2025 (11) TMI 149 - AT - Income Tax

110-day delay in filing first appeal condoned due to assessee's illiteracy, vegetable business and lack of notice awareness

ITAT condoned a 110-day delay in filing the first appeal, accepting the assessee's illiteracy, engagement in vegetable business and lack of notice ... Condonation of delay - appeal was filed against the assessment order by a delay of about 110 days - cause for the delay was shown to be the illiteracy of assessee, doing vegetable business and unaware of notices - HELD THAT:- It is well established principle of law that the substantial justice cannot be denied on technical aberrations. The object of prescribing procedure is to advance the cause of justice. In an adversial justice system like ours, no party should ordinarily be denied the opportunity of participating in the process of justice dispensation. Justice is the goal of jurisprudence. Any interpretation which eludes or frustrates the recipient of justice, is not to be followed. The object of prescribing certain time period for filing of the appeal is to expedite the proceedings before the concerned authorities and to advance the cause of justice. In the facts and circumstances of the case, we find the cause of delay sufficient and condone the delay caused in filing first appeal before the ld. CIT(Appeals). We are further surprised to note that after refuting assessee’s prayer for condonation of delay, learned CIT(Appeals) proceeded to decide the appeal on merit, which is contrary to the law. The law on the subject is well settled that unless the delay is condoned, the appeal does not come into existence legally, and in such absence, the court is wholly without jurisdiction to hear or decide the same on merit. The issue of condonation of delay in the proceedings has to be decided at the first instance before delving into the merits of the case. However, if the delay is condoned, there is no bar on the courts to proceed with the case and decide the same on merits on the very day. In the same manner, if the prayer for condonation of delay is rejected, the proceedings will automatically fail. It is, thus, settled that without condoning the delay in filing the appeal, the appellate authority lacks jurisdiction to entertain such time barred appeals. Since, we have already condoned the delay in filing the first appeal before ld. CIT(A), learned first appellate authority shall pass order afresh in accordance with law on merits, after taking assessee’s submissions into consideration. ISSUES PRESENTED AND CONSIDERED 1. Whether the delay of approximately 148 days in filing the second appeal before the Appellate Tribunal constitutes sufficient cause for condonation. 2. Whether the delay of approximately 110 days in filing the first appeal before the first appellate authority (CIT(A)) constituted sufficient cause for condonation and, relatedly, whether the first appellate authority had jurisdiction to decide the appeal on merits after rejecting the condonation application. 3. Whether the Assessing Officer's best judgment assessment under reopened assessment provisions (sections 147 read with 144 and 144B) and additions under section 69A (cash deposits/unexplained cash credits) require adjudication on merits, having regard to the assessee's alleged non-responsiveness and the available bank/CIB information. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay in filing second appeal (˜148 days) Legal framework: The law governing condonation of delay requires the appellate authority to satisfy itself that sufficient cause exists for the delay; the court must consider length of delay, reasons offered, and principles of equity and public policy underlying limitation rules. Precedent treatment: The Tribunal relied on established principles that substantial justice should not be defeated by technicalities and that courts should favour adjudication on merits where sufficient cause is shown. Interpretation and reasoning: The assessee's explanation was that the advocate misplaced the file, did not pursue the matter, subsequently returned the file to the assessee leading to delay; this explanation was supported by an unrebutted affidavit. The Tribunal treated those facts as constituting sufficient cause, emphasizing that procedural time limits are intended to advance justice and that substantial justice should not be denied for technical aberrations. Ratio vs. Obiter: Ratio - the Tribunal's finding that the specific factual explanation (misplaced file, unrebutted affidavit) amounted to sufficient cause for condonation of the 148-day delay. Conclusion: The delay in filing the second appeal was condoned. Issue 2 - Condonation of delay in filing first appeal (˜110 days) and jurisdiction to decide merits after rejecting condonation Legal framework: An appeal that is time-barred does not come into legal existence until delay is condoned; the appellate authority has no jurisdiction to entertain or decide an appeal on merits unless it first lawfully condones the delay. While courts must consider the merits when assessing condonation, they must not decide the main matter before resolving limitation. Precedent treatment: The Tribunal cited recent Supreme Court dicta emphasizing that limitation is not mere technicality and that while the court should favour adjudication on merits where appropriate, the question of condonation must be decided first and on appropriate principles. Further reference to a High Court decision reinforced that an appellate authority lacks jurisdiction to decide merits after rejecting condonation. Interpretation and reasoning: The Tribunal found the first appellate authority erred in two respects: (a) rejecting the assessee's explanation for delay (illiteracy, business preoccupation, unawareness of notices) without treating the cause as sufficient in the circumstances, and (b) proceeding to decide the appeal on merits after rejecting the condonation application - an exercise that the Tribunal described as patently illegal because a rejected condonation means the appeal never legally came into existence, depriving the appellate authority of jurisdiction to decide merits. Ratio vs. Obiter: Ratio - (i) a time-barred appeal is non-existent until delay is condoned, and (ii) an appellate authority is without jurisdiction to adjudicate the merits of an appeal if it has rejected the condonation application. Obiter - emphasis on the policy of promoting substantial justice and references to the need to consider length and reason for delay as equitable factors. Conclusion: The Tribunal condoned the delay in filing the first appeal and held that the first appellate authority's decision on merits after rejecting condonation was jurisdictionally invalid; the matter is restored to the first appellate authority for fresh adjudication on merits after taking the assessee's submissions, with directions to observe principles of natural justice and for the assessee to cooperate diligently. Issue 3 - Merits of assessment under sections 147/144 and addition under section 69A (cash deposits/unexplained credits) Legal framework: Reopening of assessment under section 147 permits reassessment where income has escaped assessment; best judgment assessments under section 144 are permissible where the assessee is non-cooperative; unexplained cash deposits/credits can be treated as income under section 69A if the source is not satisfactorily explained. Precedent treatment: The Tribunal observed established administrative and judicial principles that assessing authorities may make best judgments when the assessee remains unresponsive and that unexplained bank deposits/CIB data can be a basis for additions if explanation is absent or unacceptable. Interpretation and reasoning: The Tribunal recorded facts: no return filed, substantial cash deposits reflected in bank statements and CIB data, notice under section 148 issued, notices to banks under section 133(6), and the assessee's failure to offer an explanation or to participate in proceedings. The Tribunal noted the Assessing Officer's reliance on bank records and the assessee's irresponsive conduct, which led to best judgment assessment and additions. However, because the first appellate process must be revived (condonation granted), the Tribunal did not adjudicate the correctness of additions on merits and instead remanded the matter for fresh consideration by the first appellate authority. Ratio vs. Obiter: Obiter insofar as the Tribunal commented that non-responsiveness justified best judgment assessment and that the Assessing Officer was compelled to make additions; no binding ratio was laid down on the merits of section 69A additions because the Tribunal did not decide those issues finally. Conclusion: The merits of the additions under section 69A and the best judgment assessment are to be re-examined by the first appellate authority afresh after condoning the first appeal; the Tribunal did not uphold or reverse the additions on merits but set aside the impugned order and restored the matter for fresh adjudication in accordance with law and principles of natural justice. Disposition Because delay in both appeals was condoned and because the first appellate authority lacked jurisdiction to decide merits after rejecting condonation, the impugned order is set aside and the appeal is restored to the first appellate authority to decide afresh on merits after giving the assessee an opportunity to be heard; directions were given for adherence to principles of natural justice and for the parties to cooperate for expeditious disposal.