ITAT Condones 87-Day Delay Due to Confusion Between CPC Rectification and Appeal Remedy

ITAT Condones 87-Day Delay Due to Confusion Between CPC Rectification and Appeal Remedy

Issue

Whether a delay of 87 days in filing an appeal before the CIT(A) can be condoned when the delay was caused by the assessee’s bona fide belief—fueled by departmental communication and Bar Association advice—that filing a rectification request with the CPC was the correct remedy for a TDS mismatch, rather than filing an appeal.

Facts

• The Dispute: The assessee, a commission agent (Kachha Arhtiya), filed a return for A.Y. 2022-23 claiming a TDS credit of Rs. 1,13,872/-.

• CPC Action: The Centralized Processing Centre (CPC) processed the return under Section 143(1) and granted credit for only Rs. 41,634/-, disallowing the balance of Rs. 72,238/-.

• The Delay: The assessee filed an appeal before the CIT(A) with a delay of 87 days. The CIT(A) dismissed the appeal in limine (at the threshold) as time-barred, stating no sufficient cause was shown.

• Reason for Delay:

  • The assessee argued that he acted on the advice of the local Income-tax Bar Association and a letter from the Income Tax Officer (ITO) dated 06.03.2023.

  • The ITO had advised the assessee to approach the CPC for rectification, creating confusion about the appropriate remedy.

  • Consequently, the assessee spent time pursuing rectification instead of filing a statutory appeal immediately.

Decision

• The Income Tax Appellate Tribunal (ITAT) allowed the appeal for statistical purposes.

• Delay Condoned: The Tribunal held that the delay of 87 days was satisfactorily explained. It relied on the Supreme Court judgment in Collector, Land Acquisition vs. Mst. Katiji, which mandates a liberal approach to condonation to ensure substantial justice over technical defaults.

• Bona Fide Belief: The ITAT found the assessee’s explanation plausible. The confusion regarding whether to file a rectification with the CPC or an appeal is common, and the departmental letter advising CPC rectification validated the assessee’s bona fide intent.

• Remand: The order of the CIT(A) was set aside. The matter was restored to the CIT(A) to decide the case on merits, with a specific direction to follow binding precedents regarding TDS mismatches (Deepak Trading Company vs ITO and Mukesh vs ITO).

Key Takeaways

• Rectification vs. Appeal Confusion: Taxpayers often get stuck between seeking rectification (for apparent errors) and filing appeals (for disputed claims). Tribunals tend to view delays caused by this specific confusion leniently if the taxpayer acted diligently.

• Substantial Justice: The dismissal of a meritorious claim solely on the ground of limitation is discouraged when no mala fide intent or deliberate inaction is present.

• Departmental Advice Matters: If a tax officer advises a taxpayer to take a specific route (like CPC rectification), the taxpayer cannot be penalized later for following that advice, even if it leads to a delay in filing an appeal.

THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCHES, “SMC” CHANDIGARH
Ram Bhagat Phatela
Shop No. 3 C/o Hans Raj Babu Lal
II Additional Mandi, Sirsa
Haryana-125055
VS
The ITO
Ward-1, Sirsa