2025 (6) TMI 1701 - AT - Income Tax

Delay of 477 days in filing before ITAT - eligible reasons of delay - negligence of the accountant had resulted in ex-parte decision of the two lower authorities - HED THAT - As the the assessee has been lackadaisical in its approach and it has tried to seek condonation of delay in a nonchalant manner. The gross negligence on the part of the assessee and the lack of bona fides does not make it a fit case for condonation of delay. As held by the Hon ble Apex Court 2015 (1) TMI 1053 - SUPREME COURT the liberal approach has to encapsule the conception of reasonableness and it cannot be allowed a totally unfettered free play. We can t condone the delay on the bedrock of the principle that adjudication of a lis on merits is seminal to justice dispensation system. The conduct behaviour and attitude of the assessee relating to its inaction or negligence are relevant factors to be taken into consideration. The gross negligence of the assessee in not filing its return of income and in not complying to the notices at any stage reflects poorly on the conduct behaviour and attitude of the assessee. There are inconsistencies in the declarations as made by the assessee and the accountant regarding the delay in filing the present appeal. There was no careful concern in drafting the condonation application by the assessee considering the affidavit of the accountant. The parameters laid down by the Supreme Court when not to condone delay get squarely attracted to the facts of the present case and we find no reason to condone the delay. In the case of Mani Ram Seva Nyasi Sangh Ayodhya 2020 (6) TMI 109 - SC ORDER as held that it was otherwise the duty of the assessee to watch the affairs of its firm and delay of few days or months can be considered but delay of years is required to be examined minutely. As already discussed earlier there was gross negligence on the part of the assessee and it didn t exercise any care to enquire about the status of the second appeal and merely tried to shift the responsibility on his accountant. On the other hand the accountant has only owned up the responsibility for the ex-parte order of the CIT(A) and has not acknowledged any delay on his part for filing the present appeal. Since the assessee has failed to properly explain the reason for delay in filing the present appeal we don t find any ground to condone the delay and consequently the appeal of the assessee is dismissed as time barred.

Summary

The primary issue considered by the Appellate Tribunal was whether the delay of 477 days in filing the present appeal by the assessee could be condoned under Section 253(5) of the Income Tax Act, 1961. The Tribunal examined whether the explanation offered by the assessee, attributing the delay to the gross negligence of its accountant, constituted 'sufficient cause' for condonation of delay. Additionally, the Tribunal considered the implications of the assessee's conduct during the assessment and first appellate proceedings, including failure to file return and non-compliance with notices, which resulted in ex-parte orders by the Assessing Officer and the Commissioner of Income Tax (Appeals).

The Tribunal also addressed the legal principles governing condonation of delay, referencing authoritative judicial precedents that outline the criteria and judicial discretion applicable in such matters. The interplay between the assessee's responsibility and the accountant's negligence was scrutinized to determine whether the delay could be excused.

Issue-wise Detailed Analysis:

Issue 1: Whether the delay of 477 days in filing the appeal is liable to be condoned?

Relevant Legal Framework and Precedents: Section 253(5) of the Income Tax Act empowers the Tribunal to admit an appeal after the prescribed period if 'sufficient cause' is shown for the delay. The Supreme Court's decision in Esha Bhattacharjee v. Managing Committee of Raghunathpur was extensively relied upon, which elucidates the principles for condonation of delay. The Court emphasized a liberal, pragmatic, and justice-oriented approach, while also recognizing that gross negligence and lack of bona fides are significant factors against condonation. The principles include:

• Liberal approach balanced with reasonableness.
• Consideration of the conduct, behaviour, and attitude of the party seeking condonation.
• Distinction between inordinate delay and short delay, with stricter scrutiny for the former.
• Rejection of condonation where explanation is not bona fide or is concocted.
• Judicial discretion must be exercised on objective reasoning.

Court's Interpretation and Reasoning: The Tribunal acknowledged the principle that delay should be considered liberally to avoid injustice. However, it found that the assessee's explanation-solely blaming the accountant's negligence-was insufficient. The assessee was equally responsible for non-compliance, including failure to file income tax returns and to respond to notices during assessment and appellate proceedings, which led to ex-parte orders. The Tribunal held that the assessee should have been vigilant and exercised due diligence to ensure timely filing of the appeal, especially after being aware of the ex-parte orders passed against it.

Key Evidence and Findings: The assessee submitted affidavits from its Secretary and the accountant explaining the delay. The accountant admitted negligence before the Commissioner of Income Tax (Appeals) but did not admit negligence for the delay in filing the present appeal. The assessee's conduct was characterized by gross negligence and lack of bona fides, demonstrated by non-filing of returns and non-compliance with notices. The inconsistency in affidavits and the nonchalant drafting of the condonation application further weakened the assessee's case.

Application of Law to Facts: Applying the principles from the Supreme Court's judgment, the Tribunal found that the delay was inordinate and the explanation was neither reasonable nor bona fide. The assessee's failure to monitor the proceedings and reliance solely on the accountant's lapse did not amount to sufficient cause. The Tribunal emphasized that the liberal approach to condonation is not unfettered and must consider the balance of justice and the conduct of the parties.

Treatment of Competing Arguments: The assessee argued that the delay was caused by gross negligence of the accountant and that it had acted in good faith by entrusting the matter to the accountant. The Revenue contended that the assessee was equally responsible and could not escape liability by blaming the accountant. The Tribunal sided with the Revenue, noting that the assessee's inaction and negligence were significant and that it failed to exercise due diligence despite knowledge of adverse ex-parte orders.

Conclusions: The Tribunal concluded that the delay in filing the appeal was not condonable. The assessee's explanation did not amount to 'sufficient cause' under Section 253(5) of the Act. The appeal was dismissed as time barred.

Issue 2: Whether the assessee's conduct during assessment and first appeal proceedings impacted the condonation application?

Relevant Legal Framework and Precedents: The principle that the conduct and behaviour of a party seeking condonation are relevant factors is well established. The Supreme Court's guidelines in Esha Bhattacharjee and Mani Ram Seva Nyasi Sangh Ayodhya v. CIT were cited, emphasizing that gross negligence and lack of bona fides weigh heavily against condonation.

Court's Interpretation and Reasoning: The Tribunal observed that the assessee's failure to file its return for the relevant assessment year, non-compliance with notices under Sections 142(1) and 133(6), and failure to respond to the CIT(A) despite multiple opportunities, reflected gross negligence. This conduct resulted in ex-parte orders at both levels, which the assessee did not attempt to rectify in a timely manner. The Tribunal held that such behaviour demonstrated a lack of bona fide intention to prosecute the appeal diligently.

Key Evidence and Findings: The record showed no return was filed, and the AO had to rely on bank information to complete the assessment. The CIT(A) had granted three opportunities, but the assessee failed to provide explanations or submissions. The affidavits filed did not adequately explain the delay or the lack of compliance during earlier proceedings.

Application of Law to Facts: The Tribunal applied the legal principle that the party's conduct is a relevant consideration in condonation applications. The assessee's inaction and negligence were found to be significant and indicative of lack of bona fides, which militated against condonation.

Treatment of Competing Arguments: The assessee's reliance on the accountant's negligence was rejected as an insufficient excuse. The Revenue's argument that the assessee was responsible for its own affairs and could not shift blame was accepted.

Conclusions: The Tribunal concluded that the assessee's conduct during the assessment and first appeal proceedings negatively impacted its claim for condonation of delay, reinforcing the decision to dismiss the appeal.

Significant Holdings:

"The delay occurred in filing the appeal should be considered liberally. At the same time, it is also settled law that there is no general proposition that mistake of the counsel by itself is always sufficient ground for condonation of delay. Every case is required to be considered on the basis of facts and circumstances of the case."

"The assessee cannot escape by merely passing on the blame for delay in filing the appeal to the accountant. The attitude of the assessee was of gross negligence as it neither filed its return of income nor complied and watched the affairs of its proceedings at any stage."

"The explanation of the assessee for delay in filing the present appeal is, therefore, not found to be bona-fide."

"The liberal approach has to encapsule the conception of reasonableness and it cannot be allowed a totally unfettered free play."

"The conduct, behaviour and attitude of the assessee relating to its inaction or negligence are relevant factors to be taken into consideration."

"The parameters laid down by the Supreme Court, when not to condone delay, get squarely attracted to the facts of the present case and we find no reason to condone the delay."

"Since the assessee has failed to properly explain the reason for delay in filing the present appeal, we don't find any ground to condone the delay and consequently, the appeal of the assessee is dismissed as time barred."