High Court Condones 341-Day Revenue Delay and Admits

High Court Condones 341-Day Revenue Delay and Admits Transfer Pricing Substantial Law Questions

Issue

Whether a delay of 341 days in filing an appeal by the Revenue under Section 260A can be condoned under Section 5 of the Limitation Act when caused by inter-State jurisdictional transfer and administrative reconciliation of search records.
Whether the effect of abatement of assessment under Section 153A renders a previously concluded TPO determination non-est, requiring a fresh TPO reference, thereby raising substantial questions of law under Section 260A.

Facts

Assessment Year: 2008-09.
Condonation of Delay:
- The Revenue filed an appeal before the High Court against the Tribunal’s order with a delay of 341 days.
- The delay occurred due to the transfer of jurisdiction from Bengaluru to Kolkata following a search under Section 132, which required physical reconciliation and transfer of voluminous records alongside multi-tier administrative approvals.
- The assessee opposed the condonation, contending that the Government is bound by limitation rules and administrative red-tape does not constitute sufficient cause.
Transfer Pricing / Abatement:
- Search proceedings under Section 132 triggered assessment under Section 153A, leading to the abatement of original proceedings.
- The Tribunal deleted the transfer pricing adjustments on the ground that a fresh reference to the Transfer Pricing Officer (TPO) was not made post-abatement.
- The Revenue appealed, contending that whether an abated assessment invalidates a prior TPO determination forms a substantial question of law.

Decision

On Condonation of Delay:
- Held in favor of the Revenue.
- The 341-day delay was condoned as it arose from bona fide complexities involving inter-State transfer of files and record reconciliation, and the appeal involved substantial revenue along with complex legal questions.
On Transfer Pricing & Search Assessment:
- Held in favor of the Revenue.
- The issue of whether abatement under Section 153A renders a prior TPO determination non-est or void—and whether a fresh reference is mandatory—gives rise to substantial questions of law warranting admission of the Revenue’s appeal.

Key Takeaways

Bona Fide Administrative Delay Condonable: Delays caused by complex inter-State jurisdictional transfers and physical record movements following search operations can constitute “sufficient cause” for condoning appeal delays under Section 5 of the Limitation Act.
Substantial Questions of Law Admitted: The interplay between abated assessment proceedings under Section 153A and the validity of prior Transfer Pricing Officer determinations is a critical legal issue requiring High Court adjudication.

HIGH COURT OF CALCUTTA

Principal Commissioner of Income Tax

Himatsingka Seide Ltd.

Rajarshi Bharadwaj and Uday Kumar, JJ.

ITAT No. 190 of 2025
IA NO. GA 1 and 2/2025^†

APRIL 30, 2026

Prithu Dudhoria and Sujit Mitra, Advs. for the Appellant. Nageswar Rao and Ms. Sakshi Singhi, Advs. for the Respondent.

ORDER

In Re: GA 1 of 2025

I. THE PROCEEDING

1. This matter was heard by us on April 20, 2026, and reserved for the delivery of orders. We are called upon to adjudicate two distinct issues: first, an application for condonation of a delay of 341 days under G.A. No. 1 of 2025; and second, the admission of the appeal preferred under Section 260A of the Income Tax Act, 1961 (“the Act”), assailing the order of the Income Tax Appellate Tribunal (“Tribunal”), Kolkata, dated March 15, 2024, for the Assessment Year 2008-09.

II. ON CONDONATION OF DELAY (G.A. NO. 1 OF 2025)

2. At the threshold, we address the jurisdictional challenge of limitation. The Revenue attributes the 341-day delay to a “peculiar procedural trajectory.” Following a search operation, the jurisdiction over the assessee was transferred from Bengaluru to Kolkata, a transition that necessitated the physical reconciliation and transfer of voluminous “judicial folders” across disparate Directorates. This administrative exigency was compounded by a multi-tiered hierarchical scrutiny involving the Principal Commissioner, the Judicial Cell, and the Investigation Wing.

3. The Respondent/Assessee, through an Affidavit-in-Opposition, has vehemently resisted the prayer for condonation. Relying on the ratio in Postmaster General v. Living Media India Ltd. (2012) 3 SCC 563 , the Respondent contended that the State cannot claim a privileged status or a “lenient view” merely by virtue of being a Government entity. They specifically highlighted the Supreme Court’s observation that the law of limitation binds the Government and private litigants equally, and that administrative decision-making layers cannot be used as a shield against negligence.

4. The Respondent further cited Commissioner of Income Tax-7, New Delhi v. Odeon Builders (P.) Ltd (SC)/(2019) 18 SCC 145 , where the Apex Court refused to condone an inordinate delay, holding that the rights of the assessee had crystallized. They argued that the present delay is a symptom of “systemic lethargy” and “administrative red-tape,” which do not constitute “sufficient cause.”

5. We have weighed these competing contentions against the evolving jurisprudence on Section 5 of the Limitation Act. While the mandate for diligence remains absolute, the Hon’ble Supreme Court in Sheo Raj Singh v. Union of India (2023) 10 SCC 531 cautioned against a pedantic application of limitation laws. The Court recognized the “impersonal machinery” of the Government and the inherent procedural delays in hierarchical approvals, observing that a pragmatic and justice-oriented approach must be adopted over a purely technical one.

6. In the present case, where the appeal involves substantial public revenue and complex questions concerning the interplay of search and transfer pricing provisions, we find that the Revenue has demonstrated “sufficient cause.” The delay is attributable to the bona fide complexities of an inter-state jurisdictional transfer and record reconciliation. To dismiss the appeal at the threshold would be to prioritize a technical forfeiture over the advancement of substantial justice.

7. Accordingly, the delay of 341 days is condoned. G.A. No. 1 of 2025 is allowed.

8. Consequently, the application is disposed of.

In Re: ITAT 190 of 2025

III. ON ADMISSION OF THE APPEAL (ITAT 190 OF 2025)

8.1 Regarding the admission of the appeal, the Revenue is aggrieved by the Tribunal’s deletion of Transfer Pricing (TP) adjustments amounting to Rs. 6,90,90,330/-.

9. The assessment originally commenced in Bengaluru but “abated” under the second proviso to Section 153A(1) following a search under Section 132. The Tribunal deleted the TP additions on a technical ground, holding that the “abatement” rendered the Transfer Pricing Officer’s (TPO) prior determination non-est. Consequently, the Tribunal ruled that the Assessing Officer was mandatorily required to initiate a fresh reference under Section 92CA and could not rely upon the existing TPO report.

10. While the Tribunal supported its view by invoking CBDT Instruction No. 3/2016, the Revenue contends that “abatement” of a proceeding does not nullify the underlying international transactions or erase the specialized determination already conducted by the TPO. They argue that the Tribunal’s view represents a hyper-technical interpretation of Section 153A that undermines the efficacy of search-based assessments.

11. Upon a careful perusal of the record and the submissions made, we are of the opinion that the legal status of a TPO report in an “abated” proceeding and the jurisdictional necessity of a fresh reference under Section 153A constitute Substantial Questions of Law of significant public importance.

12. The Appeal is admitted on the following Substantial Questions of Law:

Whether the Learned Tribunal was justified in law in deleting the transfer pricing adjustments on the ground that a fresh reference to the TPO was not made under Section 153A proceedings, notwithstanding the existence of a valid reference and determination in the abated proceedings?

Whether the “abatement” of assessment under the second proviso to Section 153A(1) renders a previously concluded TPO determination non-est or void for the purposes of a subsequent search-based assessment?

Whether the Tribunal erred in law by admitting and adjudicating upon additional technical grounds regarding the validity of the TPO reference which were not raised before the lower authorities?

IV. DIRECTIONS

13. Service of notice of appeal is waived as the Respondent is duly represented.

14. The Appellant is directed to file the requisite number of Informal Paper Books within eight weeks from today.

15. Let the appeal be listed for final hearing in the Monthly List of July 2026.

16. Accordingly, the application being G.A. 2 of 2025 is disposed of.