2022 (5) TMI 1666 - AT - Income Tax

ITAT condones 689-day delay in appeal filing, cites COVID-19 exclusion period and lack of proper hearing opportunity

M/s. Effluent & Water Treatment Engineers Pvt. Ltd. Versus Deputy Commissioner of Income-tax, Circle-11 (1), Kolkata

The ITAT Kolkata condoned a 689-day delay in filing an appeal, accepting the assessee's explanation that they were unaware of the CIT(A) proceedings until ... Condonation of delay - appeal of assessee is time barred by 689 days - as contended by the assessee that the delay in submission of the appeal occurred due to the fact that the assessee was totally in dark about the fate of the appeal pending before the CIT(A) which to assesse’s knowledge only upon receipt of the penalty notice u/s. 271(1)(c) issued by the NFAC - HELD THAT:- As the assessee immediately took steps to submit the appeal before the ITAT which was done on 02.02.2022. Also vide order [2022 (1) TMI 385 - SC ORDER by the Hon’ble Supreme Court, the period from 15.03.2020 to 28.02.2022 is to be excluded for the purpose of computing the limitation period during the COVID-19 Pandemic. Considering the facts and the explanation of the assessee, we condone the delay in filing the appeal and admit it for adjudication. Ex parte order passed by CIT(A) without affording reasonable time to the assessee to comply with the hearing notice issued - HELD THAT:- Keeping in mind the provision of sections 250 and 251 of the Act and the decision of Tin Box Ltd. [2001 (2) TMI 13 - SUPREME COURT] is incumbent upon the Ld. CIT(A) to pass a speaking order on the merits of the case by examining, verifying and analyzing the material on record. Since there are no meritorious finding given by the Ld. CIT(A) on the submissions made by the assessee and also considering the grounds raised by the assessee where the Ld. CIT(A) has passed an ex parte order without giving opportunity of being heard, we find it fit to remit the matter back to the file of the Ld. CIT(A) for his objective and meritorious observations and findings on the submissions made by the assessee. Appeal of assessee is allowed for statistical purpose. ISSUES PRESENTED AND CONSIDERED 1. Whether the Tribunal should condone a delay of 690 days in filing the appeal and admit the same for adjudication, having regard to the statutory provision enabling extension for 'sufficient cause' and the pandemic-related exclusion of limitation period. 2. Whether the order of the first appellate authority disposing of the appeal ex parte without affording a reasonable opportunity of hearing and without recording meritorious findings or a speaking order is sustainable, in light of the procedural mandates in sections 250 and 251 of the Income-tax Act and established judicial principles requiring opportunity and remand where hearing was denied. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay in filing appeal Legal framework: Sub-section (5) of section 253 of the Act (empowering the Tribunal to admit appeals after expiry of the prescribed period if satisfied of 'sufficient cause') read with the analogous liberal construction principle applied under section 5 of the Limitation Act; relevant consideration of pandemic-related exclusion of limitation period for computing time limits. Precedent treatment: The Tribunal applied the established Supreme Court approach (collectively referring to authorities recognizing that 'sufficient cause' is to be construed liberally to advance substantial justice and that delay explanations are to be considered in a pragmatic, non-pedantic manner). Authorities emphasizing that refusal to condone delay can defeat substantial justice and that 'every day's delay must be explained' is not to be applied pedantically were followed. The pandemic-related exclusion of the period was accepted as relevant to computation. Interpretation and reasoning: The Tribunal examined the assessee's explanation that the appellant was unaware of the appellate outcome until prompted by a subsequent notice and that, upon such knowledge, steps to file were taken immediately. The Tribunal also relied on the Supreme Court direction excluding the period 15.03.2020 to 28.02.2022 from limitation computation for the COVID-19 pandemic. Balancing the public policy underlying limitation (preventing dilatory litigation) and the need to avoid defeating meritorious causes, the Tribunal concluded that the explanation, considered with the pandemic exclusion and absence of mala fide or dilatory intention, constituted sufficient cause. Ratio vs. Obiter: Ratio - the Tribunal's application of the liberal construction of 'sufficient cause' to admit the delayed appeal where delay arose from genuine ignorance of appellate outcome and where pandemic exclusion reduced the effective delay. Obiter - general observations reiterating propositions from cited authorities about the purpose of limitation law beyond application to the facts. Conclusions: Delay of 690 days in filing the appeal was condoned; the appeal admitted for adjudication. The Tribunal explicitly weighed the explanation, pandemic-related exclusion, and absence of mala fides and found sufficient cause to relax the time limit. Issue 2 - Validity of ex parte disposal by the first appellate authority without reasonable opportunity and requirement to remit Legal framework: Sections 250 and 251 of the Income-tax Act governing procedure and powers of the Commissioner (Appeals) - duty to fix hearing dates, give notice, permit parties to be heard, make further inquiries before disposing of appeals, and to pass a written order stating points for determination, decisions and reasons; prohibition on enhancing assessment or penalty without reasonable opportunity. Precedent treatment: The Tribunal relied on the Supreme Court precedent holding that where the assessing authority (or the first appellate authority) has not given a proper opportunity of being heard, the appropriate remedy is to set aside the impugned order and remit for fresh consideration after giving the appellant an opportunity to place evidence; the precedent was applied and followed to require remand rather than adjudicating on merits. Interpretation and reasoning: The Tribunal examined the notice history (three notices fixing hearing dates sent by speed post and e-mail) and the first appellate authority's dismissal ex parte on the ground of non-receipt of responses. The Tribunal found that the first appellate authority did not take effective cognizance of the submissions made by the appellant and failed to produce meritorious findings or a speaking order examining and analyzing the material on record as required by section 250(6) and the powers under section 251. Given the statutory mandate to afford opportunity and to pass reasoned orders, and in line with controlling judicial authority, the Tribunal concluded that the ex parte disposal without proper opportunity could not be countenanced and the matter must be remitted for fresh adjudication after hearing. Ratio vs. Obiter: Ratio - where the first appellate authority dismisses an appeal ex parte without providing a reasonable opportunity to be heard and without a speaking order addressing the appellant's submissions, the correct course is to set aside that order and remit the matter to the first appellate authority for fresh adjudication after affording opportunity and producing a reasoned order. Obiter - commentary that remand will not prejudice either side and that the Tribunal refrains from expressing views on merits pending fresh adjudication. Conclusions: The impugned ex parte order of the first appellate authority was set aside; the matter remitted to the first appellate authority to decide afresh after affording reasonable opportunity of hearing and after examining, verifying and analyzing the material on record. The appellant was directed to cooperate and to be diligent in appellate proceedings; the Tribunal did not decide the merits and expressed no view on substantive issues. Cross-reference and procedural consequence Cross-reference: The decision on condonation (Issue 1) enabled admission of the appeal; the decision on ex parte disposal (Issue 2) required remand to the first appellate authority. The Tribunal's remand order is predicated on statutory procedural safeguards in sections 250 and 251 and the established supervisory principle that denial of hearing requires fresh consideration rather than foreclosing adjudication on technical grounds.