Substantial Justice Must Prevail Over Technical Limitation Where Delay Lacks Malafide Intent or Negligence.

The Appellant, a 100% government-aided public charitable trust imparting education, sought tax exemption under Section 10(23C)(iiiab) of the Income Tax Act for A.Y. 2018-19 and 2019-20.

Due to a bona fide error by their Chartered Accountant, the return was filed under the wrong section and Form 10B was omitted.

Consequently, the DCIT (CPC) denied the exemption, resulting in a substantial tax demand.

The Appellant filed an appeal before the CIT(A) with a delay of 1,797 days (calculated as 987 days after factoring in the COVID-19 limitation extensions).

Both the CIT(A) and the ITAT dismissed the appeals in limine on the grounds of limitation, refusing to condone the delay despite an affidavit from the Trustee citing professional negligence and the pandemic.

The Appellant then challenged the ITAT’s order dated 30 January 2026 before the High Court.

1. Whether the Tribunal was justified in dismissing the appeal in limine by refusing to condone a delay of 1,797 days (effectively 987 days) despite the Appellant filing an explanatory affidavit.

2. Whether the Tribunal failed to exercise its discretion reasonably by overlooking the "non-profit" nature of the charitable institution where delay is seldom deliberate.

3. Whether the technical ground of limitation should prevail over the cause of substantial justice in matters involving statutory exemptions.

The court primarily applied Section 260A and Section 253(5) of the Income Tax Act, 1961, regarding the condonation of delay for sufficient cause.

The court relied heavily on the precedent of Inder Singh v. State of Madhya Pradesh (2025), which establishes that while diligence is required, merits should not be scuttled by limitation if a case requires examination to serve substantial justice.

The court also referenced the "liberal and justice-oriented approach" for condonation of delay as enunciated in Collector, Land Acquisition v. Mst. Katiji (1987) and Ramchandra Shankar Deodhar v. State of Maharashtra (1974), noting that the rule against stale claims is a rule of practice/discretion, not an inviolable rule of law.

The High Court observed that the ITAT had adopted an overly "pedantic approach".

While the ITAT had relied on various Supreme Court rulings emphasizing the strictness of limitation (e.g., Pathapati Subba Reddy and Basawaraj), the High Court found that the specific facts of this case—a charitable education society—warranted a more liberal application of discretion.

The court reasoned that the delay was not intentional but stemmed from professional oversight (CA's error) and the disruptions of the COVID-19 pandemic.

Applying the principles from Inder Singh, the court determined that the Appellant's statutory right to claim an exemption as a 100% government-aided institution was a substantive merit that outweighed the technicality of the 987-day delay.

The court emphasized that the real test is whether the delay indicates negligence so gross as to imply the party has abandoned its claim, which was not the case here.

The appeals are restored to the file of the CIT(A) for adjudication on the merits of the Section 10(23C)(iiiab) exemption claim. No costs were awarded.