2022 (11) TMI 1353 - HC - Income Tax

Condonation of delay - Tribunal dismissing the application for condonation of delay in filing the appeal - HELD THAT - It is not in dispute that accountant, was representing the Assessees before the AO and the CIT(A). His appearance on behalf of the Assessees is duly recorded in the order passed by the CIT(A). Assessees have also filed on record the affidavit owning up to the fact that the Assessees had instructed filing of the appeal and the non-filing happened due to a human error. It appears that there was a bonafide mistake on the part of the Assessees in pursuing the remedy. AO, in addition to determining the demand has also referred the matter to prescribed authority for initiation of penalty proceedings against the Assessees. As Collector, Land Acquisition, Anantnag 1987 (2) TMI 61 - SUPREME COURT wherein it was opined that there is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. Therefore, initiation of penalty proceedings has been referred by the AO, it would be in interest of justice that the merits of the assessment orders are tested in the appeals before ITAT rather than the Assessees being deprived of remedy in appeal due to the aforesaid default of delay. We set aside the common impugned order passed and condone the delay in filing of the appeals before the ITAT and restore the appeals to the file of the ITAT to hear the appeals on merits - Decided in favour of the Assessee.

Summary

Issues:
1. Condensation of delay in filing appeals before ITAT.
2. Barred by limitation.
3. Assessment orders under Section 201(1) of the Income Tax Act, 1961.
4. Bonafide mistake in pursuing the remedy.
5. Referral of penalty proceedings against the Assessees.
6. Rights and contentions of both parties.

Condensation of Delay in Filing Appeals Before ITAT:
The Appellants challenged the common order passed by the ITAT, dismissing their appeals as barred by limitation due to a delay of 261 days. The Appellants sought condonation of delay, arguing that the delay was unintentional and bonafide. The authorized representative of the Assessees, Mr. B.S. Bhatia, had overlooked filing the appeals due to a mix-up of papers. The Appellants contended that they would suffer prejudice if the delay was not condoned. The Court considered the affidavit of Mr. B.S. Bhatia and found a bonafide mistake on the part of the Assessees in pursuing the remedy.

Barred by Limitation:
The CIT(A) dismissed the Assessees' appeals challenging the assessment orders, stating that the orders were passed within limitation as the survey was conducted before the end of the relevant financial year. The ITAT upheld the dismissal, citing a disparity in the reasons provided for the delay in filing the appeals. The Assessees argued that they had been diligent, and the delay was unintentional. The Court observed that the delay was due to a human error and that the Assessees should not be deprived of their remedy in appeal due to this default.

Assessment Orders under Section 201(1) of the Income Tax Act, 1961:
The AO passed assessment orders under Section 201(1) of the Act, calculating the Assessees' TDS liability and referring the matter for penalty proceedings. The CIT(A) dismissed the appeals, leading to the Assessees' appeal before the ITAT. The Court noted that the initiation of penalty proceedings warranted a review of the assessment orders on merits.

Bonafide Mistake in Pursuing the Remedy:
The Assessees' authorized representative, Mr. B.S. Bhatia, inadvertently failed to file the appeals before the ITAT, leading to the delay. The Court acknowledged the bonafide mistake and emphasized that the delay was unintentional. The Assessees were diligent in instructing the filing of appeals, and the delay was attributed to human error.

Referral of Penalty Proceedings Against the Assessees:
The AO referred the matter for penalty proceedings against the Assessees in addition to determining the demand. The Court referenced a Supreme Court decision emphasizing that delay is not presumed to be deliberate and that litigants do not benefit from delays. Considering the initiation of penalty proceedings, the Court deemed it just to test the merits of the assessment orders in the appeals before the ITAT.

Rights and Contentions of Both Parties:
The Court set aside the ITAT's order, condoned the delay in filing the appeals, and restored the appeals to the ITAT for a hearing on merits. The Assessees were directed to pay costs and deposit a specified amount with the Delhi High Court Legal Services Committee. The Court clarified that it had not examined the merits of the matters, leaving the rights and contentions of both parties open for further proceedings.