CIT(A) Condones 13.5-Year Delay in Appeal Against CPC Demand on Non-Resident Seafarer’s Foreign Salary

The Commissioner of Income Tax (Appeals), Delhi–42 has examined a rare and significant case involving a delay of nearly 13.5 years in filing an appeal against a tax demand raised by the Centralised Processing Centre (CPC) under Section 143(1) of the Income-tax Act, 1961 for Assessment Year 2010–11. The appeal arose from an intimation dated 17 May 2011, through which the CPC raised a demand of ₹8.30 lakh, including interest, after restricting deductions claimed by the assessee under Chapter VI-A. The assessee, a non-resident seafarer employed with a foreign shipping company, had earned salary for services rendered outside India while working aboard vessels operating beyond Indian territorial waters. During the relevant assessment year, he qualified as a non-resident under Section 6 of the Act. His salary was credited to an NRE account, and according to him, such income neither accrued nor was received in India and was therefore not chargeable to tax under Section 5(2) of the Act. While filing the return of income, the assessee disclosed the foreign salary under the head “Salary” and inadvertently claimed an equivalent deduction under Chapter VI-A instead of declaring the income as exempt under Section 10 of the Act. The return was processed by CPC, which reduced the Chapter VI-A deduction to ₹1 lakh, computed taxable income at ₹24.59 lakh and raised a demand of ₹8,30,958, including interest. The assessee filed the appeal only in February 2025 and sought condonation of the extraordinary delay, submitting that he was completely unaware of the demand for over a decade. It was explained that due to the nature of his profession, he remained outside India for extended periods and relied entirely on his tax practitioner for compliance. All communications from the Income Tax Department were sent to the email address of the tax practitioner, and no intimation or recovery notice was ever received directly by the assessee. It was further pointed out that the impugned demand did not appear under the “Outstanding Demand” section on the income-tax portal and that refunds for subsequent assessment years were regularly issued along with interest under Section 244A, without any adjustment against the alleged outstanding demand. This, according to the assessee, reinforced his belief that no tax demand existed for the relevant year. The assessee contended that the demand came to his knowledge only when assessment proceedings were initiated for later years, namely AYs 2019–20 and 2020–21. Upon engagement of a new tax professional, the past records were reviewed and the outstanding demand for AY 2010–11 was discovered. The appeal was thereafter filed without further delay. In support of condonation, reliance was placed on several judicial precedents, including Supreme Court rulings, which hold that the expression “sufficient cause” under Section 249(3) of the Act must be construed liberally to advance substantial justice. It was argued that the length of the delay is not decisive and that a litigant should not suffer for the lapse or omission of a professional advisor. The assessee also emphasized that there was no mala fide intention or deliberate negligence on his part. The assessee additionally submitted that identical issues relating to foreign salary income were examined and decided in his favour in subsequent assessment years during scrutiny proceedings, wherein the Assessing Officer accepted that salary earned outside India by a non-resident seafarer was not taxable in India. It was argued that raising a demand on such income violates Article 265 of the Constitution, which mandates that no tax shall be levied or collected except by authority of law. Considering the peculiar facts and circumstances of the case, the CIT(A) observed that the delay appeared to have arisen due to bona fide reasons, including reliance on professional advice, lack of awareness of the demand and absence of any departmental communication to the assessee directly. The appellate authority noted that there was no evidence of willful neglect or intentional delay. Click Here To Read Order Read More: Once Tax Is Paid by Supplier, No Further Demand Can Be Raised on Recipient as It Leads to Double Taxation: CESTAT

CIT(A) Condones 13.5-Year Delay in Appeal Against CPC Demand on Non-Resident Seafarer’s Foreign Salary

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