2020 (1) TMI 654 - HC - Income Tax

Condonation of delay - sufficient cause of delay - HELD THAT - Reasons for the delay are beyond the control of the appellant and that the said reasons for the delay are on account of ill health of the Managing Director of the appellant company and the accountant s involvement in a major accident and that for the said reasons the Managing Director was not aware of the order of the Commissioner of Income Tax (Appeals) and that he came to know about the same in the month of June, 2017, when he received a phone call from the IT officer about pending arrears on account of the decision passed by the Commissioner of Income Tax Appeals, we are satisfied that the above said explanation can be accepted as sufficient cause for condonation of delay. If the explanation is accepted and an opportunity is provided to have the cause in the proposed appeal decided on merits, the highest that would happen is that the cause would be decided on its merit after hearing the parties. In that view of the matter, it cannot be said that if the delay is condoned after accepting the explanation as a sufficient cause, prejudice would be caused to the revenue/respondent herein. We find that this is a fit case for condonation of delay and affording an opportunity to the appellant to have the intended appeal decided on its merit by the Tribunal. Hence, we hold that the impugned order is liable to be set aside. In our view condoning the delay subserves the ends of justice.

Issues Involved:
1. Condonation of Delay
2. Merits of the Case
3. Disallowance of Sub-Contract and Labor Charges

Detailed Analysis:

1. Condonation of Delay:
The primary issue for consideration was whether sufficient cause was shown for condonation of delay. The appellant argued that the delay of 1635 days in filing the appeal before the Tribunal was due to the serious medical issues of the Managing Director, who suffered from vertigo and required regular medical attention, and the major accident of the accountant, who underwent critical surgery and was advised bed rest for six months. These circumstances led to the order passed on 28.11.2012 going unnoticed until June 2017, when the appellant received a call from the IT department. The Tribunal, however, dismissed the appeal on the ground of delay without considering the merits of the case.

The Court noted that no counter was filed by the respondent before the Tribunal, and the departmental representative opposed the condonation of the extraordinary delay. The Court emphasized that while considering applications for condonation of delay, the applicants are required to show sufficient cause. The expression "sufficient cause" should receive a liberal construction to achieve substantial justice. The Court found that the reasons for the delay were beyond the control of the appellant and accepted the explanation as sufficient cause for condonation of delay.

2. Merits of the Case:
The appellant contended that the Tribunal failed to appreciate the merits of the case and did not provide an opportunity for being heard before passing the order. The appellant argued that the disallowance of 25% of the sub-contract charges and labor charges was not right in law. The Tribunal's refusal to condone the delay resulted in a meritorious matter being thrown out at the threshold, denying justice to the appellant.

The Court held that if the delay is condoned and an opportunity is provided to have the cause decided on merits, the highest that would happen is that the cause would be decided on its merit after hearing the parties. The Court emphasized that the statutory right of appeal cannot be made redundant by dismissing the application for condonation of delay and rejecting the appeal on technical grounds. The cause of substantial justice deserves to be preferred over technical considerations.

3. Disallowance of Sub-Contract and Labor Charges:
The appellant challenged the disallowance of ?37,23,478/- towards sub-contract charges and labor charges, arguing that the disallowance of 25% of the sub-contract charges (?1,29,36,056/-) amounting to ?32,34,014/- and the disallowance of 25% of the labor charges were not right in law. The Tribunal did not adjudicate the disallowance made by the CIT(A) cumulatively.

The Court did not delve into the merits of the disallowance but focused on the procedural aspect of condonation of delay. The Court directed the Tribunal to take up the appeal for hearing and disposal on its merit as per the procedure established by law, uninfluenced by the observations made in the order.

Conclusion:
The Court allowed the appeal, set aside the order dated 26.12.2018, passed in ITA No. 449/VIZ/2017, and condoned the delay in filing the appeal before the Tribunal. The Tribunal was directed to take up the appeal for hearing and disposal on its merit. No order as to costs was made, and miscellaneous petitions, if any, were closed.

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