Delay of 2227 days in filing cross-objection cannot be condoned

Delay of 2227 days in filing cross-objection cannot be condoned merely due to subsequent favorable legal rulings

Issue

Whether a delay of 6 years and 35 days (approximately 2,227 days) in filing a cross-objection before the ITAT can be condoned under section 254 when the delay was caused by a conscious decision not to file based on prevailing adverse legal rulings, which were later overturned in a subsequent assessment year.

Facts

The assessee is a non-resident bank operating with branches in India.
For Assessment Year 2005-06, the Revenue filed a departmental appeal before the Income Tax Appellate Tribunal (ITAT) against an order of the CIT(A).
The appeal notice was served on the assessee on November 12, 2009, making the statutory due date to file a cross-objection December 11, 2009.
The assessee deliberately chose not to file a cross-objection within the statutory time frame because existing ITAT decisions in its own case for AYs 1995-96 to 1997-98 had ruled against the allowability of its head office expenses.
Subsequently, a coordinate bench ruled in the assessee’s favor for AY 1998-99, holding that the entire head office expenses allocated to Indian branches were allowable under Article 7(3) of the India–UAE DTAA.
Prompted by this favorable ruling, the assessee filed a cross-objection on January 15, 2016, resulting in a delay of 6 years and 35 days (approx. 2,227 days).

Decision

The delay was not caused by any circumstance beyond the control of the assessee.
A conscious and deliberate decision not to file a cross-objection based on the then-prevailing judicial view does not constitute a “sufficient and reasonable cause” for condonation of delay.
Change in the legal landscape or a subsequent favorable decision in another assessment year cannot revive a lapsed right of appeal or cross-objection after an inordinate delay.
The application for condonation of delay was rejected, and the issue was decided in favor of the Revenue.

Key Takeaways

Conscious Strategy vs. Sufficient Cause: Choosing not to appeal due to unfavorable precedents is a deliberate legal strategy, not an unavoidable circumstance, and cannot serve as a valid ground for condoning delay later.
Limits of Subsequent Legal Developments: A subsequent favorable judgment in another assessment year does not automatically grant a right to reopen or belatedly challenge finalized or time-barred matters.
Strict Benchmarks for Inordinate Delay: Condonation of long delays (e.g., over 6 years) requires demonstrating strict, reasonable, and beyond-control circumstances rather than mere changes in judicial opinion.

IN THE ITAT MUMBAI BENCH ‘I’

Mashreq Bank PSC.

Deputy Director of Income Tax (IT)^*

Smt. Beena Pillai, Judicial Member
and ARUN KHODPIA, Accountant Member

CO No. 6 (Mum.) of 2016
[Assessment year 2005-06]

JULY 15, 2026

Madhur Agrawal, AR for the Appellant. Ms. Shruti Anzare, SR DR for the Respondent.

ORDER

Smt. Beena Pillai, Judicial Member. – The present Cross Objection arises out of the appeal filed by the Department in ADIT v. Mashreq Bank Psc [ITA No. 3283/Mum/2009] directed against the order dated 08/03/2009 passed by the Ld. Commissioner of Income Tax (Appeals) [CIT(A)], Mumbai, pertaining to A.Y. 2005-06, on the following grounds:-

“1. The Commissioner of Income-tax (Appeals)-XXXI, Mumbai [hereinafter referred to as the CIT(A)] erred in restricting the allowance of the head office (HO) expenses to the amount allowable under section 44C of the Income tax Act, 1961 (the Act) as against the appellants claim that the entire head office expenses of Rs.15,043,330 and Rs.52,742 paid to Head office for reimbursement of SWIFT expenses are allocated to the Indian branches is allowable as a deduction as per the provisions of Article 7(3) of the convention between the Government of U.A.E. and the Government of India (hereinafter referred to as the DTAA) as applicable for the year under appeal.

2. The CIT(A) erred in upholding the action of the AO in disallowing Global Accounting Software Maintenance expenses of Rs.10,48,176 under section 40(a)(i) payable/paid to HO by treating the same in the nature of Royalty.

3. The CIT(A) erred in directing the AO to tax in the hands of Head office Rs. 105,319 being interest on NOSTRO Account received from Mashreqbank psc, India branches under Article 11 of the India-UAE DTAA.

4. The CIT(A) erred in upholding the action of AO in making adjustment of Rs. 65,281 on account of under charging of interest from Associate Enterprise on the basis of Transfer Pricing order.

5. The appellants pray that the provisions of 115JB are not applicable to the Bank and the Assessing Officer be directed not to apply the same.

The appellants crave leave to add to, amend, alter, vary, omit or substitute the aforesaid grounds of appeal or add a new ground or grounds of appeal at any time before or at the time of hearing of the appeal as they may be advised”

2. In the present case, only the Cross Objection survives for adjudication. The corresponding departmental appeal in ITA No. 3283/Mum/2009 filed by the revenue, already stands dismissed as withdrawn on account of low tax effect vide order of the Tribunal dated 10/04/2026.

2.1. The assessee filed the present Cross Objection with delay of 6 years and 35 days. As per the written synopsis, it is noted that the departmental appeal for the year under consideration was served on the assessee on 12/11/2009 and the Cross Objection ought to have been filed by 11/12/2009. However, the assessee has explained that at the relevant point of time the issue relating to allowability of Head Office expenses stood covered against it by earlier orders of the Tribunal in assessee’s own case for A.Ys. 199596 to 1997-98 and, therefore, in order to avoid multiplicity of litigation, no separate cross objection/appeal was filed at that stage.

It is submitted that, subsequently, when the coordinate bench of this Tribunal in assessee’s own case for A.Y. 1998-99 vide order dated 08/05/2015 held that the entire Head Office expenses allocated to Indian branches were allowable under Article 7(3) of India-UAE DTAA, the assessee filed the present Cross Objection on 15/01/2016 without any further delay. The Ld.AR thus placed reliance on following decisions in support of the application filed for condonation of delay:

CIT v. Purbanchal Paribahan Gosthi [1998] 234 ITR 663 (Gauhati)

CIT v. New India Assurance Co. Ltd. [1983] 141 ITR 367 (Bombay)

Anil Kumar Nehru v. Asstt. CIT (SC)

Vijay Vishin Meghani v. Dy. CIT 398 ITR 250 (Bombay)

Dy. CIT v. Atlas Copco (India) Ltd. (Pune – Trib.)/[2019] C.O. Nos. 34 & 35/PUN/2019

2.2. On the contrary, the Ld.DR strongly opposed the condonation of the delay of 6 years and 35 days (approx.2227 days) in filing the present Cross Objection. It was submitted that the explanation furnished by the assessee does not constitute “sufficient or reasonable cause” within the meaning of the provisions governing condonation of delay.

2.2.1. The Ld.D.R. submitted that, the statutory period prescribed for filing a Cross Objection expired on 11.12.2009, whereas the Cross Objection came to be filed only on 15.01.2016. He submitted that, such an inordinate delay cannot be condoned merely on the ground that, at the relevant point of time, the issue stood covered against the assessee by earlier decisions of the Tribunal.

2.2.2. It was contended that, an adverse decision of this Tribunal does not absolve a litigant from pursuing the statutory remedy available under law. If the assessee intended to keep the issue alive, it was incumbent upon it to file the Cross Objection within the prescribed limitation and seek appropriate relief. The assessee consciously chose not to avail of the statutory remedy and, therefore, the delay is the result of a deliberate and informed decision rather than circumstances beyond its control.

2.2.3. The Ld.DR further submitted that the subsequent decision of the coordinate Bench in the assessee’s own case for A.Y. 199899 dated 08.05.2015 cannot revive a remedy that had become time-barred several years earlier. A subsequent favourable judicial pronouncement does not constitute a fresh cause of action nor can it furnish sufficient cause for condoning an inordinate delay. Acceptance of such a plea would render the law of limitation otiose, as parties would be free to await favourable judicial developments before invoking appellate remedies.

2.2.4. The Ld.DR also submitted that the assessee failed to explain the delay on a day-to-day basis or demonstrate any unavoidable circumstance which prevented it from filing the Cross Objection within the prescribed time. The explanation offered is founded solely on litigation strategy and commercial convenience, which cannot be equated with “sufficient cause” for condonation of delay.

2.2.5. Accordingly, it was urged that, in the absence of any bona fide or compelling reason explaining the inordinate delay of more than six years, the application for condonation deserves to be rejected and, consequently, the Cross Objection is liable to be dismissed as barred by limitation.

We have perused the submissions advanced by both sides in light of records placed before us.

3. We have considered the rival submissions and carefully perused the material placed before us. The present Cross Objection has been filed with a delay of 6 years and 35 days (approx.2227 days), which is admittedly substantial. The explanation put forth by the assessee is that, at the relevant point of time, the issue relating to the allowability of Head Office expenses stood concluded against it by the earlier orders of this Tribunal in its own case for A.Ys. 1995-96 to 1997-98 and, therefore, with a view to avoid multiplicity of litigation, no Cross Objection was filed within the prescribed period. According to the assessee, immediately upon the coordinate Bench rendering a favourable decision in its own case for A.Y. 1998-99 vide order dated 08.05.2015, the present Cross Objection was filed on 15.01.2016.

3.1. In our considered opinion, the explanation offered by the assessee does not constitute “sufficient cause” for condonation of such an inordinate delay. The law of limitation requires a litigant to diligently pursue the statutory remedies available under the Act. Merely because the issue was covered against the assessee by the prevailing judicial view at the relevant point of time could not have precluded it from filing a Cross Objection within the period prescribed under law, particularly when the assessee intended to contest the issue further. A conscious decision not to invoke the statutory remedy cannot subsequently be converted into a sufficient cause for condonation merely because the legal position has undergone a change in the assessee’s favour.

3.2. It is a settled principle of law that a subsequent favourable judicial pronouncement neither furnishes a fresh cause of action nor revives a statutory remedy that has already become barred by limitation. The rights and obligations of the parties, insofar as limitation is concerned, stand crystallized on the expiry of the period prescribed under the statute. The law of limitation is founded on the well-recognised maxim interest reipublicae ut sit finis litium, meaning that it is in the interest of the State that there should be an end to litigation. Equally applicable is the maxim vigilantibus non dormientibus jura subveniunt, which signifies that the law assists those who are vigilant and not those who sleep over their rights. These principles underscore that a litigant who consciously elects not to avail the statutory remedy within the prescribed period cannot subsequently seek to reopen the matter merely because the legal position has become more favourable.

3.3. Acceptance of the assessee’s contention would, in effect, permit litigants to postpone the institution of appellate proceedings until the emergence of a favourable precedent in another case. Such an approach would render the statutory prescription of limitation wholly uncertain and contingent upon future judicial developments, thereby defeating the very object of limitation statutes, namely, certainty, finality and repose in litigation. The law does not contemplate a situation where limitation begins to run afresh every time a judicial pronouncement takes a different view on a legal issue. A subsequent change or clarification in the judicial interpretation of law cannot, by itself, constitute a “sufficient cause” to explain a delay that had already occurred much earlier. Were such a proposition to be accepted, the discipline imposed by limitation provisions would become illusory, enabling parties to revive stale claims solely on account of subsequent judicial developments, a consequence clearly impermissible in law.

3.4. In the present case, the explanation furnished by the assessee merely discloses that it consciously elected not to file the Cross Objection because the issue stood covered against it by the earlier orders of the Tribunal. Such a deliberate litigation strategy cannot be equated with a circumstance beyond the control of the assessee so as to constitute “sufficient cause” within the meaning of the law governing condonation of delay. The subsequent favourable decision rendered by the coordinate Bench in the assessee’s own case for A.Y. 1998-99 does not furnish a fresh cause of action or revive a remedy that had already become barred by limitation. The assessee was throughout aware of the adverse orders as well as the statutory remedy available to it, but consciously chose not to invoke the same within the prescribed period. The delay has, therefore, not occurred on account of any unavoidable or bona fide impediment but is the consequence of a conscious litigation strategy adopted by the assessee.

3.5. We have also carefully considered the judicial precedents relied upon by the Ld.AR in support of the prayer for condonation of delay. In our considered view, the said decisions are clearly distinguishable on facts and do not advance the case of the assessee. In those cases, the Courts found the existence of bona fide circumstances or sufficient cause which had prevented the litigants from approaching the forum within the prescribed period and, therefore, exercised their discretionary jurisdiction in favour of condonation. In the present case, however, the delay is not attributable to any circumstance beyond the control of the assessee. Rather, it is an admitted position that the assessee consciously chose not to file the Cross Objection within the statutory period on account of the prevailing judicial position. Such a deliberate litigation strategy, followed by an attempt to invoke a subsequent favourable decision as a justification for the delay, stands on an entirely different factual footing. We are, therefore, of the considered view that the authorities relied upon by the Ld.AR are distinguishable on facts and are of no assistance to the assessee.

3.6. We also find that the principal reason assigned by the assessee for seeking condonation of the delay is that a favourable decision had been rendered by the coordinate Bench of the Tribunal in its own case for A.Y. 1998-99. In our considered opinion, such a plea cannot, by itself, constitute a sufficient and reasonable cause for condonation of an inordinate delay of 6 years and 35 days (approx. 2227 days). More importantly, the legal position which prompted the assessee to file the present Cross Objection, has subsequently undergone a material change in view of the judgment of the Hon’ble Supreme Court in the case of DIT (IT) v. American Express Bank Ltd. 484 ITR 137 (SC). Thus, even the very foundation on which the assessee seeks to justify the delay no longer survives. A litigant cannot seek condonation of delay on the basis of a judicial precedent which, at the time of consideration of the application, no longer represents the prevailing position of law. This fortifies our conclusion that the assessee has failed to establish any sufficient and reasonable cause warranting the exercise of our discretionary jurisdiction to condone the delay.

3.7. Having regard to the totality of the facts and circumstances, we are not satisfied that the assessee has established any sufficient and reasonable cause warranting the exercise of our discretionary jurisdiction to condone the delay of 6 years and 35 days (approx. 2227 days) in filing the present Cross Objection. The application seeking condonation of delay is, therefore, rejected. Consequently, the Cross Objection is dismissed as barred by limitation.

4. Accordingly, the application for condonation of delay stands, rejected.

5. In the result, the Cross Objection filed by the assessee is dismissed, the assessee having failed to make out any sufficient and reasonable cause warranting condonation of the delay in filing the Cross Objection.