The question whether courts have the power to condone delay in filing of appeals under section 260A of the Income-tax Act arose because of careless drafting. While all other provisions of the Act provide that the authority therein can condone a delay in filing an application/appeal, the draftsman forgot to add a similar provision in s. 260A. This bit of careless drafting lead to a spate of litigation.
The Full Bench of the Bombay High Court took the view in Velingkar Brothers 289 ITR 382 that the Court had inherent power to condone delay. However, the Supreme Court took a different view in Singh Enterprises 221 ELT 163 and Punjab Fibres 223 ELT 337 in the context of the pari-materia provisions of the Excise and Customs Act and held that the power of the Court to condone delay flows from the provisions of the relevant law and the inherent powers of Court to condone delay under the Limitation Act does not apply. Following this, the Bombay High Court in Arun Asher and Shruti Colorants held that the Full Bench judgement in Velingkar Brothers was not good law.
However, another Full Bench took a contrary view in CCE vs. Shree Rubber Plast and held that by virtue of s. 29(2) of the Limitation Act, where a statute is silent, the provisions of s. 5 of the Limitation Act applies and the Court has power to condone delay.
Meanwhile the Supreme Court itself doubted Punjab Fibres and referred the matter to a larger Bench. The dust settled when the Larger Bench ruled in CCE vs. Hongo India 236 ELT 417 that the courts had no jurisdiction to condone delay if the statute did not permit the same.
Hongo was swiftly followed in the context of section 260A by the Bombay High Court in Grasim 27 DTR 130 and by the Allahabad High Court in Mohd. Farooq and the Chattisgarh High Court in Mahavir Prasad 225 CTR 305 among others.
The result: Thousands of belated appeals of the department involving revenue of hundreds of crores were en masse dismissed as non-maintainable!
The Excise and Customs department moved with unusual alacrity and obtained an amendment to the Excise and Customs Act by the Finance Act, 2009 to provide for specific power in the court to condone delay. However, the Income-tax department continued to be in deep slumber. What was most surprising was that several income-tax amendments were made to the Finance Bill 2009 and yet everyone in the CBDT lost sight of section 260A. Is nobody accountable?
Better late than never, perhaps. Section 260A is now proposed to be amended by the Finance Bill 2010 w.r.e.f 1.10.1998 to provide the following:
“(2A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in clause (a) of sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.”
However, the larger issue that still remains to be addressed is the gross negligence by the department in filing appeals to the High Court. It is common experience that even in matters involving huge revenue implications, appeals are routinely filed after a gross delay. The delay is not just a few days or weeks but several months and even years! Several appeals are dismissed because the officer concerned cannot even think of reasons to justify the delay on his part. Imagine the loss to the public exchequer!
This sorry state of affairs frustrated the Court so much that it came down very heavily on the department in Ornate Traders vs. ITO 219 CTR 256. It called the department’s attitude of “I will deal with the matter at leisure and my convenience” as the “curse of Lord Curzon” and asked rhetorically “How long the Courts will condone defaults as a matter of course in Government departmental cases“? The Court noted irately that the applications for condonation of delay were “practically carbon copies of each other and in most of them, the blanks were left which had been filled in subsequently“.
It observed that the officer could hardly justify that a file would lie on his table for months together and he would not act on the said file just because he claims to be pre-occupied.
It held that some of the cases before it particularly where the delay was more than a year, ex facie reflected “negligence and callous attitude of shifting responsibilities“.
It noted that there was huge loss to the exchequer and that the “negligence and irresponsibility” of the department could not be protected.
It held that there was “utter negligent and irresponsible attitude on the part of the officers“. Ultimately, the Court issued directions that the authority, “highest in the hierarchy of the Department” should issue a Circular and “introduce the concept of public accountability and responsibility” and “provide for a mechanism which will fix responsibility and consequences thereof in relation to the officer/official dealing with the approval, preparation and filing of Income Tax Appeals“.
The result of these severe strictures passed by the Court: Not known!! At least there is no visible improvement at the ground level!!
Anyway, two immediate problems need to be resolved now after the amendment comes into effect:
The first is that thousands of appeals of the department have been dismissed across the Country on the basis of Hongo / Grasim. The revenue stake in these appeals must be colossal. The appeals are now eligible to be restored and decided on merits.
But will the department take steps to restore these appeals? Within what time frame? Who will monitor this? Who will be accountable and be responsible?
Secondly, how to ensure that the negligence of the department’s officers in filing appeals does not continue? The High Court gave a cue when it directed the CBDT to “introduce the concept of public accountability and responsibility”.
Nothing succeeds like self-interest and so the best way is to make the concerned officer personally liable to pay “costs” where he is unable to satisfactorily explain the delay. The costs should be “deducted at source” from his salary. Harsh, perhaps, but there is no other way to cure this malady!