The Income Tax Appellate Tribunal (ITAT), Bangalore Bench, has dismissed three appeals filed by an assessee for Assessment Year (AY) 2017-18 after finding that delays of nearly four years in approaching the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (CIT(A)/NFAC) were not supported by any sufficient, cogent or credible explanation.
The Bench of Keshav Dubey (Judicial Member) and Waseem Ahmed (Accountant Member) has observed that the assessee had failed to demonstrate sufficient cause for condoning delays of 1,480 days in the quantum appeal and 1,298 days in the two penalty appeals. The Tribunal consequently upheld the dismissal of the appeals by the CIT(A)/NFAC as barred by limitation.
The first appeal concerned the quantum assessment, while the other two related to penalty proceedings under Section 270A and Section 271AAC of the Income Tax Act, 1961. Since the issues concerning limitation and condonation were interconnected, the Tribunal clubbed all three matters and disposed of them through a common order.
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The quantum appeal challenged, among other things, additions of ₹41,69,200 as unexplained cash deposits under Section 69A, ₹3,69,225 as unexplained credits under Section 69A, and ₹1.50 lakh as income from business or profession, besides levy of interest under Sections 234A and 234B.
However, the Tribunal did not examine these additions on merits because the appeals had already been dismissed by the first appellate authority on the ground of limitation.
Before the Tribunal, the assessee argued that he had been unaware of the assessment proceedings and had limited knowledge of the income-tax assessment and appellate process.
It was submitted that notices had allegedly been issued through email and post, but the assessee was not commercially or financially active and did not regularly check his emails. According to the assessee, he was therefore unaware of the notices and the assessment and penalty proceedings ultimately proceeded ex parte.
The assessee further contended that his primary sources of income were rental and interest income, which were below ₹5 lakh for AY 2017-18 and earlier years. He claimed that his living expenses were largely borne by his father or spouse and that he had stopped filing income-tax returns after AY 2013-14.
He also relied upon the disruption caused by the COVID-19 pandemic, stating that the lockdown affected his ability to review communications from the Income Tax Department and determine what action was required.
According to the assessee, he discovered the outstanding tax demand and assessment and penalty orders only around March 2023, when he sought to obtain a visa for overseas travel and was required to furnish tax returns. He thereafter approached a tax consultant and was advised to file appeals.
The department strongly opposed the assessee’s plea for condonation.
The Department submitted that the assessee had failed to establish any sufficient cause for a delay extending to almost four years. It argued that the explanation was general and vague and lacked supporting documentary evidence.
The department also pointed out that the notices had not merely been sent electronically but had also been dispatched through speed post. Despite receiving such communications, the assessee allegedly failed to respond to them.
The CIT(A)/NFAC had similarly found that the reasons advanced by the assessee were general and unsupported. The appellate authority observed that no material had been produced to show that the assessee had made efforts to verify his tax compliance or status during the intervening period of more than four years.
A significant aspect of the Tribunal’s reasoning concerned the assessee’s claim that he was unaware of the applicable tax provisions and was not filing returns because his income was below ₹5 lakh.
The Tribunal rejected this explanation.
It noted that the assessee had in fact filed income-tax returns for AYs 2011-12, 2012-13 and 2013-14. Consequently, the Tribunal held that it could not accept the contention that the assessee was unaware of the legal requirements relating to income-tax returns.
The Tribunal also noted that the assessee had sold a property on October 10, 2013, for ₹39 lakh but had not offered the capital gain for taxation for AY 2014-15.
Further, the Tribunal rejected the contention that the assessee was justified in not filing returns for AYs 2014-15 to 2019-20 merely because his income was below ₹5 lakh. It pointed out that the basic exemption limit during the relevant period was ₹2.50 lakh, not ₹5 lakh.
The Bench clarified that the fact that an individual may not have tax payable on income up to a particular amount does not, by itself, dispense with a statutory obligation to file a return where such obligation otherwise exists.
The Tribunal also considered the assessee’s reliance on the COVID-19 lockdown.
It observed that the assessee’s own affidavit indicated awareness of communications issued by the Revenue. According to the Bench, this weakened the argument that he was completely unaware of the proceedings.
The Tribunal held that even after taking the pandemic into account, the assessee had remained inactive for nearly four years and had not furnished a cogent reason explaining why the appeals could not have been filed within the prescribed period.
The Bench observed that the assessee’s explanation that the assessment orders came to his attention only in March 2023, when he required tax documents for obtaining a visa, demonstrated inaction rather than a legally sufficient cause for the extraordinary delay.
While deciding the issue, the ITAT relied upon several judgments of the Supreme Court dealing with condonation of delay.
The Tribunal referred to Sheo Raj Singh (Deceased) through LRs & Others v. Union of India, where the Supreme Court held that condonation is discretionary and depends upon the sufficiency and acceptability of the explanation offered. The Tribunal particularly noted the distinction between an actual “explanation” and an “excuse”.
The Bench also referred to the Supreme Court’s decision in Rajneesh Kumar & Anr. v. Ved Prakash, which emphasised that limitation provisions exist to ensure that legal rights are asserted within a reasonable period and that the law generally assists those who are vigilant rather than those who remain inactive.
The Tribunal further relied upon H. Guruswamy & Ors. v. A. Krishnaiah, where the Supreme Court stressed that concepts such as a liberal or justice-oriented approach cannot be used to undermine the substantive law of limitation.
The Supreme Court had also observed in that case that the length of delay is relevant and that, while considering condonation, the court must first examine the bona fides of the explanation rather than begin with the merits of the underlying dispute.
The Bangalore ITAT ultimately treated limitation as an important substantive principle rather than a mere procedural technicality.
The Bench observed that the assessee had failed to provide any acceptable or cogent reason capable of justifying a delay of more than four years. It agreed with the CIT(A)/NFAC that the explanations were general, vague and unsupported by corroborative or documentary evidence.
The Tribunal also found that there was no material demonstrating that the assessee had made any effort to ascertain his tax-compliance position during the lengthy period of inaction.
Accordingly, it found no reason to interfere with the CIT(A)/NFAC’s orders refusing to condone the delays of 1,480 days and 1,298 days. The three appeals were therefore dismissed in limine as barred by limitation.
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