2025 (5) TMI 1313 - AT - Income Tax

Delay of 536 days - Eligible reasons pf delay - HELD THAT - Upon analyzing the reasons cited for the delay we observe that the employee whose email ID was used in Form 35 had left the assessee s organization. Due to this the assessee was unaware of the order passed by the CIT(A). This point raised by the AR was not disputed by the ld. DR. Thus we find that there is a reasonable cause that prevented the assessee from filing the appeal within the statutory time limit. Accordingly we condone the delay in filing the appeal and proceed to adjudicate the matter on merits. TDS u/s 194C - non deduction of TDS - assessee contended that all the recipients of the payments had accounted for the income and filed their income tax returns. Therefore the assessee argued that he should not be treated as an assessee-in-default - HELD THAT - Now before us the assessee has submitted additional evidence such as a Chartered Accountant s certificate Form 26A with annexures income tax returns and Form 3CD showing that the payments made by the assessee were duly considered as income by the recipients in their tax returns. These documents are relevant and necessary to decide the matter. Hence under Rule 29 of the Income Tax (Appellate Tribunal) Rules we admit these additional evidences as they were not examined by the lower authorities. Accordingly we set aside the matter to the file of the learned CIT(A) for fresh adjudication in accordance with law. Stay petition - Assessee has already paid more than 20% of the outstanding demand. Additionally the assessee appears to have a strong case on merits. Therefore we are of the view that the balance of convenience lies in favour of the assessee. Accordingly we grant a stay on the recovery of the remaining outstanding demand by the Revenue. Hence we also direct the Revenue to lift the attachment on the assessee s bank account. Hence the stay petition filed by the assessee is allowed.

1. ISSUES PRESENTED and CONSIDERED

- Whether the delay of 536 days in filing the appeal before the Tribunal can be condoned given the circumstances explained by the assessee.

- Whether the ex-parte dismissal of the appeal by the learned CIT(A) was justified, considering the non-receipt of notices during the COVID-19 period.

- Whether the assessee is liable to be treated as an assessee-in-default for failure to deduct TDS under section 194C of the Income Tax Act, when the recipients have declared the income and filed their returns.

- Whether additional evidence submitted before the Tribunal can be admitted for deciding the matter on merits.

- Whether the stay petition filed by the assessee against recovery of outstanding demand should be granted.

2. ISSUE-WISE DETAILED ANALYSIS

Delay in Filing Appeal and Condonation

Relevant legal framework includes the principle that delay in filing an appeal can be condoned if sufficient cause is shown, irrespective of the length of delay. Precedents establish that bona fide reasons and absence of negligence justify condonation.

The Court examined the facts that the appeal was originally filed physically in January 2017 but migrated to the National Faceless Appeal Centre (NFAC) following a 2020 notification. Notices issued by NFAC were sent mostly during the COVID-19 period to an email address of an employee who had left the assessee's organization. The assessee was under the bona fide belief that notices would be received physically and was unaware of electronic notices. The delay was discovered only after receiving a notice under section 226(3) for bank attachment in February 2025.

The Departmental Representative argued negligence on the part of the assessee. However, the Court found no dispute regarding the employee's departure and the resulting non-receipt of notices, which constituted reasonable cause.

The Court applied the law to facts and concluded that the delay was neither deliberate nor intentional, and condoned the delay accordingly.

Ex-parte Dismissal by CIT(A) and Non-Representation

The CIT(A) had dismissed the appeal ex-parte due to the assessee's non-appearance. The Court noted that all notices from the CIT(A), except one, were issued during the COVID-19 period, when the assessee was unaware of them due to the email issue. Hence, it could not be held that the assessee was negligent in responding.

This reasoning aligns with principles of natural justice, where failure to appear due to non-receipt of notices does not justify ex-parte dismissal without opportunity to be heard.

Liability under Section 194C for Non-Deduction of TDS

The CIT(A) disallowed the claim on the ground that the assessee failed to deduct TDS under section 194C. The assessee contended that the recipients had accounted for the income and filed their income tax returns, negating the assessee's liability as an assessee-in-default.

However, the CIT(A) rejected this contention due to absence of supporting documentary evidence at that stage.

Before the Tribunal, the assessee produced additional evidence including a Chartered Accountant's certificate, Form 26AS with annexures, income tax returns of recipients, and Form 3CD, demonstrating that payments were duly considered as income by the recipients.

The Court admitted this additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, as these were not examined earlier and were necessary for proper adjudication.

The Court set aside the matter to the CIT(A) for fresh adjudication in light of the admitted evidence, thereby partially allowing the appeal for statistical purposes.

Admission of Additional Evidence

The Tribunal relied on Rule 29 of the ITAT Rules which permits admission of additional evidence that was not available or examined by lower authorities, if it is relevant and necessary for deciding the case.

The Court found the additional documents submitted by the assessee to be relevant and necessary, and admitted them accordingly.

Stay Petition Against Recovery of Outstanding Demand

The assessee had already paid more than 20% of the outstanding demand and appeared to have a strong case on merits.

The Court applied the principle of balance of convenience and found it in favour of the assessee.

Accordingly, the Court granted stay on recovery of the remaining demand and directed the Revenue to lift the attachment on the assessee's bank account.

3. SIGNIFICANT HOLDINGS

- "The length of the delay is not material if there is sufficient cause that prevented the assessee from filing the appeal on time."

- "Due to the employee's departure and consequent non-receipt of notices sent to his email, the assessee was unaware of the order passed by the learned CIT(A). This constitutes reasonable cause to condone the delay."

- "Ex-parte dismissal of the appeal by the learned CIT(A) cannot be sustained where the assessee was unaware of the notices due to circumstances beyond his control."

- "Additional evidence such as Chartered Accountant's certificate, Form 26AS, income tax returns, and Form 3CD, which were not examined by the lower authorities, are relevant and necessary and are admitted under Rule 29 of the ITAT Rules."

- "The matter is set aside to the learned CIT(A) for fresh adjudication in accordance with law."

- "Considering the payment of more than 20% of the demand and strength of the case, the balance of convenience lies in favour of the assessee, warranting grant of stay and lifting of bank attachment."

The final determinations are that the delay in filing the appeal is condoned, the appeal is allowed for statistical purposes with directions for fresh adjudication by the CIT(A), and the stay petition is allowed with directions to lift the bank attachment.

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