2026 (3) TMI 493 - HC - Income Tax

Condonation of delay due to Covid-19 limitation exclusion permits remittal for fresh adjudication of tax exemption claims.

Delay of 822 days in filing the departmental appeal was condoned because a substantial portion of the delay fell within the Covid-19 exclusionary period ... Condonation of delay - ITAT refusing to condone the delay of 822 days in filing appeal - extension of limitation due to COVID-19 - HELD THAT: - The Court recognised the period excluded by the Supreme Court in Re: Cognizance for Extension of Limitation [2022 (1) TMI 385 - SC ORDER] and noted the pervasive impact of the COVID-19 pandemic. Having examined the record and the explanations furnished, and in exercise of its power under Article 226, the Court found no deliberate or culpable indolence by the petitioner. The Court observed that the Appellate Authority under Section 249 has the competence to consider material and to delve into the merits when considering condonation. Taking a pragmatic and lenient view in the circumstances, the Court held that sufficient cause was made out to condone the delay and set aside the orders which had dismissed the appeal for delay. [Paras 6, 7, 8] Delay condoned; impugned orders refusing condonation set aside and the appeal restored for adjudication on merits. As most of the period of delay was consumed during the period of pandemic since the order of Appellate Authority has come to be passed and the order of learned Income Tax Appellate Tribunal has rendered the petitioner remediless to substantiate the claim for exemption under Section 12AA/10(23)(c) read with Section 11 of the Income Tax Act, 1961. Since the issue is relating to furnishing of evidence and establishment of claim of exemption in return, this Court is, therefore, inclined to show indulgence in the matter by taking a lenient view in order to grant an opportunity to the petitioner to substantiate its claim. Petitioner is entitled for one opportunity before the Appellate Authority for adducing evidence in support of exemption as claimed in the returns. Final Conclusion: The Court condoned the delay in filing the appeal, set aside the orders refusing condonation, and restored the appeal; the matter is remitted to the Appellate Authority for fresh adjudication on merits with a direction to afford the petitioner a personal hearing and opportunity to tender evidence. Issues: (i) Whether the delay of 822 days in filing the departmental appeal should be condoned and the appeal restored in view of the Covid-19 related extension of limitation and surrounding facts; (ii) Whether the appeal should be remitted to the Appellate Authority for adjudication on the merits of the claim for exemption under Sections 12AA/10(23)(c) read with Section 11 of the Income-tax Act, 1961.Issue (i): Whether the delay of 822 days in filing the appeal ought to be condoned in the circumstances of the case.Analysis: The period of limitation from 15.03.2020 to 28.02.2022 is excluded pursuant to the extension of limitation framework applied by the courts for the Covid-19 period; the Appellate Authority has statutory power under Section 249(3) of the Income-tax Act, 1961 to condone delay and consider material to decide condonation; the facts show significant part of the delay occurred during the pandemic period and there is no finding of deliberate indolence by the petitioner; denial of condonation would preclude consideration of the substantive exemption claim based on evidence.Conclusion: Delay of 822 days is condoned and the appeal is restored for adjudication.Issue (ii): Whether the appeal should be remitted to the Appellate Authority for decision on merits regarding the exemption claim under Sections 12AA/10(23)(c) read with Section 11 of the Income-tax Act, 1961.Analysis: The appeal, if allowed to be heard, requires examination of evidence and personal hearing to determine entitlement to exemption under the cited provisions; remittal permits the Appellate Authority to receive evidence, afford personal hearing, and pass an appropriate assessment order; directions were issued for prompt hearing and avoidance of unnecessary adjournments to facilitate merit determination.Conclusion: The appeal is remitted to the Appellate Authority for fresh adjudication on merits with directions to afford personal hearing and consider the evidence in support of the exemption claim.Final Conclusion: The orders refusing condonation and dismissing the appeal are set aside, the delay is condoned, and the appeal is restored and remitted for fresh merit adjudication to enable resolution of the exemption claim.Ratio Decidendi: Where significant delay in filing an appeal is substantially attributable to the Covid-19 exclusionary period and no deliberate laches is shown, the power under Section 249(3) of the Income-tax Act, 1961 permits condonation of delay and remittal for adjudication on merits to secure substantive determination of exemption claims.