2025 (7) TMI 675 - AT - Income Tax

CA's negligence and FIR deadlock leads to condonation of 2066-day delay with Rs. 2500 cost imposed

Shree Rajendra Suri Sah Sakh Santha Myd Versus Income Tax Officer, Dhar

Shree Rajendra Suri Sah Sakh Santha Myd Versus Income Tax Officer, Dhar - TMI Issues Presented and ConsideredThe core legal questions considered by the Tribunal in this appeal include:1. Whether the delay of 2066 days in filing the first appeal under Section 246A of the Income Tax Act, 1961, was justified and whether the delay ought to be condoned by the CIT(A).2. Whether the impugned order passed by the CIT(A) dismissing the first appeal in limine for non-condonation of delay was legally valid and in accordance with the principles of natural justice.3. Whether the CIT(A) was obliged to dispose of the appeal on merits rather than dismissing it summarily due to delay/non-prosecution.4. Whether the assessee's grounds of appeal challenging various additions and disallowances made by the Assessing Officer under different sections of the Income Tax Act were rightly dismissed without adjudication on merits due to dismissal of the appeal on delay grounds.5. Whether the Tribunal should impose costs on the assessee for the delay and procedural lapses.Issue-wise Detailed AnalysisIssue 1 & 2: Justification and Condonation of Delay in Filing First AppealLegal Framework and Precedents: The relevant statutory provisions are Sections 246A and 249(3) of the Income Tax Act, 1961, which govern the filing of appeals and the condonation of delay. The CIT(A) has the discretionary power to condone delay if sufficient cause is shown. The principles of natural justice require that appeals should be decided on merits unless there is a valid reason to reject them on procedural grounds.Precedents cited include the ITAT Indore Bench orders in the assessee's own cases for earlier assessment years where similar delays were condoned, and the judgment of the Hon'ble Bombay High Court in CIT vs. Premkumar Arjundas Luthra (HUF) (2017) 297 CTR 614 (Bom), which emphasized the statutory obligation of the CIT(A) to dispose of appeals on merits and not summarily dismiss them for non-prosecution or delay.Court's Interpretation and Reasoning: The Tribunal noted that the CIT(A) dismissed the appeal in limine on the ground of inordinate delay of 2066 days without providing a reasoned order on merits. The Tribunal observed that the CIT(A) did not consider the sufficiency of cause for delay as required and failed to apply his mind to the issues raised in the appeal.The Tribunal accepted the assessee's explanation that the delay was due to the erstwhile Chartered Accountant's failure to file the appeal despite instructions, compounded by a 'deadlock' caused by multiple FIRs and legal proceedings against the assessee society, which paralyzed its functioning from 2019 to 2023. The Tribunal found this to be a sufficient cause for delay, especially given that the FIRs were eventually quashed by the High Court and the society was restored to full operation only in September 2023.Key Evidence and Findings: The Tribunal relied on the affidavit of the society's Chairman/President, the timeline of FIR registrations and quashing, restoration orders by the Registrar and the High Court, and the assessee's attempts to obtain the impugned assessment order. The Tribunal also noted the assessee's reliance on earlier ITAT decisions in similar circumstances where delay was condoned.Application of Law to Facts: Applying the principles from the cited High Court judgment and statutory provisions, the Tribunal held that the CIT(A) was under a statutory obligation to dispose of the appeal on merits and not dismiss it summarily for delay. The Tribunal found that the reasons for delay constituted sufficient cause and warranted condonation.Treatment of Competing Arguments: The Revenue did not oppose condonation of delay but sought imposition of a nominal cost on the assessee. The Tribunal agreed with this approach, balancing procedural discipline with substantive justice.Conclusions: The Tribunal set aside the impugned order dismissing the appeal for delay, condoned the delay, imposed a cost of Rs. 2500/- on the assessee, and remanded the matter to the CIT(A) for a de novo hearing on merits with a direction to pass a speaking order.Issue 3 & 4: Merits of the Additions and Disallowances Made by the Assessing OfficerLegal Framework and Precedents: The appeal before the CIT(A) and subsequently before the Tribunal ordinarily involves adjudication on the merits of additions/disallowances made by the Assessing Officer under various provisions such as Section 80P (deduction), Section 37 (business expenses), and provisions regarding depreciation and other expenses.Court's Interpretation and Reasoning: The Tribunal observed that the impugned order by the CIT(A) did not deal with the merits of the additions/disallowances but dismissed the appeal solely on procedural grounds. Since the delay was condoned and the appeal restored, the CIT(A) was directed to consider the merits afresh.Key Evidence and Findings: The grounds of appeal raised by the assessee included challenges to additions on account of rejection of Section 80P deduction, disallowance of AGM expenses, adhoc disallowances on travelling, telephone, depreciation, other expenses, and estimation of expenses against commission and locker rent incomes. These grounds were not adjudicated due to dismissal on delay grounds.Application of Law to Facts: With the appeal restored, the CIT(A) is to examine these grounds in light of the facts and submissions, applying relevant provisions of the Income Tax Act and judicial precedents.Treatment of Competing Arguments: No substantive submissions on merits were addressed in this appeal since the appeal was dismissed on delay grounds. The Tribunal's order effectively reopens the matter for full adjudication.Conclusions: The CIT(A) is directed to pass a reasoned and speaking order on the merits of the appeal after providing the assessee full opportunity to present its case.Issue 5: Imposition of CostsLegal Framework and Precedents: The Tribunal has discretionary power to impose costs for procedural lapses or undue delay to ensure compliance and discourage negligence.Court's Interpretation and Reasoning: Considering the lengthy delay caused partly by the assessee's counsel's lapse and the prolonged deadlock, the Tribunal found it appropriate to impose a nominal cost to encourage vigilance and timely compliance.Conclusions: A cost of Rs. 2500/- was imposed on the assessee to be paid to the P.M. Relief Fund, with proof of payment to be filed before the CIT(A).Significant Holdings'In my considered view, once an appeal is preferred before the CIT(Appeals), it becomes obligatory on his part to dispose off the same on merit and it is not open for him to summarily dismiss the appeal on account of non-prosecution of the same by the assessee.''The law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.''Cause of substantial justice would not be served by condoning inordinate delay of 2066 days for which no cogent reason has been given' - (Held by CIT(A), but set aside by Tribunal on sufficient cause shown.)The Tribunal established the principle that the CIT(A) must apply his mind to the merits of the appeal and cannot dismiss it summarily on procedural grounds such as delay without considering sufficient cause.The Tribunal concluded that the delay in filing the first appeal was justified due to exceptional circumstances including counsel's failure and legal deadlock caused by multiple FIRs and administrative actions, and therefore the delay was condoned.The final determination was to set aside the impugned order dismissing the appeal, impose a nominal cost on the assessee, and remand the matter to the CIT(A) for a fresh, reasoned adjudication on merits in accordance with principles of natural justice.