Auditor Switch Justifies 676-Day Delay: Kerala High Court Condonates Delay, Sets Aside ITAT Order [Read Order]

The Kerala High Court has permitted the delay of 676 days in filing an appeal, observing that the withdrawal of the previous auditing company and the engagement of new consultants properly explained the appellant’s failure to file the matter within the required limit.

The Division Bench of Justice Devan Ramachandran and Justice Basant Balaji approved the Income Tax Appeal filed by Mallelil Industries Pvt. Ltd and set aside the verdict given by the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The Tribunal dismissed the appeal for condonation of delay on the ground that it did not accept the explanation of the appellant.

The controversy is that the appellant did not prefer an appeal against the order of the Commissioner of Income Tax (Appeals) dated 24.08.2022 through its professional auditors. The appeal was finally lodged after a long delay of 676 days.

Senior Advocate Rini Anna Kurian, acting for the appellant, submitted that the delay was not deliberate. She argued that the appellant’s former auditors had resigned from the assignment leaving a communication gap. She submitted that the appellant had bona fide believed that the appeal had been lodged and, upon finding the oversight, had employed fresh tax consultants to address the mistake.

However, Standing Counsel Jose Joseph for the Revenue contended that the explanation was incredible and uncorroborated. He submitted that the Tribunal was entitled to refuse the application having regard to the considerable length of the delay.

The condonation plea was dismissed by the Tribunal, citing the Supreme Court’s stern view in Guruswamy H. v. A. Krishnaiah which warns against a casual approach to delays. But, the High Court observed that while the Supreme Court requires strictness, every application should be tested on the facts of the case and on the veracity of the explanation.

The appellant had given particulars of the identities of the former and present auditors and not general allegations, Justice Ramachandran observed. The Court stated that the precise averments "probabalised" the case in the absence of documentary evidence in support of the internal transfer.

“We are of the opinion that even in the rigorous of the declarations in Guruswamy H. (supra), this Court would be justified in finding in favour of the appellant, especially because the statutory appeal filed by them before the learned ITAT is one at the first instance before a judicial forum,” the Court said.

The Court admitted the appeal, quashed the ruling of the Tribunal and directed the ITAT to decide on merit after affording a chance of hearing to the appellant.

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