2025 (1) TMI 37 - AT - Income Tax

Condonation of delay filling appeal - delay of 38 days in filing the appeal by the assessee before CIT(A) - eligible reasons for delay - HELD THAT - Before us the assessee has submitted a detailed affidavit of the chartered accountant of the assessee wherein the complete delay has been explained. It is not the case that the chartered accountant did not act. It is the case where the chartered accountant has under mistaken belief filed a reply on the online portal. The explanation of the chartered accountant clearly shows that that an email was received from the accountant of the company on 13 November 2022 along with the screenshot of the adjustment made. As the chartered accountant was busy for filing income tax returns for his overseas clients which prevented him from paying close attention to the nature of the proceedings and he presumed that the company received a communication under the Act, and he filed a response on 13 November 2022 itself on the online portal. It is not the case of the carelessness on behalf of the assessee or its chartered accountant, but merely a case of misapprehension. It is also correct that in form number 35 the assessee has given a cryptic answer for delay. The explanation of the assessee is that there is no space available for filing a condonation of delay at that particular column. In this case the delay is small and not inordinate. Nobody gains by filing an appeal late when substantial demand has arisen against him. We find that the CIT A has taken a very pedantic approach in considering the delay caused in filing of the appeal which is nominal. We find that now because of the affidavit of the chartered accountant filed before us, there is a sufficient cause of delay in filing of appeal by 38 days.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions presented and considered in this judgment are as follows:

• Whether the delay of 38 days in filing the appeal by the assessee before the Commissioner of Income Tax (Appeals) [CIT(A)] should be condoned.
• Whether the Goods and Services Tax (GST) refund received by the assessee, which was not claimed as an expenditure, should be considered taxable income.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of Delay

• Relevant legal framework and precedents: The principle of condonation of delay is guided by the need to ensure justice is served. The Supreme Court in Collective Land Acquisition versus Mst. Katiji laid down a liberal approach towards condonation, emphasizing that technicalities should not prevent substantial justice.
• Court's interpretation and reasoning: The Tribunal noted that the delay was not inordinate and was explained by the affidavit of the chartered accountant, who was busy with other tax filings and misunderstood the nature of the communication received.
• Key evidence and findings: An affidavit from the chartered accountant detailed the reasons for the delay, which included being preoccupied with other tax obligations and a misunderstanding of the communication as a routine notice.
• Application of law to facts: The Tribunal applied the principles from the Supreme Court's decision, emphasizing that the delay was not deliberate and that a detailed affidavit provided a reasonable explanation.
• Treatment of competing arguments: The Department argued that the reasons given were insufficient, while the assessee contended that the affidavit provided a detailed explanation. The Tribunal sided with the assessee, finding the explanation satisfactory.
• Conclusions: The Tribunal directed the CIT(A) to condone the delay and admit the appeal for consideration on merits.

Issue 2: Taxability of GST Refund

• Relevant legal framework and precedents: The taxability of refunds depends on whether they were claimed as an expense in the profit and loss account. Refunds not claimed as expenses are typically not taxable.
• Court's interpretation and reasoning: The Tribunal noted that the GST refund was not claimed as an expense and thus should not be considered taxable income.
• Key evidence and findings: The assessee provided documentation showing the GST refund was not claimed as an expense, which supported their argument that it was not taxable.
• Application of law to facts: The Tribunal applied the principle that items not claimed as expenses in the profit and loss account are not taxable, aligning with the evidence provided by the assessee.
• Treatment of competing arguments: The Department did not address the merits of this issue as the CIT(A) had dismissed the appeal on procedural grounds. The Tribunal highlighted the need for the CIT(A) to consider the merits upon admitting the appeal.
• Conclusions: The Tribunal did not make a final determination on this issue, as it was remanded to the CIT(A) for consideration on merits.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: The Tribunal quoted the Supreme Court's decision in Collective Land Acquisition versus Mst. Katiji, emphasizing that "substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred."
• Core principles established: The Tribunal reinforced the principle that delays should be condoned when reasonable explanations are provided, especially when the delay is not deliberate or due to negligence.
• Final determinations on each issue: The Tribunal directed the CIT(A) to condone the delay and admit the appeal for consideration on merits, particularly regarding the taxability of the GST refund.

The Tribunal's decision underscores the importance of ensuring justice by considering the merits of a case rather than dismissing it on procedural technicalities, especially when a reasonable explanation for delay is provided.