2025 (11) TMI 911 - AT - Income Tax

1,370-day delay in filing appeal denied; reliance on consultant's incorrect advice not sufficient to condone delay

ITAT held that a 1,370-day delay in filing the appeal was not condoned. The taxpayer's reliance on incorrect advice from a tax consultant did not ... Delay of 1370 days in filing the appeal - Delay was on account of wrong advise of his Tax consultant - ‘sufficient cause’ shown or not? - HELD THAT:- It is a settled law that the assessee must show that he was diligent in taking proper steps and the delay was caused notwithstanding his due diligence. It is for him to explain the reason for the delay and it is not the function of authorities to find the cause for delay. The Appellate Authority has to examine whether the sufficient cause has been shown by the appellant for condoning the delay and whether such cause is acceptable or not. Even though substantial justice should not be defeated by technicalities but that does not mean that any plea without any possible or acceptable basis and even without hearing, resemblance or rationality has to be accepted and delay has to be accepted and condoned which shall be against the very spirit of law. The time prescribed for filing the appeal will become meaningless in such an event. Perusal of the facts shows that the assessee in the present case appears to be negligent and has not taken appropriate steps to peruse the remedy till 1370 days and thus did not take necessary action in filing the appeal within the prescribed time. Our aforesaid view is that in absence of a sufficient/reasonable cause leading to the delay in filing of an appeal, the same does not merit to be condoned. Overall approach of the assessee, throughout has been of prolonging, stretching the matter just to keep the appeal proceedings pending. Thus, delay in filing of the appeal cannot be condoned in absence of any justifiable reason. Though it is well accepted that no appellant derives any benefit by filing a delayed appeal, however the same should not be used as a tool, or an excuse to avoid and prolong and thus delay further consequent proceedings from the Department. Accordingly, in this case, the assessee has not been able to explain the reason for delay for the entire period and has merely taken a general plea based on general reasons. The delay is undoubtedly substantial although the assessee has claimed that it was on account of wrong advise of his Tax consultant who did not advise any remedial action against the said order. As a result, the assessee who was banking upon the Tax consultant remained unaware of filing of appeal. Though we do not find any reasons to conclude that the delay was malafide, the fact remains that the assessee being an Private Limited Company should have been more conscious of his statutory obligations knowing fully well the implication thereof. As further noticed from the assessment order and also CIT(A) order that the assessee attended the proceeding. Therefore, certain element of negligence is palpable on his part and putting all the blame on the tax consultant would not absolve him of his own responsibility in this regard. ISSUES PRESENTED AND CONSIDERED 1. Whether the delay of 1370 days in filing the appeal can be condoned under Section 5 of the Limitation Act by showing 'sufficient cause'. 2. What constitutes 'sufficient cause' for condonation of delay - whether negligent inaction or advice of a tax consultant can amount to sufficient cause. 3. Whether, in presence of inordinate delay and lack of satisfactory explanation, the appellate authority should exercise discretion to condone delay or dismiss the appeal for delay without adjudicating merits. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay under Section 5 of the Limitation Act Legal framework: Section 5 vests discretion in the Court/Appellate Authority to admit an appeal after the prescribed limitation period if the appellant shows 'sufficient cause'. The expression 'sufficient cause' appears in various procedural provisions and is a condition precedent for exercise of discretion. Precedent treatment: Authorities consistently require that explanations for delay be proper, satisfactory and convincing; courts must distinguish ordinary delay from inordinate delay and may adopt a stricter approach where delay is substantial. Interpretation and reasoning: The Court applied the statutory scheme and settled principles to the admitted 1370 days' delay. It held that the discretion under Section 5 is not unlimited and must be exercised on sound reasons. A mechanical or routine condonation is impermissible, particularly where the legislative purpose of finality is implicated. Ratio vs. Obiter: Ratio - An appellate authority must refuse condonation where no sufficient cause is shown for a long, inordinate delay and where the explanation is not satisfactory for each period of delay. Conclusion: The Court concluded there was no sufficient cause to condone the 1370-day delay; the condonation application is rejected and the appeal is dismissed on account of delay. Issue 2 - Sufficiency of explanation: negligence, inaction, and reliance on tax consultant Legal framework: 'Sufficient cause' excludes negligent conduct, want of bona fides or mere inadvertence; the appellant must provide a reasonable, convincing explanation for the delay, ordinarily accounting for each day or period of delay. Precedent treatment: Jurisprudence requires that delay caused by lack of diligence, casual or irresponsible conduct, or failure to act cannot generally be condoned; where the delay is prolonged, the appellant must show diligence and reasons beyond the appellant's control. Interpretation and reasoning: The Court examined the factual assertion that the tax consultant's wrong advice prevented filing. It observed that even absent mala fides, a corporate appellant is expected to be conscious of statutory obligations and should not absolve itself entirely by blaming advisors. Attendance in proceedings, absence of any affidavit explaining the long delay at the time of initial filing, and failure to demonstrate efforts or communications after the impugned order militated against a finding of sufficient cause. Ratio vs. Obiter: Ratio - Reliance on professional advice or negligence by consultants, without demonstrable, convincing efforts by the appellant and without accounting for the entire period, does not ordinarily constitute 'sufficient cause' for inordinate delay. Conclusion: The Court found the explanation (reliance on tax consultant) inadequate; the appellant's negligence and failure to show proactive steps disqualify reliance on that ground as sufficient cause. Issue 3 - Discretionary exercise: inordinate delay, principles guiding exercise of discretion, and consequence of dismissal for delay Legal framework: Discretion under Section 5 must be exercised within reasonable bounds, informed by reasons, and not on whims; while a liberal approach may be appropriate for short delays, stricter scrutiny is warranted for inordinate delays to preserve the legislative intent of finality. Precedent treatment: Courts have held that discretion must be systematic, reasoned and not exercised on sentimental or sympathetic grounds; prolonged unexplained delay justifies refusal to condone. Interpretation and reasoning: The Court balanced the policy of securing substantial justice against the need to enforce limitation. It emphasised that substantial justice cannot be a cloak to defeat the law of limitation. Given the appellant's conduct suggesting delay and stretching of proceedings, and the absence of any convincing or specific explanation for the entire period, the Court held that discretion should be exercised to refuse condonation. The Court also noted there was no need to adjudicate merits once appeal was dismissed for delay. Ratio vs. Obiter: Ratio - Where delay is inordinate and unexplained, the appellate authority may and should dismiss the appeal for delay without adjudicating merits; the exercise of discretion must be reasoned and proportionate to the circumstances. Conclusion: The Court exercised discretion against condoning the delay and dismissed the appeal on that ground; there was no requirement to decide the substantive merits thereafter. Cross-references and Related Observations 1. The Court emphasised the distinction between short and inordinate delay - a more liberal approach may apply to the former, but a stricter approach to the latter. 2. The burden lies on the appellant to explain the delay satisfactorily; authorities will not seek explanations on the appellant's behalf. 3. Lack of mala fides does not automatically translate into sufficiency of cause; diligence and reasonable steps by the appellant must be demonstrated. 4. Where filings required by rules (such as affidavits in support of condonation) are absent at the time of filing, that omission is a factor against granting adjournment or condonation.