2023 (3) TMI 605 - AT - Income Tax

Tribunal Upholds Income Tax Assessment, Dismisses Appeal as Time-Barred

The Tribunal upheld the ex-parte assessment u/s 144 of the Income Tax Act, adding a significant amount to the assessee's income. The ld. CIT(Appeals) ... Condonation of delay - sufficient cause for not presenting appeal within that period - assessee is counting the period of limitation from this date, whereas the assessee is required to explain the delay from the date of its passing - HELD THAT:- Whenever any explanation of the assessee falls for consideration about the delay in filing the appeal, then such explanation is to be appreciated with a justice oriented mind. However, we find that it is a shell company, which is trying to play with the Income Tax Authorities and the position of law. It has been filing the appeal only for the sake of filing otherwise not contesting the litigation and not justifying anything. After perusing the whole record, which has been brought to us, we are of the view that it is not a case where delay even if of any number of days deserves to be condoned. Therefore, we reject this application of the assessee and dismiss the appeal being time-barred. ISSUES PRESENTED AND CONSIDERED 1. Whether the appeal before the Tribunal is barred by limitation and thus liable to be dismissed. 2. Whether the Tribunal should exercise its power under the statutory analogue of Section 253(5) to admit the appeal after the expiry of the limitation period by condoning the delay on the ground of 'sufficient cause'. 3. Whether allegations that the assessee is a 'shell company' and that the appeal/filings were pro forma may be a relevant consideration in deciding whether to condone delay. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Whether the appeal is time-barred Legal framework: The Tribunal's power to admit an appeal after the prescribed period is governed by the provision empowering it to permit filing after expiry of the relevant period if satisfied that there was 'sufficient cause' for delay (statutory provision analogous to Section 253(5) in context). Time-limit rules for appeals are part of limitation jurisprudence and operate to bar belated appeals unless the court/tribunal is satisfied to the contrary. Precedent Treatment: The Court relied upon established principles from higher courts emphasizing both the public-policy foundations of limitation rules and the need to construe 'sufficient cause' liberally to advance substantial justice (principles from Collector, Land Acquisition v. Katiji; N. Balakrishnan v. M. Krishnamurthy; and other authorities on Section 5 Limitation Act jurisprudence). Interpretation and reasoning: The Tribunal acknowledged the settled rule that 'sufficient cause' must be construed liberally and that courts should prefer substantial justice over hyper-technical disallowance of appeals. The Tribunal reviewed the record and the affidavit filed in explanation of delay, but observed that the appellant had not been properly before the adjudicating fora: multiple non-service remarks ('Addressee moved'), abandonment by the previously appearing authorised representative, and complete non-participation in the assessment and first-appeal proceedings. The Tribunal concluded that the case facts did not warrant the exercise of discretion in favour of condonation because the conduct suggested strategic or dilatory behaviour rather than an excusable oversight. Ratio vs. Obiter: Ratio - the Tribunal's conclusion that the appeal was time-barred because the appellant failed to provide a credible, non-dilatory explanation for delay and that the circumstances did not constitute a 'sufficient cause' for condonation under the statutory provision. Obiter - general restatement of the liberal approach to 'sufficient cause' drawn from precedents, insofar as it does not alter or distinguish the binding principles but reiterates them. Conclusions: The appeal is dismissed as hopelessly time-barred because the explanation for delay was inadequate and the Tribunal was not satisfied that 'sufficient cause' existed to admit the appeal out of time. Issue 2 - Whether the Tribunal should condone delay under the 'sufficient cause' concept Legal framework: The statutory phrase 'satisfied that there was a sufficient cause' permits the Tribunal to condone delay where a satisfactory explanation is placed on record. Judicial authorities require that the explanation for each day's delay be furnished, but courts have repeatedly held that the requirement is not to be applied pedantically and that the test is pragmatic and justice-oriented. Precedent Treatment: The Tribunal explicitly applied the doctrine from the apex-court authorities cited (including principles that delay should be explained, that 'sufficient cause' is to be liberally construed, and that courts must guard against deliberate or mala fide delay). It relied on authorities emphasizing that mere inadvertence or negligence may be excusable, but deliberate delay or dilatory tactics justify refusal to condone. Interpretation and reasoning: The Tribunal balanced the liberal approach mandated by precedent against the evidential record of conduct. It found multiple indicia against granting condonation: the assessee's lack of response to notices, returned service with 'Addressee moved', the prior counsel's drop-out after adjournments despite POA on record, the conduct during assessment (non-submission of explanations to the assessing officer), and that the first appellate order was also passed ex parte. The Tribunal treated these facts as constituting an abuse of process or an attempt to 'play' with the revenue and the legal process. Given this conduct, the Tribunal held that even a generous construction of 'sufficient cause' did not extend to condoning the delay in that case. Ratio vs. Obiter: Ratio - where a litigant's conduct demonstrates deliberate non-participation, repeated non-service, and apparent use of proceedings for form rather than contest, the Tribunal may properly exercise its discretion to refuse condonation despite the general liberal approach to 'sufficient cause'. Obiter - observations summarising the general principles of limitation law and the salutary guidance that costs or compensation should be considered when condoning delay (not expressly applied as an operative order here). Conclusions: The Tribunal refused to condone the delay under the 'sufficient cause' test and dismissed the appeal as time-barred. Issue 3 - Relevance of characterization of the assessee as a 'shell company' and procedural non-participation Legal framework: While limitation rules and condonation tests are ordinarily neutral as to the identity or status of the litigant, a tribunal may take into account the conduct of the party, including whether non-participation amounts to abuse of process, mala fides, or dilatory tactics when exercising discretion to condone delay. Precedent Treatment: The Tribunal relied on precedent emphasizing that courts must be alert to deliberate delay used as tactical device and that reasons failing to show bona fides may be rejected; however, no precedents were overruled or distinguished that would compel condonation despite such conduct. Interpretation and reasoning: The Tribunal found the 'shell company' characterization relevant to the exercise of discretion because the assessee had neither cooperated in the assessment proceedings nor in the first appeal, and had not been traceable at the recorded address, which collectively indicated a pattern of non-cooperation rather than excusable neglect. The Tribunal treated the affidavit explanation as insufficient to dispel the adverse inference arising from that conduct. Ratio vs. Obiter: Ratio - factual finding that where a litigant's pattern of non-cooperation and apparent use of appeals as a mere formality is established, the Tribunal may justifiably refuse to condone delay. Obiter - general commentary on the need to prefer substantial justice over formality, subject to the caveat that condonation will not be granted to perpetuate abuse of process. Conclusions: The characterization and evidential record of non-participation were material and justified refusal to condone the delay; hence the appeal was dismissed. Cross-References and Practical Outcomes 1. The Tribunal applied established authorities favouring a liberal construction of 'sufficient cause' but clarified that liberal construction does not compel condonation where the facts demonstrate deliberate non-participation or abuse of process. 2. The decision establishes that evidence of repeated non-service, abandonment by authorised representatives after adjournments, non-cooperation at assessment, and ex parte orders at successive stages together constitute strong grounds for denying condonation of delay. 3. Operational ratio - condonation is discretionary and fact-sensitive; absence of credible, bona fide explanation and conduct suggesting tactical delay or a 'shell' litigant can be independently decisive against condonation.