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Judgment
PER BRAJESH KUMAR SINGH, AM,
This appeal by the assessee is directed against the order of National Faceless Appeal Centre (NFAC) [hereinafter referred to as the ‘Ld. CIT(A)] order dated 21.01.2025 arising out of the Order u/s 154 of the Income Tax Act, 1961 (hereinafter referred to as the ‘the Act’) dated 30.07.2023 by the NWR-W-(57)(92), (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2021-22.
The Ld. AR submitted that the appeal of the assessee was against the rectification order under section 154 passed by Ld. Deputy Director of Income Tax, CPC as well as the order under section 250 passed by CIT(A). It was further submitted that the Ld. Deputy Director of Income Tax, CPC had erred in restricting the TDS credit to 33,405/-under Rule 37BA, despite the fact that Form 26AS reflects a TDS payment of 22,53,458/-, thereby wrongfully disallowing the legitimate claim solely on the basis of unmatched credit.
Further, the ld. AR submitted that the appeal of the assessee was dismissed by the Ld. CIT(A) in limine by not condoning the delay of 267 days in filing of the appeal before the Ld. CIT(A). The Ld. AR submitted that the firm initially attempted to file rectification applications under Section 154 of the Income Tax Act on 02.12.2022 and 05.12.2022, both of which were rejected by the department. Thereafter, the firm again filed a rectification application on 27.05.2023 seeking correction of the mistake apparent on record, particularly regarding grant of correct TDS credit. The rectification application order was passed dated 30.07.2023; however, against the TDS credit claimed of Rs. 22,53,458/-, credit of only Rs. 33,405/-was allowed, and the balance amount was not granted. Further, it was submitted that the delay of 267 days in filing the CIT(A) appeal was neither intentional nor deliberate but occurred due to the bona fide legal process being pursued by the firm and it occurred due to procedural and legal complexities and not due to any negligence or mala fide intention on the part of the firm. It was requested by the Ld. AR that the said delay in filing the appeal before the Ld. CIT(A) may kindly be condoned and the appeal be heard on merits.
The facts of the case, the reasons for the non-allowance of the TDS credit as claimed by the assessee and the reasons for dismissal of the appeal by the Ld. CIT(A) alongwith the submissions of the assessee are stated in the written submission of the assessee, which is reproduced as under:
“1.1.The facts of the case are that assessee is a partnership firm and is engaged in the business of providing storage and warehousing facilities. The assessee filed return of income for the Assessment Year 2021-22 on 04.02 2022 in which the assessee claiming a refund of Rs. 22,51,892/-. The ITR acknowledgment along with computation Sheet forms part of the Paper book from Page No. 1 to 2. The same was processed under Section 143(1) on 30.11.2022, granting a refund of Rs. 35,019/- against the claimed refund of Rs. 22,51,892/-. That thereafter, the firm filed an updated return on 21.12.2022, which was declared invalid on 31.12.2023.
1.2.That the firm initially attempted to file rectification applications under Section 154 of the Income Tax Act on 02.12.2022 and 05.12.2022, both of which were rejected by the department. Thereafter, the firm again filed a rectification application on 27.05.2023 seeking correction of the mistake apparent on record, particularly regarding grant of correct TDS credit. The rectification application order was passed dated 30.07.2023; however, against the TDS credit claimed of Rs. 22,53,458/-, credit of only Rs. 33,405/-was allowed, and the balance amount was not granted.
2. Order under section 250 of the Income Tax Act, 1961
2.1.Aggrieved by the order u/s 154 dated 30.07.2023, the assessee filed an appeal before the Hon'ble CIT(A), NFAC on 22.05.2024.
2.2.The CIT(A) passed an order under Section 250 dated 21.01.2025 wherein appeal of the assessee was dismissed.
3. Erroneous finding in order passed by Ld. CIT(A)
The Ld. CIT(A) passed the order under Section 250 dated 21.01.2025 dismissing the appeal of the assessee on the grounds that there was a delay of 267 days in filing of appeal. The said impugned order was passed without communicating the same defect to assessee and without giving reasonable opportunity to rectify or communicate his reasons for the delay.
That the Ld. CIT(A) has erred in dismissing the appeal solely on the grounds of delay without prior intimation to the appellant or providing an opportunity to clarify the issue, resulting in gross violation of the principles of natural justice.
3.1.It is submitted that the order passed by the Ld. CIT(A) was dismissed that there was a delay in filing of appeal by the assessee, without even considering the merits of the case.
3.2.It is submitted that the delay of 267 days in filing the CIT(A) appeal was neither intentional nor deliberate but occurred due to the bona fide legal process being pursued by the firm. The delay has occurred due to procedural and legal complexities and not due to any negligence or mala fide intention on the part of the firm.
3.3.It is further submitted that while issuing notice under section 250 of the Income-tax Act, 1961, the Department did not call upon the assessee to explain or justify the delay in filing the appeal before the Ld. CIT(A). In the absence of any such opportunity being granted, the direct rejection of the appeal in the order passed under section 250 is bad in law and contrary to the principles of natural justice. It is further submitted that the order passed under section 250 has been dismissed solely on the ground of delay, without affording an opportunity of being heard on the issue of condonation and without any discussion or adjudication on the merits of the case. Such dismissal, without examining the substantive grounds raised in appeal, is legally unsustainable and liable to be set aside. The Notice issued u/s 250 dated 31.12.2024 forms part of the Paperbook from Page No 20 to 23.
S. No. Date of Notice Due date Response submitted 1. 31.12.2024 08.01.2025 The Response was submitted on 15.01.2024 along with relevant annexures.
That the rectification order under section 154 passed by Ld. Deputy Director of Income Tax, CPC as well as the order under section 250 passed by CIT(A) is bad in law and without consideration of facts and circumstances of the case.
That the Ld. Deputy Director of Income Tax, CPC has erred in restricting the TDS credit to 33,405/-under Rule 37BA, despite the fact that Form 26AS reflects a TDS payment of 22,53,458/-, thereby wrongfully disallowing the legitimate claim solely on the basis of unmatched credit.
3.4.The rectification order passed under section 154 by the Ld. Deputy Director of Income Tax, CPC is bad in law, void ab initio and liable to be quashed.
3.5.The details of returns and rectification applications filed by the Appellant for A.Y. 2021-22 are as under:
“ It is settled law that TDS credit cannot be denied to the assessee when tax has been deducted and deposited with the Government. Further, as per Rule 37BA(1), the assessee has rightly claimed the credit, as reflected in Form 26AS. The Form 26AS is attached in the Paperbook from Page No 24 to 27. The assessee duly claimed TDS credit of Rs 22,53,458/- in ITR. It is further submitted that as per Form 26AS, the total TDS reflected is Rs. 24,90,450/-from the party Hafed Jind (towards storage charges) for A.Y. 2021-22. However, the appellant has claimed TDS of Rs. 22,47,480/- in the return of income. The difference of Rs. 2,42,970/- pertains to March 2020, which relates to F.Y. 2019-20. The assessee has duly filed the computation of income for the relevant AY 2021-22, and the forms part of the Paperbook. It is further submitted that pursuant to the notice issued under section 148 of the Income-tax Act, 1961, the assessee duly filed its return of income in compliance with the said notice. In the ITR filed the assessee claimed TDS of Rs. 22.53,458/-, The ITR form evidencing the filing of return in response to section 148 forms part of the Paperbook from Page No 28 to 105 for your kind perusal. Thus, there has been complete and timely compliance with the statutory requirement under section 148. It is further submitted that for Assessment Year 2021-22, the reassessment proceedings pursuant to the said notice are presently in progress and have not yet been concluded.
The details of the notices issued by the Department and the replies filed by the assessee are shown below:
Date of Notice Notice u/s Date of reply 07.05.2025 148 26.05.2025 01.09.2025 143(2) 16.09.2025 10.09.2025 142(1) 16.09.2025 That the appellant craves to add, amend, or alter grounds of appeal before the appeal is finally heard and disposed off.
3.8.It is submitted that this ground is general in nature and does not need any specific adjudication.
4. Prayer
In light of the facts on record and settled judicial position, it is humbly prayed that the order of the Ld. CIT(A) u/s 250 may kindly be quashed. We request your honours to kindly take the submission on record and oblige.”
On the other hand, the Ld. Sr. DR relied upon the orders of the authorities below.
We have heard both the parties and perused the material available on record. We have carefully considered the reasons for the delay in filing of the appeal. We agree with the submission of the assessee that the delay in 267 days in filing of the appeal before the Ld. CIT(A) in the given facts of the case was neither intentional nor deliberate but occurred due to the bona fide legal process being pursued by the firm and therefore, the same is condoned. The Ld. CIT(A) dismissed the appeal of the assessee in limine, by not condoning the delay and thus, no opportunity of being heard was provided to the assessee. Accordingly, in the interest of justice, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the Ld. CIT(A) for fresh adjudication, after providing due opportunity of being heard to the assessee and in accordance with law.
The assessee is directed to appear during the appellate proceedings and the assessee is also at liberty to submit any details / evidences in support of its claim(s)/ appeal.
In the result, appeal of the assessee is allowed for statistical purposes.