2025 (5) TMI 2032 - AT - Income Tax

Delays in Tax Appeals Pardoned: Medical Emergencies Validate Late Filing, Restoring Substantive Rights Under Income Tax Provisions

Smt. Ponnam Bhavani Versus Income Tax Officer (International Taxation), Vijayawada

The SC/Tribunal condoned delays in tax appeals (404 and 402 days) based on the appellant's husband's medical conditions. The court found sufficient cause ... CIT (A) has dismissed the appeals of the assessee as barred by limitation and declined to condone the delay - Default u/s 201(1) and 201(1A) for failure to deduct Tax at Source (TDS) on purchase consideration paid for immovable property - there was a delay of 404 days in filing the appeal for the A.Y 2012-13 and 402 days in filing the appeal for the A.Y 2014-15 HELD THAT:- As submitted that the assessee is a house-wife and uneducated, solely dependent on her husband who used to handle the tax matter. However, the husband of the assessee aged 72 years and was suffering from chronic diabetes. The serious diabetes condition also lead to the heart-disease and consequently undergone the procedure of insertion of stent in one of the complete blocked artery in the year 2016. Due to the ill health of the husband, the assessee was helpless and was busy to take care of her ailing husband and therefore, the appeal could not be filed before the learned CIT (A) within the period of limitation. After the prolonged medical treatment, the health condition of the husband improved from the month of January, 2020 onwards. Thus, assessee had a sufficient cause for the delay in filing the appeal before the learned CIT (A). The assessee has now stated that the seller of the property has offered the capital gain to tax and therefore, in view of the 1st proviso to section 201 (1) of the I.T. Act, 1961, the assessee may not be held as assessee in default. Accordingly, reasons explained by the assessee, we are satisfied that the assessee was having a sufficient cause for not filing the appeals before the learned CIT (A) within the period of limitation hence, the delay of 404/403 days in filing the appeal before the learned CIT (A) is condoned. Appeals of the assessee are allowed for statistical purposes. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in these appeals are:(a) Whether the learned CIT (A) was justified in refusing to condone the delay of 404 days and 402 days respectively in filing the appeals against orders passed under sections 201(1) and 201(1A) of the Income Tax Act, 1961 for assessment years 2012-13 and 2014-15;(b) Whether the Assessing Officer was justified in charging tax and interest under sections 201(1) and 201(1A) of the Income Tax Act, 1961 for failure to deduct Tax at Source (TDS) on purchase consideration paid for immovable property;(c) Whether the assessee can be held as an assessee in default under section 201(1) given that the seller of the property has offered the capital gain to tax, invoking the first proviso to section 201(1) of the Act;(d) Whether the appeals dismissed by the learned CIT (A) in limine on the ground of limitation should be restored for adjudication on merits.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Justification for refusal to condone delay in filing appealsRelevant legal framework and precedents: The limitation for filing appeals before the CIT (A) is prescribed under the Income Tax Act, and condonation of delay is governed by principles established in judicial precedents requiring demonstration of 'sufficient cause' for delay. Courts have consistently held that personal hardships and health-related reasons of the appellant or close family members may constitute sufficient cause if adequately explained.Court's interpretation and reasoning: The learned CIT (A) recorded the assessee's explanation that she was a housewife dependent on her husband who managed tax matters. The husband, aged 72, suffered from chronic diabetes and heart disease, including a stent insertion procedure, which incapacitated the family's ability to file the appeal timely. The CIT (A) was not satisfied with the explanation and declined to condone the delay.Key evidence and findings: The assessee subsequently filed an affidavit before the Tribunal elaborating the husband's serious health conditions and the consequent inability to file appeals within limitation. The Revenue did not oppose the condonation of delay, acknowledging the genuineness of the health-related reasons.Application of law to facts: The Tribunal found the reasons factually undisputed and sufficient to constitute 'sufficient cause' for delay. Although the explanation before the CIT (A) was brief, the affidavit provided detailed medical and personal circumstances justifying the delay.Treatment of competing arguments: The Revenue raised no substantial objection to condonation in view of the medical conditions. The CIT (A)'s initial dissatisfaction was outweighed by the detailed affidavit and lack of dispute on facts.Conclusions: The Tribunal held that the delay of 404 and 402 days in filing the appeals was justified and condoned the delay accordingly.Issue 2: Justification for charging tax and interest under sections 201(1) and 201(1A)Relevant legal framework and precedents: Section 201(1) of the Income Tax Act treats a person who fails to deduct tax at source as an 'assessee in default' and liable to pay the tax amount not deducted. Section 201(1A) imposes interest on such defaults. However, the first proviso to section 201(1) provides that if the person from whom tax is deductible has offered the income to tax and paid the tax, the deductor shall not be deemed an assessee in default.Court's interpretation and reasoning: The assessee contended that the seller of the immovable property had offered the capital gain arising from the sale to tax and paid the tax. Therefore, under the first proviso to section 201(1), the assessee could not be held as an assessee in default for failure to deduct TDS on the purchase consideration.Key evidence and findings: The orders under sections 201(1) and 201(1A) were passed solely on the basis that the assessee failed to deduct TDS on the purchase consideration. The Tribunal noted that the seller's declaration of income and payment of tax on capital gains was not disputed.Application of law to facts: The Tribunal applied the first proviso to section 201(1) and found that since the seller had offered the income to tax, the assessee could not be treated as an assessee in default, negating the basis for tax and interest charges under sections 201(1) and 201(1A).Treatment of competing arguments: The Revenue did not present detailed counter-arguments on this point during the hearing before the Tribunal.Conclusions: The Tribunal concluded that the Assessing Officer was not justified in charging tax and interest under sections 201(1) and 201(1A) against the assessee in these circumstances.Issue 3: Whether appeals dismissed in limine on limitation grounds should be restored for merits adjudicationRelevant legal framework and precedents: Appeals dismissed solely on limitation grounds without adjudication on merits may be restored if delay is condoned, allowing substantive issues to be decided after appropriate hearing.Court's interpretation and reasoning: Since the CIT (A) dismissed the appeals in limine due to delay, and the Tribunal condoned the delay, it set aside the orders and remanded the matters to the CIT (A) for adjudication on merits.Key evidence and findings: No merits findings were recorded by the CIT (A) as appeals were dismissed without hearing.Application of law to facts: The Tribunal found it appropriate to restore the appeals to enable merits adjudication after affording the assessee a proper opportunity of hearing.Treatment of competing arguments: No objection was raised by the Revenue to restoration for merits.Conclusions: Appeals were restored for merits adjudication by the CIT (A).3. SIGNIFICANT HOLDINGS'Though the learned CIT (A) was not satisfied with the reasons explained by the assessee however, the reasons explained by the assessee are factually not in dispute... Accordingly, in the facts and circumstances and the reasons explained by the assessee, we are satisfied that the assessee was having a sufficient cause for not filing the appeals before the learned CIT (A) within the period of limitation hence, the delay of 404/403 days in filing the appeal before the learned CIT (A) is condoned.''The Assessing Officer has passed the order u/s 201(1) and 201(1A) of the I.T. Act, 1961 in respect of the sale consideration paid by the assessee for purchase of the immovable property without deducting the TDS. The assessee has now stated that the seller of the property has offered the capital gain to tax and therefore, in view of the 1st proviso to section 201 (1) of the I.T. Act, 1961, the assessee may not be held as assessee in default.''Since the appeals of the assessee were dismissed by the learned CIT (A) in limine and no finding has been given on merits therefore, the matters are set aside to the record of the learned CIT (A) for both the A.Ys i.e 2012-13 and 2014-15 respectively for adjudication of the same on merits after giving an appropriate opportunity of hearing to the assessee.'Core principles established include that personal hardship and medical conditions affecting the appellant's family may constitute sufficient cause for condonation of delay in filing appeals, and that the first proviso to section 201(1) protects a deductor from being treated as an assessee in default if the deductee has offered the income to tax. Further, dismissal of appeals on limitation grounds without merits adjudication can be set aside upon condonation of delay to allow substantive hearing.Final determinations:- Delay in filing appeals was condoned.- Appeals dismissed in limine were restored for merits adjudication.- The Assessing Officer's levy of tax and interest under sections 201(1) and 201(1A) was not justified in view of the seller having offered the income to tax.