COVID-19 Limitation Extension Applies to Tax Appeals | ITAT Bangalore Upholds 90-Day Filing Window Post-01.03.2022

The Income Tax Appellate Tribunal (ITAT), Bangalore, has clarified that the Supreme Court's suo motu directions extending limitation periods during the COVID-19 pandemic apply to appeals under Section 249 of the Income Tax Act, 1961. The Tribunal held that the assessee's appeal, filed on 06.04.2022, was within the prescribed 90-day period from 01.03.2022 and thus not delayed. The case has been remanded to the Commissioner of Income Tax (Appeals) for adjudication on merits, marking a significant precedent for tax litigation timelines.

Background & Facts

The Dispute

The assessee, S.V. Distilleries Private Limited, filed its return of income for Assessment Year (AY) 2018-19 on 19.09.2018, declaring a current year loss of Rs. 89,54,703. The case was selected for complete scrutiny under the Computer Assisted Scrutiny Selection (CASS) on the issue of "Business Loss." Notices under Section 143(2) and Section 142(1) of the Income Tax Act were issued, and the assessee responded with relevant details.

Key Facts

• The assessee initially claimed to be engaged in manufacturing but later stated, via a letter dated 16.03.2021, that it had no business activities during AY 2018-19.
• Despite this claim, the assessee reported business expenses of Rs. 1,02,14,492 in its profit and loss account.
• The Assessing Officer (AO) disallowed the entire business expenditure, treating it as non-genuine, and added it back to the assessee's total income.
• The assessee had also taken unsecured loans of Rs. 14,56,51,759 from related parties. The AO demanded proof of identity, creditworthiness, and genuineness of the lenders, but the assessee failed to provide any documentary evidence.
• The AO treated the unsecured loans as income from undisclosed sources under Section 68 of the Act, read with Section 115BBE.

Procedural History

• 26.04.2021: AO passed assessment order under Section 143(3), assessing total income at Rs. 14,69,11,548 (against the returned loss of Rs. 89,54,703).
• 06.04.2022: Assessee filed Form No. 35 (appeal before CIT(A)) but did not seek condonation of delay.
• 24.06.2025: CIT(A)/NFAC dismissed the appeal in limine, holding that the appeal was filed after a delay of 36 days (excluding the COVID-19 exemption period from 15.03.2020 to 28.02.2022) and that no "sufficient cause" was shown under Section 249(3) read with Section 5 of the Limitation Act, 1963.
• Present Appeal: Assessee filed ITA No. 1940/Bang/2025 before ITAT, supported by an affidavit dated 13.08.2025, arguing that the appeal was filed within the extended limitation period.

Relief Sought

The assessee sought:

1. Condonation of the alleged delay in filing the appeal before CIT(A).
2. Remand of the case to CIT(A) for adjudication on merits.
3. Directions to CIT(A) to grant a reasonable opportunity of hearing and consider all relevant documents.

The Legal Issue

The central question before the ITAT was whether the assessee's appeal, filed on 06.04.2022, was barred by limitation under Section 249(2) of the Income Tax Act, given the Supreme Court's directions extending limitation periods during the COVID-19 pandemic.

Arguments Presented

For the Appellant (Assessee)

• Relied on the Supreme Court's order dated 10.01.2022 in In Re: Cognizance for Extension of Limitation (2022) 441 ITR 722 (SC), which extended limitation periods for all judicial and quasi-judicial proceedings.
• Contended that the limitation period for filing the appeal expired during the COVID-19 exemption period (15.03.2020 to 28.02.2022), entitling the assessee to a fresh 90-day period from 01.03.2022.
• Argued that the appeal filed on 06.04.2022 was within this 90-day window and thus not delayed.
• Submitted that the assessee's declaration in Form No. 35 (stating "NO" to delay) was based on a genuine belief and understanding of the law.
• Prayed for remand of the case to CIT(A) for adjudication on merits, citing principles of natural justice and fair play.

For the Respondent (Revenue)

• Supported the CIT(A)'s order, arguing that the assessee failed to show "sufficient cause" for the delay under Section 249(3) of the Act.
• Contended that the assessee did not seek condonation of delay in Form No. 35, warranting dismissal of the appeal.

The Court's Analysis

The ITAT examined the Supreme Court's directions in In Re: Cognizance for Extension of Limitation, particularly paragraph III, which stated:

"In cases where the limitation would have expired during the period between 15-3-2020 till 28-2-2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 1-3-2022. In the event the actual balance period of limitation remaining, with effect from 1-3-2022 is greater than 90 days, that longer period shall apply."

The Tribunal observed:

1. The limitation period for filing the appeal before CIT(A) expired during the COVID-19 exemption period (15.03.2020 to 28.02.2022).
2. As per the Supreme Court's directions, the assessee was entitled to a fresh 90-day period from 01.03.2022.
3. The appeal filed on 06.04.2022 fell within this 90-day window, and thus, there was no delay.
4. The CIT(A)'s finding of a 36-day delay was erroneous and contrary to the Supreme Court's directions.
5. Since the assessee acted under a genuine belief that no delay existed, the question of filing an explanation for delay or seeking condonation did not arise.

The ITAT further noted that the CIT(A) had dismissed the appeal in limine without adjudicating on merits. Given the absence of delay, the Tribunal deemed it fit to remit the case to CIT(A) for fresh consideration, directing that the assessee be granted a reasonable opportunity of hearing and allowed to produce all relevant documents.

The Verdict

The ITAT partly allowed the assessee's appeal for statistical purposes and remanded the case to the CIT(A) for adjudication on merits. The Tribunal directed:

1. The CIT(A) to decide the appeal afresh in accordance with law.
2. The assessee to be granted a reasonable opportunity of being heard.
3. The assessee to produce all relevant documents to substantiate its claims.

What This Means For Similar Cases

COVID-19 Limitation Directions Are Binding on Tax Authorities

• The ITAT's ruling reaffirms that the Supreme Court's directions in In Re: Cognizance for Extension of Limitation are binding on all judicial and quasi-judicial authorities, including tax tribunals and appellate authorities.
• Taxpayers whose limitation periods expired during 15.03.2020 to 28.02.2022 are entitled to a fresh 90-day period from 01.03.2022, regardless of the actual balance period of limitation remaining.

No Need for Condonation When Limitation Is Extended

• Where the limitation period expired during the COVID-19 exemption period, taxpayers need not file a separate application for condonation of delay under Section 249(3) of the Income Tax Act.
• The Supreme Court's directions operate as a blanket extension, and authorities cannot dismiss appeals on grounds of delay if filed within the extended period.

Remand for Merit-Based Adjudication

• The ITAT's decision underscores the importance of adjudicating appeals on merits, especially when procedural errors (such as incorrect findings on limitation) are identified.
• Taxpayers should ensure they produce all relevant documents and evidence during remand proceedings to substantiate their claims, as the ITAT has directed CIT(A) to grant a reasonable opportunity of hearing.