Facts of the Case

The appellant challenged the order passed by the Income Tax Appellate Tribunal (ITAT) dated 31 March 2006. According to the appellant, the Tribunal's order was received on 10 May 2006. However, no appeal was filed against the said order within the prescribed period.

Subsequently, the appellant claimed that it was under the impression that relief would be granted through an application filed under Section 254(2) of the Income-tax Act, 1961 before the Tribunal. Even that rectification application was filed only on 20 October 2007 and was itself barred by limitation.

The appellant sought condonation of delay of one year and eleven months in filing the appeal before the Delhi High Court and attributed the delay in filing the Section 254(2) application to a change of legal counsel.

Issues Involved

  1. Whether a delay of one year and eleven months in filing the income tax appeal should be condoned.
  2. Whether the change of counsel constituted a sufficient cause for condonation of delay.
  3. Whether any substantial question of law arose for consideration in the appeal.
  4. Whether reliance on a belated application under Section 254(2) of the Income-tax Act could justify the delay in filing the appeal.

Petitioner’s Arguments

  • The appellant contended that it expected relief through proceedings initiated under Section 254(2) of the Income-tax Act before the ITAT.
  • It was submitted that the delay in filing the rectification application under Section 254(2) occurred due to a change of counsel.
  • The appellant sought condonation of the substantial delay in filing the appeal before the High Court.

Respondent’s Arguments

  • The Revenue opposed the request for condonation of delay.
  • It was argued that the reasons advanced by the appellant did not constitute sufficient cause under law.
  • The Revenue maintained that both the appeal and the rectification proceedings were time-barred and no substantial question of law arose from the Tribunal’s order.

Court Findings

The Delhi High Court observed that:

  • There was a delay of one year and eleven months in preferring the appeal.
  • The explanation that the appellant was awaiting relief through a Section 254(2) application was not acceptable, particularly when the rectification application itself had been filed beyond the prescribed limitation period.
  • Mere change of counsel could not be treated as a sufficient ground for condonation of delay.
  • No adequate cause had been shown to justify the extraordinary delay.
  • Apart from the limitation issue, the Court found that no substantial question of law arose from the matter.

The Court therefore held that the appellant had failed to establish sufficient cause warranting condonation of delay.

Court Order

The application seeking condonation of delay was dismissed.

The Delhi High Court further held that no substantial question of law arose for consideration and consequently dismissed the appeal.

Important Clarification

  • Filing or proposing to file a rectification application under Section 254(2) does not automatically extend or suspend the limitation period for filing an appeal.
  • A change of legal counsel, without compelling and sufficient justification, is generally not regarded as a valid ground for condonation of substantial delay.
  • Even where limitation issues arise, the High Court may independently examine whether any substantial question of law exists before entertaining an appeal.

Sections Involved

  • Section 254(2), Income-tax Act, 1961 – Rectification of mistakes apparent from the record by the Income Tax Appellate Tribunal.
  • Provisions governing appeals to the High Court under the Income-tax Act, 1961 concerning substantial questions of law.

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2009:DHC:7264-DB/AKS27082009ITA8112009_161956.pdf

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