Kerala High Court remands ITAT order on 542‑day delay in income tax appeal

Background of the dispute

The matter in Chathamangalam Service Co-Op. Bank Ltd Vs ACIT reached the Kerala High Court from an order of the Income Tax Appellate Tribunal, Cochin Bench. The assessee had filed a statutory appeal for the Assessment Year 2015–16 before the ITAT, but the Tribunal declined to admit the appeal because it was lodged with a delay of 542 days.

The ITAT examined the assessee’s application for condonation of delay and found the explanation unacceptable. The assessee had stated that its work was outsourced to an external agency and, due to this arrangement, the filing of the appeal was delayed. However, the assessee did not furnish even basic information about this agency, such as its name, identity, or any supporting particulars. The Tribunal found such an explanation to be devoid of credibility and refused to condone the delay, resulting in the statutory appeal not being taken on file.

Aggrieved by this, the assessee approached the Kerala High Court, challenging the ITAT’s refusal to condone the delay and seeking restoration of its appeal.

Contentions raised before the High Court

Submissions on behalf of the assessee

Counsel for the assessee, Smt. Preetha S. Nair, candidly accepted before the High Court that the affidavit filed before the ITAT in support of the condonation petition was not appropriately drafted and was deficient in material particulars. However, she contended that:

  • A defective or poorly prepared affidavit by itself should not deprive the assessee of its statutory right of appeal.
  • The assessee’s claim on merits was supported by binding precedents of the Honourable Supreme Court, particularly in relation to deduction under Section 80P of the Income Tax Act 1961.
  • The assessee had filed the first appeal in time before the Commissioner of Income Tax (CIT) against the assessment order, and the disallowance related to Section 80P.
  • The CIT’s order was issued after the Supreme Court had delivered its judgment governing Section 80P claims, which, according to the assessee, should have guided the authorities in its favour.

On this basis, counsel requested the High Court either:

  1. To allow the appeal outright on merits, or
  2. At least to remand the matter to the ITAT, giving the assessee an opportunity to submit a proper affidavit explaining the delay with complete particulars.

Submissions on behalf of the Revenue

On the other side, Sri. G. Keerthivas, Standing Counsel for the Revenue, supported the ITAT order and argued that:

  • The Tribunal’s remit at the stage of condonation was limited to examining whether the delay of 542 days had been reasonably and satisfactorily explained.
  • At this threshold stage, the ITAT was not required to enter into the merits of the assessee’s claim or examine the impact of the Supreme Court’s decision on Section 80P.
  • The explanation offered by the assessee was effectively no explanation, since:
    • Only a vague statement was made that the work was outsourced; and
    • No name, details or documentation regarding the alleged external agency were furnished.
  • In the absence of even basic facts, the ITAT was justified in holding that there was no sufficient cause to condone an extraordinarily long delay.

Accordingly, the Revenue requested that the High Court uphold the ITAT’s order and dismiss the assessee’s appeal.

High Court’s evaluation of the rival positions