Appeal should not be dismissed for limitation as delay can be compensated in terms of money

An Appeal should not be thrown away on the ground of limitation as delay can always be compensated in terms of money.

In a recent judgment, Hon’ble Kerala High Court has held that the law with regard to condonation of delay is no longer res integra as the intention behind is to adjudicate the matter on merits but should not be thrown away on the ground of limitation as the such act can always be compensated in terms of money.

ABCAUS Case Law Citation:
4926 (2025) (12) abcaus.in HC

The appellant was running a Hotel and had been regularly filing the income tax return. For the three assessment years 2010-11, 2011-12, and 2012-13, the assessee filed returns claiming certain amounts as deductions towards interest and bank charges paid to State Financial Corporation.

The Assessing Officer, on examining the matter, noticed that under Section 43B of the Income Tax Act, interest on a borrowed loan is allowed to be deducted, only if it has actually been paid. Since it was found that the assessee had not paid the interest even at the time of assessment for the respective periods, the Assessing Officer revised the assessment order, holding that the claimed amounts were not allowable and that the excess remuneration was to be disallowed, accordingly, the demand notices were issued.

Aggrieved of the same, appellant preferred an appeals before the CIT(A) who dismissed the appeal observing that till date, no written submission had been made by the appellant. Thus, it appeared that the appellant was not interested in proceedings with the appeal filed.

The appeal filed by the assessee before ITAT was delayed by 588 days. The asessee in the affidavit seeking the condonation of delay stated that he had not noticed the appellate order as he was out of station and his office staff also did not inform about the order. However, the Tribunal dismissed the appeal.

The Hon’ble High Court observed that ITAT had dismissed the appeal on the ground of delay without adjudication on merits much less the fact that the order of the Assessing Officer exfacie did not reveal the compliance of the principles of natural justice.

The Hon’ble High Court noted that there was no denial of the fact that the impugned order of the Assessing Officer, passed in exercise of powers under Sections 143(3), 147 read with 154 of the Income Tax Act by revising the returns for the aforesaid assessment years, did not indicate that the assessee was at any stage afforded an opportunity to defend the claim of deduction under section 43B of interest on the loan availed from the State Financial Corporation for the relevant periods.

The Hon’ble High Court opined that order of the Assessing officer ex facie was not sustainable as it was passed at the back of the appellant assessee who was willing to compensate in terms of cost, in case an effective opportunity was granted to contest the order before the Assessing Officer or Tribunal in accordance with law.

The Hon’ble High Court held that without doubt, the act of the appellant in preferring an appeal before the Income Tax Tribunal with a delay of 588 days was unjustified and reprehensible, being supported only by vague pleadings and a lackadaisical approach.

However, the Hon’ble High Court observed that the law with regard to condonation of delay is no longer res integra as the intention behind is to adjudicate the matter on merits but should not be thrown away on the ground of limitation as the such act can always be compensated in terms of money.

Accordingly, the Hon’ble High Court set aside the order of the Income Tax Appellate Tribunal as well as of the CIT(A) by deciding the question of law in favour of the appellant.

The appeal was restored to CIT(A) subject to payment of Rs. 3,00,000/- to the Mediation and Conciliation Centre of the High Court.

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