Analysis of Judgement on Delayed Filing of Appeal and Deduction u/s 36(1)(va) of Income Tax Act

Reported as:

2024 (4) TMI 1006 - CHHATTISGARH HIGH COURT

Introduction

This article analyzes a judgement by the High Court (HC) concerning two key issues: (1) the delay of 690 days in filing an appeal before the HC due to procedural issues in the new faceless appeal scheme, and (2) the disallowance of the assessee's claim for deduction of delayed deposit of employees' share of contribution towards ESI/PF u/s 36(1)(va) of the Income Tax Act, 1961.

Arguments Presented

Appellant's Arguments

The appellant's counsel, Mr. Manoj Kumar Sinha, submitted the following arguments:

• The delay in filing the appeal was due to the migration from the physical mode to the faceless mode of appeals, and the order of the Commissioner of Income Tax (Appeals) [CIT(A)] was merely uploaded on the appellant's e-filing portal without any real-time alert, contrary to legal provisions.
• Similar delays have occurred in several other cases, substantiating the ill-effects of the transition to the faceless mode.
• As per Rule 46 of the Income Tax Rules, 1962, and other provisions, the date of receipt of a communication dropped on the e-filing portal is deemed to be the date when the addressee has downloaded it. Therefore, the delay in this case was neither deliberate nor attributable to the appellant's lackadaisical attitude.
• The appellant relied on various judgements to support their contentions, including MUNJAL BCU CENTRE OF INNOVATION AND ENTREPRENEURSHIP, LUDHIANA THROUGH ITS AUTHORIZED SIGNATORY SH. BHARAT GOEL Versus COMMISSIONER OF INCOME TAX EXEMPTIONS, CHANDIGARH - 2024 (3) TMI 479 - PUNJAB & HARYANA HIGH COURT, SAKTHI STEEL TRADING REP. BY ITS PROPRIETOR M.S. BAKKIR MYDEEN VERSUS THE ASSISTANT COMMISSIONER (ST) , VANDAVASI ASSESSMENT CIRCLE, VANDAVASI. - 2024 (2) TMI 357 - MADRAS HIGH COURT and others.

Respondent's Arguments

The respondent's counsel, Ms. Naushina Afrin Ali, submitted that the order passed by the Income Tax Appellate Tribunal (ITAT) was just and proper, warranting no interference.

Discussions and Findings of the Court

Delay in Filing Appeal

The Court observed that the reason given by the assessee firm regarding the inordinate delay in filing the appeal did not inspire confidence and revealed a lackadaisical conduct on the part of the partners. The Court relied on the Supreme Court's decisions in STATE OF WEST BENGAL Versus ADMINISTRATOR, HOWRAH MUNICIPALITY & ORS. - 1971 (12) TMI 106 - Supreme Court and Ramlal, Motilal And Chhotelal Versus Rewa Coalfields Ltd - 1961 (5) TMI 54 - Supreme Court, which held that the expression "sufficient cause" should receive a liberal construction, but the action should fall within the realm of normal human conduct or normal conduct of a litigant. In this case, the Court found that the assessee was acting in defiance of the law, and there was no reason to condone the substantial delay of 690 days.

Deduction u/s 36(1)(va)

Regarding the issue of claiming deduction u/s 36(1)(va) of the Income Tax Act, 1961, on delayed payment of employees' share of contribution towards ESI/PF, the Court relied on the Supreme Court's decision in CHECKMATE SERVICES P. LTD. Versus COMMISSIONER OF INCOME TAX-1 - 2022 (10) TMI 617 - Supreme Court. The Supreme Court had held that the non-obstante clause in Section 43B would not dilute or override the employer's obligation to deposit the amounts retained or deducted from the employee's income unless the condition of depositing it on or before the due date is satisfied. The Court found that the present appeal filed by the appellant was devoid of merits and barred by limitation u/s 253 of the Act.

Analysis and Decision by the Court

The Court analyzed the facts, circumstances, and the law laid down by the Supreme Court in Checkmate Services P. Ltd. v. Commissioner of Income Tax-1. It concluded that the present appeal filed by the appellant was not only devoid of merits but also barred by limitation as provided u/s 253 of the Income Tax Act, 1961. The Court upheld the ITAT's decision to dismiss the assessee's appeal.

Doctrine or Principle Discussed

The Court discussed the doctrine of "sufficient cause" and the principles governing the condonation of delay in filing appeals, as laid down by the Supreme Court in various judgements.

Summary of the Judgement

The High Court dismissed the appeal filed by the assessee, upholding the ITAT's decision. The Court found that the delay of 690 days in filing the appeal was not justified, as the reason given by the assessee firm did not inspire confidence and revealed a lackadaisical conduct on the part of the partners. Regarding the issue of deduction u/s 36(1)(va) of the Income Tax Act, 1961, the Court followed the Supreme Court's decision in Checkmate Services P. Ltd. v. Commissioner of Income Tax-1, which held that the non-obstante clause in Section 43B would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction. The Court concluded that the present appeal was devoid of merits and barred by limitation u/s 253 of the Act.

 

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Full Text:

2024 (4) TMI 1006 - CHHATTISGARH HIGH COURT

Sufficient cause for delay in filing appeals rejected where faceless scheme migration did not excuse prolonged inaction. The court held that migration to a faceless appeal system did not, without persuasive evidence, constitute sufficient cause to condone a lengthy delay in filing an appeal, finding the explanation reflective of litigant inaction rather than unavoidable impediment. On tax deduction, the court applied authority that a non-obstante clause does not negate the employer's obligation to deposit employees' statutory contributions by the due date as a condition for claiming the deduction, and treated the appeal as meritless and barred by limitation.