SHRI KHANDESHWAR SAHAKARI PATSANSTHA LTD,MUMBAI V. INCOME TAX OFFICER - 27(3)(1), MUMBAI, NAVI MUMBAI

ITA 487/MUM/2025

AI Insights

The case involves Shri Khandeshwar Sahakari Patsanstha Ltd., a credit cooperative society, which did not file its income tax return for the assessment year 2017-18. The Income Tax Department discovered that the society had deposited a significant amount of cash during the demonetization period but had not filed a return. Consequently, an assessment was made under section 144 of the Income-tax Act, 1961, resulting in a substantial tax demand. The society's appeal to the Ld. CIT(A) was initially dismissed due to a delay in filing. The Tribunal's decision to condone the delay was based on the circumstances presented, including the society's lack of awareness of tax obligations and the subsequent engagement of a Chartered Accountant.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 706187 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: Collector of Land Acquisition v. Katiji, Bajaj Hindustan Ltd. v. JCIT, Sandhya Rani Sarkar v. Sudha Rani Debi, OP Kathpaliya v. Lakhmir Singh, Ornate Traders (P.) Ltd. v. ITO, Concord of India Insurance Co. Ltd. v. Smt. Nirmala Devi, Ram Nath Sao v. Gobardhan Sao
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANSHU JOSHI
• Assessee Lawyers: KUMAR KALE
• Keywords: Condonation of delay; Set aside; Business income; Opportunity of being heard; Bonafide belief; Avoidance of tax; Charitable institution
• Section: 144; 142(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI SANDEEP GOSAIN (JUDICIAL MEMBER) AND SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) ITA No. 487/MUM/2025 Assessment Year: 2017-18 Shri Khandeshwar Sahakari Patsanstha Ltd. C/o. Shantaram Jagtap, Ravji Sojpal Chawl No. 7, Room No.18, T.J. Road, Sewri, Mumbai-400015 Vs. Income Tax Officer-27(3)(1), Mumbai 422, 4th Floor, Tower No. 6, Vashi Railway Station Complex, Vashi, Mumbai- 400703 PAN NO. ABYFS 0132 L Appellant Respondent Assessee by : Mr. Kumar Kale Revenue by : Mr. Hemanshu Joshi, CIT-DR Date of Hearing : 23/06/2025 Date of pronouncement : 30/06/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 31.12.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short „the Ld. CIT(A)‟] for assessment year 2017-18, raising following grounds: “Being aggrieved by the order dated 31.12.2024 passed by the learned Commissioner of Income Tax (Appeals), National Shri Khandeshwar Sahakari Patsanstha Ltd 2 ITA No. 487/MUM/2025 Faceless Appeal, Centre, Delhi \"Ld. CIT(A)\" u/s. 250 of the Income-tax Act, 1961 (\"Act\"), your appellant prefers this appeal, among others, on the following grounds of appeal, each of which is without prejudice to, and independent of, the other: 1. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in not condoning the delay in filing the appeal before him. The appellant submits that the Ld. CIT(A) failed to appreciate that the delay was caused due to reasonable and sufficient reasons, and therefore, he ought to have condoned the delay. Your appellant, therefore, prays that the aforesaid delay may kindly be condoned, and the matter be restored to the file of the Ld. CIT(A) for adjudication on its merits. 2. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in not deleting the addition of Rs. 13,96,500/- made by the Ld. AO u/s. 69A of the Act. Your appellant, therefore, prays that the aforesaid addition of Rs. 13,96,500/- be deleted. 3. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in not deleting the addition of Rs.1,10,75,097/ made by the Ld. AO as appellant's business income. Your appellant, therefore, prays that the aforesaid addition of Rs. 1,10,75,097/- be deleted. 4. Your appellant craves leave to alter, modify, amend or delete any of the above grounds of appeal, or to add one or more new ground(s), as may be necessary.” 2. Briefly stated facts of the case are that the assessee society did not file its return of income for the year under consideration. The Income-tax Department on the basis of the information gathered during the phase of the online verification under(“Operation Clean Money) found that assessee had deposited cash of Rs. 13,96,500/- in its bank account during the demonetization period (09.11.2016 to 30.12.2016) in old currency notes (Rs. 500/- and 1,000/-) notes but had not filed return of income and therefore notice u/s 142(1) of the Act, 1961 (in short „the Act‟) was issued to the assessee on Shri Khandeshwar Sahakari Patsanstha Ltd 3 ITA No. 487/MUM/2025 08.03.2018 calling for filing a true and correct return of income for assessment year under consideration but no compliance was made on the part of the assessee and therefore assessment was completed said u/s 144 of the act on 07.10.2019 assessing the total income at Rs. 1,24,71,597/-. The assessee filed the appeal before the Ld. CIT(A) but no compliance was made on the part of the assessee of the various notice issued by Ld. CIT(A). The Ld. CIT(A) further observed that the assessee was required to file appeal within 30 days of passing of the assessment order but the assessee had filed the appeal on 30.01.2020 i.e. delay of 85 days. Before the Ld. CIT(A) it was submitted that office bearer of the society were illiterate and the turnover of the society was also meager i.e. Rs. 5,002/- only and there was no professional for handling the taxation work. In support of contention an affidavit was filed and it was further submitted that delay was not intentional and hardship would be caused due to such heavy demand. The Ld. CIT(A) however noted that assessee was credit co-operative society engaged in providing credit to members. The Ld. CIT(A) observed that the assessee should have been more vigilant in complying the limitation in filing the appeal and the illiteracy of the office bearer of the society did not impede in filing of the appeal after due date, surely it could not have impeded filing of the appeal within the due date. The Ld. CIT(A) following the various decision of the Hon‟ble Court‟s referred in the impugned order held that there was no sufficient cause for filing the appeal with the delay of 85 days. Accordingly, he Shri Khandeshwar Sahakari Patsanstha Ltd 4 ITA No. 487/MUM/2025 dismissed the appeal in-limine. Aggrieved the assessee is in appeal before us by filing grounds as reproduced as above. 3. We have heard rival submission of the parties and perused the relevant material on record. The impugned order passed by the Ld. CIT(A) reveals that the appeal filed by the assessee was dismissed in limine on the ground of delay of 85 days in filing, without adjudicating upon the merits of the matter. The relevant finding recorded by the Ld. CIT(A) is extracted below for ready reference: “5.5 In the present case, on facts, as already noted above, it has been seen that the appellant committed an inordinate delay in filing of appeal of 85 days. The delay shows negligence and lack of due diligence as the appellant has not provided any grounds which would have shown sufficient cause for delay, and thus, sufficient cause is clearly not established in this case. The appellant has, as already seen, been non-compliant in the assessment proceedings. Such non- compliance in assessment proceedings shows negligence and lack of good faith. Further, without prejudice, even 'sufficient cause' could not have saved the case of the appellant owing to inordinate delay, negligence and lack of due diligence, as per the judgment of the Hon'ble Supreme Court in the PATHAPATI SUBBA REDDY (DIED) (supra) case. Hon'ble Supreme Court, as already seen, has pointed out:  An appeal which is preferred after the statute of Limitation is liable to be dismissed.  The use of the word 'shall' connotes that the dismissal is mandatory subject to the exceptions.  Section 3 of the Limitation Act is peremptory and casts an obligation upon the court to dismiss an appeal which is presented beyond limitation. This is the general law of limitation.  Section 5 of the Limitation Act empowers the courts to admit an appeal even if it is preferred after the Shri Khandeshwar Sahakari Patsanstha Ltd 5 ITA No. 487/MUM/2025 prescribed period provided the proposed appellant gives 'sufficient cause' for not preferring the appeal within the period prescribed.  Power to condone the delay is discretionary in nature and may not be exercised even if sufficient cause is shown, based upon host of other factors such as negligence, failure to exercise due diligence etc.  Merely because some persons obtained relief in similar matter, it does not mean that others are also entitled to the same benefit if the court is not satisfied with the cause shown for the delay in filing the appeal;  Merits of the case are not required to be considered in condoning the delay. 5.6 On the basis of the above, it is held that the delay in filing appeal cannot be condoned in the case of the appellant.” 3. Thus, the issue that arises for consideration before us is whether the explanation tendered by the assessee for the delay in filing the appeal constitutes “sufficient cause” as contemplated under Section 249(3) of the Act. The relevant submission made on the part of the assessee in the affidavit is reproduced as under: “I, Shri. Pandurang Maruti Ghule, the Chairman of Shri Khandeshwar Sahakari Patsanstha Ltd., Shop no 41/2, Janta Nagar, P.Y.Thorat Marg, Chembur, Mumbai 400089, do hereby on behalf of the Society solemnly state and declare as under: I state and declare that I am a Chairman and Principal Officer of Shri Khandeshwar Sahakari Patsanstha Ltd. I further state and declare myself and other office bearers of the society are vernacular matriculate and therefore we are not aware of income tax obligations and proceedings I further state and declare that the activities of the Society are very meager and net profit earned by the Society for the FY 2016- 17 is Rs.5002/-In view of the said factthe management of the Society has not submitted the return of income under bonafide belief that the Society is not required to submit the Return of Shri Khandeshwar Sahakari Patsanstha Ltd 6 ITA No. 487/MUM/2025 Income. I further state and declare that the officer bearers of the Society were not aware of online show cause notice issued by the assessing officer and therefore we could not respond to such notice. I further state and declare that we were not aware of on line assessment order passed by assessing officer and we came to know when the physical copy of the said order was sent at our address through post which was delivered to our neighbor shop who has handed over in the office of Society on 28/10/2019. I further state and declare that the Appeal against the said order was required to be submitted on or before 27/11/2019. However we could not submit the Appeal due to the fact that we were not aware of the tax obligations and also the Society has no Chartered Accountant who looks after the tax works. I further state and declare that our office bearers enquired with the other Societies about the taxation issues and finally contacted Chartered Accountant who can look after our taxation work and finally appointed Chartered Accountant on 19/01/2020 to look after out taxation matters. I further state and declare that the delay in filing Income Tax Appeal is technical in nature and without any intention of avoidance of tax and the Society will not get benefited by delaying the Appeal.” 3.1 The explanation offered by the assessee, supported by a duly sworn affidavit of the Chairman of the Society, is summarised as follows: the office bearers of the Society were vernacular matriculates with no knowledge of income-tax proceedings or online assessment procedure; they were unaware of the statutory requirement to file a return of income due to meagre profits earned; they remained unaware of the assessment order until it was physically received; and upon becoming aware, they promptly engaged a Chartered Accountant to assist with legal compliance. It is also asserted that the delay was neither intentional nor motivated Shri Khandeshwar Sahakari Patsanstha Ltd 7 ITA No. 487/MUM/2025 by any malice, but occasioned by a bona fide misunderstanding of tax obligations. 3.2 The period prescribed for filing an appeal before the Ld. CIT(A) is 30 days under Section 249(2) of the Act. However, sub-section (3) thereof vests a discretionary power in the appellate authority to condone delay, if sufficient cause is demonstrated. For evaluating sufficient cause for condonation of delay, For evaluating sufficiency of cause for condonation of delay, the Hon‟ble Supreme Court in the case of Collector of Land Acquisition v. Katiji AIR (1987) 167 ITR 471 (SC) has laid down following six principles: (i) Ordinarily, a litigant does not stand to benefit by lodging an appeal late. (ii) Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. (iii) \"Every day's delay must be explained\" does not mean that a pedantic approach should be taken. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common-sense pragmatic manner. (iv) When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. (v) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. (vi) It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.\" 3.3 The Co-ordinate Bench of the Tribunal in the case of Bajaj Hindustan Ltd. v. JCIT (2005) 92 ITD 11 has condoned the delay for one of the reason that Revenue had not filed any counter Shri Khandeshwar Sahakari Patsanstha Ltd 8 ITA No. 487/MUM/2025 affidavit opposing the application for condonation of the delay. The Hon‟ble Supreme Court in the case of Sandhya Rani Sarkar v. Sudha Rani Debi AIR 1978 SC 537 held that non-filing of affidavit in opposition to an application for condonation of the delay may be sufficient cause for condonation of the delay. The Coordinate bench of Tribunal in the case of Bajaj Hindustan Ltd. (supra), accordingly, condoned the more than 180 days. The Hon‟ble Madras High Court in the case of Sreenivas Charitable Trust v Dy. CIT [2006] 154 Taxman 377/280 ITR 357 held that in order to advance substantial justice which is of prime importance, the expression \"sufficient cause\" should receive a liberal interpretation. The Hon‟ble Supreme Court in the case of OP Kathpaliya v. Lakhmir Singh AIR 1984 SC 1744 has held that refusal to condone the delay results in grave miscarriage of justice, thus it would be a ground to condoning the delay. The Hon‟ble Supreme court in the case of Ornate Traders (P.) Ltd. v. ITO (2008) 312 ITR 193 (Bombay) held that expression 'sufficient cause' will always have relevancy to reasonableness and actions, which can be condoned by Court and it should fall within realm of normal human conduct or normal conduct of a litigant. In the case of Concord of India Insurance Co. Ltd. v. Smt. Nirmala Devi (1979) 118 ITR 507 (SC) Hon‟ble Supreme Court held that what is to be looked into is whether there is any taint of mala fide or element of recklessness or ruse and if neither is present, legal advice honestly sought and actually given, must be treated as sufficient cause for condoning Shri Khandeshwar Sahakari Patsanstha Ltd 9 ITA No. 487/MUM/2025 the delay. The Hon‟ble Supreme Court in the case of Ram Nath Sao v. Gobardhan Sao, AIR 2002 SC 1201 held that by taking a pedantic or hyper-technical view, the explanation furnished by the assessee for condonation of delay should not be rejected particularly where assessee had arguable points of law on merits and refusal for condonation of delay will cause erroneous loss and irreparable injury to the aggrieved party by terminating lis at the inception. 3.4 The object of prescribing the time period for filing of the appeal is to expedite the proceedings before the concerned authorities and advance cause of the substantial justice 3.5 In the present case, the explanation of the assessee, does not appear to be tainted with mala fides or indifference. The omission appears to be bona fide rather than deliberate default. 3.6 In view of ratio of the decisions referred above and uncontroverted affidavit filed by the assessee, we feel it appropriate to condone the delay in filing the appeal before the ld. First Appellate Authority. 4. In the totality of the circumstances, and in view of the pronouncements of the Hon‟ble Supreme Court and various High Courts, we are persuaded to accept the explanation tendered by the assessee as constituting “sufficient cause” for condonation of delay. Accordingly, the delay of 85 days in filing the appeal before the Ld. CIT(A) is hereby condoned. Having condoned the delay, we note that Shri Khandeshwar Sahakari Patsanstha Ltd 10 ITA No. 487/MUM/2025 the Ld. CIT(A) has not adjudicated the matter on merits, we, therefore, consider it just and appropriate to set aside the impugned order and restore the matter to the file of the Ld. CIT(A) for de novo adjudication on all issues raised in the appeal, in accordance with law. The assessee shall be afforded a reasonable opportunity of being heard and to place all relevant material on record in support of its contentions.. The ground No. 1 of the appeal of the assessee is accordingly allowed. 5. Since we have restored the appeal to the file of the Ld. CIT(A), the other grounds raised on merits are not adjudicated upon at this stage. Accordingly same are dismissed as infructuous. 6. In the result, the appeal of the assessee is allowed for statistical purpose. Order pronounced in the open Court on 30/06/2025. Sd/- Sd/- (SANDEEP GOSAIN) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 30/06/2025 Disha Raut, Stenographer Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, Shri Khandeshwar Sahakari Patsanstha Ltd 11 ITA No. 487/MUM/2025 //True Copy// (Assistant Registrar) ITAT, Mumbai "