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Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2025 (5) TMI AT This

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2025 (5) TMI 2123 - AT - Income Tax


1. The core legal questions considered in this appeal include:

- Whether the delay of 2390 days in filing the appeal against the order of the Commissioner of Income Tax (Appeals) can be condoned under the provisions of the Income Tax Act and relevant judicial principles.

- Whether the order passed by the Assessing Officer under Section 144 of the Income-tax Act, 1961, determining total income ex parte, was valid considering the alleged non-service of notices and principles of natural justice.

- Whether the Commissioner of Income Tax (Appeals) erred in dismissing the appeal for want of prosecution without adjudicating on the merits.

- Whether the Assessing Officer was justified in disallowing the foreign tax credit claimed under Section 90 of the Income Tax Act and deductions under Chapter VIA.

- Whether the interest levied under Sections 234B and 234C of the Act was correctly imposed.

2. Issue-wise detailed analysis:

Delay in filing appeal and condonation thereof:

The legal framework governing limitation and condonation of delay is derived from the Limitation Act and judicial precedents, notably the recent Supreme Court ruling in Pathapati Subba Reddy v. Special Deputy Collector (2024), which lays down principles for condoning delay. The Court emphasized that limitation laws serve public policy to bring finality to litigation, and condonation of delay is discretionary, requiring sufficient cause to be shown. Mere negligence or inaction negates condonation, and merits of the case are irrelevant in this exercise.

The appellant filed the appeal on 14.11.2024 against the CIT(A) order dated 28.2.2018, resulting in a delay of 2390 days. The appellant submitted an affidavit explaining the delay, citing factors such as non-resident status residing in Australia, unfamiliarity with Indian tax laws, reliance on an authorized representative (CA Chikkerur) who ceased communication, multiple grievances filed with tax authorities, and rejection of rectification application under Section 119(2)(b) due to delay exceeding six years.

The Department opposed condonation, citing the enormity of delay and lack of sufficient cause. However, the Tribunal noted that the appellant had consistently pursued remedies through various authorities, including CIT(A), grievance mechanisms, and rectification requests, albeit without success or proper guidance to file the appeal before the Tribunal. The appellant's non-resident status and dependence on consultants were considered relevant to assess bonafides and due diligence.

The Tribunal applied the Supreme Court principles, observing that despite the long delay, the appellant was not negligent but made bona fide efforts to resolve the dispute. The failure of authorities to advise timely appeal filing and the appellant's persistent attempts to engage with the tax authorities weighed in favor of condonation. The Tribunal distinguished the present facts from cases where delay was due to negligence or inaction. Consequently, the delay was condoned, and the appeal admitted.

Validity of ex parte assessment under Section 144 and principles of natural justice:

Section 144 permits ex parte assessment if the assessee fails to comply with notices. The appellant contended that notices were not served at the updated address, violating natural justice. The Assessing Officer noted non-response to notices and proceeded ex parte. The appellant claimed to have informed the Department of address change to Australia and that notices were sent to an old address, leading to non-compliance not attributable to him.

The Tribunal observed that the appellant received the assessment order but not the hearing notices. The appellant's authorized representative filed an appeal, indicating some engagement. The CIT(A) dismissed the appeal for want of prosecution, relying on a coordinate bench decision. However, the Tribunal held that the CIT(A) must decide appeals on merits under Section 250(6) and cannot dismiss them merely for non-prosecution, especially when the appellant responded to notices and submitted documents.

The Tribunal concluded that the ex parte assessment was questionable due to non-service of notices at the correct address and that the principles of natural justice were not fully complied with. The appellant's grievance about notice service was credible and warranted reconsideration.

Disallowance of foreign tax credit under Section 90 and deductions under Chapter VIA:

The appellant claimed foreign tax credit under Section 90 of the Act amounting to Rs. 7,04,594/- and deductions under Chapter VIA of Rs. 1,10,977/-. The Assessing Officer disallowed these claims without providing reasons, confusing the foreign tax credit claim with a deduction under Section 54, which the appellant had not claimed.

The Tribunal noted that the appellant furnished details of foreign tax credit and deductions but these were not verified by the Assessing Officer. The Tribunal directed the Assessing Officer to verify the claims after giving the appellant an opportunity of hearing and to decide the claims in accordance with law. The issue was remanded for fresh adjudication.

Dismissal of appeal by CIT(A) for want of prosecution:

The CIT(A) dismissed the appeal based on the appellant's alleged failure to appear for hearings on 22.12.2017 and 25.1.2018, relying on the decision in CIT v. Multiplan India Ltd. The appellant argued that the hearing notices were not properly served or were affected by external events (Karnataka Bandh), and that submissions were made by email in advance. The CIT(A) erroneously recorded that the appellant was unrepresented at the hearing.

The Tribunal held that the CIT(A) erred in dismissing the appeal without considering the appellant's submissions and without adjudicating on merits. Section 251 mandates that the CIT(A) decide appeals by confirming, reducing, enhancing, or annulling assessments with reasons. Summary dismissal for want of prosecution without merit adjudication is impermissible. The appellant's bona fide efforts and communication with the CIT(A) were sufficient to preclude dismissal on procedural grounds.

Levy of interest under Sections 234B and 234C:

The appellant disputed the levy of interest under Sections 234B and 234C, contending it was erroneous. The Tribunal did not adjudicate on this issue directly but restored the appeal to the Assessing Officer for fresh verification and decision, implicitly leaving the interest issue to be decided in accordance with law after full opportunity.

3. Significant holdings and principles established:

"The CIT(Appeals) has to decide the appeal on its own merits. According to section 251 in an appeal against the order of assessment, he has to confirm, reduce, enhance or annul the assessment by giving the detailed reason. He cannot short-circuit the appeal of the assessee and dismiss it for want of prosecution."

"The discretion to condone delay is to be exercised only when sufficient cause is shown. Negligence, inaction, or lack of bonafides disentitle the party from condonation. The merits of the case are irrelevant in condoning delay."

"Non-service of notices at the updated address resulting in ex parte assessment violates principles of natural justice and requires reconsideration."

"The Assessing Officer must verify claims of foreign tax credit under Section 90 and deductions under Chapter VIA after giving the assessee an opportunity of hearing and decide the issue on merits."

"Repeated grievances and attempts by a non-resident assessee to engage with tax authorities, coupled with failure of authorities to advise timely appeal filing, constitute sufficient cause for condonation of delay despite its length."

Final determinations:

- The delay of 2390 days in filing the appeal is condoned on sufficient cause shown.

- The appeal is admitted and restored for adjudication on merits.

- The ex parte assessment order under Section 144 is set aside for fresh consideration, particularly addressing the issue of notice service and natural justice.

- The disallowance of foreign tax credit under Section 90 and deductions under Chapter VIA is set aside for verification and fresh decision by the Assessing Officer.

- The dismissal of appeal by CIT(A) for want of prosecution is quashed as legally impermissible.

- The interest levied under Sections 234B and 234C is to be reconsidered by the Assessing Officer after hearing the appellant.

 

 

 

 

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