2025 (10) TMI 942 - AT - Income Tax

Appeal time-barred under s.249(2) excused by assessee's due diligence and s.154 pursuit; remitted under s.14 Limitation Act

ITAT, Mumbai held that although the appeal initially appeared barred by limitation under s.249(2), the assessee acted with due diligence, pursued s.154 ... Dismissal of Assessee appeal in limine being barred by limitation u/s 249(2) - 'sufficient cause for not making the application within the period of limitation' - HELD THAT:- Though the provisions of section 14 of the limitation Act, are not strictly applicable to the instant case, as there was no defect of jurisdiction or any case of like nature, is entertaining the claim of the Assessee by the AO, however, considering the true spirit of the provisions, as the Assessee has acted with due diligence and in good faith and continued with the proceedings by filing application u/s.154 of the Act and raising various grievances, which otherwise have not yielded any result and therefore the Assessee is entitled for the leniency and/or exclusion of time spent in those proceedings detailed above. There was no delay in filing of an appeal before the Commissioner challenging the intimations/orders u/s 245 read with computation sheet/demand. Even otherwise, if any delay is attributable then the same deserves to be condoned in view of the aforesaid peculiar facts and circumstances and the judgments and the provisions of section 14 of the Limitation Act as referred to above. Hence, we hold so. Thus, for just and proper decision of the case and substantial justice, we deem it appropriate to remand this case to the file of the Ld. Commissioner for decision on merit, suffice to say by affording reasonable opportunity of being heard to the Assessee. Assessee’s appeal is allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether the delay in filing first appeal against intimations/orders arising from a computation sheet u/s 143(1)(a) for an earlier assessment year can be condoned under section 249(3) of the Income Tax Act read with Section 5 of the Limitation Act. 2. Whether time spent pursuing rectification proceedings and other bonafide communications with revenue authorities can be excluded or treated as sufficient cause for condonation of delay (application of Section 14 Limitation Act principles or its spirit). 3. Whether the appellate authority should admit the belated appeal and decide it on merits, or dismiss it in limine for want of limitation where there has been inordinate delay and alleged negligence. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay under section 249(3) read with Section 5 Limitation Act Legal framework: Section 249(2) prescribes the period for filing appeal to the Commissioner (Appeals); section 249(3) permits admission of an appeal after expiry of limitation on showing 'good and sufficient reason'; Section 5 of the Limitation Act governs 'sufficient cause.' Precedent treatment: The Tribunal considered and applied recent Supreme Court guidance in Pathapati Subba Reddy (and earlier precedents such as Katiji, Perumon Bhagvathy Devaswom, Balwant Singh, University of Delhi) which: (i) require public-policy respect for limitation but allow discretionary condonation when 'sufficient cause' is shown; (ii) counsel a liberal, justice-oriented approach to Section 5 but not one that defeats Section 3; and (iii) caution against condonation where inordinate delay, negligence or want of due diligence is shown. Interpretation and reasoning: The Court examined the facts - an original computation/143(1)(a) sheet dated 23.03.2014 raising demand; a rectification application u/s 154 dated 28.04.2016; multiple subsequent communications/intimations (including 26.06.2019, 05.01.2023, 17.02.2023) in which the particular demand was not highlighted; later intimation/communication dated 11.11.2024 and final affirmation on 26.12.2024. The Tribunal reasoned that the assessee acted in good faith and with due diligence in pursuing rectification and other grievances and was led to a bona fide belief that the demand was addressed; therefore the elapsed time cannot be treated as unexplained negligence in all circumstances. The Court balanced the principle that limitation must be respected with the permissive, liberal approach to Section 5 where delay arises from bonafide pursuit of remedies before revenue authorities. Ratio vs. Obiter: Ratio - A belated appeal may be condoned under s.249(3)/s.5 where the assessee shows bonafide pursuit of rectification/grievance and reasonable cause for not filing within 30 days; mere length of delay is not decisive if a satisfactory explanation exists. Obiter - General observations on varied precedents and maxims illustrating limitation policy. Conclusions: The Tribunal held that, on these facts, there was either no delay in challenging the 11.11.2024 and 26.12.2024 intimations or any delay was sufficiently explained and therefore deserving of condonation under the statutory scheme; the impugned dismissal in limine for want of limitation could not be sustained. Issue 2 - Exclusion of time spent in pursuing rectification/other proceedings (application of Section 14 spirit) Legal framework: Section 14 Limitation Act excludes time consumed in prosecuting with due diligence another civil proceeding in a court without jurisdiction where the proceeding relates to the same matter and is prosecuted in good faith. Though section 14 on its face concerns court proceedings, its principle is available as aiding interpretation of limitation questions arising from administrative/rectification pursuits. Precedent treatment: The Tribunal cited authorities that treat time spent in bonafide proceedings before a wrong forum as capable of exclusion and quoted Supreme Court dicta emphasising liberal application of 'sufficient cause' depending on facts. Interpretation and reasoning: The Tribunal found that, while section 14 strictly applies to civil court proceedings, the 'true spirit' of exclusion - i.e., leniency where time is spent diligently and in good faith pursuing related remedies - is applicable to the facts. The assessee had filed a rectification application u/s 154 and followed up communications with CPC/AO; certain subsequent intimations did not reflect the demand, reinforcing the assessee's belief that the grievance had been resolved. On these grounds the Tribunal treated the time so expended as a legitimate basis for condonation. Ratio vs. Obiter: Ratio - Time spent prosecuting bona fide rectification and grievance proceedings with due diligence may, in appropriate circumstances, justify condonation of delay even where section 14 strictly does not apply; such time may be excluded or treated as 'sufficient cause.' Obiter - Observations distinguishing strict textual application of section 14 from its equitable spirit. Conclusions: The Tribunal held that the assessee was entitled to the benefit of leniency under the spirit of section 14 because of diligent, good faith pursuit of rectification and related proceedings; this supported condonation of any delay. Issue 3 - Whether appeal should be dismissed in limine for want of limitation or remanded for adjudication on merits Legal framework: Where condonation is refused under s.249(3) read with s.5, the appellate authority may reject the appeal as not admitted; conversely, where sufficient cause is shown, the appeal is to be admitted and decided on merits. Precedent treatment: The Tribunal considered coordinate-bench decisions (Tribunal benches addressing similar fact patterns and condoning long delays) and High Court/Supreme Court authorities that require examination of diligence, bona fides and reasonableness in condonation applications. Interpretation and reasoning: The Tribunal weighed conflicting findings: the Ld. Commissioner had dismissed the appeal in limine on the basis of inordinate delay (3900 days) and negligence. The Tribunal, however, found material supporting the assessee's bona fide belief and continued pursuit of rectification, and noted precedents where similar conduct attracted condonation. Given these circumstances and the interest of substantial justice, the Tribunal concluded that the matter should not have been dismissed in limine but should be remanded for adjudication on merits after affording opportunity of hearing. Ratio vs. Obiter: Ratio - Where sufficient cause is shown by evidence of bona fide, diligent pursuit of rectification/grievance processes and recent affirmations revive previously raised demands, the appropriate remedy is to condone delay and remit the matter for merits rather than dismiss in limine. Obiter - Comments on comparative weight of inordinate delay versus bona fide conduct in varied factual matrices. Conclusions: The Tribunal remanded the matter to the first appellate authority for decision on merits after affording a reasonable opportunity to the assessee, and ordered allowance of the appeal for statistical purposes (i.e., admission and remand rather than final disposal).