strike between procedural rules and substantive justice. The High Court’s decision to set aside the ITO’s order and instruct a re-evaluation of the appeal highlights the importance of considering the circumstances leading to the delay and the potential merits of the appeal itself.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT 

The petitioner Society is an assessee under the Income Tax Act, 1961 (for short, ‘the Act’). Against Ext.P1 order of assessment passed by the 1st respondent under Section 143(3) of the Act, the petitioner preferred Ext.P3 appeal before the 2nd respondent along with Ext.P4 application for condonation of delay. The 2^nd respondent, by Ext.P5 order, dismissed Ext.P4 application for condonation of delay on the ground that the petitioner has not shown sufficient cause for condoning the delay. Paragraph 5.7 of Ext.P5 order reads as follows:-

“5.7 In view of the foregoing discussion, factual matrix and the judicial precedents, I find that no case has been made out by the assessee for existence of sufficient cause in the application for condonation of substantial period of delay of 18 days in filing the appeal. I also find that it is also a settled position of law that the delay is unexcusable unless sufficient cause is shown. I further find that proper explanation and reasons for delay have not been given. Therefore, I am of the view that in the absence of existence of reasonable cause and also in the absence of proper explanation and reasons, without being supported by proper evidence, the appeal filed by the assessee late by 18 days, the delay is not condonable. Hence, the appeal of the assessee I not admitted and the same is dismissed in limine.”

2. P4 is the petition to condone the delay in filing Ext.P3 appeal, wherein it is stated as follows:-

“On receipt of the impugned order the Appellant was making enquires to get details of full-fledged interest statement from the government auditor and clarifications regarding the interest earned from other co-operative banks mentioned in the said order. On receipt of the same, the Appellant contacted the counsel briefed him about the facts and instructed him to file the appeal. This has resulted in a delay 14 days in filing the appeal.

It is respectfully submitted that the delay was occasioned due to reasons beyond the control of the Appellant. The conduct of the Appellant is neither wilful nor contumacious. The Appellant has a good case to succeed in the appeal. In these circumstances it is respectfully prayed that the assessing authority may be pleased to condone the delay of 14 days in filing the appeal.”

On going through the reason stated in Ext.P4, I find that the petitioner has stated sufficient reason in the application for condonation of delay.

3. The 2^nd respondent has taken technical view in dismissing the application to condone the delay and in consequently dismissing the appeal. The 2nd respondent went wrong in dismissing the appeal at the threshold on technical grounds. Accordingly, I set aside Ext.P5 order and direct the 2^nd respondent to consider Ext.P3 appeal on merits, as expeditiously as possible, at any rate, within a period of three months from the date of receipt of a copy of this judgment. Till orders are passed on Ext.P3 appeal, there shall not be any recovery steps against the petitioner pursuant to Ext.P1.

The writ petition is disposed of with the above direction.